School board hangs on to rainy-day fund

GUILDERLAND — The school board here has decided to break the law to prepare the district for dire financial times.

“It’s a technical violation,” said board President Richard Weisz at last Tuesday’s school-board meeting. “We’re not aware of any liability except we’re saving too much for a rainy day,” said Weisz, a lawyer, who heads the board’s audit committee.

The school district got a good report on how it handles its finances, according to a state-required audit on the 2007-08 school year. No material weaknesses were identified in the 49-page report presented to the board by Rick Bingham, of The Bonadio Group. (The work was done by Dorfman-Robbie, which merged in July with the Rochester accounting firm, The Bonadio Group.)

The district passed an $82 million budget for the 2007-08 school year.

In reviewing financial highlights, the audit says that, during the year that ended on June 30, 2008, the district’s total net assets increased by $4.6 million. Its actual revenue exceeded its budgeted revenue by $1.4 million due mostly to higher interest rates on investments, added state aid, and energy savings. Also, the district spent $2.2 million less than planned due to savings in instruction, transportation, special education, and employee benefits.

The district’s total assessed valuation rose by $19 million, or just over six-tenths of a percent, “indicative of a strong residential and commercial tax base,” the audit says.

Guilderland’s unreserved, undesignated fund balance — of $4.4 million — was outside the limit set by state law; the rainy-day account is not supposed to be greater than 4 percent of the district’s budget for the upcoming school year. Guilderland has $1,020,876 over the state-set limit, Assistant Superintendent for business Neil Sanders told The Enterprise this week.

In the past, when Guilderland has had a fund balance over the state-set limit, as has been the case in recent years, the school board has put the money into reserve funds, allowed by law, such as for workers’ compensation, unemployment insurance, repairs, retirement contributions, tax certiorari, and employee benefits and accrued liabilities.

Other allowable funds are for capital reserve, to pay for bonds; reserve for tax reduction; reserve for debt service; property loss and liability reserve; reserve for insurance recoveries; and reserve for encumbrances.

Weisz said that the audit committee recommended not putting the excess into a reserve this year because of concerns that the allotted state aid of $23 million for Guilderland “will not hold up.”

Other board members agreed.

“I would opt for the flexibility,” said Vice President John Dornbush.

Board member Barbara Fraterrigo said she agreed “100 percent.”

Board member Gloria Towle-Hilt also agreed. “The administration can have a couple of plans waiting,” she said. “We’ve got to keep ourselves open.”

Referring to the state’s fiscal crisis, board member Hy Dubowsky said, “The money’s simply not there.” He also asked of state aid to Guilderland, “What happens if you lose a million dollars? What does that mean in terms of program?”

“The state has given us an IOU for $23 million,” said Weisz, asking, “What if it drags on giving us cash?”

He concluded, “When we vote on accepting the report, we’re implicitly voting on being out of compliance.”

All eight board member present — Cathy Barber, Dornbush, Dubowsky, Fraterrigo, Colleen O’Connell, Judy Slack, Towle-Hilt, and Weisz — voted to accept the audit. Denise Eisele was absent.

Other issues

In a Sept. 30 letter to the school board, the auditor went over five other issues as well:

— Extra-classroom disbursements: The auditor noted four instances where payment requisition forms were missing a signature from either the student treasurer or faculty advisor.

Weisz said that, in four out of 40 samples, the auditor had found incomplete documentation for such things as class trips.

To solve the problem, Sanders said, “We met with class advisors at the high school and middle school and did a training session.”

Sampling is done at every school, he said, concluding, “We’ll continue to work on that this coming year.”

Weisz stressed the auditor had not found missing funds. Bingham agreed that all funds were accounted for and said it was “a procedural issue”;

— Develop a claims audit procedures checklist: “Management does not currently have a procedures checklist for the Internal Claims Auditor to follow while performing her assigned duties,” said the auditor.

“She now has a checklist,” said Sanders;

— Post-employment benefits: State and local governments have to follow new reporting requirements, set by the Government Accounting Standards Board (GASB), for post-employment benefits. The school district is required to implement this standard — reporting liabilities of post-employment benefits earned by employees on a current basis —  by the year ending on June 30, 2009.

Sanders said that Guilderland has joined with other schools in the Capital Region Board of Cooperative Educational Services, which has hired an actuarial firm to calculate the amounts. This will save money because of the “economy of scale,” said Sanders, rather than the district making the calculations on its own. And it is “fully BOCES aidable,” he said, meaning the state will repay the district for a portion of the costs.

“It’s a private-sector accounting method, creeping into the public sector,” said Sanders, adding that businesses in the private sector have to set aside money to pay for the benefits, but school districts do not. Sanders concluded that the district is in “good shape” and will have the information for next year’s requirement.

Weisz referred to “sticker shock,” when looking at the amounts of money involved. He cited figures from the audit that place the district’s total assets at $87.7 million and its total liability at $52.8 million. The budget now for retirees’ health insurance, he said, is $1.9 million, an annual expense.

“When GASB come on, we’ll have negative assets,” said Weisz;

— General ledger: Some manual postings, the auditor said, were not reflected in the general ledger, recommending management post all adjustments to the general ledger to properly support the final balances.

Additionally, the auditor noted that Guilderland does not use accounting software to maintain some accounts and recommended each fund be maintained and reconciled within the district’s accounting software.

Weisz said the problem was not having enough hands to do everything.

Sanders said that Joy Pierle, the supervisor of finances, maintains detailed transactions on spreadsheets and that the district was getting software to manage it “on a day-to-day basis.”

“We’ll have to give her some help,” said Weisz.

“The accuracy was right on,” commented Bingham; and

— Develop written disaster recovery procedures: Guilderland does not have well-defined, written disaster recovery procedures, the auditor said, stating, “The time to make contingency plans is before disaster strikes, so that personnel will be aware of their responsibilities in the event of an emergency situation that precludes the use of the existing facilities.”

While, on the surface, developing such a plan seems simplistic, said Sanders, “It’s very involved...involving a lot of staff time to do it well.”

He said BOCES is close to releasing a service and has a contract pending with a software provider. Guilderland may possibly be used as a test site, he said.

The district does have back-up but not at the level required, said Sanders; in 2006, the district’s server went down so Guilderland used BOCES servers to do its payroll. Data is archived from the district office — it’s backed up every day — and stored off-site at Farnsworth Middle School, Sanders said earlier.

The auditor made the same comments last year. Also last year, when the state comptroller’s office released its audit of the Guilderland School District, it noted Guilderland “has not developed a formal disaster recovery plan for its computerized data.”

Sanders said at the time that he could find no templates for a high-school disaster recovery plan.

“We’re being cited for something nobody has?” board member Colleen O’Connell asked at the time.

“To say it’s a deficiency when you’re trying to invent the wheel defies logic,” O’Connell said at last Tuesday’s meeting.

“We’re looking at things beyond the scope of, ‘Oops, the server went down,’” Sanders told the school board.

Another repository is needed if, for example, a tornado went through Guilderland and through BOCES, too, he said.

 “We asked the state comptroller for a template; they don’t have one,” said Sanders. “I’m not aware of any other school with it.”

Weisz concluded the session by saying, “We have a good report and we’re looking for ways to do things better.”

The board applauded Sanders who in turn thanked Pierle and the business office staff.