By Mike Schnitzel
At the close of the Jan. 11 Lynbrook Board of Education meeting, President Phyllis Caruso read from a written statement which revealed significant differences between the board and their auditor over the amount of money in the fund. Caruso detailed the board's confusion and how the district will now have to work in concert with their auditor to straighten things out.
Caruso explained that the board members - Vice President Cathy Papandrew, Secretary David Penso, Alicemarie Bresnihan, Michael Rehns, David Herrmann and Ron Nash- believed that the school district's capital reserve fund limit was $5 million. However, their auditor, Vincent Cullen of Coughlin, Foundotos, Cullen, Danowski, LLP, of Port Jefferson Station, had informed the board after its August 2005 meeting that its records showed a reserve limit of $10 million - twice the amount that voters approved in 2001. And twice the amount that the board thought it had.
According to Education Law section 3651, a proposal for a reserve fund must specify the purpose, the ultimate amount, the probable term, and the source from which the funds will be obtained. The resolution, which was put to and approved by the community, in May 2001, stated that a fund for "the purpose of district-wide improvements, including, but not limited to, windows, additions, roofing, asbestos abatement, and similar projects" was to be established and the amount in the fund was not to exceed "five million dollars plus interest." The source of the funding was to be "the annual transfer of surplus or tax monies, if any, as may be available at the end of each fiscal year from June 30, 2001 through and including June 30, 2006."
Board members believed they might have exceeded their fund limit by about $240,000 after determining the budget surplus for 2004-05. They wanted to know what the procedure was if that was the case, said Melissa Burak, assistant superintendent for business. Cullen's office said that records confirmed a $10 million reserve limit and that the new funding brought the reserve to a little over $8 million, so the funding was acceptable. Yet, the board's consensus was that their reserve was set at $5 million.
Burak and Superintendent Dr. Philip Cicero were unsure of how the discrepancy arose. "The board's intention was to have a reserve not to exceed $5 million at any time," said Burak.
According to a book called "School Law," which is published jointly by the New York State School Boards Association and the New York State Bar Association, the total funds paid into the reserve over the lifetime of the fund cannot exceed the maximum amount authorized by the voters - in Lynbrook's case, that would be $5 million, plus any interest accrued. New York State Department of Education spokesperson Jonathan Burman said that he could not directly comment on the situation in the Lynbrook School District, because he was not familiar with it.
William Stris, a trustee of the Valley Stream Central High School District and Elementary School District 13 who received the a Master Boardsman Award from the New York State School Boards Association in 2005, said that the extra money would have to be returned to taxpayers, and that he had never heard of a school board exceeding their capital reserve fund limit.
"If they did exceed their limit, that's a violation of the law," said Stris. He further explained that if it was determined that the capital reserve fund limit was indeed exceeded, the state would send a letter of reprimand to the district and probably ask for disciplinary action against personnel in charge of maintaining financial records.
According to Burman, a capital reserve fund is used to pay the cost of any object or purpose for which bonds may be issued. Voter authorization is required for both the establishment of the reserve and payments from it, he added.
District projects that have used capital funding this year include additions to the roof at West End School, asbestos abatement at North Middle School, and window projects at Marion Street.
The capital reserve fund is set to expire on June 30. According to state law, once the established probable term of a reserve fund has expired, a school district can ask voters to extend the probable term as long as a proposition is submitted to voters prior to the expiration of the original probable term. If voters reject that proposition, the fund would essentially be defunct, except as a way to hold previously accumulated money.
School board members feel that it is important that the fund be renewed for another five years. Burak said that the new figure for the fund would be determined by two factors - the district's funding history and the projects that will be needed in the future.
Cicero said that "the needs of the district over the next five years" would be the driving force behind the board's determination of an amount they will ask the public to approve.
Burak said that the correct amount of the capital fund would be resolved by spring, in time for a vote on a new fund.
Caruso said that one issue that led to the discrepancy between the board and their auditor was the board's misunderstanding of the state's definition of capitalization. After the district's attorney and auditor researched the issue over several months following the revelation, they informed the board that capitalization referred to the amount of money deposited in the account without regard to expenditures that were made.
"We considered capitalization to be what was in the fund at any one time," said board member Rehns at the Jan. 11 meeting. "The state considers everything that goes in [to the fund] capitalization, no matter what comes out."
Caruso said that there would be further discussions of the matter during budget sessions and that copies of her statement would be available in the superintendent's office.
"We're going to try to reach out to the community to explain [the situation]," said Burak. "It's not something you can read off a piece of paper and understand. You need the face-to-face [meeting] to explain it."
Cullen would not speak directly to the Herald, but said through his secretary that the matter would be handled by the district. Late on Tuesday, Burak said she had received a call from Cullen regarding those requests for comments, and that policy required Cullen to respond through the district. She said he has been invited to the Feb. 8 Board of Education meeting to answer questions.
Comments about this story? Mschnitzel@liherald.com or (516)569-4000 ext.265.
