by Mike Schnitzel
While an SED audit report of the Lynbrook School District in 2000 found that a resident's allegations of misuse of capital reserve funds were unfounded, the state did find cause to make recommendations that the board improve policies and procedures related to the fund. The audit based its conclusion on a review of documentation and samples of expenses charged to the fund, as well as interviews with district officials regarding policies and practices.
Michael Abbott, Director of Audit Services for the SED, was the audit manager for the special review, the results of which were published in March 2000. In that report, the SED suggested that the district pay for capital reserve projects directly from the capital reserve fund. The SED said that this would eliminate the need to transfer funds between the general fund and the capital reserve, and minimize the risk of the fund commingling, which is what the district was doing at the time.
The audit revealed that the district had been paying for
capital projects out of the general fund and then transferring funding from the capital reserve to the general fund - rather than paying directly from the capital reserve. The SED also recommended that the specific account code, project number, or project location be included on checks and invoices to improve accountability. A discrepancy was also noted in that the district used the designation "D" to refer to the capital reserve fund, while the Uniformed System of Accounts for School Districts designates capital reserve funds with an "H."
Abbott said that at the time, the district did not provide a formal written response to the review, but they indicated verbally that they agreed with the recommendations and had, in fact, already implemented many of them.
At the Jan 11 meeting, the Lynbrook Board of Education's revelation was that they may have exceeded the limit of their capital reserve fund, and that they were taking steps to rectify the situation. In a statement read at the meeting, President Phyllis Caruso said that board members believed that they had exceeded their funding limit by about $240,000 after determining their budget surplus for 2004-05, and that after discussions with their auditor there were questions over what their actual funding limits were.
School district auditor, Vincent Cullen of Coughlin, Foundotos, Cullen, and Danowski, LLP, of Port Jefferson Station, said records showed that the fund limit was $10 million, while the district believed it was $5 million. According to Education Law section 3651, the amount for the fund must be in the proposition approved by voters that creates the fund. In Lynbrook's case, the proposition approved by voters in May 2001, set that limit at $5 million plus interest.
According to SED spokesperson Jonathan Burman, 2005 financial statements show that the district's capital reserve fund limit was exceeded by $241,855. Burman said, this week, that the district "does not have the authority to exceed that amount" and that in response the district has indicated that it intends to submit a proposition to the voters to increase the limitation.
"In these types of cases, we do typically send letters to districts outlining our concerns," said Burman. "These letters explain that the district does not have the authority to exceed the voter-authorized amount and they must adhere to the law. We do not typically ask for disciplinary action to be taken against personnel in charge of maintaining financial records."
Burman added that any residents feeling aggrieved by the action of a school district may file a Section 310 appeal to the Commissioner of Education challenging that action. Information on appeals can be found at http://www.counsel.nysed.gov/appeals/faqs.htm.
Seeking a solution
In her statement at the board meeting Caruso said that the board felt obligated to inform the community of the issue, and that upon the recommendation of their auditor and attorney, the board intends to ask the community to allow the district to continue with major capital improvements by extending the limits of the capital reserve fund. The current fund is set to expire on June 30.
"We're going to try to reach out to the community to explain [this situation]," said Assistant Superintendent for Business Melissa 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."
Burak said it was important to renew the fund for another five years, and that the new limit for the fund would be determined by two factors - the district's funding history and the projects that will be needed in the future. Superintendent Dr. Philip 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.
At least one resident is resistant.
"The taxpayers would do better to set up a three-card monte game on a corner in the city rather than trusting these people," said Larry Lombardo, a recent candidate for the school board. Aside from making a bid for a school board seat five times, he has filed several actions against the district over other alleged infractions. "I could never win against the board, but [the SED] always seemed to find that I had some valid points."
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. Cullen has been invited to the Feb. 8 Board of Education meeting to answer questions from the public.
Comments about this story? Mschnitzel@liherald.com, or (516) 569-4000 ext. 265
