Purpose of Audit

The purpose of our audit was to evaluate the District’s financial operations for the period July 1, 2009, to April 30, 2012.

Background

The Wayne Central School District is located in Wayne County and Monroe County. The District is governed by the Board of Education which comprises nine elected members. The District’s budgeted expenditures for the 2011-12 fiscal year are $41.3 million, which are funded primarily with State aid, sales tax, real property taxes, and grants.

Key Finding

• Over the last five years, District officials consistently underestimated revenues and overestimated expenditures in the adopted budgets by a total of $20.5 million. As a result, the District had operating surpluses totaling $13.8 million, which caused the accumulated fund balance to exceed the statutory maximum of 4 percent of the ensuing year’s budget. To make it appear that the fund balance was within statutory limits, District officials: appropriated $4.6 million in fund balance that was not needed to fund the budget, created fake encumbrances (by at least $3.1 million for the 2009-10 and 2010-11 years); and transferred approximately $14 million to the District’s reserves with no documented plan or justification for their excessive funding levels.

Key Recommendations

• Develop realistic revenue, expenditure, and fund balance estimates for the annual budget. Discontinue creating fictitious encumbrances and ensure that year-end encumbrances are valid and supported. Develop comprehensive policies and procedures related to the establishment and use of reserve funds.
• Develop a plan for the use of the surplus balances in unexpended surplus funds and in the District’s reserve funds identified in this report in a manner that benefits District taxpayers.