Purpose of Audit

The purpose of our audit was to evaluate the District’s financial management for the period July 1, 2011 through May 3, 2013.

Background

The Germantown Central School District is located in Columbia County. The District is governed by a Board of Education which comprises seven elected members. The District’s budgeted expenditures for the 2012-13 fiscal year were approximately $13.7 million.

Key Finding

• Over the last four years, District officials consistently overestimated expenditures in the adopted budgets by a total of $5.5 million. As a result, the District had operating surpluses totaling $2.7 million for the period, which caused the accumulated fund balance to exceed the statutory maximum of 4 percent of each ensuing year’s budget. During these four years, District officials appropriated $3.2 million in fund balance that was not needed to fund the budgets, and transferred approximately $1.1 million to the District’s reserves with no documented plan or justification for the excessive funding levels, which effectively allowed it to circumvent the statutory limits. District officials have exceeded the 4 percent fund balance limit by an average of approximately $1.1 million in the fiscal years 2009-10 through 2012-13, levied more real property taxes than necessary and retained large amounts of taxpayer dollars without full disclosure of how these funds will be used.

Key Recommendations

• Develop realistic budget estimates using actual financial results from prior years to project expenditures.
• Ensure unexpended surplus fund balance is within the allowed legal limits.
• Develop comprehensive policies and procedures related to the establishment and use of reserve funds. Review all reserves and determine if the amounts reserved are necessary, reasonable and in compliance with statutory requirements.
• Include the funding of all reserves in their adopted budget plan so that funding the reserves is done in a transparent manner.
• Develop a plan for the use of unexpended surplus funds and excess reserve funds identified in this report in a manner that benefits District taxpayers.