Purpose of Audit

The purpose of our audit was to examine the District’s financial management practices for the period July 1, 2008 through October 21, 2013.

Background

The Holley Central School District is located in the Town of Murray in Orleans County. The District is governed by a Board of Education, which comprises seven elected members. The District’s budgeted appropriations for the 2013-14 fiscal year total $23 million.

Key Findings

• For the last five fiscal years ending June 30, 2013, the Board and District officials consistently underestimated revenues by a total of $7.2 million and overestimated expenditures by a total of $4.4 million. These budgeting practices generated approximately $6.7 million in operating surpluses, which caused unexpended surplus funds to significantly exceed the statutory limit each year. Although District officials annually appropriated fund balance to reduce the tax levy, these funds were not needed because the budgeting practices generated operating surpluses. As a result, the District’s unexpended surplus funds exceeded the statutory limit of 4 percent of the ensuing year’s budget by more than $7 million, or 35 percent, as of June 30, 2013.
• District officials also improperly accounted for certain financial activity related to the capital projects fund, the debt service fund and encumbrances which understated unexpended surplus funds by approximately $1 million. Consequently, the District has accumulated more than $8 million in unexpended surplus funds.

Key Recommendations

• Develop realistic revenue, expenditure and fund balance estimates for the annual budget.
• Return moneys improperly residing in the capital projects fund to the general fund. Determine the source of moneys in the debt reserve fund and either use it to pay related debt, if required to do so by statute, or return the moneys to the general fund. Properly record and report encumbrances.
• Ensure that the amount of the District’s unexpended surplus fund balance is in compliance with Real Property Tax Law statutory limits and develop a plan for the use of the general fund’s excess unexpended surplus funds in a manner that benefits District taxpayers.