Purpose of Audit

The purpose of our audit was to examine the District’s financial condition for the period July 1, 2012 through December 31, 2013.

Background

The Shelter Island Union Free School District is located in the Town of Shelter Island in Suffolk County. The District is governed by the Board of Education which comprises seven elected members. The District operates one school with approximately 230 students and 100 employees. The District’s actual expenditures for the 2012-13 fiscal year were $9.1 million.

Key Findings

• The Board underestimated revenues and overestimated expenditures when developing budgets, which caused the District to have operating surpluses totaling approximately $1.2 million for these four years rather than deficits.
• The District reported year-end unexpended surplus funds of almost 10 to 12 percent of the ensuing year’s budgets, which was nearly three times greater than the allowed 4 percent maximum.
• The District’s reserve policy does not define how reserve funds should be used. In addition, we found that District officials were not following the policy.
• The unemployment insurance reserve was funded at an excessive level that was ten times greater than the District’s average annual unemployment cost during the past four fiscal years.

Key Recommendations

• Use historical data from prior fiscal years to help it develop and adopt budgets that include realistic estimates of revenues and expenditures.
• Ensure that the amount of the District’s unexpended surplus fund balance is in compliance with Real Property Tax Law statutory limits.
• Amend the current reserve fund policy or develop a formal plan to define how reserves will be funded, how much will be reserved, and when reserves will be used.
• Review the unemployment insurance reserve and determine if the amount reserved is necessary and reasonable. To the extent that it is not, the Board should transfer moneys in this reserve to other reserves, compliance with statutory directives.