[read complete report – pdf]

Audit Objective 

Determine whether the Hammond Central School District (District) Board of Education (Board) and District officials properly managed fund balance and reserve funds. 

Key Findings 

The Board and District officials did not properly manage the District’s fund balance and reserve funds. As a result, they levied more taxes than needed to fund operations and were not transparent with taxpayers. The Board and District officials: 

• Overestimated budgetary appropriations by an annual average of $1.5 million from 2020-21 through 2022-23. This made it appear that the District needed to increase real property taxes and use appropriated fund balance to close projected budget gaps, when the District’s actual annual revenues were sufficient to cover annual expenditures. 
• Reported surplus fund balance that exceeded the statutory limit by $624,000. This amount increased to $1.6 million when adding back the unused appropriated fund balance that was not needed.
• Did not follow legal requirements when they used reserves funds totaling $1.6 million. In addition, they exceeded the voter-approved funding level for the capital reserve fund by $900,000. 
• Accumulated excessive balances totaling about $600,000 in three reserves. 
• Did not budget to fund reserves. From July 1, 2020 through June 30, 2023, more than $1.5 million in fiscal year-end unbudgeted transfers were made to increase various reserve funds. Among these was a $350,000 transfer to increase the employee benefit accrued liability reserve (EBALR) that was already significantly overfunded. 

Recommendations 

The audit report includes nine recommendations which, if implemented, would improve the Board and District officials’ financial management practices.

District officials generally agreed with our recommendations and indicated they will take corrective action.