Audit Objective 

Determine whether the Southampton Union Free School District (District) Board of Education (Board) and officials effectively managed fund balance and reserve funds.

Key Findings 

The Board and District officials did not effectively manage fund balance and reserve funds. We determined that the Board and District officials: 

• Annually appropriated fund balance, totaling $5.3 million over five years, that was not used to pay operational expenses and made year-end unbudgeted transfers to reserves, totaling $21.6 million, to stay within the statutory surplus fund balance limit.
• Consistently underestimated certain revenue accounts and overestimated certain expenditure accounts in the annual budgets.
• Did not have support for the establishment of six reserves, overfunded two reserves and may have overfunded an additional reserve.

Key Recommendations 

• Ensure adopted budgets include realistic estimates for revenues and appropriations.
• Ensure reserve fund balances are necessary and reasonable, and use any excess funds identified to benefit residents in accordance with statutory requirements.

Except as noted in Appendix A, District officials generally agreed with our recommendations. Appendix B includes our comments on the District’s response.