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Jan 12, 2018 3:50 PMPublication: The Southampton Press

East Quogue School's Reserve Fund Still Exceeds State Limit

Superintendent Robert Long stands in front of the East Quogue Elementary School. DANA SHAW
Jan 14, 2018 3:42 PM

An external financial audit completed this summer concluded that East Quogue School District officials overestimated their expenditures for the 2016-17 school year by some $2.3 million, increasing their school’s unassigned reserve fund balance to $3.1 million—three times more than what should be kept in the account to meet state guidelines.

As of earlier this month, the district’s fund balance—which is traditionally used to fund unanticipated expenses, such as emergency school repairs—still stood at $2,013,529, or more than $1 million over what is mandated by Albany. State law requires that a school district’s fund balance not exceed 4 percent of its total budget for any fiscal year, which runs from July 1 to June 30 for schools.

According to the East Quogue School District website, the district’s operating budget for the current 2017-18 school year is $24,366,274, meaning that its fund balance should not exceed $974,650.

Brian Butry, the deputy press secretary for the State Comptroller's office, wrote in an email on Friday that while school districts that routinely keep too much money in their fund balances can “technically” be penalized by State Education Department officials, he could “not recall” an example of that ever occurring.

Completed in June by EFPR Auditors of Rochester, East Quogue’s auditing firm, the report notes that, for the 2016-17 school year, the district budgeted $23,898,277 but spent only $21,574,584. That overestimation of anticipated expenditures was primarily found on three lines in that year’s budget—general support, transportation and employee benefits. According to auditors, district officials overestimated general support by $142,236, transportation by $177,751 and employee benefits by $281,038.

The audit, which was signed by EFPR Group, attributed the excess fund balance to “an excess of revenue over expenditures,” though it also notes that it has “no opinion” regarding the effectiveness of the district’s internal financial controls. “Providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion,” the audit states.

To address the excess surplus, district officials approved nearly $650,000 in transfers in September to five preexisting authorized reserves—$100,000 was transferred to the workers’ compensation reserve, $200,000 to the employee benefit accrued liability reserve, $100,000 to retirement, $150,000 to the capital reserve, and $100,000 to the unemployment insurance reserve.

But even with those transfers, the district’s unassigned reserve balance still totals $2,013,529—exceeding the state requirement by $1,038,879, or 4.69 percent, according to EFPR Auditors.

When asked this week about their budgeting practices, East Quogue school officials said they always do their best to accurately estimate future costs, noting that they must make decisions well before any money is actually spent.

“When we craft a budget in March we are fully doing our best guesswork for expenses that are going to conclude almost a year and a half later,” School Superintendent Robert Long said. “When you’re doing a budget it’s based on reasonable assumptions. There’s no way we can really know what the numbers are going to be.”

In his district’s Corrective Action Plan, which was filed with EFPR Auditors in September and approved by the East Quogue Board of Education later the same month, Bruce Singer, East Quogue’s business administrator, accepted the auditors’ findings. Mr. Singer also wrote: “We understand that the unassigned fund balance was above the 4 percent limit. In the future we will maintain the 4 percent limit.”

According to the audit, the district was supposed to allocate $600,000 of surplus funds to the current year’s operating budget, which was approved by voters in May. But when reached this week, Mr. Singer explained that that did not happen; instead, the $600,000 will be used to help reduce taxes in the 2018-19 school year, he added.

He also noted that officials intend to address the district’s surplus in the coming months, when Mr. Long and Board of Education members start crafting the preliminary budget for the 2018-19 school year. “We haven’t even had a budget meeting yet,” Mr. Singer said. “All this information will be coming forth.”

Still, some community members want to know why the district has no plans to tap its more than $1 million surplus to help finance a proposed $8.4 million school expansion project that East Quogue taxpayers will be asked to vote on in March. Such a transfer would be permitted by Albany.

But Mr. Long explained that district officials have already opted not to tap the unassigned reserve fund to finance the proposed work, stating that the “budget is independent of the bond issue.”

“The architect made recommendations and this is what the project costs,” Mr. Long added, referring to John A. Grillo, the district’s architect for the expansion.

That decision does not sit well with Cynthia McNamara, a former vice president of the Board of Education, who says that she and others in the community would have preferred if the district had applied some of its surplus to reduce the cost of the proposed expansion.

“There are things in the school that 100 percent need to be addressed,” Ms. McNamara said. “But in light of the district’s financial position, the administration approached this bond the wrong way.”

Board of Education members were expected to open preliminary talks about the district’s 2018-19 budget at their most recent meeting on the evening of Tuesday, January 16.

East Quogue is not the only local school district whose reserve funds violate state law. Last month, an audit completed by the State Comptroller’s office discovered that Quogue School’s unassigned reserve fund balance stood at $2.9 million—or nine times more than what should be kept in the account to be in compliance with the law.

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"Mr. Long explained that district officials have already opted not to tap the unassigned reserve fund to finance the proposed work, stating that the “budget is independent of the bond issue.”"
Yet if approved, the bond will become part of the budget for the next twenty years.
By cmac (184), East Quogue on Jan 13, 18 10:13 AM
2 members liked this comment
Ask who is the underwriter for the bond, and what the underwriting fee is, this is based on the bond amount. Also ask what the legal fees are too. Look for any connections. Follow the money.
By dfree (818), hampton bays on Jan 14, 18 7:15 AM
1 member liked this comment
This is the perfect reason to vote "NO" on the upcoming bond and budget vote. Why don't they use these excess funds to purchase something the children need?I am tired of hearing the children will suffer if one chooses not to support the budget. I would like to see an itemized budget not the one that is released to the residents.
By crusader (391), East Quogue on Jan 15, 18 9:47 AM
1 member liked this comment
Hopefully people have read the articles, seen the pictures, and even visited the school to see some of the conditions of certain parts of the school building before advocating for people to vote no on the budget/bond. The renovation is sorely needed, and the end of the current bond means a perfect transition to the next bond with no tax increase overall. Schools require bonds and bonds have fee's which is a normal cost of doing business...it's not as though this is some plan to make the building ...more
By gquogue (7), East Quogue on Jan 15, 18 10:57 AM
Once in the past the EQ school board accumulated an impermissibly large surplus. In that instance, as well, it happened in a year in which it floated a construction bond issue. The community voted "No", twice, preferring that the school board use the money to reduce the tax rate. Instead, the board spent the money on a smaller construction project, which, since the money was in hand, didn't require voter approval.

It's a very, very bad idea to permit school boards to accumulate unallocated ...more
By highhatsize (4217), East Quogue on Jan 15, 18 10:13 PM
if the district has accumulated an illegally large fund, doesn't that show that the tax rate is to high?
By bigfresh (4666), north sea on Jan 15, 18 11:41 PM
1 member liked this comment
Enough with the overtaxing. Yes, there should be a cushion, some rainy day funds, but we are all being taken advantage of. However, many taxpayers collectively yawn, do no research, and continue to vote yes for everything.

When not one but all taxing institutions continually overestimate expenses to collect more money and rarely if ever "fix" the problem when they see money accumulating, it adds up to A LOT of our family money not being invested in our own home budgets.

The ...more
By st (129), westhampton beach on Jan 16, 18 8:04 AM
Looks like there is plenty of money available to bring our buses back.
By Michael Tessitore (76), East Quogue, New York on Jan 16, 18 8:21 PM
This is disappointing. Every meeting I attend it seems the school cries poverty. They even made it seem like unless The Hills subdivision was approved, the school would be in dire straights. This revelation will certainly be kept in the back of my mind when it comes to future budget and project votes.
By 2329702 (67), East Quogue on Jan 17, 18 9:15 AM
1 member liked this comment
... is this the same school board that got up at the last hills PDD hearing with their mumbling attorney and proclaimed they were broke?
By William Rodney (561), southampton on Jan 17, 18 5:11 PM
2 members liked this comment
Yes, I was at the PDD hearing and heard the EQ attorney speak. What a bunch of boloney and I'd imagine the EQ taxpayers foot the bill for the attorney.
By crusader (391), East Quogue on Jan 19, 18 2:45 PM
1 member liked this comment