Poor financial practices in the East Ramapo school district —including inaccurate budget estimates—have left it with operating deficits for the last two years that could jeopardize future operations, according to an audit released this morning by state Comptroller Thomas DiNapoli. He recommended school officials revise their financial records to reflect a true balance deficit for 2013 and develop a plan to address an additional unanticipated shortfall for 2013.
The district estimated a $7.4 million deficit for the 2012-13 school year and issued a budget note to cover the deficit. State auditors estimated the actual deficit to be $8.2 million, $800,000 more than East Ramapo borrowed to cover the deficit. School officials had planned to use the proceeds from sale of property to pay off the borrowing, but the sale was delayed.
“Sound budgeting practices ensure that a school district can fund operations and address unexpected expenses,” DiNapoli said in a statement. ”East Ramapo School District must do a better job to keep its finances in order to avoid deficits and fiscal uncertainty. School district officials have an obligation to students and taxpayers to accurately reflect the district’s financial condition and make any necessary adjustments to stay on track.”
The troubled district is frequently in the news, most recently for firing its law firm after an attorney insulted and cursed at parents in the parking lot confrontation after a school board meeting.
The audit also found that the district’s unassigned fund balance—the difference between revenues and expenditures over time—had a $1.3 million deficit as of June 30, 2012. Fund balances allow school districts to handle unanticipated expenses, including emergency repairs, fluctuations in the cost of essential commodities and shortfalls in estimated revenues. Not having a fund balance could hurt the district’s ability to manage its finances.
State auditors examined the district’s finances from July 1, 2009 to Feb. 1, 2013, but the audit included a projection of East Ramapo’s operating results through June 30, 2013.
In a response to the Comptroller’s Office, the district said it agrees there were errors in prior years’ revenue and expense projections, but “we don’t believe that those errors are the cause of our current budget problems. Rather, we believe that the deficit was caused by a structural imbalance between the District’s growing expenditures for state mandated services and pension and health care costs on the one hand, and the modest tax revenues generated by the District, and inadequate state aid, on the other.”
The audit also found:
—The district’s current budget includes $5 million as revenue for a pending sale of the Colton school building, but it’s unclear whether that amount will be realized.
—The district overestimated Medicaid costs by $2.1 million when past revenues should have enabled officials to make a more accurate estimate.
—The district underestimated school aid by $4.2 million when previous aid should have indicated revenue would be higher.