Letter to the Community Comptroller
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English

Letter to the Community Comptroller's Audit 12-18-08

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Minisink Valley Central School District Central Administration December 19, 2008 Dear Minisink Valley Community Member, I’d like to respond to the information contained in an article reported in the Times Herald Record. The article references the state comptroller’s office audit conducted this summer and released earlier this week. The audit speaks about the unreserved appropriated fund balance that has been built up over decades of sound financial planning. Explanation of auditors’ methodology We take great exception to the characterization found in the auditors’ report that “payroll and employee benefits exceeded expenditures by a total of $31.1 million.” In the auditor’s report, each year’s appropriation was totaled when these appropriations were actually rolled over annually. Subsequent years’ appropriations include the previous year’s amount. We do not have a $31.1 million dollar fund balance, and the state auditors know we don’t. An analogy would be the balance of a savings account in which an individual saved $1,000 a month for four months: Using the method employed by the auditors in their report, the individual would have $10,000 at the end of the four-month period of saving. We all know from our own savings accounts that this is not the case, however much we wish it were. Savings Account Balance Savings Account Balance MV Method OSC Auditors’ Method September 2008 $1000 September 2008 $1000October 2008 $2000 ...

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Minisink Valley Central School District
Central Administration
December 19, 2008
Dear Minisink Valley Community Member,
I’d like to respond to the information contained in an article reported in the
Times Herald Record.
The article references the state comptroller’s office audit conducted this summer and released
earlier this week.
The audit speaks about the unreserved appropriated fund balance that has
been built up over decades of sound financial planning.
Explanation of auditors’ methodology
We take great exception to the characterization found in the auditors’ report that “payroll and
employee benefits exceeded expenditures by a total of $31.1 million.”
In the auditor’s report,
each year’s appropriation was totaled when these appropriations were actually rolled over
annually.
Subsequent years’ appropriations
include
the previous year’s amount.
We do not have
a $31.1 million dollar fund balance, and the state auditors know we don’t.
An analogy would be the balance of a savings account in which an individual saved $1,000 a
month for four months:
Using the method employed by the auditors in their report, the individual
would have $10,000 at the end of the four-month period of saving.
We all know from our own
savings accounts that this is not the case, however much we wish it were.
Savings Account
Balance
MV Method
Savings Account
Balance
OSC Auditors’
Method
September 2008
$1000
September 2008
$1000
October 2008
$2000
October 2008
$2000
November 2008
$3000
November 2008
$3000
December 2008
$4000
December 2008
$4000
Total in Account
$4000
Total in Account
$10000
When pressed for an explanation of why they would total the yearly appropriation instead of
accurately showing a given year as
including
the same amount of money from the previous year
plus the current year’s appropriation, they could not give a logical reason nor one that would
make any mathematical sense. They chose instead to comment on page 12 of the report that
they used this method “to give the reader an understanding of its [their] significance.”
Explanation of the districts unreserved, appropriated fund balance
Boards of education spanning decades have worked hard to monitor the unreserved,
appropriated fund balance that is the subject of this audit report.
It currently stands at $6.9 million
dollars.
Our external auditors have noted it on an annual basis and have even praised the
soundness of our fiscal planning.
The district has included this unreserved appropriated fund
balance in our budget presentations and budget hearings to the community, showing it on the
revenue side of the ledger as helping to reduce the anticipated tax levy.
We have always explained this unreserved, appropriated fund balance as a “savings account”
that reflects prudent planning.
This “savings” was meant to address fluctuations in state aid, and
changes in legislative mandates such as the GASB 45 obligation to fund the post employment
benefits.
We are still waiting for legislative and/or regulatory guidance to address this liability.
Using this fund balance in challenging fiscal times
Governor Paterson’s proposal, released this week, will mean a 5 million dollar deficit for Minisink
Valley School District in the 2009-2010 school year.
We are looking at flat state aid with rising
costs for each of the next two years and an additional
Deficit Reduction Assessment
of more than
$2.6 million dollars.
Our fund balance will compensate somewhat for this loss in state aid.
However, it should be noted, that whatever portion of the fund balance we use to make up for lost
revenue from the state this year will not be available next year or in ensuing years.
Once we
spend it, it’s gone. Historically, school districts that have “spent down” their fund balance in one or
even two years have looked at tax increases of 20-30% in ensuing years.
We cannot, we will not
do this to the community.
Therefore, the prudent, fiscally responsible thing to do would be to “spend down” this fund
balance gradually to avoid wide swings in future tax levies.
We anticipate that through a
combination of applying a portion of the fund balance and reducing spending, we will be able to
keep the tax levy at a reasonable level. The district will be working hard in the coming months to
decide just how much of the fund balance should be used this year. We will also be taking
deliberate steps to reduce spending.
Weathering this economic downturn with its loss of state aid will take a two-pronged approach:
1. Using a portion of our fund balance
2. Reducing spending.
Minisink Valley is fortunate to be in a position to have both options available.
Our goal in the next
few months is to reduce spending, and to build a tight, responsible budget that will still address
the needs of our students.
The prudent application of the fund balance that is the subject of this
audit puts our district in a better position to be able to meet this goal.
The finance committee will be meeting to build the budget in a series of budget development
meetings that are open to the public.
These meetings are set for January 29, February 11,
February 26, and March 12 at 6:30 PM in Room 108 of the middle school.
Please join us.
Sincerely,
Dr. Martha Murray
Superintendent of Schools