Roser: District aware 'more needs to be done'
by Terry Duffy
The Lewiston-Porter School District received some unfavorable news this week from the state comptroller's office.
In his report, State Comptroller Thomas DiNapoli criticized the Lewiston-Porter administration and Board of Education for its continued overall lack of diligence on managing its finances. It marked the second occasion over the past year where the district has been criticized by DiNapoli's office. Earlier, the Lew-Port School District was cited as being in significant fiscal stress due to an over reliance on reserve accounts versus revenue to help it cover its operations.
This time it's a similar problem - the Lew-Port Board of Education's repeated practice of relying on the fund balance as a primary financing source. "The Board used fund balance as a financing source in the annual general fund budget until it was nearly depleted," according to the DiNapoli report. "Since 2010-11, the District appropriated more than $4.7 million in fund balance to finance appropriations in the general fund. This has resulted in a dramatic reduction in the District's total fund balance. During this same time period, the District increased property taxes an average of $521,000 (2.3 percent) annually. In addition, the District improperly used two reserves to help fund general fund operations during the 2012-13 fiscal year."
The report faulted Lew-Port for its repeated practice of relying on fund balances to operate rather than on revenues. It suggests that if this is allowed to continue the district could find itself in trouble to maintain typical cash flow needs or for any unforeseen circumstances.
"The District's continued reliance on fund balance as a financing source in the annual budget has negatively impacted the District's financial condition. The District reported $260,654 of unrestricted fund balance in the general fund as of June 30, 2013, and it is expected that unrestricted fund balance will further decrease to $259,345 as of June 30, 2014. Given the size of the District's operations, this balance is well below 1 percent of the ensuing year's budget, which is a dangerously low level," it read.
In reviewing Lew-Port's $41 million 2014-15 budget, DiNapoli's office again blasted district administration and the Lew-Port BOE. "The District has not made any significant changes to the budget to improve its financial position," it said. "If the District realizes unfavorable budget variances in the 2014-15 fiscal year, it could exhaust the District's unrestricted fund balance in the general fund and there will be no fund balance available to fund unanticipated costs or maintain cash flow.
"The Board is responsible for adopting a comprehensive reserve policy that clearly communicates to District taxpayers the purpose and intent for establishing each reserve fund, the manner in which the Board will fund and maintain each reserve fund, the optimal or targeted funding levels and conditions under which each fund's assets will be used or replenished."
The report closed by recommending Lew-Port immediately begin work on the following as it plans for the 2015-16 budget year and beyond:
•Reduce its reliance on fund balance as a funding source in the annual budget and adopt budgets that rely on recurring revenue to fund recurring expenses.
•Closely monitor actual operating results to prevent unfavorable budget variances and further deterioration of unrestricted fund balance.
•Develop and adopt a reserve policy and ensure that reserves are properly used.
In response to the report, Lew-Port Superintendent of Schools Chris Roser said that Lew-Port has indeed been taking corrective measures, including staff cuts and reducing its reliance on the fund balance. He said that this is continuing.
"As a result of many factors, including the reduction in state aid, the tax cap limit, as well as increased state pension costs, Lewiston-Porter CSD experienced dwindling financial resources, resulting in fiscal stress to the District," Roser wrote to Jeffery D. Mazula, of the state comptroller's Buffalo regional office. "In an attempt to balance expenditures and revenues the District eliminated 22 staff positions in 2012-2013 and 29 in 2013-2014. However, this alone was not able totally stem the financial decline."
Roser noted steps have been taken, pointing out, for example, that a Lew-Port debt reserve fund was liquidated to help pay for retiree health benefits in 2012-13, due to the fact the fund was problematic in its initial setup and continued fund maintenance.
Roser continued, stating that, for the 2013-14 fiscal year, he undertook "a much greater role in budget development to ensure revenues were in better balance. The reliance on fund balance was significantly reduced from $1.8 million in past years to $500,000 for the 2012-13 year. In addition, the board retained a retired school business official to help determine what further steps needed to be taken to correct the fiscal problems."
Roser said those measures "have made a positive change" in Lew-Port's fiscal condition.
"There is recognition by the board and its executive staff that more needs to be done," he said. "Processes, procedures, staffing reorganization and auditor changes have been under consideration. Some changes have already been made, and others are in the planning stages.
Specifics on these changes will be provided when the board completes its corrective action plan ... later this year."