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CROTON-ON-HUDSON, N.Y. The New York State Comptroller says the Croton-Harmon Board of Education purposely overestimated costs by $12.3 million over the course of three years to save money in reserves. Karen Zevin, Croton-Harmon Board of Education president, said the report is incendiary and that the district is completely transparent about the money it saves.
The board and district officials repeatedly overestimated expenditure items, which resulted in the continued accumulation of unassigned fund balance at year-end in excess of what is permitted by the [Real Property Tax Law], reads the external audit conducted by the comptrollers office
Zevin said the $12.3 million figure is misleading, because the number adds a variety of reserve funds from which expenditures are strictly regulated. An example of one such reserve fund is the capital reserve fund, from which the district recently used over $3 million to fund repairs on district buildings. The district created the capital reserve fund to save for repairs to buildings. It can only be used for repairs or improvements to buildings and any other use would be illegal. Similar rules apply to reserve funds for legal liabilities reserves, tax certiorari reserves and debt service reserves.
We believe that establishing fund balance limits to which only school districts must adhere to is unfair and causes significant concern, particularly in a small school district with a limited budget, the district responded in the audit. The district also noted that no pattern of waste, fraud or abuse was found, by auditors.
In the audit, the district said that With the additional fund balance, the Croton-Harmon School District has also avoided the expense of borrowing on tax anticipation notes since there have been available funds for cash flow. Maintaining a positive cash flow is vital to the district.
Zevin said reserve funds became even more important for districts after the passage of the tax levy cap, because the complicated formula that governs how much districts may raise the property tax levy often puts the levy well below 2 percent. In Crotons case, the levy is .71 percent.
The tax cap is almost like it was designed by bankers because it penalizes savings, and paying back your debt, Zevin said. It actually rewards for having debt.
The complicated web of legislation that governs school district spending only allows districts to pay back a certain amount of debt annually, allows only 4 percent of the general fund balance to be in excess of expenditures and exempts certain types of debt from being calculated into a districts tax cap, which essentially allows a district to raise its levy by more than 2 percent.
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