By LINDA KELLETT

C-S-E News Staff

FORT PLAIN — State auditors in a report released late last week criticized Fort Plain School Board members and district officials for levying more real property taxes than necessary because they failed to “adequately use surplus fund balance or reserves as spending sources,” exceeding the amount of surplus funds allowed by law.

That, in a nutshell, is a summary of the finding of auditors with the state Comptroller’s Office who examined the district’s financial operations from July 1, 2007 to Jan. 31, 2012 as well as recent years’ budgets and other financial information with respect to the question: “Did the board adopt realistic budgets and retain only the amount of unexpended surplus funds allowed by law?”

The short answer is no.

According to the Comptroller’s Office, district officials in 2009 reportedly squirreled away surplus money in an employee retirement contribution reserve and an unemployment insurance reserve, where it has remained, untapped, with no formal plan for its use.

While reserve funds are permitted by the state and can be funded at any (preferably reasonable) amount, the transfer of surplus money to those funds “reduces the amount of fund balance that can be used to reduce taxes,” noted the report.

Consequently, “the board must ensure that funds are not reserved in excess of the district’s needs,” it continued.

As noted by the Comptroller’s Office, instead of using the extra money to reduce property taxes, “the district’s budgetary practices have resulted in a retention of resources that could have been used for the benefit of district taxpayers.”

Although district officials and the school board over the last five years have taken steps to reduce the amount of surplus funds, auditors said the amounts projected to be used in each year’s budget “have not been used in full...”

They called upon district officials to “develop realistic expenditure and fund balance estimates for the annual budget; develop a plan for the use of surplus fund balance identified in [the] report in a manner that benefits district taxpayers; and [d]evelop a plan for the future funding and use of reserve funds.”

Essentially, the surplus money was being held in what district Superintendent Douglas Burton on Tuesday described as a “rainy day fund” for a worst-case scenario.

In the Fort Plain district’s official response to the audit, Burton said the district’s actions “have been guided by long range plans that have taken into account previous and future massive state aid cuts, the loss of significant amounts of temporary federal funds and our desire to lower our tax rate to assist residents of this below average wealth school district.”

Additionally, he wrote: “As with all plans, adjustments have been made to ensure educational goals are met even when unanticipated and unknown expenses are absorbed by the district due to considerable cost escalations resultant from our continuous bombardment by the state with unfunded mandates, the tax cap restrictions and an absence of mandate relief or state aid adjustments.”

Fort Plain isn’t the only district to try to stock up reserves against a proverbial deluge. In a June 2011 audit, for example, the Ilion Central School District was also faulted for doing the same thing.

Brian Butry, a spokesperson for the Comptroller’s Office, on Tuesday said, “Unfortunately, it’s something we found in previous audits of [other] school districts. It’s something Comptroller DiNapoli is taking seriously,” not only to reduce the budgets but also to address the reliance on property taxes.

Burton on Tuesday explained that the Fort Plain District’s surpluses resulted, in part, from unexpected, post-budget windfalls in federal funding, for example.

Additionally, there was a higher-than-expected refund from BOCES for services, savings from the streamlining of the district’s Transportation Department, and the realization of $50,000 in revenue from the one-time sale of buses.

Extra money in the 2011-2012 fiscal year stemmed from an unusually mild winter with lower-than-normal energy, labor, and snow- and ice-removal costs.

Conversely, however, the district has experienced colder-than-normal winters with higher-than-anticipated costs that have strained spending plans, he said.

He noted that “it doesn’t take a lot to deplete” the state-allotted amount of surplus funds (that is, 4 percent of the next year’s budget appropriations).

The district had twice that amount in 2007-2008, but it has been steadily decreasing — coming more in line with state guidelines. In 2010-2011, the percentage of next year’s appropriations was 5.16 percent, slightly more than the recommended 4 percent, according to the report.

As one looks at the tax increases the district has had over the whole period, Burton noted the board has been frugal and tried to keep any tax levy increase low.