Mineola BOE Responds To State Audit Report

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It was more than two years ago, Sept. 5, 2019, that the district was first contacted by the NYS comptroller’s office to kick off a routine audit. The 12-page audit report was issued by the comptroller’s office a few weeks ago. The finding was that the district had overbudgeted, which resulted in an excess in undesignated fund balance. Newsday reported that we had “amassed unneeded cash surpluses.” We might agree with them if we were talking about Harvard’s $42 billion endowment, but we are not, we are talking about Mineola. Let us be perfectly clear—at no time were any public funds unaccounted for, unneeded, or otherwise mismanaged. The board of education understands its fiduciary duty to act in the best interests of the school district and the taxpayers who fund it.

Our budgeting process is transparent to a degree that no other public budget is. No mechanism exists for a public school system to run a deficit like many different levels of government can and often do, so our budget is necessarily conservative. This means we must take great care to ensure adequate funding for our district throughout the fiscal year or risk having to cut programs and staff as we’ve seen in other districts. Education must be done in real time—you can delay the paving of a road, but you cannot delay or restrict the education of a child. At the start of the pandemic, school districts around the state were informed by Albany that we may have to endure a 20 percent cut to state aid. That’s quite a hostile action to take against children during a pandemic, but one of the things that we were prepared to deal with had we needed to—because we budget conservatively. The uncertainty around state and federal aid remains to this day and it’s not responsible to build our budget based on unfunded promises, so we don’t.

The undesignated fund (our surplus) at the end of a fiscal year is transferred to capital line items by a public board resolution for project work to occur during the following fiscal year. As is discussed publicly at our board meetings, this is how we help fund the many capital improvement projects that our students and the larger community benefit from. All the work done throughout the district over the last 12 years has been done without floating a bond. This plan to reconfigure the district and invest the savings in our schools was debated, voted on, and approved by the public. For those that remember this process, it was a remarkable example of democracy in action. That plan continues to be executed today. We have not borrowed any money for the vast improvements that are evident throughout our district. All the money went to projects, and none went to interest or other borrowing costs. Only a local school board, acutely aware of its unique circumstances, and an informed public can determine what an appropriate amount and use of its reserves are. That is a practice we go through annually. Albany cannot do that. Only recently has the state finally committed to fully funding school foundation aid that was promised and established by law 15 years ago. Time will tell whether the state will follow through on its promise the way Mineola UFSD does every year.

Reserves are an important part of any budgetary process. In fact, as this audit was getting underway, the governor signed into law a new provision that allows school districts to set aside monies in a new reserve fund for employer (district) contributions to the Teachers’ Retirement System (TRS). The state did this because of the short-term volatility of investment returns and the inability of many districts to absorb spikes in their state-mandated contributions. All of this is necessary even after the state’s blending formula is applied. Our board acted immediately to create and fund that reserve with $785K. It is another reason why Mineola maintains a stable levy. Over the last 12 years, our levy was below the county average every year and averaged a predictable and low rate of 1.32 percent a year, including a 0 percent levy increase this year. So, while the state was preparing to criticize our use of reserve funds, they were simultaneously telling us to use them more.

Another benefit of our use of undesignated reserve funds is our favorable bond rating. This summer, Moody’s assigned Aa3 (Prime-1) to the Mineola UFSD. Moody’s report mentions “ongoing operating surpluses leading to reserve growth” as a factor in its rating and cautioned that “a structural imbalance leading to declines in reserves” could lead to a downgrade of the rating. This enabled the district to refinance a bond floated many years ago, which will result in a savings of $860K over the next decade.

In addition to the comptroller’s office, which audits us from time to time, our budget is audited annually by our internal and external auditors. Our budget is prepared and presented to the public several times with ample opportunity for questions and comments before being put to a vote. Our board values its civic outreach; we want our community to be informed. The public vote alone is more scrutiny than any other budget receives, and we are very proud that over the last eight years, the district has averaged a 75 percent pass margin for our annual budgets. Would the town or county or state or federal budget when subjected to the same level of scrutiny pass a public vote with the same margin? Would those budgets even pass with a simple majority?

We find the comptroller’s report to be pedantic and myopic. It’s important to note that during the district’s exit conference with the comptroller’s office, the auditors acknowledged that they were unaware of the cost and time advantages of funding projects with available undesignated reserves. We find it regretful that they chose not to include that fact in their final report. A common refrain in public spending is “How are you going to pay for it?” We answer that question each year as we effectively develop and manage our budget. It is a process that takes an inclusive approach and considers the needs of many diverse stakeholders. By comparison, the audit report fails to see the bigger picture and sadly attempts to undermine the good work of this board and our administration as we continue to pursue our district’s mission on behalf of our children.

—Mineola Board of Education

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