VVS should adopt policy on reserve funds, audit says
VERONA — Issues with how the Vernon-Verona-Sherrill school district has established and maintained some of its reserve funds were cited in an audit by state Comptroller Thomas DiNapoli’s office.
The VVS Board of Education has not adopted policies for any reserve funds other than its health insurance reserve, and its tax certiorari reserve to address legal challenges of tax assessments is overfunded by $4.5 million, according to audit results issued Wednesday.
VVS district officials, in their response, noted there were no findings of improper or irresponsible accounting or financial management practices. They also listed corrective actions to be taken based on audit results.
The district’s corrective action plan said it will reduce the tax certiorari reserve by $4.54 million through one-time expenditures, funding other needed reserves, paying off debt, and/or reducing property taxes commencing with the 2018-19 fiscal year; the reduction of the surplus funds will be complete by June 30, 2021.
The district will establish a reserve fund policy to address the purpose of each reserve, optimal funding levels, and conditions for usage. It will be presented to the school board for review at its Feb. 26 meeting, with a recommendation for approval at the March 26 meeting.
The audit, covering July 1, 2015 through July 31, 2017, said the district has four general fund reserve categories with balances totaling about $10 million including health insurance, tax certiorari, employee benefit accrued liability and unemployment. While the school board has a health insurance reserve policy addressing its purpose, optimal funding level, and conditions for usage and periodic analysis, it “has not adopted any policies for the other reserve funds,” the state report said.
The balances in the reserves are “reasonable with the exception of the tax certiorari reserve,” which as of July 31, 2017 totaled about $4.86 million while the district had received notice of tax-challenge claims totaling $320,748, the report said; this resulted in an overfunding of $4.54 million.
The report referred to a 2013 settlement between the Oneida Indian Nation, the state and Oneida and Madison counties involving the nation providing payments to the state instead of property taxes, with the state allocating some money to the counties. It also mentioned a 2015 agreement between VVS and Oneida County, providing for the county to make payments to the district, with the district agreeing not to litigate tax grievances filed by the nation or challenge the settlement agreement; if the district violates the agreement, it is required to pay back any proceeds received, with interest, the report added.
The district should return the excess amount to its unrestricted fund balance, the report said, and use the surplus for one-time expenditures; funding needed reserves; paying off debt; and reducing district property taxes.
In the VVS district’s response, Superintendent Martha Group said “it is reassuring...that there were no findings of improper or irresponsible accounting or financial management practices. This should also serve to reassure the school community that the school district takes its responsibility for fiscal accountability and the safeguarding of public funds with the utmost seriousness.”
Group also detailed the district’s approach for the tax certiorari reserve since establishing it in 2005, and said its funding level was related to potential liability involving terms of the agreement for payments from the county. She commented it was in the “pursuit of ensuring financial stability that the tax certiorari reserve was funded and maintained, not to the community’s detriment, but in fact to its benefit.” She further said it was “important that the district be thoughtful and intentional in its reduction of the tax certiorari over time.”