The fate of sports, musical performances and clubs in the Riverhead Central School District remains up in the air after a divided school board last night voted to wait until it receives an auditor’s report to make a decision.
The town’s auditing firm is scheduled to present its report on FY 2019-2020 to the school board’s audit committee on Sept. 16.
Since fall sports — excluding football and volleyball — are not permitted by state COVID-19 restrictions to begin practicing until Sept. 21, a majority of the board agreed last night to hear what the auditors have to say about the district’s cash position before making any decisions on whether to fund sports and other extracurriculars.
Gov. Andrew Cuomo has warned that school districts may face up to a 20% cut in state aid during the current fiscal year unless the federal government provides financial relief to state and local governments to help them recover from the fiscal crisis triggered by the pandemic this year.
Jill Sanders, CPA, of Cullen and Danowski, the school district’s outside auditing firm, said a 20% cut to Riverhead’s state aid would be a loss of $6.5 million. The district would have to tap into its unassigned fund balance to try and make up the loss or make additional program cuts.
And if the 20% cut is permanent, Sanders said, the district will have to deal with that gap in the 2021-2022 fiscal year as well.
Unassigned fund balances are different from reserves, Sanders explained. Reserves are set aside for particular purposes, such as, for example, compensated absences when people retire from the district. Collective bargaining agreements provide for the cash payment of a certain amount of accrued sick leave upon retirement, so the district sets money aside in a special savings account — a reserve fund — to cover those future expenses. That reserve can only be used for that particular purpose, Sanders said.
“Reserve balances are not there to support general spending by the district,” Sanders told board members. The expenditures have to be specifically authorized by New York State General Municipal Law.
According to the Office of the State Comptroller, “Fund balance represents resources remaining from prior fiscal years that can be used to finance the next year’s budget or set aside in reserve funds for specific purposes, or both. New York State Real Property Tax Law limits the amount of fund balance that can be legally retained by District officials to no more than 4 percent of the ensuing year’s budget.”
Sanders told the board Riverhead’s unassigned fund balance for fiscal year 2019-2020 — was $5.7 million.
If the board wants to fund anything not presently included in the contingency budget — such as sports and other extracurriculars — it would have to come out of the unassigned fund balance, Sanders said.
If state aid is cut, the amount cut would also have to be made up through unassigned fund balance. Any extra contingency budget spending also comes out of unassigned fund balance.
As a reminder, Sanders said, the district is already relying on about $3.5 million in a combination of unassigned fund balance and reserves each year to support the budget in the following year. If the district uses unassigned fund balance to make up state aid it loses and fund new items added to the contingency budget, it won’t have unassigned fund balance to support next year’s budget, she said.
“You would need to be able to recreate that as an additional funding source on top of everything else,” she said.
If that results in the district having to exceed the 2% cap on its property tax levy for the next fiscal year, the budget would have to be approved by a supermajority vote.
But, Sanders cautioned, “the audit is not complete and I don’t know what the final numbers are. I am scheduled to present the audit report to the audit committee towards the latter part of September. Once we have audit numbers in front of us, it might be more beneficial for the board to make decisions based on what those numbers are.”
After trustees Therese Zuhoski and Christopher Dorr renewed their request to fund fall sports and other extracurricular programs, trustee Matthew Wallace made a motion to table the discussion until after the board has the audit report for fiscal year 2019-2020.
“We will have more knowledge of how much money we have. That was the recommendation of our auditor,” Wallace said.
Trustee Susan Koukounas seconded the motion and the board voted 5-2, with Zuhoski and Dorr dissenting, to table it until after the auditor’s report was in.
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