Long Beach schools’ budgeting practices led to higher-than-necessary fees, state audit finds

A state audit found that the Long Beach school The district’s budgeting practices have resulted in higher-than-necessary levies, with an excess fund balance exceeding the legal limit, findings that district officials said were due to Superstorm Sandy reimbursement and the pandemic.

The district’s reported surplus fund balance exceeded 4 percent, the legal limit, in three of the four school years examined by auditors from 2018-19 through 2021-22, according to a report issued last week by the office of state Comptroller Thomas P. DiNapoli. .

The state office serves as a fiscal watchdog for local school district operations.

“If the Board and district officials had developed and adopted more reasonable budgets, they could have considered using these excess funds to fund one-time expenses or necessary reserves, pay down debt or reduce taxes,” the auditors wrote.

Long Beach officials disagreed with certain aspects of the state’s findings.

District Superintendent Jennifer Gallagher wrote in a response to the audit that the district kept more than 4 percent of its unrestricted fund balance for years after Superstorm Sandy on the advice of its outside auditors.

Following the 2012 storm, the district had larger amounts in that fund to protect it from the financial risk of unreimbursed storm recovery expenses.

“We were at risk of not receiving approximately $5 million in FEMA reimbursements,” Gallagher wrote in a statement to Newsday Friday. “Had FEMA failed to reimburse those funds (which was certainly a possibility at the time), it would have put the district in financial jeopardy.”

However, the state said district officials are not free to ignore the legal limit on the fund balance and that it has more than enough funds to avoid any financial burden.

After the district received FEMA reimbursement, Gallagher said, the district lowered the rate to 4 percent, where it has been for the past two years.

State auditors said officials must apply any excess fund balance that was greater than the 4 percent limit to reduce next year’s property tax or properly fund needed reserves.

In Long Beach schools, property taxes remained the same, a 0 percent increase, in 2021-22 and 2022-23. The district had a 1.5% increase in 2023-24 and for 2024-25.

In the state’s dispute that the district used the surplus to fund capital projects, such as repairing faulty steam lines, instead of lowering taxes, district officials said those projects are badly needed.

“Capital project funding is legally permissible and allows the district to address facility emergencies as they arise, just as a homeowner would for their home,” Gallagher wrote. “While keeping taxes as low as possible is certainly a high priority for us, we also need to make sure our facilities are safe and well maintained for our students.”

The district also cited the uncertainty created by the pandemic years for district budgets.

State auditors also wrote that district officials “failed to present the district’s spending plans in a transparent manner.” The district transferred a total of $17.3 million from its general fund surplus balance to the capital projects fund at the end of two of the four fiscal years reviewed, but that was not made clear in annual budget documents for voter approval.

Gallagher objected to “characterizing any of our budget practices as non-transparent.”

“We present the community budget in detail at the Board of Education meetings from January through April each year and inform the public of the budget details by mailing to each resident,” she wrote.

However, auditors said the 2022-2023 budget notices sent to taxpayers and audited financial statements reported a total allocated fund balance of $5,364,646.

“It was not transparent to voters that $4,285,400 was for capital project funding,” the report said.

A Newsday analysis published last month showed that 19 Long Island school districts have accumulated cash reserves that exceed legal limits in 2023-24. Long Beach was not one of them.

Dandan Zou covers education for Newsday. Previously, she worked for a community newspaper in Maryland and a personal finance magazine in Washington, DC