The Riverhead Central School District had a good year financially in its 2021-2022 fiscal year, with actual revenues coming in higher than budgeted and spending less than budgeted, according to the district’s annual external audit.
Auditors Cullen & Danowski presented the results of the their audit of district finances for the 2021-22 school year at the Board of Education Tuesday night, just as district administration officials began to present plans for the 2023-2024 school year.
“[A]s a result of actual revenues coming in higher than had been budgeted, there was a positive financial result for the school district,” said Jill Sanders, partner at public accounting firm Cullen & Danowski. “On the spending side, the school district spent about almost 96% of their budget. And so that’s a good place to be.”
The district’s fiscal year runs from July 1 through June 30.
Total expenses for the 2021-2022 fiscal year totaled $162,118,313, against total revenues of $177,265,185.
State aid and operating grant increases, as well as an increase in payments in lieu of taxes strengthened the district’s bottom line last year.
Revenues from state sources increased $15,135,281, the statement shows.
The district received funding of $6,003,741, allocated under the Coronavirus Response and Relief Supplemental Appropriations Act, and $12,820,407 under the American Rescue Plan. As of June 30, the district had spent roughly $6 million of that money.
The district’s property tax levy in 2021-2022 was the same as the prior year’s levy.
As a result of excess revenues over expenditures, the district’s unassigned fund balance increased by nearly $10 million last year. The district allocated more than $3.8 million to reserves and appropriated slightly less than $4.2 million to the pay expenses in the current fiscal year, ending the year with an unassigned fund balance of $7,927,986. That amount is 4.7% of the 2022-2023 budget, which is in excess of the 4% statutory limit, the report notes.
Operations last year improved the district’s total net position by more than $15 million over the prior year, but the district’s total net position — assets to liabilities — was a deficit of more than $52 million at June 30, 2022. Net position takes into account decreased values of capital assets due to depreciation, and increases in pension liabilities and post-employment healthcare benefits.
The district also refinanced roughly $22 million in bonds that resulted in a net gain of about $1.29 million.
The auditors also sent a letter to the district with comments on its internal control. Although the firm did not cite any “significant deficiencies” or “material weaknesses,” it commented that the firm had to “propose a significant number of audit adjustments to correct misstatements; without these audit adjustments, the District’s financial statements would have been misstated.”
The letter states that “Management has accepted and recorded these audit adjustments.”
The district’s business official, who is responsible for financial operations, was “administratively reassigned” early in the 2021-2022 fiscal year. The district hired two people to perform the function of business official.
The former business official, Deputy Superintendent Sam Schneider, was demoted and sidelined pending an investigation into unspecified allegations. A forensic audit of the last five years of the district’s business affairs by an accounting firm hired by the district found no evidence of fraud, embezzlement or malfeasance. The district subsequently entered into a settlement agreement with Schneider, which stated there were “certain differences” between him and the superintendent and school board. The district agreed to pay Schneider his full compensation through the end of his contract, June 30, 2022 and he agreed to resign. He was hired soon after as the business official of the East Hampton Union Free School District.
Riverhead got a new full-time business official at the start of the current school year in Assistant Superintendent Rodney Asse.
The auditors also recommend in the letter several other practices the district should undertake with concern to its business.
Among them is a recommendation that the district appoint a central treasurer for the Extraclassroom Activities Fund, the financial transactions of school clubs and activities. The fund, although independent from the school district and managed by students, is under the oversight of the board and is reported as a special revenue fund, according to the auditors.
The Extraclassroom Activity Fund could not be adequately audited, according to the report, due to insufficient cash receipts. The auditors prepared a cash-basis financial statement, which does not comply with generally accepted accounting principles, the report states. As such, the auditors could not issue an “unmodified opinion” for this fund, the report states.
The auditors made the same recommendation for a central treasurer to manage the Extraclassroom Activity Fund in the previous year’s audit report. The Board of Education adopted a Corrective Action Plan in January, and prior to that appointed a central treasurer for the fund. Leidis Rubi, a senior account clerk in the district, will be paid $20,000 annually to do the job.
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