HARRISVILLE — The state Comptroller’s Office finished an audit of Harrisville Central School District last week, and found that the district unnecessarily borrowed nearly $300,000 for the purchase of 11 buses.
The district will take on an estimated additional $11,000 in unnecessary interest expenses from the debt, the comptroller’s office said.
This is in addition to another issue, where the district was not appropriately documenting and requesting bus purchase aid from the state education department.
According to the report issued by the comptroller, school districts are entitled to “transportation capital aid” from the state’s education department, which is meant to cover the debt they undertake for the purchase of school buses.
Over the last six fiscal years, the district used a process to finance the purchase of new buses that involved bond anticipatory notices, which are short-term interest-bearing securities issued in advance of a larger bond issue. They are typically used by governments to generate funds for upcoming projects.
According to the comptroller’s report, the district’s Board of Education approved the submission of a proposal with the annual budget that sought the voters approval for the purchase of new buses at a set maximum amount, to be financed by the issuance of a bond or BAN. After the voters approved the budget, the board would adopt a bond resolution for the maximum approved amount.
Officials then ordered new buses using a state contract, and received a trade-in credit for the buses they were retiring. The resulting costs of the bus purchase were typically about 25 percent lower than the approved maximum, yet the board authorised the issuance of bonds or BAN’s to the maximum amount agreed upon earlier in the process.
All the money raised from the bond or BAN issuance was then transferred to the district’s general fund, which is in violation of a local law that requires any money left over from the bonds or BAN’s after reimbursing the general fund for the costs of the buses be put into a separate account.
The result is that the district borrowed about $294,000 more than was necessary, according to the comptroller’s report.
“The District did not apply for all the State aid to which it was entitled for new bus acquisitions,” read the report.
According to the state’s review, the district purchased seven new buses between the 2016-2017 to 2019-2020 fiscal years, for a total cost of about $582,300. When audit work began in 2019, the district had not applied for state aid for any of those seven buses, which could’ve resulted in the loss of over $477,000 in potential revenue.
The report states that after the comptroller’s office asked about the districts process for applying for state aid, the district’s business manager applied for aid for three of the seven buses, and was approved to receive $227,240. The comptroller’s office then found that those applications used incorrect purchase prices, $4,413 less than the actual purchase price for those buses.
The report states that the district will lose about $3,400 in state aid due to those errors if they stand uncorrected.
The report goes on to say that the district’s business manager has not yet applied for aid regarding two buses purchased over 3 years ago, and two buses bought in July of 2019, which the comptroller’s office estimates translates to a loss of approximately $246,550 in state aid over the next five or six years.
“A representative of SED told us that SED will likely approve State aid for the remaining four buses once the District applies for the aid,” the comptroller’s report reads. “However, the failure to apply for State aid for all new bus acquisitions in a timely manner has resulted in delayed payments of State aid and the District levying more real property taxes than would have been needed to fund operations during the 2017-18 through 2019-20 fiscal years.”
The state comptroller’s office suggested that the district implement processes that ensure that all state transportation aid applications are accurate and submitted in a timely manner, ensure that the business manager prepare an annual reconciliation of expected and actual transportation aid received, and file the appropriate aid for four remaining buses.
The district’s response was included in the report published by the comptroller’s office.
“The Harrisville Central School District is in agreement with the findings of the New York State Comptroller’s Audit,” read the district’s response letter.
The letter, signed by Jan Mosher, president of the Harrisville Board of Education, and Robert Finster, the superintendent of schools, states that the district has consulted with its financial advisers to ensure that, going forward, they only borrow the exact amount required.
“The first finding of not submitting the proper paperwork to the State Department of Budget for several buses was a complete oversight on my part and our business manager’s part,” reads the letter. The letter states that the district has established a calendar reminder on their computers to indicate that the bus approval forms must be completed.