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By DAVE EMKE Special to the OBSERVER MAYVILLE — A state audit of internal controls over reserves in the Chautauqua Lake Central School District has revealed confusion from the district about how it should have been handling its Capital Reserve Fund. The audit, compiled by the office of state Comptroller Thomas P. DiNapoli, determined that a $2.5 million Capital Reserve Fund approved by voters in 1996 was being improperly used by the district as a ‘’rolling reserve fund,’’ spending from it and replenishing it without regard to the originally approved limit. As a result, the audit found, the district had placed more than $2.9 million into the reserve, exceeded the approved amount by $400,000. The reserve totaled $1.2 million as of June 30, 2008. The purpose of the reserve is to provide funding for constructing, acquiring, adding to, renovating, altering and improving district buildings, facilities and grounds and real property over a probable term of 20 years. In the district’s official response to the audit, Superintendent Benjamin Spitzer said that the district did not realize that the referendum meant the fund could not be replenished in excess of its original amount. “This was not fully understood at the time of the creation of the Capital Reserve Fund in 1996 or at the time of a voter referendum on March 29, 2000,’’ Spitzer’s statement reads. The 2000 referendum authorized placing certain proceeds received by the district in connection with the sale of certain former Chautauqua Central School District properties into the fund, which is what pushed it above its limit. The state audit recommended that the district ensure capital reserve is funded in accordance with provisions and that the excess $400,000 be returned to the general fund - recommendations with which the district plans to comply. Spitzer’s response also states that the district intends to present a new voter referendum that would then increase the limit of the Capital Reserve Fund “as soon as it is practical.’’ The district also will review its practices to ensure that the limit is not exceeded in the future. The comptroller’s office also took issue with accountability of the district’s debt service fund, which had a balance of $519,455 as of June 30, 2008. The fund is established when a capital improvement that was financed with outstanding debt is sold, or if state or federal aid is received for a capital improvement for which there is outstanding debt. Funds in the reserve may only be used to pay for debt service on the related obligations or for capital expenditures associated with the project for which the debt was issued. While proper transfers were made for debt payments from the general fund to the debt service fund, the audit also found additional amounts totaling $238,000 which were transferred during the 1999-2000 and 2006-07 fiscal years and with which the district could not associate specific debt issues. To avoid further issue, the audit recommended that the district identify the source of all money remaining in the debt service fund and develop a plan to pay debt service expenditures for money required to be held for that purpose. All money that is not required to be restricted, meanwhile, should be returned to the general fund. In his official response to the audit, Spitzer said the district understands that funds in the debt service reserve need to be properly identified. “The district understands that it needs to identify the source of the balance in this fund and then develop a plan to pay debt service expenditures from these funds, or return these funds to the general fund,’’ Spitzer’s statement reads. “This plan will be addressed further in the corrective action plan that will be developed following the receipt of the final OSC audit report.’’

 

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