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BC News

June 16, 2011

A note from Superintendent Michael Tebbano regarding the Comptroller's Audit

This note to the community addresses the recently released New York State Comptroller's Office audit of the district, which Dr. Tebbano spoke about at the June 15 Board of Education meeting.

Dear BC Community:

Auditors from the Office of the New York State Comptroller spent eight weeks in the district last summer as part of their routine audits of the state's school districts. They released their audit report this week.

As a district, we have already addressed most of the items in the report. We want to provide our community further context for others, including the fact that we take exception to one of the findings.

The routine audit cites the district for its procedures in setting up a reserve fund eight years ago; the purchase of gift cards to recognize retirees last year; and the manner with which the district obtained competitive prices for some services. Auditors reviewed the district’s internal controls over budgeting and purchasing from July 2009 through August 2010.

While the report covers these select areas, it provides no context about the overall fiscal management of the district, which has been strong. During this recent period of unprecedented fiscal challenges, we have held tax increases to historically low levels, and preserved programs to a great extent compared to many districts across the state. This is precisely because we have been so conservative and careful with taxpayers' investment in our schools, especially in the areas of fiscal reserves and purchasing.

The fund balance issue in the audit stems from the settlement a decade ago of an assessment challenge with our then largest commercial taxpayer, PSEG. The agreement resulted in the annual tax payments generated from that property declining by $3 million, with the provision for some transition payments. District officials at that time used these payments to establish a “Tax Reduction Reserve,” designed to help cushion this large loss of tax base for the rest of taxpayers.

According to the Comptroller’s report, such a reserve can only be funded by the sale of district property, meaning BC did not have the authority in 2003 to establish this reserve.

Next year, we plan to use the remaining money in the reserve to again help us weather a difficult budget year. This will address the concern presented in the audit.

Over the years, this reserve has benefited taxpayers greatly, allowing us to restrain tax increases and preserve programs. We have talked publicly about this fund since it was created. Also, in extending the district's AA bond rating this past fall, Standard & Poor's cited the district’s strong fiscal reserves as a positive factor in its favor.

In our formal response to the Comptroller's report, we suggested the office use its role at the state level to broaden the criteria for the establishment of tax reduction reserves, which would allow more districts to realistically benefit from what can be a useful fiscal tool.

Another issue in the Comptroller's report is the district's purchase of 26 gift cards of $50 each to give to retiring employees at a staff recognition dinner last May. The district also spent $2,974 to offset the cost of the dinner.

The state allows school districts to expend funds for tokens of appreciation for years of service or a milestone such as retirement. It does not give districts the authority to pay for meals consumed by officers, employees or guests, according to the audit.

We believe it is important to recognize the careers of those who do so much to provide for Bethlehem’s children. Still, we accept that this was more than we should have done, and have changed the way we honor our retirees. Last night, there was a 30-minute recognition event for this year’s retirees just prior to the  Board of Education meeting; Honorees were given certificates and a pin to mark their service.

The audit also discusses some elements of the district's purchasing practices. We obtain competitive prices for all goods and services, which we are required to do.

However, the Comptroller's Audit outlines five areas of professional services where it contends that the district did not seek competitive prices in an appropriate manner. It suggests that this tallies up to $718,000 in services for which we did not seek competitive pricing. This is not accurate.

For example, rather than soliciting the bids directly for general liability and workers’ compensation insurance, the district used a broker that obtained competitive quotes from carriers on its behalf. We then chose the carrier that offered the lowest price.

We believe a better understanding of the way insurance is procured indicates that we acted appropriately. We take exception to that finding.

The report also indicates the district expended about $5,000 for products from employee-owned businesses. While we should have taken an extra step in these cases to meet policies, it's important to point out that we solicited multiple price quotes in these instances, and the businesses selected offered the lowest prices.

In closing, we recognize the importance of these audits, and appreciate the recommendations and the professional manner in which it was conducted. If you have any questions about the report, please give us a call.


Dr. Michael D. Tebbano


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