On December 31, 2016 the governor signed into law Chapter 514 (S-5795-A/7675-A). The new law requires school districts to provide notice of reserve funds and reserves funded by resolution. It also requires that each school district post on its website a final annual budget and any multi-year financial plan adopted by the board of education. The law adds to existing school district budget reporting requirements that school districts develop a schedule of reserve funds setting forth the name of each reserve fund, a description of its purpose, the balance as of the close of the third quarter of the current school district fiscal year, and a brief statement explaining any plans for the use of each such reserve fund for the ensuing fiscal year. In summary the law will require school districts to:
- Post on the website the annual external audit along with any corrective action plan;
- Post on the website any Comptroller’s final audit report;
- Post on the website a final annual budget and any multi-year financial plan adopted by the Board;
- Fund any reserves in the future through a resolution of the Board of Education;
- Include a schedule of all reserve funds as part of the detailed statement that is appended to the annual budget document.
The District’s audited financial statements were approved by the Board of Education on October 3, 2017, and contain reserve balances and information as of June 30, 2017. The notes to the financial statements describe the legal authority for each reserve, its purpose, and funding. The balance of a reserve, in some cases, may exceed the initial authorized amount due to accumulated interest on balances carried over from year to year. The following show the balances of all the district’s restricted and assigned reserves as of June 30, 2017:
Workers Compensation Claims $ 802,457
Unemployment Insurance 94,782
Retirement Contribution Reserve Fund 3,200,405
Tax Certiorari 2015 351,416
Employee Benefits & Accrued Liabilities 918,622
Reserve for Repairs 55,694
Capital Reserve 2,340,523
Total Restricted Reserves $7,763,899
Restricted reserve balances are part of the school district’s overall fund balance, which is governed by Board of Education Policy #6245, Fund Balance and Governmental Fund Type Definitions. Funding for reserves is allowable only if it is consistent with law and regulation. The annual general fund budget contains estimates of revenues and expenditures, and the actual financial results will differ from the budget. In addition, as recommended by the Office of the State Comptroller, there are contingencies built into budgeted expenditures. In the event that any surplus funds are available at the end of the year, the Board of Education will determine the best use of these funds in accordance with policy #6245.
The following outlines the creation, purpose, funding methods, use, and monitoring policies for each reserve within our district.
Capital Reserve
Creation – $10,000,000 was authorized by voters in May 16, 2017 for a probable duration of ten years.
Purpose – The purpose of the Capital Reserve is to pay the cost of any object or purpose for which bonds may be issued. This includes future equipment purchases and any capital improvements needed within the district.
Funding – Funding may come from excess fund balance. Funds placed in this reserve are restricted for use for specific voter-authorized capital improvement projects.
Use of Reserve – Voter authorization is needed to expend from this reserve.
Monitoring – The Business Administrator will monitor this reserve. Comprehensive records will be maintained to support the amount in this reserve.
3/31/18 Reserve Balance: $2,351,348
Note: This balance represents accumulated interest between the initial authorized amount and any use of the reserve.
Recommendation: When the next capital project is planned, consideration will be given to using these reserve funds to offset project costs rather than bonding.
Reserve for Accrued Employee Benefits Liability
Creation- This reserve was established by a Board of Education resolution in May 2003.
Purpose – The purpose of the Reserve for Accrued Employee Benefits Liability is to pay for unused accumulated leave time contractually provided to certain groups of employees. This includes the authorized cash payment of the monetary value of accrued and accumulated but unused and unpaid sick leave, personal leave, holiday leave, and vacation time.
Funding – This reserve is funded from excess fund balance and is established through a Board of Education resolution.
Use of Reserve – A separate Board of Education authorization is not required to spend from this reserve. This reserve is used when an employee leaves the district and the accumulated leave is required. If a balance in the reserve is in excess of employee benefit obligations, the excess balance can be transferred to other reserves. There is no limit on the duration of this use of this reserve.
Monitoring of Reserve – The reserve is to be monitored by the Business Administrator.
3/31/18 Reserve Balance: $923,156
Recommendation: The District will fund this reserve, if possible, up to the allowable accrued benefits liability.
Tax Certiorari Reserve
Creation – Funding of $350,000 was established by a Board of Education resolution in June 2015 and money was subsequently deposited in the reserve fund in September of 2015.
Purpose – The purpose of the Tax Certiorari Reserve is to pay for potential judgments and claims for tax certiorari cases identified in the year the reserve was established.
Funding – This reserve is funded from excess fund balance and is established through a board of education resolution. Monies held in this reserve will not exceed the amount deemed necessary to meet anticipated judgments and claims.
Use of Reserve – It is not required to receive a separate authorization from the Board of Education in order to spend from this reserve.
Monitoring of Reserve – This reserve is monitored by the Business Administrator. Funds which are not expended for the payment of judgments or claims arising out of tax certiorari proceedings for the tax roll in the year the moneys are deposited to the fund will be transferred to the general fund on or before the first day of the fourth fiscal year following the deposit of such moneys to the reserve fund.
There are no pending cases from the tax year when the reserve was established.
03/31/18 Reserve Balance: $353,148
Note: This balance represents accumulated interest between the initial authorized amount and the use of the reserve.
Recommendation: The District will review tax certiorari claims annually to determine appropriations from this reserve.
Unemployment Reserve
Creation – This reserve was created by a Board of Education resolution in June 1995.
Purpose – The purpose of the Unemployment Reserve is to reimburse the State Unemployment Insurance Fund for any payments made to claimants in which the district elected to use the “benefit reimbursement” method.
Funding – This reserve is funded from excess fund balance and is established through a Board of Education resolution.
Use of Reserve – A separate Board of Education authorization is not required to spend from this reserve. At the end of the school year or within 60 days of the close of the fiscal year, the district may choose to transfer all or part of the excess amounts to certain other reserve funds, or apply all or part of the excess to the budget appropriation of the next succeeding fiscal year.
Monitoring of Reserve – This reserve will be monitored by the Business Administrator to assess the potential for incurring unemployment claims.
3/31/18 Reserve Balance: $95,249
Recommendation: Maintain current funding level to defray future claims.
Reserve for Retirement Contributions:
Creation – This reserve was established by a Board of Education resolution in May of 2006.
Purpose – The purpose of the Reserve for Retirement Contribution is to fund employer retirement contributions payable by an eligible school district to the New York State and Local Employees’ Retirement System (ERS).
Funding – This reserve is funded from excess fund balance and is established through a Board of Education resolution. The Board must determine the level of funding to meet future retirement obligations. The Comptroller’s Office has not set a specific limit for the maximum amount a district can fund this reserve.
Use of Reserve – Use of this reserve requires a Board of Education resolution. Transfers to or from other reserves require a public hearing within 15 days’ notice published in official newspaper(s).
Monitoring of Reserve – This reserve is monitored by the Business Administrator.
3/31/18 Reserve Balance: $3,216,193
Recommendation: The district plans to fund this reserve up to five years’ worth of employer contributions. Over the past ten years, the average employer contribution rate ranged from a low of 7.49% to a high of 20.9% of salaries demonstrating the volatility of annual payments. The current district ERS annual contribution is $1,518,079.
Reserve for Workers’ Compensation
Creation – This reserve was established by a Board of Education resolution in June of 1996.
Purpose – The purpose of the Reserve for Workers’ Compensation is to pay for actual claims, related medical expenses, and self-insurance administrative costs.
Funding – This reserve is funded from excess fund balance and is established through a Board of Education resolution
Use of Reserve – A separate Board of Education authorization is not required to spend from this reserve. This district is self-insured for worker’s compensation. This reserve is used to pay claims that exceed the budgeted appropriations for workers’ compensation. Funds remaining in excess of requirements to pay all pending claims may be transferred, within sixty days of the close of the fiscal year, to other reserve(s) or applied to the next succeeding fiscal year’s budget.
Monitoring of Reserve – This reserve is monitored by the Business Administrator.
3/31/18 Reserve Balance: $806,415
Recommendation: Maintain no more than five years’ worth of expenses in the reserve.
Reserve for Repairs
Creation – Funding of up to $50,000 was authorized by voters on May 18, 2004.
Purpose – The purpose of the Reserve for Repairs is to pay for repairs and maintenance expenses to capital equipment that are unusual and do not recur annually.
Funding – This reserve is funded through excess fund balance and requires voter approval. This reserve is to be replenished through budgetary appropriations or other funds legally appropriated. Any unneeded balance may be transferred to a reserve fund (capital reserve, tax certiorari reserve or retirement contribution reserve) pursuant to Section 3651 of Education Law.
Use of Reserve – Expenditures require a public hearing (5 day notice), except in emergencies. If there is no public hearing any amounts expended in a given year must be replenished to the reserve within two years.
Monitoring of Reserve – This reserve is monitored by the Business Administrator.
3/31/18 Reserve Balance: $55,969
Note: This balance represents accumulated interest between the initial authorized amount and the use of the reserve.
Recommendation: The Assistant Superintendent for Business and the Director of Facilities will meet in March to discuss any necessary repairs for the coming year. The Board can then consider designating the use of the reserve in next year’s budget.