Audit faults Southampton schools' budgeting practices for accumulating $21 million in cash reserves
State Comptroller Thomas P. DiNapoli. Outsized surpluses have been a frequent subject of comptroller's reports, not just in Southampton. Credit: Hans Pennink
Southampton school officials over a period of five years continually overestimated expenses and underestimated revenues while accumulating $21.6 million in cash reserves, a state audit has found.
A newly posted audit report from the office of state Comptroller Thomas P. DiNapoli also concluded that the Southampton district each year appropriated money that had not been spent on operational costs and made unbudgeted transfers to reserves. This practice continued year after year between July 2018 and June 2023, auditors added.
The state report declared that "taxpayers were taxed more than necessary" due to what they described as the district's decision to hold on to the money — an assertion disputed by the district's administration.
In response to the state's critique, Jacqueline Robinson, president of Southampton's school board, pledged in a letter that the district would work to improve the accuracy of its financial estimates. Robinson added, however, that some estimates were difficult to make, due to special circumstances in her East End district.
As an example, Robinson stated that between 10% and 12% of the district's annual revenues consisted of tuition fees paid for students living outside the district but attending its classes. Southampton High School enrolls a significant number of teenage students who have completed elementary classes in smaller districts nearby.
Due to this situation, Southampton faces difficulties in estimating tuition revenues when it drafts its annual budget proposals in the spring — several months before it can confirm how many students will be in attendance in September, Robinson added.
"Revenues are not intentionally underestimated," the board president wrote in her letter to auditors.
A district spokesperson said neither Robinson nor Superintendent Fatima Morrell would comment beyond what was said in Robinson's letter.
Overall, Southampton enrolls about 1,300 students and operates on a $79.9 million budget for the current 2024-25 school year.
Statewide, the size of districts' cash reserves is a politically sensitive issue. Outsized surpluses have been a frequent subject of comptroller's reports, not just in Southampton, but in dozens of other systems as well.
Newsday reported in July that 19 districts on the Island had accumulated unrestricted reserves — that is, funds that can be spent at the discretion of local boards — beyond the limit set by state law. The current limit is equivalent to 4% of districts' annual budgets.
State records include Southampton among those districts, with 4.13%. The district calls that a typographical error, adding its actual figure is 4%.
Gov. Kathy Hochul has scolded districts that hold excessive reserves and ordered a review of that situation and related fiscal issues. State consultants are due to deliver a report on those issues, along with recommendations for corrections, by Dec. 1.
In Southampton, one particular target of state auditors was the districts' establishment of reserves restricted for specific uses such as contributions to a teachers retirement fund. As of June 2023, Southampton had established 11 separate reserve funds totaling $23.1 million, auditors reported.
Auditors criticized the district for what they described as its failure to establish conditions under which retirement reserves could be used or to explain their optimal funding level. Auditors added that the district had not been able to explain the basis for the balance amounts in seven of the reserve funds.
Robinson, in her letter, said the district would review its reserves "to ensure they are necessary and reasonable."
John Hildebrand is Newsday's senior education writer and has covered school news and policy issues affecting Long Island for more than 40 years.
