New budget mathematical concerns

[Go Plainedge!]

There is a need for an accountant that lives in Plainedge who is willing to get involved in the School District financial affairs.

Basically, what is needed is someone of a creditable financial and/or accounting background to refute the advice given to Dr Richman by "our accountants" in his Budget Funding letter of 4/7/05 were it concerns the addition of $390,000 to the Contingency Budget calculations.

Since this money required approval by the voters to be transferred into the Capital Portion of the Budget, and since the voters did not approve the budget and this transfer, the amount should never have been included into the Contingency Budget calculations. The Contingency Budget only comes into play when the budget is voted down and the transfer rejected!

The latest Tax levy includes this $390,000 overage based upon an improper Contingency Budget total funding calculation. It is reflected in levying $390,000 too much property tax.

The originally released documents from the District clearly shows these computational errors. Because of the late release of the Minutes of the August tax levy meeting, more than 30 days have passed since the aggrieved action and there can be no Appeal to the Commissioner of Education. Comptroller Hevisie is the only formal recourse if an appeal to the Board and Dr. Richman has no impact.

By the way, this $390,000 money from excess property tax is in ADDITION to the $390,000 from the "Packard Fund" money which should have gone back into the General Fund Balance when it was dissapproved as a transfer into the "repair reserve fund".

I believe the woman responsible for helping raise the sports money (she spoke at the last meeting) is an accountant (CPA) and she was going to submit her interest in becoming a board member.

[justfacts]

Last year the School Board and the Administration added the following four numbers;

600,000 + 705,500 + 14,638,059 + 41,190,363

then published the results as 56,539,922.

Is that the number you get? I don't! And, if you add correctly, it's not the number you should get.

The purpose of this note is not to dig up an old "arithmetic error" that the Administration made last year and the Board reviewed and approved ~ but to raise the most serious question of;

"Why do we continue to let the Administration and the Board to participate in number counting and addition when it comes to that most vital of acts ~ the tally of the votes!"

This is especially true since in the past two years, the Administration and/or Board members participated in the four tallies of the votes - in some instances this was done at a table behind screens so the attending public's view of the process was blocked.

At least twice the vote count took an undue amount of time because of tallying and re-tallying. It did not appear to be a reliable process. And, in one instance, the machine count was done over because of an undisclosed problem. Dr. Richman himself participated in the "do over" count at the machines themselves, opening and re-closing each after their initial sealing.

The vote count is supposed to be done solely by the School District Clerk and the School District Attorney, each verifying the work of the other and resolving any conflicts in an unbiased manner. This procedure is spelled out in the legislation and process for vote counting supplied by the State. [/i]

It is also best done in full open view of all those attending the meeting for the count, not done in screened off areas.

It is not a matter of distrust, nor of implying improper past counts (as occurred at the least in the year 2000), for us to demand that the Administration and the Board recuse themselves from any vote counting activity in this and all future counts of the vote.

It is a matter of adhering to a recommended method that will not lead to mistrust. Is there anyone else in the District of like mind?

If, so, let us draft a letter to the Board and the Administration requesting that they stick to the State guidelines and not have anyone of them participate in the vote tally process - especially not doing as was done last year, appointing the President of the Board to the Vote Committee so that he could participate in the count.

[justfacts]

Anyone whose followed some of the posts on this Forum would know by now that I hold in very little respect the present Administration's business acumen.

I believe they tend to make too many "minor arithmetic errors", penny wise and pound foolish judgments, unfounded and ill supported changes in the cost for Sports, Programs, Staff, etc. In addition, they fail to report in full on elements of the Budget that the Commissioner's and the Comptroller's recommendations and Decisions say they should report on in a well prepared Budget. (Fund Balance, Rental income, etc.)

And I'll bet that a reliable current Inventory of the District's assets is non-existant (Just how many working musical instruments are sitting in closets in the old Packard building? What are they worth? How about the Shop and Laboratory equipment? The "residue" from the Planetarium? The good desks, tables, chairs, cabinets, lights and shelving?) If nothing else - some of these items could be sold or donated down South, rather than laying fallow, uncontrolled and neglected in a building open to renters.

But - then again, I have had some first-hand dealings with their incompetent actions that most of the Plainedge residents have not had. As an instance here's a little story about ridiculous thinking on the part of an Administrator (one possessing an MBA, or not)

In 2001 the District, after holding onto the Deed for the Library Building for 40 years or more as required by law, had new Administrators who "discovered" it was in their possession. Now the Library building, as well as all District buildings, is owned outright by the residents of the District, the District just holds them in trust for the taxpayers, using the deed with banks as the collateral basis for taking out TANs and BANs. [/b]


However, one of these Administrators decided that he would try to "get mo' money" into the School District by charging the Library "rent" for the use of the building! Damned if he wasn't serious!

Of course, this would mean that the Library would have to put a cost for renting into its Budget and collect taxes to pay for this rental - while the School would just report it as "rental income" (?? as they do - or don't do, for other property??)

Now, I leave it for you to decide, Just how asinine is it to even conceive of charging the public for rental of property they already own?

The Administrator was sent packing with that stupid concept from the Library Board meeting - at least they had a better sense of what is right.

Is it any wonder that I consider that Administrator to be horrendously unqualified to make a business decision for the taxpayers of this District?

[justfacts]

A Suggestion for improved School District Budget information to taxpayers.

If anyone with past Budget information available chooses to do so, you can check two columns that appear in the Budget - the present Proposed Budget numbers and the Past Budget numbers for the prior year. There may or may not be a third column showing the percentage change of the Proposed Budget amounts from the Past Budget amounts.

But there is a problem here! Often, the listing for the Past Budget numbers has values that are actually far different from the numbers put out the year before when the Past Budget was the Proposed Budget! Was there skulduggery here? Is deception being tried? The answer is NO! Just the standard for accounting trickery that we permit to be pulled on us each year!

It is just that the District uses some numbers for the "Past Budget" that aren't what was actually proposed in the prior year - but they do reflect what actually happened during the year! This mix and match technique of giving us Proposed vs Actual values is indicative of poor, very poor, accounting techniques that are commonly used when making up Budgets. They confuse issues, and do not clarify them! It allows "open barn doors" to appear closed to the casual observer!

Don't believe me? Just check this out from out Plainedge Budgets for the past years. The State Aid listed in the 2005-06 Proposed Budget plan for "Revenue" said that the Budgeted 2004-05 Aid was for $14,638,059. Yet - get your hands on a Budget Summary sheet from 2004-05 and you'll find that the actual number entered for State Aid Revenue was $12,652,535! That mysterious $1,985,524 (or 16%) increase in State Aid may not be of significance to you, but to me it is very significant.

It means that the Proposed State Aid value given for last year was so far under the actual value that almost $2 Million more in Property Tax was levied than what was actually needed! Look at the amount of Revenues over Expenses that happened last year - it actually matched this $2 Million excess (within the expected Budgetary accuracy amounts)

The interest that can be earned on $2 Million for one year (the mandated, but not disclosed as such, "advanced loan" taken by the District of Taxpayer's money) is at least $70,000!!! Just how many unheralded "car washes" does that amount to?[/b]

Budgeting differences of this amount seem to get "hidden" by our (the Voters) casual acceptance of any numbers put forth by the District on the Budget or Budget Summary sheets. The District is very aware of our indifferences when they prepare the Budgets.

I propose that we, the Voters, insist that the School District change this for any new Proposed Budgets by adding a Third column to the Budget - - - an "Actual Revenue/Expense" column sandwiched in between the true "Proposed Budget" values for last year and the "Proposed Budget" values for this year! This way, we can easily see how the actual Revenues or Expenses for last year met their forecasted values. It would give a much better idea of how reliable this coming year's Budget numbers are.

Having three Proposed Budget columns:

Past Year Budgeted Revenue/Expense - Past Year Actual Revenue/Expense - New Year Budgeted Revenue/Expense

will, for the first time, give us a measure of what the School District performance against the Budget really was during the past year!

And! - it requires no extra bookkeeping to do since the District is required to put out a report to the Board each month with this information - "How are we doing with regard to actual Expenses/Revenue compared to Budgeted values?" YES!, for the last few months, it may need some updated estimates - but this is what is done with the actual Budget numbers anyway - so it's not a new or added work effort! It simply means the District must tell the community what they are telling the Board!

What say, members of the Plainedge community, do you have the same interest that I have in requiring the District to put out a clearer and more accurate Proposed Budget in this coming year? One that is more consistent with accounting principles and one that is more logical in the information that is given to us? OR, do you want to have more of the "same-old-same-old" that covers or hides at least $2 Million in excessive Property Taxes?

By the way - this $2 Million "under-estimated" State Aid was hidden from the State! In the January just before the 2004-05 Budget was prepared, the District gave the State an estimate of what they expected in State Aid for 2004-05! Was it for the $12.6 Million they told us in the Budget the District prepared two months later? NO!, Absolutely NO! It was for the standard State formula value calculated at $14 Million - closer to what they really got at year's end!

If you don't watch closely, the "Prestidigitators of Plainedge" will get you every time![/b]

A third column entry system would cause the Proposed Amounts and Actual Amounts to be fully shown. It eliminates one more way to hide false or misleading information! There could have been no hiding of the big $2 Million difference in State Aid had a third column Budget report been in effect last year. If you believe as I do, that this third column entry is a practical way to improve Budgetary information, then speak up to the District on this issue - do it at meetings, in e-mails to each Board member, or at this Forum. Whatever way you do it, the prime action is for you to do it!

[Go Plainedge!]

I like the idea of the side by side columns. I think this accomplishes many things:

1. It allows for a basis of comparison to really see where the growth is occuring and where possible trimming can occur.

2. It serves as a checks and balance to insure that money is not foolishly being spent in one catergory year over year.

3. It allows the community to become more educated where the money is being spent - thus possibly creating a more positive feeling towards the proposed budget.


Hey Just...do the BOE members personally sign the proposed budget after they have reviewed it and checked it's accuracy?

[justfacts]

Just in case it was missed in an earlier post - let's repeat some prior info with highlights!
===========================================

Hey! What happened Administration? You took a free $2,000,000 loan from every taxpayer in the 2004-05 Budget - and never once said "Thank You!"

Yep! The Administration came knocking on the door of every home in Plainedge, (there's more than 6,200 of them) and said "Give me over $300 in cash now! - I want to put it in the Bank and earn interest on it!". And we, the Plainedge residents, kicked in without a murmur and gave the Administration a free loan that they earned more than $70,000 on!

And not one word of thanks from them! In fact, they made it a living hell last year in this District when they wanted even more than that (twice they demanded a 13.34% Property tax increase - or else!). Then, when they didn't get that after being spoiled by the $2,000,000 free loan we gave them the year before - they acted like spoiled brats and cut out programs this year! That's just one poor way to say "Thank You" to taxpayers!

Don't believe me? Just get some past Plainedge Budgets and check out these numbers.

The State Aid listed in the 2005-06 Proposed Budget plan for "Revenue" said that the Budgeted 2004-05 Aid was for $14,638,059. Yet - get your hands on the Budget Summary sheet from 2004-05 and you'll see that the actual number they entered for State Aid Revenue was $12,652,535! That's a mysterious $1,985,524 (or 16%) and sudden increase in State Aid!

But then again it's not that mysterious - this $2 Million Budgetary "under-estimated" State Aid was never shown to the State! In the January just before the 2004-05 Budget was prepared, the District, as usual, filed with the State what they expected for State Aid in 2004-05. Was it for the $12.6 Million they told us in the Budget two months later? NO!, Absolutely NO! It was for the $14,000,000 they would count on using the standard State formula to figure out how much was coming! - closer to what the State actually kicked in at year's end![/b]

It means that the State Aid value they put in the Budget papers to us was so far under the actual value that almost $2 Million more in Property Tax was levied on us than what was actually needed! The result of this finagling can be seen by looking at the amount of Revenues over Expenses for last year - it was just about $2 Million - if you allow for the other number juggling that also went on!

The interest that can be earned on $2 Million for one year in a mandated, but not disclosed as such, "advanced loan" taken by the District is at least $70,000!!! Just how many "car washes" did the unrecorded interest on that free loan amount to? Where did it go?

Budgeting differences of this amount get "hidden" from us because we casually accept any numbers put forth by the District on the Budget or Budget Summary sheets. And, believe me, the District Administrator is very aware of our lackadaisical indifference to crunching numbers when he prepares the Budget. I wonder what the schnorrer is going to hit us with this year?

If you don't watch closely, the "Prestidigitator of Plainedge" will get you every time!

[justfacts]

Revisiting the past to prepare for the future.

Last year the BOE put out the following information to explain how they had done their best to prepare a tight budget. They pointed to items that were beyond their control and how the impact of these things, not the BOE "extravagances" were the cause of the large percentage increase in the Budget. Wordmanship is their tool used to convince the unwary. Let's just look at these words from them more carefully to see what the real impact on the Budget increase was from this one factor that they chose to highlight.

"As an employer we are also required by law to contribute a percentage (determined by the state) to the state’s Teacher Retirement System fund; this must be included in the budget as an expenditure item. Contrary to rumor, this is not a district-initiated pension plan and is not part of the teacher’s contract negotiations with the district. The way this works is that NY State collects money from every school district, invests the money as they choose (hoping to get the best return on their investments), and then uses the money in the fund to pay out pensions to all NY State teachers when they retire. Unfortunately, due to the state’s bad investment choices (which they blame on the post Sept. 11th decline in the economy), they did not get the return they had hoped for. Now they are forcing the school districts to make up the shortfall in the TRS fund to enable them to pay the pensions. As a result, the state is mandating a 29% increase from the district, which brings our cost up to approx. $1,300,000.00. The cost to the average homeowner in Plainedge, just for this one item in the budget over which we have no control, equates to approximately $176.00 of your school tax bill!"



Now - just how much of a percentage increase does this pension cost have on the final budget? Is it 29%? Is it $176? NO!, it is none of these numbers.

Let's look carefully at that 29% increase that brings the cost up to $1,300,000. This means that the amount before the increase (call it "X" since we're into School matters) was $377,000 less or $923,000. So the real increase "mandated" for pensions is $377,000 above last year's value. Since last year's Budget was $55,313,898 the net effect of this pension change is (100% x 377,000/55,313,898). That comes out to a 0.682% increase on the Budget! So the percentage increase by this one element is nowhere near the 29% the "wordsmiths" prominently used - but is an actual 2/3rd's of a percent Budget increase.

Let's look at the dollars involved. Are they $176? Well, the total dollars spent on the pension is, they say, now going to be $1,300,000 from the prior level of $923,000. That $377,000 total increase is spread around over all the homes in the district. Just how many homes are there? Using the "wordsmiths" numbers the $1,300,000 reduced to an average of $176 per house. That comes to ($1,300,000/$176) houses or a total of 7386 homes. So the increase over last year's per home cost would be ($377,000/7386), or $51. A lot of money, yes. But not as much as one would think from the way the "wordsmiths" said it. The $125 paid last year would now go up by $51, 1/3rd the amount that a casual reading of their information would imply.

The end result is that this Pension issue, which has been a "hot-button" issue among NY State employers, changed. That's due to angry protests from all of NY State employees so the legislators stepped in. They reduced the hardship of the impact by a change in reguations which phases in the change over a few years, rather than it being implemented all in one year. So, did the "wordsmiths" tell us that? No, they chose to "cry WOLF!" in a very loud way - a way that still can't explain why the end effect of their proposed Budget was a "take it or leave it" attitude to mandating upon us a 13.34% Property Tax increase.

Looking towards tommorrow - Let's watch this new Budget and its information package carefully, reading "between the lines" where we can!

[justfacts]

Quite frequently, there is a quote made about what the "average" household pays in taxes in Plainedge. In no way shape or form does this mean the average person will pay this amount!

For example: we could have 9 homes in the district paying $5,000 in taxes and one paying $25,000. That's a total of $70,000. It does not mean that "most people" pay $70,000/10, or $7,000 in taxes.

Also we could have 9 homes in the district paying $5,000 in taxes and one paying nothing. That's a total of $45,000. It doesn't mean that most people are paying $45,000/10 or $4,500 in taxes.

So when the "Average Taxpayer" costs are mentioned we have to realize this is an approximation based on the fact that there are a very large amount of taxpayers paying roughly similar amount in taxes, and that, although some taxpayers will be at the far end of these "average" costs, there will be many that are somewhat close to this average amount.

Just how large is that large amount of taxpayers in Plainedge? Well if you use some of the widely varying figures thrown about recently by the School District, you'll find that the number varies from about 5,000 homes to about 7,000 homes - apparently one or the other number is used to shift the result to favor the result the person wants to show a "high" or a "low" amount.

But, if you want to know what the "real" number is - you'll have to go out and count for yourself. I tend to use, as the most accurate source of this information, the number given each year by the County Assessor's office. For the 2004-5 school year this number was 6,242 homes in Plainedge.

It is an interesting number in that, when you take Jeff Burns recent dismissal of a $600,000 "minor arithmetical error" on last year's Budget, it comes out to just shy of $100 per house! That's a lot of "give or take a few dollars or so" on a Tax Bill he was asking us to pay. It's not so minor to me.

Or take the famous overage on the Unencumbered Fund Balance -$1,700,000. That comes out to about $270 per house. Hey! That's one heck of a lot to add onto my tax bill- especially when you guessed at the amount "within a few dollars or so"

Try it out for yourself - the undocumented Administration Expenses left over according to Hevisie's audit were for $10,000. That comes to about $1.60 per house! Peanuts! Maybe that's why the Administration has yet to account for it although the Hevisie report asked them to do so.

[justfacts]

An interesting site for those concerned about money

I was speaking with Tom Murphy of CitiBank today. He's the VP who handled some of Plainedge's TANs (Tax Anticipation Notes) for last year.

He gave me info about the following site which I think may be of interest to many others in Plainedge. It seems a lot of free financial instruction is offered by them and their employees to children and adults. Although he has made this info available to many School Superintendents - few have called back to take advantage of it.

This particular site has a list of other places that provide free financial information -current rates on many loans, mortgages, CDs, bonds, etc.

There are some in Plainedge who might like to bookmark this site.

financialeducation.citigroup.com/citigroup/financialeducation/curriculum/resources.htm

Ed.

P.S. I got a good estimate and input from Tom about what the TAN interest rates and note amounts should be this year!

It always pays to double-check School District supplied information.

[gopybl]

Ed - Are you going to be applying to be part of the district's audit committee? This type of info would proove invaluable on that committee.

[justfacts]

gopybl

No. The committee activity is from the period of May 11 to June 30 - not much can be done during that time. Additionally, not withstanding what my credentials are for the task, or what they aren't, there is slim chance that I would be selected, or be able to work effectively in that environment.

I will continue however, to do the best within my limited resources and capabilities, to provide accurate insights into the financial and business activities of the District.

For all the purported financial acumen and expertise of some of the newer Board Candidates, I've heard little of similar nature that comes close to some of the information that I've been supplying over the years. Do they have actual inputs to make in this area? - or just credentials they sit upon?

Yesterday, for instance, I found that if a TAN is taken out for an amount of $10 Million of less, the interest charge on it would be 1/4% point lower than if the TAN is for an amount over $10 Million.

In practical terms, what does this mean? Doesn't seem like much - but when you consider that the State Aid, which aids cash flow of input funds has been increased this year by about $1.5 Million over last year - our own Cash Flow analysis, which finds out what the needed TAN funding would be, might be close enough to allow a $10 Million TAN, not a $12 Million one.

That cost of borrowed money difference could be significant.

Here's an example - at a projected high TAN cost of 4.0% for a $12 Million TAN the cost would be: $480,000 for a year and 11/12ths of that for the eleven months we'd have the money. That comes to $440,000.

The District used a 4.5% TAN in their example. That comes to $540,000 times the 11 months or $495,000 as a final cost. (I found that he expected high side of interest would be 4.0% - that's why I use the most likely lower interest rate)

If the TAN however, is kept at $10 Million, then the cost is 3.75% for $10 Million or $375,000. For an 11 month period this comes to a total cost of $343,750.

That is less than what the District was planning for a TAN cost by $151,250. It is less than a "most likely" $12 Million TAN cost of $440,000 by $65,000. Either amount would be nice to apply to the Program part of the Budget - without affecting the amount needed to be raised by Property Taxes.

Not only that - it is $2 Million less in borrowing and $2 Million less that has to be paid back.

Clearly, tight, accurate Cash Flow estimates are vital this year. Can we get them?

Ed.

Let's get most of the Budget money flowing to the Children!