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Schools face deficit of $6 million in Falls Uncollectible funds put hole in budget

After being slammed hard this week by a state audit that found the district has mismanaged its finances in multiple ways, the School Board learned Thursday its $127 million current budget is $6 million short.

Board members also were provided with inch-thick folders containing the Corrective Action Plan its audit committee and staff have devised over the past nine months to deal with problems cited in the state comptroller's audit.

Members are expected to study the plan with its upgraded policies and procedures, recommend any adjustments and approve the document so it can be submitted to the comptroller and the state Education Department by Jan. 7 as required by law.

Noting facetiously what a good time he is having in his final year as the district's leader, Superintendent Carmen A. Granto told the board, "We have a $6 million deficit."

He said that has caused the district to use its $3.8 million surplus and about $1 million in general fund money, which was to pay for renovations to the district central office on 66th Street, to help offset the shortfall.

"So now we still have to cut back this year to make up for the remaining $1.2 million" shortfall, Granto said.

He said he will provide the board with a number of recommendations next month on where expenditures could be cut to cover the remaining deficit. He said they will not affect the classroom.

The deficit developed because the district's budget has been including revenues due from failed businesses that owe the district money under "payment in-lieu of taxes" agreements, Granto said.

These businesses, he said "were supposed to pay the equivalent of 10 percent of their normal tax bill each year, going up another 10 percent
every passing year for 10 years until they paid full taxes," but a number of them never paid a thing.

One culprit dating back to 1994 was the Niagara Splash water park, which owed the district $1.2 million, but has been out of business for some time and never honored its agreement.

The defunct Falls Street Faire also closed while owing the district $1.2 million, never having paid a cent of the money.

Another was the old Aqua Falls project, which left the board holding the bag for $393,388 in unpaid taxes.

"We expected them to pay up and have been billing them. And even though we knew the money would not be collected, it was our belief that you could gradually build up a reserve [against the resulting deficit] over the years and write it off that way.

"We had built up $2.5 million [reserve in the surplus] against it, but our new auditor told us you can't do that -- that we have to write it off our books all in one year if you can't collect," Granto said.

So the district used its surplus and general fund money to help do that and is using Casino Niagara revenues for the capital project instead, since it can't be used to pay off deficits. Casino money is designated only for capital projects, Granto said.

By taking those steps, he said the board will allow the new superintendent to work with a budget that contains no deficit.

As for the state audit, Granto said the district has provided corrective measures in response to all 33 recommendations by the state Comptroller's Office.

He said one involved using credit cards without providing proper documentation of the expenditures.

"We eliminated district credit cards. We haven't had them since last January. So we're telling them we don't have them anymore. That's a pretty good corrective action," Granto said.

He also said that when the auditors informed his staff last January that the district had overpaid 272 employees by more than $500,000 by giving them an extra pay check last year, district officials immediately started recovering the money.

All but nine people have repaid the district, which is taking legal action against those who have failed to do so.


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