By Hank Russell
A local fire district failed to make reasonable estimates when preparing its adopted budgets and handling its capital reserve funds, according to an audit from the New York State Comptroller’s office.
During the audit period of January 1, 2019 to December 31, 2023, auditors found that the Holtsville Fire Department’s board of commissioners did not adopt budgets with reasonable estimates or properly establish and manage capital reserve funds. As a result, from 2019 through 2023, the board transferred an additional $1 million into reserve funds. This was 45% more than the $2.2 million in transfers planned, with no indication of the board’s plan to use the funds. The district’s tax levy increased by $771,762 from 2019 to 2024, meaning that real property taxes may have been higher than necessary.
The board developed and adopted budgets that resulted in a total operating surplus of $4.8 million between fiscal years 2019 and 2023. The board underestimated revenues in 2023 and consistently overestimated expenditures during the audit period, resulting in budget variances in four of the five fiscal years reviewed totaling $1.4 million, or 11% of the $13.8 million in appropriations. The board also appropriated fund balance totaling $68,598 in three of the fiscal years reviewed that was not utilized.
Additionally, the board did not properly establish two capital reserve funds. Board meeting minutes from 1972 (the year the district was established) mention the reserve funds and balances at the time of the meeting. However, there was no board resolution or other supporting documentation indicating that the board properly established the reserve funds.
Furthermore, the district did not have a fund balance and reserve policy to address these matters and made unbudgeted transfers to these reserves that were not transparent. Although the Board planned to transfer $2.2 million into the capital reserve funds between 2019 and 2023, $3.2 million was transferred during that time because of operating surpluses.
Because the board did not adopt budgets with reasonable estimates, have a fund balance and reserve policy or ensure that the district’s capital reserve funds were properly established, the board’s intentions regarding fund balance were not clear, reserves may have been overfunded and real property tax levies may have been higher than necessary.
Additionally, the official’s financial management practices were not transparent and officials did not inform taxpayers on how all district funds were being used or reserved.
The report includes six recommendations that, if implemented, will improve the district’s ability to adopt budgets with reasonable estimates and properly establish and manage capital reserve funds. District officials disagreed with certain aspects of our findings but indicated they planned to initiate corrective action.
The recommendations are as follows:
- Ensure that annual budget documents include a detailed estimate of revenues to be received and an estimate of fund balance.
- Ensure that adopted budgets contain realistic revenue and expenditure estimates based on historical trends.
- Have the treasurer update prior years’ accounting records and continue to reconcile future accounting records at year’s end.
- Consult with the district’s legal counsel to take action to ratify the “de facto” capital reserve funds by adopting an appropriate resolution, subject to referendum requirements if necessary.
- Adopt a written fund balance and reserve fund policy to govern the levels of reserve fund balances to maintain The policy should state the Board’s rationale for establishing each reserve fund, the objectives for the reserve, optimal or maximum targeted funding levels and conditions under which the reserve will be used or replenished.
- Include transfer amounts and reserve figures in the proposed annual budget documents to transparently convey how the District intends to use current fiscal year funds and the intended future purpose and use of reserved funds to taxpayers.
In response, Board Commissioner Anthony Asselta said in a letter to the comptroller’s office that the board has accepted the recommendations. Since the audit, Asselta said, the treasurer will work with outside auditors before making any adjustments to the budget and will provide a breakdown of all estimated revenues in future budgets. In addition, the board established Apparatus Fund and Building Fund and adopted a Fund Balance Policy.
“The Holtsville Fire District takes great pride in serving our community with dedication and transparency,” Asselta said. “We value the findings and recommendations presented by your audit team and take them very seriously. Our commitment to responsible governance and continuous improvement remains a top priority.”