DIVISION OF LOCAL GOVERNMENT AND SCHOOL ACCOUNTABILITY

REPORT OF EXAMINATION

Deposit Central School District
Financial Condition
FEBRUARY 2019

  2018M-204

 Contents
Report Highlights .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 1
Financial Condition .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2
How Should District Officials Manage Financial Condition?. .  .  .  .  .  . 2
Officials Have Begun to Address the General Fund’s Financial
Condition. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 2
Officials Did Not Fully Address the Cafeteria Fund’s Financial
Condition. .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 3
What Do We Recommend? . .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . 4
Appendix A – Response from District Officials .  .  .  .  .  .  .  .  .  .  .  .  . 6
Appendix B – OSC Comments to District’s Response .  .  .  .  .  .  .  .  . 7
Appendix C – Audit Methodology and Standards .  .  .  .  .  .  .  .  .  .  .  . 8
Appendix D – Resources and Services.  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  10

 Report Highlights
Deposit Central School District

Audit Objective
Determine whether District officials took action to
effectively manage the financial condition of the
general and cafeteria funds.

Key Findings
District officials have:
ll

Implemented measures to contain costs in the
general fund. Over the last three fiscal years,
general fund expenditures have increased
8 percent while revenues have increased 5
percent.

ll

Not implemented plans to improve operating
results in the cafeteria fund. It has had three
successive operating deficits in each of the last
three fiscal years totaling over $100,000.

Key Recommendations
ll

The Board should continue to examine the costeffectiveness of special education services and
offer programs in-house when it is cost-effective
to do so.

ll

District officials should examine ways to gain
more control over cafeteria menu options in an
effort to increase student participation.

District officials disagreed with certain aspects of our
findings and recommendations. Appendix B includes
our comments on issues raised in the District’s
response letter.

Background
The Deposit Central School District
(District) is located in the Towns of
Deposit, Masonville and Tompkins
in Delaware County and the Town of
Sanford in Broome County.
The Board of Education (Board) is
responsible for managing and controlling
the District’s financial and educational
affairs. The Superintendent of Schools
(Superintendent) is responsible, along
with other administrators, for the
District’s day-to-day management and
for developing and administering the
budget.
The District is a component district of
the Broome-Tioga Board of Cooperative
Educational Services (BOCES). The
Business Official, shared through
BOCES with another district, plays a
key role in the daily administration of
the Business Office. The Cafeteria
Manager, a BOCES employee, is in
charge of the day-to-day cafeteria
operations.
Quick Facts
2018-19 General Fund Appropriations

$16.3 million

2017-18 Enrollment
2017-18 General Fund Expenditures
2017-18 Cafeteria Fund Expenditures

488
$15.2 million
$489,869

Audit Period
July 1, 2016 – April 9, 2018
We extended our audit period back to
July 1, 2014 and forward to July 1, 2018
to analyze financial trends.

Of f ic e of t he New York State Comptroller

1

 Financial Condition
How Should District Officials Manage Financial Condition?
A school district’s financial condition is a determining factor in its ability to provide
educational services to its students. The board, superintendent and business
official are responsible for making sound financial decisions in the best interest
of the district, the students they serve and the taxpayers who fund the district’s
programs and operations. District officials should identify cost savings to minimize
expenditures and reduce the taxpayers’ burden. To minimize and control
expenditures, District officials should obtain as much pertinent data as possible
to perform cost-benefit analyses for all programs, services and benefits offered
before implementing changes.
Additionally, officials should monitor and analyze cafeteria operations to identify
efficiencies. For example, officials should compare costs-per-meal equivalent
(ME)1 to meal prices to help identify potential cost savings.

Officials Have Begun to Address the General Fund’s Financial
Condition
Although the District has experienced operating surpluses totaling over $1 million
over the last three fiscal years, expenditure increases are outpacing revenue
increases. Expenditures have increased by 8 percent while revenues have
increased by only 5 percent over the same period. The increases in expenditures
were primarily driven by personnel costs (8 percent) and BOCES services (8
percent). Personnel costs were due to salary increases from contracts. BOCES
costs increased because of special education and related services as well as
school enrichment services provided to the District.
The District has explored numerous options to address the increasing costs.
For example, District officials have hired a special education teacher which
has allowed them to offer an additional class in-house. Officials calculated
potential savings of over $150,000 per year by taking this action. Additionally,
the District shares various services with a neighboring district. Furthermore,
officials negotiated a change in the employee contracts to reduce the District’s
share of health insurance costs for new employees and retirees as of July 2018.
The District used to pay 100 percent of the cost of retiree health insurance. As
employees retire, the District will recognize a savings ranging from $922 to $2,604
per retiree, depending on coverage.2

1 An ME includes a conversion of the number of breakfasts and a la carte revenues into an equivalent number of
lunches. A single lunch is the standard by which any measures are calculated.
2 New retirees will contribute 10 to 15 percent towards health insurance. Teachers will contribute 15 percent
towards health insurance.

2

Of f ic e of t he New York State Comptroller

 Officials Did Not Fully Address the Cafeteria Fund’s Financial
Condition
The cafeteria fund has experienced increasing operating deficits in each of the
last three years totaling over $109,000 (See Figure 1). Total expenditures in
the cafeteria fund have increased 24 percent over the last three fiscal years
while revenues have only increased 6 percent. The main cost increases were
associated with salaries and food price increases. Additionally, the District is
receiving, on average, $3.84 per meal equivalent (ME), but it costs the District
$4.18 per ME to operate the cafeteria, resulting in a deficit of $0.34 per ME.
Figure 1: Results of Cafeteria Operations
2015-16

2016-17

Unaudited
2017-18

Totals

Revenues

$390,508

$413,946

$412,721

$1,217,175

Expenditures

$395,670

$441,370

$489,869

$1,326,909

Operating Surplus/(Deficit)

($5,162)

($27,424)

($77,148)

($109,734)

Interfund Transfers

$25,000

$25,000

$40,603

$90,603

Results of Operations (including
interfund transfers)

$19,838

($2,424)

($36,545)

($19,131)

As of the 2017-18 school year, the District joined a national program3 that
provides free breakfast and lunch to all District students. The program increased
student meal participation by 13 percent for lunch and resulted in an increase
of 10 percent in revenues received from federal and State reimbursements from
the previous school year. However, breakfast participation decreased 16 percent.
District officials told us this was partially attributable to no longer providing
students with “grab and go” breakfast options because the District could not
accurately account for the number of students taking these bagged breakfasts in
order to apply for federal and State reimbursements.
We reviewed menus and associated production and sales records and found that
several main menu items served at the District resulted in low meal participation.
Based on these records, average lunch participation at the elementary and
middle/high school buildings was 191 and 202 meals per day, respectively.
Average lunch participation at the two buildings for the main menu item was 130
and 135 meals per day, respectively. However, each building continually served
main menu items with below average participation. Overall, the District served
unpopular main menu items 52 times from September 2017 through June 2018
which equates to over two months of meals. For instance, at the elementary
school, pulled pork meal participation was, on average, 68 meals/day (overall

3 Community Eligibility Provision of the National School Lunch Program

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3

 lunch participation was 177 meals/day) and the fruit and yogurt parfait meal
participation was, on average, 102 meals/day (overall lunch participation was 169
meals/day). Each time these main menu items were served, main menu item
participation was far less than average. At the middle/high school, grilled cheese
(meal participation averaged 118 meals/day and overall lunch participation was
202 meals/day) was on the menu eight times and seven of the eight times main
menu meal participation was less than average.
District students do have other meal options at the cafeteria when these
unpopular main menu items are served. However, these unpopular choices
were continually on menus because the District has no control over the main
menu items. Instead, BOCES controls the menu for all the districts serviced in
its cafeteria program with no consideration to District-specific preferences. As a
result, we estimate potential lost revenue of over $3,400 in 2017-18 based on
overall lunch participation on days main menu meals had 25 percent less than
average participation (52 meals in total) calculated using the District’s meal
reimbursement rate4 for lunch. Had the District had the opportunity to explore
more enticing menu options to replace these meals or different ways to serve
these existing main menu items, it could have potentially increased revenues with
participation closer to daily averages.
We also compared the total cost paid to BOCES for its services to the salary
and fringe benefit costs that could be paid directly to the Cafeteria Manager as a
District employee to determine which option was more cost-effective. The District
pays BOCES an average of $102,815 annually for menu planning, completing
free and reduced price lunch applications and the Cafeteria Manager’s personnel
costs. The cost of using in-house services or a BOCES employee were relatively
the same. However, if cafeteria operations were managed in-house, the District
would have more control over cafeteria food choices which could potentially
increase revenues.
Furthermore, with potential revenue increases from increased student
participation, the cafeteria fund may need a smaller future subsidy from the
general fund.

What Do We Recommend?
The Board should:
1.  Continue to examine the cost-effectiveness of providing special education
classes and offer programs in-house when it is cost-effective to do so.

4 The District receives reimbursement for meals at a unique rate based on the Community Eligibility Provision of
the National School Lunch Program. The District receives reimbursement for 83.392% of meals at the free rate
of $3.3699 and 16.608% of meals at the paid rate of $.04499.

4

Of f ic e of t he New York State Comptroller

 District officials should:
2.  Examine ways to gain more control over menu options in an effort to
increase participation and cafeteria revenues, including ways to make
breakfast more accessible to students.

Of f ic e of t he New York State Comptroller

5

 Appendix A: Response From District Officials

See
Note 1
Page 7

See
Note 2
Page 7

6

Of f ic e of t he New York State Comptroller

 Appendix B: OSC Comments to District’s Response
Note 1
We obtained the “Total K-12 Public School Students” enrollment for the District
from the New York State Education Department’s (SED) public data site: https://
data.nysed.gov/
Note 2
We compared rates of participation of Broome County districts using the reported
SED student enrollment and the Average Daily Participation for breakfast and
lunch figures submitted to SED by the respective districts. For the 2017-18 school
year, the District did not have the highest participation for the breakfast or lunch
programs when compared to other districts in Broome County.

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 Appendix C: Audit Methodology and Standards
We conducted this audit pursuant to Article V, Section 1 of the State Constitution
and the State Comptroller’s authority as set forth in Article 3 of the New York
State General Municipal Law. To achieve the audit objective and obtain valid audit
evidence, our audit procedures included the following:
ll

We interviewed District officials to gain an understanding of the processes for
reviewing financial condition and cafeteria operations.

ll

We calculated the average expenditures per pupil for 2014-15 through
2016-17 and compared the District to all other BOCES component districts,
neighboring districts and districts with similar enrollment (those with 100
students greater or less than the District) in Broome, Chenango, Cortland,
Delaware, Otsego, Schoharie, Sullivan, Tioga and Tompkins counties.

ll

We determined the shared services the District utilized and the associated
cost savings achieved.

ll

We calculated the results of operations from 2014-15 through 2016-17 for
the general fund and cafeteria fund.

ll

We determined whether the District was analyzing BOCES services costs
and utilizing the most cost-effective option by reviewing special education
costs at the BOCES compared to in-house District costs.

ll

We calculated the MEs5 from 2014-15 through 2016-17. We used this figure
to determine the average daily participation for 2014-15 through 2016-17
assuming a 180-day school year. We analyzed the trends in participation
rates and the MEs for both the elementary and middle/high schools.

ll

We analyzed trends in total cafeteria fund revenues and expenditures and
results of operations, revenues and expenditures per ME and results of
operations per ME from 2014-15 through 2016-17.

ll

We reviewed production records and menus to determine whether the
District considered past participation when planning future meals. We
calculated the average participation based on menu item purchases. Using
that average participation, we calculated the potential revenue if the District
had served different items on days when participation was low.

We conducted this performance audit in accordance with GAGAS (generally
accepted government auditing standards). Those standards require that we
plan and perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objective.

5 See the University of Mississippi Institute of Child Nutrition’s Financial Management Information System,
at https://theicn.org/resources/119/financial-management-a-course-for-school-nutrition-directors-2ndedition/103036/8-hour-participants-workbook.pdf page 38 for the calculation steps to determine MEs.

8

Of f ic e of t he New York State Comptroller

 We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objective.
A written corrective action plan (CAP) that addresses the findings and
recommendations in this report must be prepared and provided to our office within
90 days, pursuant to Section 35 of General Municipal Law, Section 2116-1(3)
(c) of New York State Education Law and Section 170.12 of the Regulations of
the Commissioner of Education. To the extent practicable, implementation of the
CAP must begin by the end of the fiscal year. For more information on preparing
and filing your CAP, please refer to our brochure, Responding to an OSC Audit
Report, which you received with the draft audit report. We encourage the Board to
make the CAP available for public review in the Clerk’s office.

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 Appendix D: Resources and Services
Regional Office Directory
www.osc.state.ny.us/localgov/regional_directory.pdf
Cost-Saving Ideas – Resources, advice and assistance on cost-saving ideas
www.osc.state.ny.us/localgov/costsavings/index.htm
Fiscal Stress Monitoring – Resources for local government officials
experiencing fiscal problems
www.osc.state.ny.us/localgov/fiscalmonitoring/index.htm
Local Government Management Guides – Series of publications that include
technical information and suggested practices for local government management
www.osc.state.ny.us/localgov/pubs/listacctg.htm#lgmg
Planning and Budgeting Guides – Resources for developing multiyear financial,
capital, strategic and other plans
www.osc.state.ny.us/localgov/planbudget/index.htm
Protecting Sensitive Data and Other Local Government Assets – A nontechnical cybersecurity guide for local government leaders
www.osc.state.ny.us/localgov/lgli/pdf/cybersecurityguide.pdf
Required Reporting – Information and resources for reports and forms that are
filed with the Office of the State Comptroller
www.osc.state.ny.us/localgov/finreporting/index.htm
Research Reports/Publications – Reports on major policy issues facing local
governments and State policy-makers
www.osc.state.ny.us/localgov/researchpubs/index.htm
Training – Resources for local government officials on in-person and online
training opportunities on a wide range of topics
www.osc.state.ny.us/localgov/academy/index.htm

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Of f ic e of t he New York State Comptroller

 Contact
Office of the New York State Comptroller
Division of Local Government and School Accountability
110 State Street, 12th Floor, Albany, New York 12236
Tel: (518) 474-4037 • Fax: (518) 486-6479 • Email: localgov@osc.ny.gov
www.osc.state.ny.us/localgov/index.htm
Local Government and School Accountability Help Line: (866) 321-8503

BINGHAMTON REGIONAL OFFICE – Ann C. Singer, Chief Examiner
State Office Building, Suite 1702 • 44 Hawley Street • Binghamton, New York 13901-4417
Tel (607) 721-8306 • Fax (607) 721-8313 • Email: Muni-Binghamton@osc.ny.gov
Serving: Broome, Chenango, Cortland, Delaware, Otsego, Schoharie, Sullivan, Tioga, Tompkins
counties

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