South Country audit finds $3.49 million deficit

The South Country School District revealed a $3.49 million deficit was found as part of an external audit’s findings.

“While even a single dollar of overspend is unacceptable, it is of note that this number is far less than the wild, unsubstantiated amounts being posted on social media over the past month,” the board wrote in a letter to the community.

The board has also appointed John Belmonte of Belfor Long Island as the district’s acting assistant superintendent for Finance and Management Services, effective Oct. 9, to address the district’s financial challenge. Prior to his current position with Belfor, Belmonte spent over 30 years as a business manager in public education, including serving as an assistant superintendent for business in the Sayville and Middle Country school districts. During last week’s board of education meeting, Belmonte gave a presentation on the findings.

“I do not believe there was any theft; this has to do with budgeting and things that happened in [the] business department that may not have been handled in a timely fashion,” he said, explaining that it means the expenses incurred during the 24/25 school year exceeded the actual revenue.

However, he said, when you take a look at the 24/25 school year, he found the expenditures exceeded the revenue by a total of $16.2 million, but because of the fund balance, the district did not go bankrupt.

“To cover the shortfall, the district had to draw down from its reserves, which are taxpayer dollars that had been set aside in prior years. The use of reserves as one revenue source is not unusual for school districts. It helps mitigate annual tax impacts. What was not planned on was the extent to which the district would need to draw down on its reserves,” the board wrote. “While this did allow the district to meet expenditure obligations, it also significantly reduced the financial cushion the district has available for future years. This has been a ‘red alert’ for the district, underscoring the importance of what this board has set as a critical priority going forward—the strengthening of the district’s financial practices to build back its reserves and to avoid relying on those reserves in this way in the future.”

Belmonte explained that the district had reserves, which had about $31 million, minus the $16.2 million over expenditure, leaving the district with about $15.3 million.

“The good news is the district still has money in reserves; the problem is you [the district] can’t continue on this particular strategy. [We] need to mostly align our revenue and our expenses. We can’t withstand another year removing so much from the fund balance,” he said.

The overexpenditures, he explained, mostly came from transparent transactions, including increased costs in the transportation and special education costs.

“The approach and management of this situation should have happened earlier in the school year; it could have been addressed. You can’t sugarcoat that what should have been done is now being put in place,” he said frankly. “It’s an isolated situation, but unfortunately, it has happened and we need to address it.”

He suggested enhanced management of the district budget by putting in place control of the expenses and how they are managed. Thus far, he said, he has already suggested that reporting of financial reports to the board of education come in a timely fashion rather than two to three months. Also, he said, any negative balances need to be monitored correctly and overages need to be covered with a budget transfer immediately.

Earlier this month, the board unanimously approved an agreement with Investigative Management Group (IMG) for the provision of forensic financial auditing and investigation services.

IMG has since conducted their review finding a root cause analysis, identifying the causes that led to the deficit as well as providing recommendations for a corrective action plan.

“We know this is frustrating and concerning to the community; please know that it is very much frustrating and concerning to us on the board as well,” the board of education wrote in a letter to the community. “We want to reiterate our commitment to clarity, transparency, and best practices in all areas of district operations, including our financial office. We thank you for your support and your continued dedication in helping us provide the high-quality education the children of South Country deserve.”

When the most recent deficit was discovered in September, the board of education voted to hire the forensic audit. The shortfall was discovered after the regularly planned annual audit of the district’s finances. 

The superintendent of schools Antonio Santana also promised to develop a Corrective Action Plan that will “focus on reviewing every expenditure line by line, strengthening the flow of financial information to the board through budget status reporting, and identifying cost reductions in non-mandated, non-instructional areas in ways that protect our academic programs.”

He also promised exploring tighter internal controls and improving training for budget custodians, as well as potential adjustments to the budgeting models.

As far as transparency, he added, they will be launching a Transparency Hub on the website that will include an F.A.Q., a corrective timeline, and regular updates so that everyone has access to the same information.

“Rumors and speculation can take on a life of their own, especially on social media, and that only adds to the anxiety and frustration people feel,” Santana said in a letter. “That’s why Wednesday’s board of education meeting was so important—it allowed us to share clear numbers and facts with the community. We were able to state, with confidence, that last year’s budget was overspent by $3.49 million. While even a single dollar over is too much, it’s important to know the real figure, which is far less than the inflated amounts that had been circulating online.”

For more information, the district suggested members of the community refer to the FAQ document posted on the district’s website. The district plans to make available a link that will allow community members to submit questions they may still have regarding the district’s financial operations and budgeting.