Financial Information and Updates

Understanding Our District Finances

The South Country Central School District is committed to open communication and
accountability. We know our community has important questions about recent financial reports,
the budget overspend, and the steps being taken to strengthen oversight. To provide clear,
accurate information, we have created a Financial Oversight & Accountability FAQ.

This resource explains what happened, what we are doing right now, and how we are planning
for the future. Our goal is to keep the community informed with verified information and to
reaffirm our shared commitment to fiscal responsibility and strong schools.

[Read the Financial Oversight & Accountability FAQ below]

Important Information

Financial Oversight & Accountability FAQ

Questions About the Reported Overspend & Deficit

Q: What steps has the Board taken in response to the overspend?

A: The Board of Education acted quickly after it was notified by the administration that the
expenses for the last year exceeded the budget. The Board asked that our external auditors,
Cullen & Danowski, finalize the 2024–2025 audited financial statements as soon as possible.
They also contracted with IMG, a highly regarded forensic auditing firm, to conduct an
independent, in-depth review of what went wrong and to recommend corrective actions. To
strengthen daily financial oversight, the Board provided additional resources to the district by
authorizing the retention of John Belmonte, a school business official with more than 30 years of
experience.

Q: What was the overspend last year?

A: After a full review of expenditures and revenues, we can state with confidence that the
district overspent the voter-approved 2024–2025 budget by approximately $3.49 million. This
reflects the difference between what was budgeted and what was actually spent. The
forthcoming audited financial statements, along with the results of the independent forensic
audit, will provide additional details about where those variances occurred.

Q: What does it mean to have a deficit?

A: The deficit reflects that last year’s expenditures exceeded revenues by approximately $16.2
million. To cover this shortfall, the district drew down from reserves — essentially using taxpayer
dollars that had been set aside in prior years. The use of reserves was planned in the budget,
but not to the extent created by the expenditures. While this allowed us to meet our obligations,
it also reduced the financial cushion available for future years. This underscores the importance
of strengthening our financial practices to avoid relying on reserves in this way moving forward.

Q: Why did the district issue a Tax Anticipation Note (TAN) for $27.5 million?

A: A TAN is short-term borrowing that many school districts, like ours, use annually to manage
cash flow until the collection of property taxes. It is important to note that this borrowing is repaid
within the fiscal year, once tax receipts are collected. In addition, the district was awarded a
MIG-1 rating for this borrowing — the highest short-term rating available — which reflects the
confidence that outside financial institutions have in the district’s ability to repay its obligations.
The TAN was not issued due to the overspend, but again, is the annual practice districts use to
manage cash flow.

Questions About Oversight & Controls

Q: What immediate internal controls and protocols has the administration already put in place this year to help prevent an overspend?

A: We have enacted strict spending controls, including thresholds for administrative approval of
expenditures, enhanced budget code monitoring, and monthly reporting of actuals compared to
projections. In addition, with the Board's support, we have contracted with John Belmonte, a
veteran school business official with over 30 years of experience, to provide added oversight
and expertise.

Q: How will the Board be informed if additional corrective controls are recommended by the auditors?

A: Any recommendations from the external auditors will first be reviewed by the Audit
Committee. From there, they will be shared with the full Board in public session, along with an
implementation plan for any new corrective controls. Additionally, any recommendations from
the forensic auditors will be reported to the Board.

Q: Are there thresholds or approval requirements in place for expenditures while we await audit results?

A: Yes. All discretionary expenditures now require central office review and approval. Larger or
non-routine expenditures must be justified in writing and reviewed by both the Superintendent
and the business office before proceeding.

Questions About Stakeholder Communication

Q: What role will the Audit Committee play in ensuring transparency and accountability when the reports are finalized?

A: The Audit Committee, consisting of three board members and two community members,
serves as the first line of Board review. They will receive the reports directly from the external
auditors, ask clarifying questions, and ensure that recommendations are communicated clearly
before the reports are shared at a public Board meeting.

Q: How will the findings of the external audit be communicated to the public once complete?

A: Once finalized, the external audit reports will be presented first to the Audit Committee, then
to the Board of Education at a public meeting. They will also be posted on the district website for
full community access.

Questions About Long-Term Planning

Q: How will the district use the audit results to strengthen multi-year financial forecasting and planning?

A: The results from both the external and forensic audits will be used to build stronger
forecasting models, including conservative revenue projections, multi-year expenditure trend
analysis, and earlier detection of budget variances.

Q: Will there be opportunities for the Board to discuss structural changes (such as budget development processes) based on recommendations?

A: Yes. The Board will have dedicated opportunities to discuss changes to the budget
development process, reserve funds, and reporting practices once the recommendations are
delivered.

Q: Are there professional development or training opportunities being considered for administrators or staff in budget monitoring and forecasting?

A: Absolutely. We are exploring targeted professional development for administrators and
finance staff, including state-led workshops, BOCES training, and customized sessions with
outside experts to strengthen internal financial capacity.

Q: Is there a long-term plan in place to address the District’s fiscal challenges and ensure
financial stability moving forward, and where can I find it?

A: The District’s Three-Year Fiscal Recovery Plan provides a clear framework for restoring
financial stability while preserving the quality of education our students deserve. The plan
focuses on strengthening internal controls, enforcing disciplined spending practices, improving
revenue oversight, and implementing long-term structural changes to ensure sustainability. It
emphasizes transparency, accountability, and continuous monitoring, with regular updates to the
Board of Education and community. Importantly, this framework is designed to evolve as
additional information becomes available and corrective actions progress. The full Three-Year
Fiscal Recovery Plan is available on the District website for review, reflecting our commitment to
open communication and responsible fiscal stewardship.

Frequently Asked Questions: 2025 Financial Statement

Q: What is the purpose of the annual financial audit?

A: Each year, the district’s finances are reviewed by independent auditors to ensure that
financial statements are accurate and comply with accounting standards. The 2025 audit
received a clean (unmodified) opinion, meaning the statements are accurate and fairly
presented.

Q: What were the main findings in this year’s report?

A: The auditors identified significant financial stress due to overspending the 2024–25
voter-approved budget by about $3.5 million. This led to a $16 million drop in the general fund
balance and an unassigned fund balance deficit of about $1.8 million.

The Following is an excerpt from the 2024/2025 Financial Statements:
Condition: The general fund's total expenditures and outstanding encumbrances for the
2024-2025 fiscal year exceeded the final budget by $3,488,612. The District’s general fund is
now reporting an unassigned fund balance deficit of ($1,783,248) as of June 30, 2025.

Q: What caused the overspending?

A: The district’s 2024–25 budget did not fully account for the end of temporary federal
COVID-relief funds that had supported recurring expenses such as salaries and special
education programs. When those grants expired, costs shifted back to the general fund. Rising
employee benefits and transportation costs also contributed to the shortfall.

The Following is an excerpt from the 2024/2025 Financial Statements:
Cause: Budget estimates for several expenditure categories were not sufficient to cover actual
2024–25 spending due to a combination of ineffective budgeting practices and unanticipated
cost increases. Key areas of underestimation included central services, teaching – regular
school, programs for students with disabilities, occupational education, teaching – special
schools, and employee benefits. The lack of accurate projections and timely corrective action
resulted in the District’s internal controls over budgeting and expenditure monitoring being
ineffective in 2024-25

Q: What steps are being taken to address these challenges?

A: The Board of Education and administration have taken concrete steps to address these
challenges. Beginning this year, we will be providing monthly fiscal reports to the Board to
ensure stronger, ongoing oversight of spending. For 2025–2026, we have also implemented
targeted cost-reduction measures to help slow the growth of expenditures. In addition, the
administration is developing a multi-year financial recovery plan to responsibly rebuild reserves
and restore the district’s fund balance over time. These efforts reflect our commitment to
stabilizing the district’s finances and preventing similar issues in the future.

Q: What is the district’s financial outlook for 2025–26?

A: The 2025–26 voter-approved budget is $147.2 million, an increase of 2.87%. It includes a
3.48% property-tax increase, which is within the state tax cap. The district entered the new year
without an available unassigned fund balance, so rebuilding reserves and managing costs will
be top priorities.

Q: Will these findings affect programs or services?

A: The district remains committed to maintaining core instructional programs while taking a
careful, strategic approach to reduce spending. The goal is to protect classroom experiences
while restoring long-term financial stability.

Questions About the Use of Reserves

Q: The 2024–2025 Budget Newsletter showed $4.25M in “Use of Reserves,” but the district ultimately used $16.2M. How did we go from $4.25M to $16.2M?

A: The $4.25 million shown in the Budget Newsletter was a budget projection included in the
voter-approved budget. Budget estimates for several expenditure categories were not sufficient
to cover actual 2024-2025 spending due to a combination of ineffective budgeting practices. In
particular unexpected increases in instructional, special education, transportation, and benefit
costs, combined with the expiration of federal COVID-relief funds — caused actual spending to
exceed the budget.

To meet required expenses, the district had to draw additional funds from its reserves and fund
balance. Part of the $16.2 million also reflects the Board- and voter-approved use of capital
reserves to cover mandated capital and operational expenditures.

In short, $4.25 million was budgeted, while $16.2 million reflects the actual year-end impact,
including overspending and approved reserve uses.

Questions About the 3-Year Fiscal Recovery Plan

Q: Why does the district need a multi-year fiscal recovery plan?

A: New York State law does not allow school districts to operate with structural operating
deficits. The recovery plan is designed to restore budgetary balance, ensure legal compliance,
maintain credibility with state oversight agencies, and avoid compounding financial challenges
in future years.

Q: What is the estimated size of the district’s structural deficit?

A: The district’s structural operating deficit is estimated to be between $10 million and $12
million, driven by ongoing cost pressures and insufficient corrective actions in prior budgets.

Q: What recovery options were evaluated by the district?

A: The district evaluated three primary options:
1. Immediate pay-as-you-go reductions with no borrowing,
2. Short-term deficit financing through a budget note, and
3. State-authorized special act legislation allowing deficit bonds or notes paired with a
managed recovery plan.

Q: Why is a “no-borrowing” option considered impractical?

A: Eliminating the deficit without borrowing would require immediate recurring reductions of
approximately $10.5 million, with an estimated staffing impact of 30–35 positions in the first
year. This option would have the most immediate and significant impact on programs and class
size.

Q: What is a budget note and why is it not recommended?

A: A budget note is a short-term borrowing tool typically repaid within one to two years. While it
can stabilize cash flow quickly, it does not resolve the underlying structural deficit and
significantly limits future budget capacity. Given the district’s financial condition, this option is not
considered viable

Q: What is special act legislation and how would it help the district?

A: Special act legislation is state-approved authority allowing the district to issue deficit bonds or
notes to spread repayment of the deficit over multiple years. This option provides the lowest
annual budget impact and allows the district to pair borrowing with disciplined, phased
expenditure reductions under state oversight.

Q: Does borrowing eliminate the district’s deficit?

A: No. Borrowing does not eliminate the deficit — it finances it. Long-term fiscal stability still
requires recurring expenditure reductions and structural reforms to prevent the deficit from
recurring.

Q: What level of borrowing is being considered under special act legislation?

A: The plan contemplates $10–$12 million in state-authorized borrowing, with repayment
structured over up to 5–15 years, depending on final approvals and district decisions.

Q: What impact would special act borrowing have on staffing and programs?

A: Under a managed recovery approach, staffing reductions would be phased over multiple
years, with an estimated impact of 20–25 positions in Year 1, followed by smaller reductions in
Years 2 and 3. This approach is intended to minimize immediate disruption to students and
programs.

Q: What additional actions are required regardless of the financing option chosen?

A: All options require a mandatory multi-year corrective action plan, including staffing
realignment, program consolidation, transportation and BOCES optimization, benefit cost
management, and disciplined budget monitoring aligned with NYSED and OSC expectations.

Questions About Special Act Deficit Financing Legislation

Q: What action did the Board of Education approve regarding special act
legislation?

A: The Board of Education approved a resolution requesting that New York State adopt special
act legislation authorizing the district to finance its projected general fund deficit through
state-approved deficit bonds or notes. This action is a key component of the district’s broader
fiscal recovery plan and reflects the Board’s unanimous support for pursuing a legally
permissible path to restore fiscal stability.

Q: What is special act deficit financing?

A: Special act deficit financing is a process that requires approval by the New York State
Legislature and Governor. If enacted, it allows a school district to issue deficit bonds or notes to
liquidate an accumulated operating deficit over time, rather than absorbing the full impact in a
single year.

Q: How much borrowing is authorized under the proposed special act legislation?

A: The proposed legislation authorizes the district to issue up to $12 million in serial bonds or
notes to finance the accumulated general fund deficit as of June 30, 2026, including any
outstanding short-term notes that may be refinanced as part of this process.

Q: Does this mean the deficit is eliminated?

A: No. The special act legislation allows the district to finance the deficit, not eliminate it. The
underlying financial imbalance must still be addressed through disciplined budgeting, recurring
expenditure reductions, and long-term structural reforms as outlined in the district’s recovery
plan.

Q: Why did the Board determine that special act legislation was necessary?

A: After reviewing all available options, the Board determined that special act legislation
provides the most responsible way to address the size of the district’s deficit while minimizing
immediate disruption to students and programs. New York State law does not permit districts to
operate with structural deficits, and timely corrective action is required to restore fiscal balance.

Q: What oversight is required if special act legislation is enacted?

A: The legislation includes heightened state oversight. While any deficit bonds or notes are
outstanding, the district must submit quarterly budget reports and trial balances to the Board of
Education, the State Comptroller, the Commissioner of Education, and state legislative leaders.
The district must also prepare and submit a multi-year financial plan demonstrating its path to
fiscal recovery.

Q: Will the district still need to make budget reductions?

A: Yes. Special act financing does not replace the need for corrective action. The district is
required to implement recurring expenditure reductions and structural changes over multiple
years to restore long-term fiscal health and prevent future deficits

Q: What happens next after Board approval?

A: Following Board approval, the district will work with bond counsel and state leaders to seek
legislative sponsorship and enactment of the special act. If approved by the State, the district
will proceed under the conditions and reporting requirements established in the legislation.

Questions About Midyear Staff Reductions

Q: Why did the district implement midyear staff reductions and position
adjustments?

A: The midyear reductions were necessary to begin addressing the district’s operating deficit
and to slow the rate of spending growth during the current fiscal year. These actions are part of
a broader effort to stabilize the district’s finances while longer-term recovery measures are
developed and implemented

Q: How were decisions about reductions made?

A: Decisions were made after careful review of staffing levels, enrollment trends, program
participation, and fiscal impact. The district focused on vacancies not filled, position
consolidations, and reductions in low-enrollment or non-mandated areas whenever possible.
Throughout this process, the priority was to preserve academic programs and classroom
instruction to the greatest extent possible

Q: Will these reductions impact students’ academic programs?

A: The district took deliberate steps to minimize direct impacts on core academic programs.
While any reduction can be felt across the organization, the intent of these midyear actions was
to protect instructional quality and student learning while addressing immediate financial
pressures.

Q: Are additional reductions expected in the future?

A: Yes. While these midyear reductions are an important first step, they will not fully resolve the
district’s operating deficit. Additional reductions and structural changes will be necessary as part
of the district’s multi-year fiscal recovery plan to restore long-term financial stability.

Q: Why are these decisions so difficult for the district?

A: These decisions are never easy. Every position, program, and service within the district adds
value and supports students in meaningful ways. The Board of Education and administration
recognize the human impact of these actions and do not take them lightly. At the same time,
responsible fiscal stewardship requires making difficult choices to ensure the long-term health of
the district and the sustainability of its academic mission

Q: How does this align with the district’s overall financial recovery efforts?

A: The midyear reductions are one component of a broader strategy that includes strengthened
financial oversight, targeted cost containment, and a multi-year recovery plan. Together, these
actions are intended to stabilize finances, rebuild reserves, and protect the educational
experience for students now and in the future.

Questions About the Transportation Referendum

Q: What is the transportation referendum being considered by the district?

A: The referendum asks voters whether the district should continue providing private and
parochial school transportation beyond the state-required distance of 15 miles. Currently, the
district provides transportation up to 25 miles, which is beyond the state mandate and
represents a locally funded service.

Q: What happens if the referendum passes?

A: If the referendum passes, the district would eliminate transportation beyond the
state-required mileage, which would remove approximately $900,000 in annual transportation
costs from the budget. Because the expense would no longer exist, the district would also
reduce the tax levy by approximately $900,000.

Q: What happens if the referendum does not pass?

A: If the referendum does not pass, the district would continue providing transportation up to 25
miles, and the $900,000 annual cost would remain in the district’s budget and tax levy each
year.

Q: How would this affect the district’s future tax levy growth?

A: Removing the $900,000 from the tax levy lowers the district’s tax levy base used to calculate
future increases. However, the financial analysis shows the difference is very small.
For example, with a 2% tax levy increase, the district would generate about $18,000 less in new
revenue compared to maintaining the higher tax base.
Q: Why is eliminating the $900,000 expense considered financially
significant?

Questions About the NYS Comptroller’s Review

Q: Why is the district sharing this information with the community?

A: As part of our commitment to transparency and accountability, we believe it is important to
clearly communicate both the findings of the New York State Comptroller’s review and what they
mean for our district moving forward. While the report confirms that we are facing real financial
challenges, it also reinforces and supports the importance of the steps we are now taking to
stabilize our finances.

In many ways, the actions already underway — including strengthened financial oversight, cost
containment measures, and the development of a multi-year recovery plan — are aligned with
the recommendations outlined in the Comptroller’s report.

We recognize that these are difficult conversations, and we remain committed to addressing
these challenges responsibly, with a continued focus on preserving academic programs,
supporting our students, and ensuring the long-term stability of the South Country Central
School District.

Q: Why did the New York State Comptroller review the district’s finances?

A: Following the district’s October 2025 disclosure of an unplanned deficit, stakeholders requested an independent review. The New York State Comptroller’s Office conducted this review to evaluate whether the district’s budget estimates and financial projections were reasonable across the 2024–2025, 2025–2026, and proposed 2026–2027 budgets.

Q: What was the overall conclusion of the Comptroller’s review?

A: Aligned with the findings of the district’s external auditors and Mr. John Belmonte, the district’s Acting Assistant Superintendent for Finance and Management Services, the Comptroller found that key revenue and expenditure estimates in prior budgets were not reasonable, which contributed to the district’s current financial challenges. The report also indicates that, without corrective action, the district is projected to continue facing significant operating deficits.

Q: What were the main causes of the district’s financial challenges?

A: The report identified several contributing factors, including:

Reliance on one-time or temporary funding (such as COVID relief funds) to support ongoing expenses
Underestimating key costs, including salaries, special education, insurance, and transportation
Use of fund balance and reserves to cover recurring expenditures
Limited budget monitoring and adjustments as costs increased Together, these factors resulted in spending exceeding available

Q: How did the district’s fund balance change as a result?

A: The district’s fund balance declined significantly, decreasing by approximately $16.3 million

(over 50%) during the 2024–2025 fiscal year. The district also ended that year with a deficit in its unassigned fund balance, leaving little financial cushion moving forward.

Q: What does the report say about the current and future budgets?

A: The Comptroller projects that:

The district may face a 2025–2026 operating deficit of approximately $8.7 million, potentially growing to over $10 million if steps are not taken to further reduce current-year expenditures
The proposed 2026–2027 budget may require approximately $6 million in borrowing to remain balanced

The report cautions that relying on borrowing for operating expenses may create future financial challenges.

Q: Does the report account for actions the district has already taken?

A: Yes. The Comptroller acknowledges that the district has already implemented cost-saving measures, including staffing reductions and spending controls. However, the report also makes clear that additional action will be necessary to fully address the structural deficit.

Q: What recommendations did the Comptroller make?

A: The Comptroller recommended that the district:

Develop a plan to eliminate reliance on one-time revenues for recurring costs
Use trend analysis when building future budgets
Closely monitor revenues and expenditures and make timely adjustments These recommendations support long-term fiscal stability.

Q: What is the district doing in response to the report?

A: The district has already begun implementing changes aligned with the report’s findings, including strengthening financial oversight, implementing cost-reduction measures, and

developing a multi-year financial recovery plan. These efforts are focused on restoring fiscal stability while preserving academic programs and student services to the greatest extent possible.

Q: What is the key takeaway for the community?

A: The Comptroller’s review reinforces that the district is facing a structural financial challenge that developed over time and cannot be resolved through a single action. The report also supports the findings of the district’s external auditors, the work of our current financial leadership, and the corrective actions already underway.

Addressing these challenges will require thoughtful, sustained decision-making that balances fiscal responsibility with the district’s commitment to its students, staff, and community. We also appreciate the time, attention, and expertise provided by the New York State Comptroller’s Office in conducting this review. Their work offers valuable insight that will help guide our ongoing efforts to strengthen financial practices and restore long-term stabilit

We will continue to update this FAQ as new information becomes available.

The Board of Education and district administration are committed to transparency and accountability related to all district operations. Nothing less is what the South Country Central School District community demands and deserves. We are taking the steps necessary to resolve the immediate issues and ensure the district is never in this financial situation again. We welcome on-going dialogue and discussion with the community. We do share the same goal: to restore and build confidence, safeguard taxpayer resources, and minimize a disruption to the educational program in the South Country Central School District.

Have a Question?

We understand that our community may have additional questions about the district’s budget
beyond those addressed here. If you would like to share a budget-related question or concern,
please use the link below. Your input will help us identify what information is most important to
our families and allow us to respond with clear, accurate updates for everyone.

Submit a Budget Related Question Here