Budget Fraud

Valhalla, NY May 16, 2005

We are writing to make you aware that New York State Comptroller Alan Hevisi’s Office has ruled, in effect, that Contingency budgets prepared for your public notice need not be presented in accordance with  Education Law 2023.   According the Comptrollers finding, a contingency budget only exists and must be lawfully prepared at the time it is adopted.  Contingency budgets prepared for public notice as required  Education Law 2022 can contain fraudulent, padded and improper items, with no penalty whatsoever.

Background:

In June 2003, taxpayer advocates uncovered several fraudulent, padded and illegal line items in the Valhalla Union Free School District contingency budget worksheet, which generated a contingency budget figure overstated by over $1.0 million.  The fraudulently prepared figure was sent to every resident in the school district.   (Contingency budgets disclose the maximum spending level allowed by law, in the event the voters fail to approve a school budget after two votes).

 The taxpayers first contacted the New York State Education Department- Office of Management Services who volunteered that the line item looked like a fudge factor and was clearly not permissible under the rules of the budget handbook.  Mr. Charles Szuberla wrote to the taxpayers saying that the district business manager knew it was not an allowable expense and that it was not meant to be seen by the public.  Then the Office of Management Services began to stonewall the taxpayers group, referring them to an arcane process of appeals to the commissioner, a process that carries no penalties and takes years to complete.

The taxpayers then turned to the New York State Comptrollers department, which, after a year issued the attached letter, ignoring all the facts in the case and concluding in effect that a contingency budget, as presented to the public, may be padded in any fashion with any item, legal or fraudulent as long as, after two votes the contingent budget submitted to New York State Education Department is correct as prescribed by law.  In Valhalla’s case their budget passed on the second vote, so the two fraudulent contingent budgets presented to the public were no longer an issue.

School Districts are now free to report any figure, legal or fraudulent to the public in its pre-budget vote notification, change it if the budget is put up a second time, as Valhalla did. They are free to use a fraudulent contingent budget to promote a yes vote, which is also here-to-fore illegal, which Valhalla also did.

In a conference call with Mr. Ellis, he admitted

• He did not know the contingent budget was publicly disclosed to residents as required by Education Law 2022 or that it was to be sent to every resident at the time of the school budget vote.

• He never read or referred to the New York State Education Department Budget Hand Book in making his decision

• He did not know that the illegal line item they termed “Expenses Attributable to FAPE was changed by Valhalla between the first and second vote in order to maintain a spread between the budget being voted on and the reported contingent budget. 

• He did not know that Valhalla had actually presented two fraudulent and illegal contingency budgets in 2003.

His findings say that, as the district avoided going to a contingency budget, the fraudulent budget presented to the voters was no longer an issue.  Of course, one of the reasons they avoided going to contingency was the fact that the contingency budget as presented was padded. The end, in his finding, justified the fraud used in the means.

If this finding stands, districts throughout the state are no longer bound to prepare their budgets in accordance with the law.  They can include any and every fraudulent or improper expense in the contingent budget presented to the public, as long as they fix it after two defeats at the polls.  Contingency budgets can now be equal to, or even greater than the proposed budget, in order to promote a yes vote.

Let's see if Mr. Hevisi will correct this incredible ruling or if he seeks to override the New York State Legislature and New York State Education Department, writing new law and rendering the entire statewide voting process, a joke.

Update: We appealed the Comptroller's department denial of access to their records on this matter and won.  The Committe on open government has ruled that we must be given the documents that will show fraudulent financials prepared by  the district and much more.