A state audit found that the school in Long Beach The district’s budget practices resulted in higher tax collections than necessary and a surplus fund that exceeded the statutory limit, a finding that district officials attributed to reimbursement for costs related to Superstorm Sandy and the pandemic.

The district’s reported surplus fund exceeded the statutory limit of 4% in three of the four school years that auditors reviewed, from 2018-19 to 2021-2022, according to a report released last week by State Auditor Thomas P. DiNapoli’s office.

The state office acts as a financial oversight agency for the activities of local school districts.

“Had the board and county officials developed and adopted more reasonable budgets, they could have considered using these surplus funds to finance one-time expenses or necessary reserves, pay down debt, or reduce tax collections,” the auditors wrote.

Long Beach officials disagreed with certain aspects of the state’s results.

In her response to the audit, District Manager Jennifer Gallagher wrote that the district, on the advice of its outside auditors, retained more than 4% of its unrestricted fund balance for years following Superstorm Sandy.

After the 2012 storm, the district had larger amounts in this fund to protect itself from the financial risk of unreimbursed storm recovery expenses.

“We risked not receiving approximately $5 million in reimbursements from FEMA,” Gallagher wrote in a statement to Newsday on Friday. “If FEMA had not reimbursed those funds (which was entirely possible at the time), the district would have been in financial difficulty.”

However, the state stated that it was not within its discretion to disregard the statutory fund balance limit and that there were more than enough funds to avoid any financial burden.

After the county received reimbursement from FEMA, Gallagher said, it reduced the rate to 4%, where it has been for the past two years.

State auditors said officials must use any surplus funds above the 4% limit to reduce property taxes for the coming year or to create equivalent reserves.

In Long Beach Schools, property tax levies remained the same in 2021-22 and 2022-23, representing a 0% increase. The district saw a 1.5% increase in 2023-24 and 2024-25.

The state countered that the county had used the surplus to finance major projects such as repairing broken steam lines rather than reducing tax revenues. County officials, however, said those projects were urgently needed.

“Capital project funding is permitted by law and allows the district to respond to facility emergencies when they arise, just as a homeowner does with their home,” Gallagher wrote. “While keeping taxes as low as possible is certainly a high priority for us, we also need to ensure that our facilities are safe and well maintained for our students.”

The district also pointed to the uncertainty that the pandemic years brought to district budgets.

State auditors also wrote that county officials “did not present the county’s spending plans transparently.” The county transferred a total of $17.3 million of the general fund’s surplus fund balance to the capital projects fund at the end of two of the four fiscal years they reviewed, but this was not clearly outlined in annual budget documents for voter approval.

Gallagher spoke out against the “characterization of our budget practices as non-transparent.”

“We present the budget in detail to the community each year from January to April at the Board of Education meetings and inform the public of the details of the budget in letters to all residents,” she wrote.

However, auditors said the 2022-23 budget notices sent to taxpayers and the audited financial statements showed a total balance of approved funds of $5,364,646.

“It was not clear to voters that the $4,285,400 was intended to finance capital projects,” the report said.

A Newsday analysis published last month found that 19 Long Island school districts have accumulated cash reserves exceeding legal limits in 2023-24. Long Beach was not one of them.

Dandan Zou covers education for Newsday. She previously worked for a local newspaper in Maryland and a financial magazine in Washington, DC.