(Editor's Note: The Internal Auditor's Report from Coughling, Foundotos, Cullen & Danowski, LLP did not state the recommendation of replacing the assistant superintendent for finance, rather it stated "we recommend that the district consider designating a purchasing agent who is completely independent of all other business office operations. The district should obtain the necessary expertise, either in-house or through outsourcing, to ensure control over the preparation of the district-wide financial statements.")

Once again, we must respond to Mr. Kelty's unsupported allegations, innuendo, and "spin." I will do so, on behalf of all the members of the Island Trees Board of Education, point by point.

First, each year, copies of every district's Annual Audit Report must be sent to the New York State Education Department and the New York State Comptroller's Office. Administration called the Comptroller's Office directly regarding Mr. Kelty's statement that our audit report was "sitting in their legal department for almost a month." This is just not the case. There is nothing out of the ordinary as he implies. Moreover, the audit report was accepted at a public meeting and is available to anyone who wishes to read it.

Second, Mr. Kelty then implies, as he did the previous year, that the district "lost" $617,230, which is once again misleading. The same as last year, the amount referred to is mainly due to the depreciation of our fixed assets, such as our school buildings. This entry in our audit report is an accounting requirement that became effective in 1999. It is a lesser amount than last year because each year the depreciation is accounted for and taken off the books. This has nothing to do with actual cash funds and the district certainly does not have a deficit. Quite to the contrary, please be advised that as of June 30, 2007, the district took in $1,312,655 more in revenue than projected and spent $1,783,203 less than anticipated, resulting in a net change of plus +$3,095,858, most of which was given back to the taxpayers to keep the tax levy down! Indeed, this demonstrates that the district remains in excellent financial condition.

Third, it is well-known that the district offered a retirement incentive to teachers last year, which was approved by a public board of education resolution. Although a retirement incentive is designed to save money, the impact on staffing requirements and the educational program were analyzed carefully before making a decision to implement it. Fourteen teachers accepted the incentive and retired, enabling the district to hire teachers at much lower salaries. This fiscally sound strategy allowed the district to keep its tax levy increase among the very lowest on Long Island. Funds kept in the Employee Benefit Accrued Liability Reserve had to be transferred to the General Fund, in accordance with accounting regulations, to pay the incentives and thereby recorded as an increase in the budget. The transfer was approved by board resolution under the guidance of our auditor. Mr. Kelty is confusing "generosity" with fiscal prudence.

Fourth, Mr. Kelty casts aspersions on board members who have family members employed in the district. People don't get jobs because they are related to someone on the board, nor are they denied employment for the same reason. Candidates go through a rigorous process and the best candidates are selected for the job.

Fifth, the "blockbuster statement" according to Mr. Kelty, is not so blockbuster. Our auditors recommended that the district hire a CPA or contract with a CPA firm to prepare the financial statement relative to GASB 34 (Governmental Accounting Standards Board 34 is a Statement of Net Assets reporting depreciation expense), which is a small portion of the overall audit. Many school districts have received the same recommendation. We have already acted on this at our November 2007 board meeting. It must be noted that the district did in fact suggest to the auditor, last year, that the district hire an accountant for this purpose. The auditor advised the district that this was not necessary since they would assist with the GASB 34 accounting and did so. The auditor has since changed his position on this issue. Mr. Kelty either misinterpreted or chose to misinterpret the auditor's recommendation regarding this matter. The auditor did not recommend the replacement of the assistant superintendent for finance. Mr. Kelty asserts that the recommendation states that he be replaced with "an individual who can operate the office in a professional, honest manner." It does not. Mr. Kelty's implication that the current assistant superintendent for finance does not meet those criteria is outrageous. The auditor, who wrote the report, Mr. Peter Rodriguez, will be at the next board of education meeting on Jan. 30 to address this issue and to answer any questions about his recommendations.

Sixth, the Extra Classroom Activity Fund is not located in the district's business office. The transactions for these accounts take place in the main offices of the high school and Memorial Middle School. The majority of funds are from fundraisers conducted by school clubs and teams. Therefore, Mr. Kelty's assertion that the auditors "... don't trust the numbers given them by the business office" is totally uninformed. The auditor's statement that records were not adequate to permit the application of adequate auditing procedures is standard. It refers to the fact that the amount of money collected in a fundraiser cannot be verified by the auditor since they only see the amount recorded by the staff member in each school who is in charge of the fund. What is indeed "shocking" is that Mr. Kelty did not explore this more carefully before making his inaccurate and inflammatory statements. Please know that procedures are in place to monitor the fund and the board's Audit Committee has asked that the internal auditor conduct an even more intensive review and make recommendations to further strengthen the existing controls and procedures.

Seventh, a state law established in 2005 requires that we issue a Request for Proposal for our external auditor at least every five years. The board of education felt it was best to issue a Request for Proposal (RFP) for auditing services at this juncture. We not only issued an RFP for external auditing, but for claims and internal auditing firms as well. Mr. Kelty missed that point.

Lastly, the Island Trees Union Free School District is in excellent financial condition. We stand by that statement.

Ken Rochon, President

Island Trees Board of Education