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Decision No. 13,298

Appeal of HERMAN H. MOESSINGER from action of the Board of Education of the Iroquois Central School District regarding the retention of unexpended surplus funds.

Decision No. 13,298

(December 2, 1994)

Hodgson, Russ, Andrews, Woods & Goodyear, Esqs., attorneys for respondent, David A. Farmelo and Jeffrey F. Swiatek, Esqs., of counsel

SOBOL, Commissioner.--Petitioner appeals the actions of the Board of Education of the Iroquois Central School District ( "respondent") concerning the retention of unexpended surplus funds. The appeal must be sustained in part.

Petitioner, a member of respondent's board, challenges respondent's budget practices and alleges that respondent violated Real Property Law '1318. That provision requires that, at the end of each fiscal year, any unexpended surplus funds must be applied to the tax levy for the current school year. "Surplus funds" is defined as "any operating funds in excess of 2% of the current school year budget, and shall not include funds properly retained under other sections of law." Accordingly, at the end of each school fiscal year, a board of education may not retain more that 2% of its surplus funds for expenditures the following year, and must use the remaining surplus funds to offset the upcoming tax levy.

As an initial matter, respondent contends that petitioner improperly offers new material in his reply. The purpose of a reply is to respond to procedural defenses or material contained in an answer (8 NYCRR '275.3). A reply is not meant to buttress allegations contained in the petition or add assertions or exhibits that should have been in the petition (Appeal of Taber, et al., 32 Ed Dept Rep 346; Appeal of Mermelstein, et al., 30 id. 119). Therefore, I will not consider the new material included in petitioner's reply.

Petitioner alleges that for the 1991-92, 1992-93 and 1993-94 school years, respondent retained more that 2% of its surplus funds in violation of Real Property Tax Law '1318. He requests that an independent audit team review and report on respondent's budgetary operations and requests the establishment of a restricted account for the deposit of excess funds that should then be applied to reduce taxes in the next fiscal period.

Respondent raises a number of procedural defenses, including an improper affidavit of verification, untimeliness and lack of clarity and conciseness in the petition. Respondent also claims petitioner's requests for relief are unnecessary and states that at all times it acted in good faith regarding its budgetary practices.

Before reaching the merits, I will address the procedural issues raised by respondent. Section 275.16 of the Commissioner's Regulations requires that an appeal to the Commissioner of Education be commenced within thirty days from the making of the decision or the performance of the act complained of. This appeal was commenced on April 18, 1994, more that nine months after the close of respondent's 1992-93 fiscal year and one year and nine months from the close of respondent's 1991-92 fiscal year. Therefore, this appeal could not have been instituted within 30 days of the action complained of in the 1991-92 and 1992-93 fiscal years concerning those excessive undesignated fund balances. Consequently, that portion of the appeal that concerns the retention of an excessive undesignated fund balance in the 1991-92 and 1992-93 fiscal years is dismissed as untimely. Petitioner's claim with respect to the 1993-94 fiscal year, however, is timely because petitioner began this appeal within the 1993-94 fiscal year.

Respondent also claims that the appeal must also be dismissed for failure to state a claim upon which relief may be granted. It is well settled that a petition must contain "a clear and concise statement of the petitioner's claim showing that petitioner is entitled to relief, and shall further contain a demand for the relief to which the petitioner deems himself entitled" (8 NYCRR 275.10; Appeal of Lawson, 33 Ed Dept Rep 427; Appeal of Mitzner, 32 id. 536; Appeal of Mitzner, 32 id. 403; Appeal of Fassler, 31 id. 15). Respondent contends that the petition does not contain a clear and concise statement of petitioner's claim and alleges that respondent is prejudiced by its inability to provide meaningful responses.

I agree with respondent that the petition is inartfully worded. Nevertheless, my review of the petition also indicates that petitioner's claim against respondent is apparent. He states that respondent has repeatedly violated Real Property Law '1318. Moreover, I note that petitioner is not represented by counsel. In appeals before the Commissioner of Education, when the petitioner is not represented by counsel, a liberal interpretation of the regulations is appropriate. Respondent was apparently able to adequately address petitioner's claims in its answer and memorandum of law. Therefore, I decline to dismiss the petition for failure to state a claim.

Respondent also contends that the appeal should be dismissed because of an irregularity in petitioner's affidavit of verification. The date of the verification is March 17, 1994, while the petition is signed and dated April 11, 1994. Respondent contends that petitioner could not have verified on March 17 that he knew the contents of the petition when it was not signed until April 11, 1994. Petitioner explains that he had difficulty serving the petition and that accounts for the error in the dates. Respondent also contends that the wording of the affidavit of verification is not identical to that in 8 NYCRR 275.6. Because I find these procedural defects to be deminimis under the facts of this case, I will not dismiss the petition on that basis.

With respect to the merits of the appeal, respondent defends its financial practices by stating that it experienced erratic cash flows and that its auditors recommended a financial plan that apparently accounted for the retention of funds. While respondent claims that it acted in good faith at all times with respect to its educational programs and business operations, the record indicates otherwise. The State Education Department issued an audit review memorandum to respondent board's president indicating that in both the 1991-92 and 1992-93 fiscal years the fund balance retained by the district exceeded the 2% limit permitted under Real Property Law '1318. Respondent was requested to take steps to insure that in the future, funds retained were only those permitted by statute. Respondent failed to take those recommended corrective measures.

Accordingly, I admonish respondent and its officers to abide by the requirements of Real Property Law '1318 hereafter. Moreover, I direct respondent to apply unexpended surplus funds which exist at the end of the 1994-95 school year to the reduction of the school tax levy for the 1995-96 school year, as required by Real Property Tax Law '1318(1), and to prepare its tax warrants in strict adherence to that provision. The State Education Department will closely monitor respondent's compliance.

THE APPEAL IS SUSTAINED IN PART.

IT IS ORDERED that respondent henceforth fully comply with Real Property Tax Law '1318(1) and that it approve its tax warrants in strict adherence to the statutory requirements.

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