Source: http://www.counsel.nysed.gov/Decisions/volume54/d16756
Timestamp: 2020-01-20 01:09:56
Document Index: 766961960

Matched Legal Cases: ['§1318', '§103', '§306', '§275', '§306', '§306', '§306', '§1318', '§275', '§306', '§277', '§1318', '§1318', '§1318', '§1318', '§1318', '§35', '§2116', '§170', '§1318', '§107']

Decision No. 16,756 | Office of Counsel
Decision No. 16,756
Appeal of PATRICIA AFFRONTI from action of the Board of Education of the Wayne Central School District, Superintendent Renee Garrett, and Assistant Superintendent Gregory Atseff relating to district finances and application for the removal of members of the board, the superintendent and assistant superintendent.
Wayne A. Vander Byl, Esq., attorney for respondent board of education.
BERLIN, Acting Commissioner.--Petitioner appeals actions of the Board of Education of the Wayne Central School District (“respondent” or “board”), Superintendent Renee Garrett (“superintendent” or “Garrett”), and Assistant Superintendent Gregory Atseff (“assistant superintendent” or “Atseff”) (collectively “respondents”) regarding the oversight and management of the district’s budget and financial operations. Petitioner further requests that members of the board, the superintendent and assistant superintendent be removed. The appeal must be dismissed and the application denied.
Petitioner’s appeal and application are based on an audit report by the Office of the New York State Comptroller (“Comptroller”) which, petitioner states, was released on March 22, 2013 and is included as an exhibit to the petition. The Comptroller’s audit report is entitled “Wayne Central School District Financial Management,” and states that it covers the period of July 1, 2009 through April 30, 2012. It includes a cover letter dated March 2013.[1] Petitioner indicates that the audit report made her aware of certain issues related to respondents’ oversight and management of the district’s budget and financial operations. Petitioner also states that the Comptroller’s audit report provided the information for many of the factual statements included in her petition. I note that the petition consists essentially of statements from the audit report.
Petitioner contends generally that district officials have consistently adopted budgets that generated significant operating surpluses, improperly retained the excess funds rather than return them to the taxpayers, and that they have done so with a lack of transparency in the budget process. As a result, petitioner contends that respondents have failed in their fiduciary responsibilities. With respect to Garrett and Atseff, petitioner alleges that: (1) the results of the audit demonstrate a neglect of duty of their fiduciary responsibilities to the district; and (2) misleading budget practices were used to circumvent the four percent fund balance limit, in wilful violation of Real Property Tax Law (“RPTL”) §1318. Petitioner also alleges that Garrett wilfully violated the Open Meetings Law (Public Officers Law §103) on March 28, 2013, by refusing to allow two television stations to bring cameras into a board meeting.
As relief, petitioner seeks removal of: Garrett, as superintendent; Atseff, as assistant superintendent; and Jeffrey Schultz, Dom Paz, Jerry Champagne, Tom Nicholson, Debra Hibbard, and Joyce Lyke, as board members who, petitioner states, served during the budget years covered by the Comptroller’s audit. Petitioner further requests an order: (1) directing the board and district officials to develop realistic revenue, expenditure, and fund balance estimates for the annual budget; (2) directing district officials to not create fictitious encumbrances and to ensure that year-end encumbrances are valid and supported; (3) directing the board and district officials to develop comprehensive policies and procedures related to the establishment and use of reserve funds; (4) directing the board and district officials to review all reserves and determine if the amounts reserved are necessary, reasonable and in compliance with statutory requirements; (5) directing the board and district officials to include both the funding and use of all reserves in their adopted budget plan each year to provide transparency for the district’s voters; and (6) directing the board and district officials to develop a plan for the use of the surplus balances in unexpended surplus funds and in the district’s reserve funds in a manner that benefits district taxpayers including, but not limited to, paying off debt, financing one-time expenditures, reducing district property taxes, and increasing necessary reserves in accordance with established and reasonable plans and statutory requirements.
Respondent board contends that the appeal is untimely; moot with respect to Tom Nicholson and Joyce Lyke; fails to properly join Jeffrey Schultz, Debra Hibbard, Tom Nicholson, Joyce Lyke, Jerry Champagne, and Dom Paz as respondents for purposes of the removal application; fails to state a claim for removal of any of the board members or Superintendent Garrett because it fails to set forth with particularity any specific action or facts demonstrating a wilful violation of law or neglect of duty; and fails to state a claim for Assistant Superintendent Atseff’s removal because an assistant superintendent is not a school officer subject to removal under Education Law §306. Respondent also contends that petitioner failed to obtain personal jurisdiction over Renee Garrett, Gregory Atseff, Joyce Lyke, and Jerry Champagne by personal service upon each individual in accordance with 8 NYCRR §275.8(a) of the Commissioner’s regulations. Finally, respondent contends that the petition seeks relief which may not be granted in this appeal.
I will first address several procedural matters. A member of the board of education or a school officer may be removed from office pursuant to Education Law §306 when it is proven to the satisfaction of the Commissioner that the board member or school officer has engaged in a wilful violation or neglect of duty under the Education Law or has wilfully disobeyed a decision, order, rule or regulation of the Board of Regents or Commissioner of Education (Application of Kolbmann, 48 Ed Dept Rep 370, Decision No. 15,888; Application of Schenk, 47 id. 375, Decision No. 15,729). However, such a proceeding may not be maintained against respondent Atseff. Assistant superintendents are district employees and not school officers subject to removal under §306 (Application of Johnston, 50 Ed Dept Rep, Decision No. 16,184; Application of Eagelfeld, 36 id. 186, Decision No. 13,696). I, therefore, lack jurisdiction to remove Atseff pursuant to Education Law §306.
To the extent petitioner seeks to remove individual board members, the application must be denied for failure to join necessary parties. A party whose rights would be adversely affected by a determination of an appeal in favor of a petitioner is a necessary party and must be joined as such (Appeal of Murray, 48 Ed Dept Rep 517, Decision No. 15,934; Appeal of Miller, 48 id. 465, Decision No. 15,917; Appeal of Williams, 48 id. 343, Decision No. 15,879). Joinder requires that an individual be clearly named as a respondent in the caption and served with a copy of the notice of petition and petition to inform the individual that he or she should respond to the petition and enter a defense (Appeal of Murray, 48 Ed Dept Rep 517, Decision No. 15,934; Appeal of Miller, 48 id. 465, Decision No. 15,917; Appeal of Williams, 48 id. 343, Decision No. 15,879). Here, the notice of petition does not name any of the individual members of the board whose removal petitioner seeks. It is the notice of petition which alerts a party that he or she is required to appear and answer the allegations contained in the petition (Appeal of Chechek, 37 Ed Dept Rep 624, Decision No. 13,943). Petitioner’s failure to name such board members in the notice of petition, thus, results in a failure to properly join as respondent each individual board member whose removal is sought, warranting dismissal of the application as against each.
The record also indicates that the petition that was served upon each board member contains two captions. The first caption does not name any board member as a respondent. While the second caption contains a board member’s name, respondent asserts that Jeffrey Schultz, Debra Hibbard, Tom Nicholson, Joyce Lyke and Dom Paz were each served with a petition that did not include their name but, instead, named someone else. Petitioner submits no reply to refute respondent’s allegations. Petitioner’s failure to name the board members in the notice of petition, as well as in the petition in some cases, warrants dismissal of the application for removal as to each board member.
The application and appeal are also defective with respect to Garrett, Atseff, Lyke and Champagne for lack of proper service upon them. Section 275.8(a) of the Commissioner’s regulations requires that the petition be personally served upon each named respondent.
In this case, the affidavits of service for Garrett and Atseff state that each was served by delivering a copy of the petition to the district clerk at the district office. However, because Garrett and Atseff were not personally served, as required, the application and appeal must also be dismissed as to them on that ground.
With respect to Joyce Lyke, the affidavit of service states that her daughter was served. Section 275.8(a) of the Commissioner’s regulations requires that the petition be personally served upon each named respondent or “if he cannot be found upon diligent search, by delivering and leaving the same at his residence with some person of suitable age and discretion ....” The affidavit of service does not set forth any prior attempts to personally serve respondent Lyke. Moreover, an affidavit submitted by Lyke’s daughter states that she was served at her residence rather than at Lyke’s.
With respect to Jerry Champagne, although the affidavit of service lists several attempts to serve him, there is no indication that service, ultimately, was made upon him or anyone else. Consequently, service upon Lyke and Champagne is also defective.
The application must also be dismissed as moot. The Commissioner will only decide matters in actual controversy and will not render a decision on a state of facts which no longer exist or which subsequent events have laid to rest (Appeal of a Student with a Disability, 48 Ed Dept Rep 532, Decision No. 15,940; Appeal of M.M., 48 id. 527, Decision No. 15,937; Appeal of Embro, 48 id. 204, Decision No. 15,836). Petitioner requests removal of Garrett, as superintendent, and Schultz, Paz, Champagne, Nicholson, Hibbard and Lyke, as board members. However, I take judicial notice that those board members and Garrett no longer hold the offices for which removal is sought. Consequently, petitioner’s application for their removal is moot.
In addition to seeking removal of the above-referenced individuals, petitioner challenges action of the board, Garrett and Atseff regarding their “oversight and management of the District’s budget and financial operations.” The gravamen of petitioner’s claim is that respondents engaged in improper financial practices and, as a result, retained unexpended surplus funds at the end of each fiscal year in excess of four percent as permitted under RPTL §1318.
The application and appeal must be dismissed, in part, as untimely. An appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of, unless any delay is excused by the Commissioner for good cause shown (8 NYCRR §275.16; Appeal of Lippolt, 48 Ed Dept Rep 457, Decision No. 15,914; Appeal of Williams, 48 id. 343, Decision No. 15,879). The 30-day limitation period also applies to a removal application made pursuant to Education Law §306 (8 NYCRR §277.1; Application of Kelty, 48 Ed Dept Rep 476, Decision No. 15,921; Appeal of Budich, 48 id. 383, Decision No. 15,892). In addition, a removal application may be timely commenced within 30 days of the petitioner’s good faith discovery of the alleged conduct even though the actual conduct occurred more than 30 days before the application was instituted (Application of Nett and Raby, 45 Ed Dept Rep 259, Decision No. 15,315; Application of Bean, 42 id. 171, Decision No. 14,810).
Respondent contends that petitioner commenced this proceeding well beyond 30 days after the last action taken by the board or any district officer during the period covered by the Comptroller’s report - July 1, 2009 through April 30, 2012. Petitioner states that she was “made aware of” the challenged actions of the board, Garrett and Atseff when the Comptroller’s audit was released in March 2013. However, respondent asserts that petitioner could have obtained information regarding its financial practices prior to the release of the audit report and contends that petitioner offers no explanation of why she could not have ascertained such information prior to the report. Petitioner does not submit any reply refuting respondent’s assertion; indeed, attached to her petition are copies of documents from prior fiscal years that petitioner apparently was able to obtain. Petitioner does not allege or establish that she was unable in good faith to discover the facts underlying her claims until the 30-day period prior to commencing this proceeding (see Application of Paladino, 53 Ed Dept Rep, Decision No. 16,594; Application of Leman and Sluys, 39 Ed Dept Rep 330, Decision No. 14,252). Petitioner’s application for removal is, therefore, untimely and she has not provided sufficient basis to excuse her delay in commencing the appeal. Therefore, except as provided below, petitioner’s claims regarding actions by respondents that occurred prior to March 22, 2013 are dismissed.
However, with respect to alleged violations of RPTL §1318, an appeal is timely if it is brought within the fiscal year during which unexpended surplus funds are improperly retained (Appeal of Gorman, 52 Ed Dept Rep, Decision No. 16,412; Appeal of Schadtle, 40 id. 60, Decision No. 14,421; Appeal of Siver, 37 id. 498, Decision No. 13,912). As noted, this appeal was commenced on April 22, 2013. Thus, to the extent that petitioner challenges actions of the board and district officials relating to budgets for the 2009-2010 and 2010-2011 school years, the appeal must be dismissed as untimely. However, since the appeal was commenced during the 2012-2013 school year, it is timely to the extent petitioner alleges that excess unexpended surplus funds from 2011-2012 were improperly retained into the 2012-2013 school year (see Appeal of Schadtle, 40 Ed Dept Rep 60, Decision No. 14,421).
Under RPTL §1318(1), at the conclusion of each fiscal year, a board of education must apply any unexpended surplus funds to reduce its tax levy for the upcoming school year. Surplus funds are defined as "any operating funds in excess of four percent[2] of the current school year budget, and shall not include funds properly retained under other sections of law" (RPTL §1318[1]; Appeal of Gorman, 52 Ed Dept Rep, Decision No. 16,412). Accordingly, at the end of each school year all unexpended surplus funds in excess of the designated percentage (depending on the school year) of the amount of the budget for the upcoming school year must be applied to reduce the tax levy (Appeal of Gorman, 52 Ed Dept Rep, Decision No. 16,412; Appeal of Wolfley and McCauley, 50 id., Decision No. 16,225; Appeal of Uy and Norden, 44 id. 368, Decision No. 15,201).
The petition in this appeal consists almost entirely of statements taken from the March 2013 audit report which covered the period July 1, 2009 through April 30, 2012. I note that the report also references certain limited information from draft audited financial statements for the 2011–2012 fiscal year, as well as the district’s proposed 2012–2013 budget, as of the report’s release date. Petitioner sets forth no independent allegations regarding the 2011–2012 or 2012–2013 budgets. According to the audit report, the district’s 2012–2013 proposed budget was $42.1 million, and the district’s budget presentation stated it as $42,155,734. Consequently, respondent board was permitted to retain no more than four percent (4%) – or $1,686,229.36 - of its 2011–2012 unexpended surplus funds, not including funds “properly retained under other sections of law” (RPTL §1318[1]).
Based on this record, I am unable to make any determination as to whether respondent board, in fact, improperly retained unexpended surplus funds in excess of four percent of the 2012-2013 budget, in violation of RPTL §1318, because the Comptroller’s audit report does not include relevant actual financial information for that period. Nor does petitioner submit any other evidence establishing such facts. The record before me, therefore, is insufficient to make a determination regarding funds retained – properly or otherwise – by respondent board at the conclusion of the 2011–2012 school year. Consequently, petitioner has failed, on this record, to carry her burden of establishing facts sufficient to sustain the appeal.
Moreover, as relief, petitioner asks only that I direct the board to follow the recommendations made in the Comptroller’s audit report. I note that General Municipal Law §35, Education Law §2116-a(3)(c) and §170.12 of the Commissioner’s regulations set forth the process with regard to addressing findings and recommendations made in an audit by the Comptroller, including the implementation of a corrective action plan that must also be filed with the State Education Department. According to the record, the board’s response to the audit report set forth its disagreement with several of the audit findings. I also take administrative notice that respondent board is implementing corrective action in response to the audit report recommendations as part of an ongoing process. Although the appeal must be dismissed, in view of significant issues raised in the audit report regarding certain of the board’s past practices and those of its administrative staff, including Assistant Superintendent Atseff, I admonish respondent to ensure that it complies fully with the requirements of RPTL §1318, and addresses the audit report recommendations, particularly with regard to estimating revenue and expenditures, as well as the funding and use of reserve funds.
Although petitioner’s claims are, for the most part, untimely, and she has failed to carry her burden of proof to establish necessary facts regarding the alleged retention of excess unexpended surplus funds from the 2011–2012 school year, I am compelled to comment on two matters for the benefit of the parties. It appears that, in previous years, respondent has transferred unexpended surplus funds from the prior school year to reserve funds during the fall of the ensuing school year. It is well- settled that transfers of unexpended surplus funds, if otherwise authorized, may be made prior to the imposition of the tax levy (Appeal of Muench, 43 Ed Dept Rep 419, Decision No. 15,039; Appeals of Gorman, 43 id. 32, Decision No. 14,906; Appeal of Simons, 39 id. 744, Decision No. 14,367; Application of Mills, 34 id. 92, Decision No. 13,243). In further regard to district reserve funds, expenditures may be made only in accordance with such funds’ established purpose. Respondent board is reminded of these parameters as it proceeds with its corrective actions.
Although, on this record, I am constrained to dismiss the appeal, I am directing State Education Department staff to provide technical assistance to respondent board and its administration to assist in its continuing corrective actions.
Finally, to the extent that petitioner raises Open Meetings Law claims, Public Officers Law §107 vests exclusive jurisdiction over complaints alleging violations of the Open Meetings Law in the Supreme Court of the State of New York, and alleged violations thereof may not be adjudicated in an appeal to the Commissioner (Appeal of McColgan and El-Rez, 48 Ed Dept Rep 493, Decision No. 15,928; Applications and Appeals of Del Río, et al., 48 id. 360, Decision No. 15,886). Therefore, I have no jurisdiction to address the Open Meetings Law allegations raised in this appeal.
[1] The report states that some subsequent limited information was reviewed up through its issuance in March 2013, such as draft 2011-2012 audited financial statements and the district’s adopted 2012-2013 budget.
[2] Prior to 2007, surplus funds meant those in excess of two percent. In 2007, the statutory definition of surplus funds was amended to mean “in excess of three percent” for the 2007-2008 school year and “in excess of four percent for the 2008-2009 school year and thereafter” (L. 2007, ch. 238).