Posted: 12/4/02

ISD 831 gets clean audit report

A reduction in expenditures to revenues and establishment of a fixed assets inventory has led to a ìcleanî audit report for ISD 831.

Auditor Aaron Nielson of Malloy, Montague, Karnowski & Radosevich presented his report to the school board Monday night. Nielson reviewed the findings of the firm review of the districtís financial statements for the 2001-2002 school year which ended on June 30.

The past fiscal year marked the first time districts were required to establish a fixed asset inventory. With that step completed in the past school year, Nielson said the district took the correct step in securing a clean report from the independent auditing firm.

The clean report was a ìfirstî for the district, said Larry Martini, director of business affairs, prior to Nielsonís report.

The board voted 7-0 Monday to accept the audit.

Spending Patterns

Nielson praised the district for its exactness in projecting income and its belt-tightening efforts to bring revenues in line with expenditures.

The auditor said the district projected revenues that were within $15,000 of the overall $55 million district budget last year.

Favorable interest rates for district borrowing and a mild winter that netted lower heating and utility costs were factors in the districtís positive picture, Nielson said.

Although the district remains in statutory operating debt status, the auditor said ISD 831 is ahead of schedule in a plan to move free of SOD. A key to the improved situation in the past year was the ability to curtain expenditures, Nielson said.

ìWe need to continue that focus,î Nielson said.

The district was $2.3 million under budget and experienced a $5.3 million decrease in expenditures in fiscal 2002 compared to fiscal 2001. The district was under budget in all categories.

As of June 30, 2002, the district reported a general fund deficit unreserved-undesignated fund balance of approximately $2.16 million.

ìThe district must continue to expend less than available resources to establish a sufficient and healthy financial condition,î the audit report said. ìThis need for adequate fund balance levels has increased with the change in funding general education, causing school districts to become reliant on the state (and economy) for future funding increases.î

Based on funding and reimbursement patterns, Nielson said districts are likely to face growing cash flow problems.

ìBeginning in fiscal year 2003 the general education levy has been eliminated and replaced entirely with state aid as a result of the stateís effort to fund this program entirely at the same level,î the audit said.

ìIn addition to this shift in funding change, we believe districts will experience a further reduction in cash flow due to the new changes enacted in the state aid metering system. Both of these changes will cause more districts to seek tax or aid anticipation borrowing for cash flow purposes and reduce investment earnings.î

Food service

The audit also gave good marks to the food service fund.

Following four years of negative spending, the food service fund in the past fiscal year produced a positive balance. As of June 30, the department revenues $118,493 in excess of expenditures. The strong showing eliminated the deficit that existed on June 30, 2001.

Food services revenues increased by $303,761 or 10.6 percent over fiscal 2001 due to increased participation with the all day kindergarten program and increased prices. Expenditure increases were held to $75,726 or a 2.2 percent increase.

ìDue to constraints of general education funding, and the current financial condition of the general fund, it is particularly important that food service operations are self-sustaining,î the audit said. ìThis would include the accumulation of fund balance for future capital improvements to food service facilities and to provide a cushion in the event of a negative trend in operations.

Community Services spending also received good grades in the report.

The fund experienced a planned decrease in fund balance of $67,979 for the year ended June 30, 2002, but even with the reduction in total fund balance, Community Services was able to eliminate the negative unreserved-undesignated portion of the fund balance as of June 30, 2001.

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