District Audit Reportposted Nov 25, 2013
BESD Audit Report
School districts in the State of Utah are required to undergo an annual audit conducted by an independent auditor. During this process, the auditors check to make sure the district has adequate internal controls over all finances and that the district’s financial statements are reasonably free of material misstatements. The auditors review the accounting process, internal controls, and the financial records at both the district and the school level. They also review revenues and expenditures of local, state, and federal funds.
The goal for the district is always to gain an “unqualified opinion” that the financial statements are fairly presented and conform to the required auditing principles. We reached that goal for the 2013 fiscal year (2012-2013 school year). As with any good audit, areas were identified where improvements need to be made. Work will begin in those areas immediately.
District’s Financial Condition
The district’s financial situation is a mixed bag in that we’re very healthy in some areas while losing ground in others. One area in which we are healthy is our capital budget. Our audit verified a fund balance of $27,917,782 which is an increase of $1.44 million from the fund balance at the end of the 2012 fiscal year. During the 2013 fiscal year we did an extensive remodel of the natatorium at Bear River High School and increased our budget for major maintenance concerns to $2 million. We are maintaining a replacement program for buses and other capital equipment. Unless something unforeseen happens, the district should be able to take care of our building needs during the next several years without asking for your support on a bond levy.
School food service is a “huge” business with revenues and expenditures equaling over $4.3 million a year. Although expenditures exceed revenues by a small amount, the program has a fund balance of approximately 18% of their annual revenues. It is important to note that the federal government will require the district to raise prices over the next several years even though our district has a fund balance. The government is also instituting additional controls on what foods can be sold in schools starting July 1.
The district is able to handle the debt service, which is primarily the result of the $70 million in general obligation bonds approved by the voters in 2007. During the 2013 fiscal year, Box Elder School District paid $6.85 million toward retiring the debt that the district incurred through school building projects. Of that amount, $4.35 million was paid on the debt’s principal.
The district also maintains a “rainy day” fund of a little more than $2.3 million in case of an emergency, such as a decision to reduce state revenue during the middle of a fiscal year.
The district’s financial challenge comes in the general fund where 72.5% of all expenditures occurred during the 2013 fiscal year. Of the $65.75 million spent in the general fund last year, 84.9% was used to provide salaries and benefits for our employees.
In order to meet our obligations, we were required to use a little over $1 million of our fund balance in the general fund. As indicated in a recent School Board meeting, at the current rate our fund balance in that area will be depleted within two years. It is important to note that many of our veteran teachers are making less money than they were a few years ago. Employees have watched the amount of money they pay for health insurance increase while their coverage has decreased during each of the past couple of years.
The general fund answer is obvious. The district must either increase revenues or decrease costs in the very near future. When 84.9% of the general fund goes for the salary and benefits of employees, it is virtually impossible to decrease costs without affecting employees.
There are several different ways to increase general fund revenues. As we look at the upcoming legislative session, one of the most important goals is to have new state revenues either go directly toward increasing the value of the weighted pupil unit (WPU) or increased funding to line items in the state budget that we’re currently supporting with general fund money (transportation and state retirement as examples). It is hoped that legislators will avoid sidetracking new revenues into pet projects that may not be as important as helping those who are working with children and our current programs on a daily basis.