By Jim Newell

Review Editor

Lake Orion Community Schools received an “unmodified opinion” on its annual audit report, the highest form assurance it could receive, from its auditors during the board of education meeting Nov. 29.

The audit covered the fiscal year beginning July 1, 2016 and ending June 30, 2017.

Donna Hanson, a partner at Plante Moran in Auburn Hills, presented the district’s audit report, noting that Lake Orion had no internal deficiencies and no material noncompliance issues (relating to laws and regulations).

The district also received an unmodified opinion on its federal programs audit, including its Individuals with Disabilities Education Act (IDEA) major program audit, a key component of this year’s audit requirements. Overall, the district had no federal audit findings identified as outstanding issues.

“The district continues to be a low-risk auditee, which is very important because it dictates what needs to be tested at the federal level,” Hanson said.

Hanson said one area that the district needs to address is its fund balance.

The district has been working to increase its fund balance over the past couple of years, including closing Pine Tree Elementary to save on operating costs.

“The district went up slightly (in its fund balance), which was a good thing this year,” Hanson said. “It is still a challenging financial future, considering how the state is funding school districts.”

In 2008, the district’s fund balance was 18.53 million; about 25.4 percent of its operating budget. The fund balance has declined over the years and now stands at $7.12 million, or 8.9 percent – an increase from $5.99 million the previous year.

Board Secretary Jim Weidman questioned who much the district should have in its fund balance.

Hanson said the district should look at its cash flow and the cash needed on hand to cover payroll during the four weeks in the summer when the fiscal year ends and the district receives its first foundation allowance payment from the state.

Generally, districts are in a “solid position capital-wise” if they have 15-20 percent of annual operating revenue in fund balance, Hanson said.

Lake Orion’s total revenue in the 2016-17 fiscal year was $81.15 million, with an operating budget of $80 million.

The district received $58.9 million, 72.6 percent of its total revenue, from the state, while federal aid constituted 3 percent, $2.45 million. Local revenue amounted to $8.59 million, 7.2 percent; $5.82 million was classified as “other” revenue; and the state restricted retirement amounted to $5.35 million, or 6.6 percent.

The retirement amount is slightly misleading as an estimate of revenue, said John Fitzgerald, assistant superintendent of business and finance, because the district receives the funds and then is required to pay it into the retirement system. “It’s what we call flow-through dollars,” he said.

Total expenditures – what the district had to pay to operate for the year – were $80.025 million. Instruction and instructional support accounted for 74.7 percent, $59.8 million of costs. Operations and maintenance costs were $5.22 million, 6.5 percent, and school administration amounted to $4.65 million, or 5.8 percent of expenditures.

Transportation amounted to $2.92 million, 3.7 percent, and athletics were $1.17 million, 1.5 percent, of the budget. Technology surpassed athletics at $1.57 million, or 2 percent of expenses.

In a further object breakdown of costs, the total amount the district spent on salaries was more than $40 million, or 50.2 percent of the $80 million budget. Benefits were $21.44 million, 26.8 percent. In total, employee compensation accounted for 83.7 percent of total expenses.

Lake Orion is a “middle-funded district,” Hanson said, noting that the district does not receive the highest, or lowest, foundation allowance from the state.

“At your level, you’re also getting some of the lowest funding increases every year,” she said. “The district is receiving less funds today than it did 10 years ago in per pupil funding.”

Hanson said also that it was “good” that the district did not have a bond to fund operations, which would present a repayment liability.

“Right now, you have a sinking fund, which is fabulous that that passed,” Hanson told the board.

“Our sinking fund, I’m very, very pleased we have it. It’s kept our head above water on some of those” repairs and capital improvements, said Fitzgerald.