Clarkston Community Schools met its goal of having more than a 15 percent fund equity balance last school year, but current budget concerns will likely reduce those savings.
The school board last week received an outside audit of accounts for the 2002-2003 school year, both in the conventional income/expense method and a new asset/liability model required by state law.
Tina Kostiuk, of the Plante and Moran accounting firm, said they awarded the district an “unqualified” or “clean” opinion of the district’s financial statements for the year ended June 30, 2003.
In the “major funds” category (including the general fund, community education and special education), the district showed revenue of $64,376,535 and expenditures of $59,726,763. With a previous fund equity, that left the district with a cushion of $10,441,570 at the end of the 2002-2003 school year, or 17.5 percent of the total budget, Kostiuk said.
Part of that fund balance was designated for specific areas of spending, so undesignated fund equity came in at about 14.2 percent, according to Bruce Beamer, executive director of business and financial services.
District officials have been on a three-year plan of budget adjustments help the fund equity grow from a recent low of 5.3 percent in 2000-2001 to the 15 percent goal.
Kostiuk said the growth in the district’s financial cushion was especially notable given various budget pressures.
“We were very surprised,” Kostiuk said. “If we think about the executive order cut we faced last fiscal year and the economic times in general, your low foundation [grant], and looking at this year’s enrollment projections, it really takes a tremendous effort on your part in planning and budgeting to have done what you did for FY 2003.
“This year you did not have to go out and borrow on an anticipation note because you have enough fund equity to operate until that first state aid payment came in,” she said.
Local officials have complained of inequities in the state’s per-pupil “foundation grant,” and the Plante and Moran audit showed Clarkston lower than many districts in Oakland County. (Clarkston received $6,947 per student in 2002-2003, compared with a county high for Birmingham of $11,755 per student.)
The audit included a new, government-mandated audit with the addition of physical assets and long-term liabilities.
The new auditing standards, dubbed “GASB 34,” come from the federal Governmental Accounting Standards Board, and in Michigan have been phased in according to a district’s budget size. It requires documentation not only of budget balances, but also capital assets (land, building, buses, etc. at purchase value), depreciation of assets and long-term debt.
The audit found Clarkston’s long-term debt (including bond issues and eventual pension payments) to be $124.7 million for 2002-2003, leading to a net deficit of $6.67 million.
While this was the first year the new system was required, the Plante and Moran staff computed a 2001-2002 net deficit of $11.7 million for Clarkston according to GASB 34 standards.
“I don’t want to say it’s right. However, because of our economics and our growth and our need for space, it should have been anticipated,” Beamer said later, noting how things will come into balance as bonds are repaid. “In reality, it’s not bad.”
The budget for the current year, however, is a concern.
The amendment approved by trustees Monday, Oct. 13 added $263,738 in revenue and $1,109,385 in spending, resulting in a total budget of about $65.4 million. By current estimate, the expected cash surplus will shrink from $893,180 to $47,533.
The ending fund balance next June, estimated in July to be $11.3 million, will shrink to about $9.6 million, according to the budget amendment.
Midyear amendments are not uncommon for local governments, and schools are especially affected because line items such as state aid and official enrollment are not determined until well into the school year.
“We started saying we were going to have a balanced budget and add to our equity,” Beamer said. “Now we’re swinging the other way.”
Part of the reason for the “swing” is additional spending in various general fund categories and special education, based on more accurate projections, Beamer said. While there are some additional revenues from grant programs, some grants have been reduced this year and the district’s student enrollment count was less than expected.
That will impact the state per pupil foundation grant, and officials are looking at a potential reduction of $200 per student because of state budget problems.
“We’re going to get a state cut, and we’re not going to get our 100 [extra] kids,” Beamer said. “It’s a good thing we had that equity last year.”
There are still unanswered questions on additional revenue. For example, while Oakland Schools in September announced a $20.5 million payout to local school districts because of alleged financial mismanagement of special education funds, Clarkston Community Schools have yet to see their local share.
Beamer hopes to see those funds before the end of the calendar year, and there is expectation of financial help in moving fiber optic lines from along Sashabaw Road thanks to sale of right-of-way property for the road construction project.
Another financial question involves a Safe and Drug Free Schools grant, revenue from which is expected to help the school district resume their funding of a second sheriff’s deputy/school liaison officer.
Deputy Superintendent Dave Reschke said the district is finalizing the application for that grant, and has good reason to believe it will be awarded, although reduced from an expected $28,000 to $24,000.
About $9,000 is expected to go toward the liaison officer’s salary, with the remainder to be used for projects such as a student drug use survey coordinated through Western Michigan University.