Purpose of Audit

The purpose of our audit was to review the District’s budgeting practices and reserves for the period July 1, 2011, to March 7, 2013.

Background

The Laurens School District is located in Otsego County. The District is governed by the Board of Education which comprises five elected members. The District’s budgeted expenditures for the 2012-13 fiscal year were $8,626,984.

Key Finding

• The Board adopted budgets that included the use of surplus fund balance to finance operations in an effort to avoid raising unnecessary real property taxes. However, although fund balance was included in the budgets, the District has not actually used fund balance to finance operations since 2008. In fact, the District has had operating surpluses for the past several years. Instead of spending down the District’s accumulated surplus by an average of 248,000 annually, as the Board had planned, the District’s operations generated additional surpluses totaling nearly $1.8 million over the last five completed fiscal years. These operational surpluses occurred because the Board’s adopted budgets consistently included overestimated expenditures for each of the last five years and underestimated revenues for three of those years. As a result of the Board’s budgeting practices, for the fiscal years ending 2008 through 2012, total fund balance has increased 72 percent to $3.6 million with reserves at almost $3 million or 82 percent of the fund balance at June 30, 2012.

Key Recommendations

• Adopt budgets that include realistic estimates for revenues and expenditures based on contractual and historical data.
• Review the District’s reserve fund balances and determine if the amounts are reasonable and necessary.
• Adopt a policy for reserves setting forth the planned balances to be accumulated in each reserve and how the reserves will be used.