Purpose of Audit

The purpose of our audit was to examine the District’s financial activities for the period July 1, 2011 to May 14, 2013.

Background

The Charlotte Valley Central School District is located in seven towns within Delaware, Otsego, and Schoharie Counties. The District is governed by the Board of Education which comprises five elected members. The District’s general fund budgeted expenditures for the 2012-13 fiscal year were approximately $8.6 million.

Key Findings

• District officials believed they were effectively managing the District’s finances. However, the Superintendent and the Board did not develop reasonable budget estimates. For fiscal years ending 2007-08 through 2011-12, the Board adopted budgets that over-estimated expenditures by almost $2 million, with over-estimating the students with disabilities account comprising almost 68 percent of that variance. The District’s revenue estimates were underestimated by nearly $723,000 for the same time period. These estimates ranged from as little as $9,000 in 2010-11 to $269,000 in 2011-12. The Board’s adopted budgets also included appropriating fund balance totaling more than $2 million during the 2007-08 to 2011-12 fiscal years. However, only $420,000 of this fund balance was actually needed due to the operating surpluses in 2008-09 and 2009-10 (totaling $1,155,011). This resulted in the unexpended surplus fund balance to be more than the 4 percent statutory limit, at 10.61 percent in 2007-08, 5.11 percent in 2008-09, 12.04 percent in 2009-10, and 4.05 percent in 2011-12. However, for the 2010-11 year, the fund balance was under the threshold at 3.95 percent.
• To reduce the unexpended surplus fund balance and bring it closer to the 4 percent limit, District officials made unplanned transfers to the District’s reserves.

Key Recommendations

• Adopt realistic budgets that are consistent with the District’s actual revenues and expenditures.
• Set limitations on the amount of transfers the Superintendent can make without prior approval. Review all reserve balances and determine if the amounts reserved are necessary, reasonable, and in compliance with statutory requirements.