Purpose of Audit

The purpose of our audit was to review the District’s financial condition related to the establishment, funding and use of reserves for the period July 1, 2011 through June 30, 2013.

Background

The District is located in Onondaga County and the Onondaga Nation Territory. It is governed by a Board of Education which comprises seven elected members. During the 2012-13 fiscal year, the District had general fund operating expenditures of approximately $19.4 million.

Key Findings

• Four of the five reserve funds in the District were not formally established. However, since the Board funded these reserve funds over multiple fiscal years, they can be considered de facto reserve funds.
• The District did not have a plan for funding several of its reserves. In addition, the Board did not adopt written policies for establishing and using reserve funds.
• The Board’s extensive use of reserves along with appropriating fund balance in the annual budgets left the general fund with unassigned fund balance deficits for the past three years.
• District officials inappropriately transferred funds from reserves, and these transfers were not approved by voters as required.

Key Recommendations

• Adopt resolutions when establishing or funding reserves. Take remedial action to ratify the de facto reserves by adopting appropriate resolutions.
• Adopt a comprehensive reserve policy that clearly communicates the purpose and intent for establishing each reserve fund, and how it will be funded and maintained.
• Adopt a policy setting forth reasonable amounts of “unexpended surplus funds” that the District should maintain, not to exceed the 4 percent statutory maximum.
• Ensure that funds are expended from reserves only for the purpose for which the reserve was established or as otherwise provided by law. Refrain from loaning reserve money to other funds except as permitted by law.