Purpose of Audit

The purpose of our audit was to examine the District’s financial management practices for the period July 1, 2014 through April 12, 2016.

Background

The Frankfort-Schuyler Central School District is located in the Towns of Frankfort and Schuyler in Herkimer County. The District, which operates two schools with approximately 985 students, is governed by an elected seven-member Board of Education. Budgeted appropriations for the 2016-17 fiscal year total approximately $19.2 million.

Key Findings

• District officials did not adopt budgets based on historical or known trends but instead overestimated expenditures by almost $2.7 million over the last four fiscal years (2011-12 through 2014-15).
• The District retained an average of approximately $342,000 of unrestricted funds in the debt service fund, $1.1 million in the agency fund’s group health insurance account and $429,000 in excessive reserves.
• The Board did not adopt a written reserve fund policy or develop a multiyear financial plan, which would allow District officials to identify developing revenue and expenditure trends, set long-term priorities and goals, avoid large fluctuations in tax rates and more effectively manage the use of unrestricted fund balance.

Key Recommendations

• Develop estimates of expenditures and the use of fund balance in the annual budget based on historical and known trends.
• Ensure that the amount of the District's unrestricted fund balance is in compliance with the statutory limit; use surplus funds as a financing source for funding one-time expenditures, funding needed reserves and reducing District property taxes; and ensure that reserve fund balances are maintained at reasonable levels and take appropriate action, in accordance with statute, to remedy reserves with excess funds.
• Adopt a reserve fund policy that states its financial objectives for the reserves, optimal funding levels and conditions under which the assets will be used and develop and adopt a comprehensive multiyear financial and capital plan that addresses the use of reserves and unrestricted fund balance.