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Audit Objective

Determine whether the Board and District officials adopted realistic budgets and effectively managed fund balance and reserves.

Key Findings

• District officials circumvented the statutory limit on surplus fund balance by making more than $12 million in unbudgeted year-end transfers to capital projects and reserves, overstating encumbrances by $827,000 and not using $5.3 million in appropriated fund balance as a funding source.
• The tax certiorari and unemployment insurance reserves were overfunded by $2.86 million as of June 30, 2018.
• The Board increased real property taxes by $2.6 million over the last three years despite having sufficient funds to finance the District’s increased costs.

Key Recommendations

• Provide transparency by developing and adopting budgets that include reasonable estimates for revenues and appropriations and the amounts of fund balance and reserves that will be used to fund operations.
• Review and fund reserve balances to reasonable levels in accordance with applicable statutes.

District officials disagreed with certain aspects of our findings and recommendations but indicated they have begun to implement corrective action. Appendix B includes our comments on issues raised in the District’s response letter.