[read complete report - pdf]

Audit Objective

Determine whether the Board effectively managed District finances by adopting realistic budgets and ensuring fund balance remained within statutory limits.

Key Findings

• District officials circumvented the statutory limit on surplus fund balance by not using $3.7 million in appropriated fund balance as a financing source, improperly booking $3.6 million in encumbrances and improperly reserving $7.7 million for debt service.
• Recalculated surplus fund balance exceeded the statutory limit by 10 to 12 percentage points for the fiscal years 2015-16 to 2017-18. The District also maintained 11 proper reserve funds totaling $34 million at June 30, 2018.
• During the last three fiscal years, District officials could have funded operations and reduced surplus fund balances which impact real property tax levies.

Key Recommendations

• Ensure that the District’s fund balance complies with statutory limits and use surplus funds for one-time expenditures, paying down debt or applying it to the necessary property tax levy amount.
• Provide transparency by budgeting for operations and reserves more accurately, and accounting for encumbrances and debt service funds properly.

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