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Audit Objective

Determine whether the Board of Education (Board) properly managed reserve funds.

Key Findings

The Board did not properly fund, use or manage reserve funds according to applicable laws or best practices. The Board did not:

• Define the financial objectives including the purpose, funding goals, conditions for reserve fund use and replenishment.
• Obtain voter approval to liquidate the liability reserve or fund the repair reserve, as required.
• Pass a required resolution to properly transfer $114,895 into the retirement reserve.

While it is a prudent practice for officials to save for future expenditures, without a reserve fund policy there is a risk that the District may overfund reserves which can result in higher than necessary real property tax levies.

Key Recommendations

• Adopt a comprehensive written reserve fund policy and develop a written plan for future funding and use of reserve funds and ensure amounts are necessary and reasonable.
• Consult with legal counsel as to the appropriate remedy for addressing improper funding of and transfer of funds from reserves.

District officials generally agreed with our recommendations and have initiated, or indicated they planned to initiate corrective action.