Delayed financial audit is complete
Auditor finds no concerns in now completed report
Typically a financial audit is nothing to get too excited about, but for the RE-1 Valley School Board, it was one of the highlights of their Monday meeting.
“We’ve been on pins and needles now, I have, literally for eight months,” RE-1 Valley Interim Superintendent Dr. Foster said thanking Deb County, interim chief financial officer, and her staff, as well as Terry Buswell, retired CFO from Centennial BOCES, who has been assisting the district, for all of their work on it. “I can’t say enough good things about what they’ve done.”
The yearly audit is typically completed in the fall, but this year the district had to request an extension from the state as finance officials worked to get records caught up. Dr. Foster likened the situation that’s been going on for the last several months with someone who pays their bills as they come in every month but doesn’t take the time to balance their checkbook.
“We’ve got to balance the checkbook,” he said. “What does that mean? It means as we move forward in preparing a budget for next year we’ve got a starting point. Finally we have that and it’s a good number, that’s the other positive thing.”
After Scott Szabo of Lauer, Szabo and Associates, reviewed the 2021-22 financial audit, which was clean and later approved by the board, board president Steve Shinn asked about the circumstances that Szabo’s firm encountered that caused the delay and how to avoid that in the future.
Szabo explained that when they were doing the Fiscal Year 202021 audit in December and January of 2021 and 2022, they were told that a lot of things had not been posted or reconciled from July through December 2021, but they were focused on getting the audit at the time done. Then when it came time to do the 2021-22 audit that caused issues.
“There was a lot of activity that had taken place that had not been posted, bank record
reconciliations hadn’t been done and largely from an auditor’s perspective if the bank reconciliations aren’t done we have no idea if all of your transactions are recorded. That’s the worst case scenario from an auditor’s perspective is when you come in and are told that the bank accounts haven’t been reconciled,” Szabo said.
So, they came up with a plan to extend the audit deadline and start it the last week of January, to give the district as much time as possible to get its records in order.
“Really from a board’s perspective you should be getting monthly financial statements, you should be getting bank reconciliations, the superintendent should be getting those, you guys should really know where you stood and I don’t think anybody knew. So, from that perspective, it literally would have done us no good to come in September to try to do the audit if things weren’t posted and things weren’t reconciled,” Szabo told the board.
The last time the board approved financial statements was in January 2022.
In presenting his report, Szabo called it “a difficult audit,” but said there was a good support system in place between district staff and his staff, and they dove right in and got things taken care of.
The audit shows the general fund had revenues of $21.6 million and expenditures were just under $18.9 million and there was a transfer of $210,000 to the capital reserve fund. The general fund itself went up $2.5 million and there was $4,885,000 in the fund at the end of the year, which equates to about three months reserve, “a good reserve for a school your size,” Szabo said, noting most have three to six months in reserve.
He noted the grants fund was higher than in the past because it included Elementary and Secondary School Emergency Relief (ESSER) funds given to assist schools with COVID-19 relief. It had $2,264,000 in revenue and the same amount of expenditures.
Additionally, the food service fund had revenue of $1,362,000 and expenditures of $1,129,000, and the fund itself went up $230,000, with a little over $6,000 in the fund at the end of the year. Szabo noted those funds are restricted to spending within the food service program. He also pointed out that the federal government gave a lot of money to food service programs the last two years, so it’s not uncommon to see revenue higher than what is originally budgeted for, but that also means districts will serve more meals than anticipated, which is why RE-1 spent $239,000 more than what was appropriated.
“It’s really not a big concern. CDE (Colorado Department of Education) will follow up and remind you of your options when it comes to budgeting and changing the budget through a supplemental budget later in the year,” Szabo said, noting this happened to a lot of schools.
The Walsh fund and Campbell Library fund had no funds spent and $1,000 spent respectively. Both of those funds were created with financial gifts given to the district to be used for specific purposes. Szabo encouraged the district to revisit the purpose of the fund to see if maybe it is spending general fund money on things that these funds could be used for instead. The Campbell Library fund had a $35,000 fund balance at the end of the year and the Walsh Fund had an $84,000 fund balance.
Additionally, the capital reserve fund’s only source of revenue was the $210,000 transfer from the general fund, which increased the fund balance from $13,000 to $224,000 and the bond redemption fund had total revenue of $1,948,000, principal and interest payments of $1,523,000 and a fund balance of just under $4.6 million.
Szabo also addressed the district’s funded pupil count. In 2019 the funded count was 2,210, then it went up to 2,187 in 2020 but in the last couple of years there has been a declining enrollment, with the projected funded pupil count in the 2022-23 budget at 2,065 and while generally that results in declining revenue, that’s not what the district saw in 20212022. That year RE-1’S per pupil revenue went up $1.6 million.
Some of this has to do with the budget stabilization factor, which was established in 2010-11 by the legislature as a way to reduce funding to districts to balance the state budget. Once total program funding is calculated per the School Finance Act, the budget stabilization factor is applied to the district’s total funding.
In 2018-19, the average pupil funding was $8,137; in 2019-20 it went up to $8,489, but in 2020-21 it dropped to $8,123, “so you lost $300 some dollars a kid and that’s not what’s supposed to happen under the Colorado School Finance Act,” Szabo said. In 2021-22, the average per pupil funding went up to $8,991, an increase of $867 a student and that times the district’s funded pupil count is why there was a $1.6 million increase.
“The big thing if you look at all of those years the budget stabilization factor $672.4 million in 2018-19, $572.4 million in 2019-20 all the way to $1.05 billion in 2020-21, that’s the legislature through the budget stabilization factor pulling some of these resources out of school districts. Totally out of your control, doesn’t have anything to do with your pupil count,” Szabo said.
In 2021-22 the budget stabilization factor dropped to $571 million, the lowest it had been in four years. However, as a result of the 12 years of the budget stabilization factor, over $9 billion have been withheld from Colorado’s schools.
At the conclusion of the meeting, Shinn noted, “a lot of these situations that we got ourselves in have been basically ongoing for quite some time and there have been a lot of boards here that had to deal with a lot of issues and they had difficult issues presented to them and not always the perfect choice for trying to resolve all of that,” he said. “My comments are not in any way to be considered as negative or derogatory about people who’ve come forward and served on any board at any time. I know that they’ve all had the best interest of RE1, but there was just apparently a combination of factors that developed some would say the perfect storm.”
He went on to note that the issues that RE-1 is facing are not unlike what other districts across the nation are facing with regard to finding people to fill positions from administrators to teachers to the finance staff. Now, with this audit complete they have information that is needed to make critical decisions with regard to areas like salary schedules.
“This meeting was very important to rebuild confidence and knowing where we stand financially and knowing we have a strong leader for this next year is huge; it will help us to continue to propel forward,” Ronda Monheiser added.