Caledonia Argus

School Board explains deficit

Posted: 4/16/02

The following is a letter to the editor from the Dist. 299 School Board.

For over a year, residents of School District 299 have been asking one question - How did our school district fall into statutory operating debt? The following is information to address that question. We bring forth this information because a school district simply cannot be successful without the support and trust of residents in the district.

1. What happened to our finances?

The past six year of ìCOMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESî are provided for your review along with the notation of which superintendent was responsible for preparing the budget for that year. The numbers under the budget Column are the numbers that were budgeted for that school year and the numbers under the Actual Column are the actual audited numbers that were received and spent for that year. The Variance column shows the difference between the budget and what was actually received and spent.

Sound financial management when establishing a budget requires that conservative revenue estimates are made upon which the expenditure budget is built. When overestimates of revenue are made and/or there is a failure to stay within the expenditure budget, trouble can arise.

Miles Miller retired as our superintendent at the end of the 1995-1996 school year. The school district had a positive fund balance of $201,149 at that time. Our next superintendent, Don Wilke, started July 1, 1996 and inherited a budget that was largely prepared by Dr. Miller. The 1997-1998 budget was the first budget that Mr. Wilke was responsible for preparing. Starting with Mr. Wilkeís first budget, 1997-1998, total revenues were overestimated by $261,462. In 1998-1999, total revenues were again overestimated by $421,834 and by $463,327 in 1999-2000.

On the expenditure side, spending was over budget $ 92,862 in 1997-1998, $179,410 in 1998-1999, and $86,905 in 1999-2000. If you add up the revenue shortfalls and over expenditures during Mr. Wilkeís tenure, it comes to $1,505,800.

Percy Lingen became superintendent 7-1-00, inheriting a budget prepared by Mr. Wilke for the school year 2000-2001. Mrs. Lingen discovered errors in the budget in August, however, little could be done since contracts had been signed. Superintendent Lingen and the school board did what they could to reduce non-contracted expenditures.

The end result of four years of large negative budget variances is that our current auditor projects the district to have a negative general fund balance of $ 581,000 at the end of this fiscal year (6-30-02).

2. How did this happen to our finances?

Relaxes school board oversight during the large budget variance years is not the only reason for our predicament. Red flags should have been raised by our districtís auditor. This problem should have been caught in the school year 1997-1998 when we missed our budget by $354,324. When Lloyd Johnson, our auditor at the time, presented the audited financial report for the school year 1998-1999, in Eitzen, he was asked the question ìAre you saying that our school district is being prudently managed and in good financial condition?î His answer was yes! Not only had we missed our budget the year before, but we had missed it by $601,244 for the year 1998-1999! The school districtís financial condition was not duly reported by our auditor.

3. What is being done to make sure this does not happen again?

In the last year the school board has been proactive in taking steps to manage all revenue and expenditures. The school board replaced Lloyd Johnson as our auditor and hired the firm of Larson Allen Weishair & Company (LAWCO) to perform our audit. The board passed a policy that limits expenditures in any given category to the approved budgeted amount. Any expenditure in excess of the approved budgeted amount requires school board approval. Budgetary oversight has been implemented with the school board now receiving a monthly financial report that shows actual expenditures to date, budgeted amounts and expenditures for previous year-to-date. This report also contains the same data for revenues. We have also increased the role of the school board treasurer. The school board has acquired the services of LAWCO to review the budgeted revenues at critical times of the year. In addition we continue to have a service provider known as Region V look over our budgeted numbers before they are approved by the school board. New programs, recommendations, etc., that come before the school board are closely scrutinized as to their effect on the districtís budget. Audited reports are public information. The ìCOMBINED STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCESî will be published in The Caledonia Argus for your review. The 2001-2002 audit will be available in the fall.

We share this information with you so that you may better understand how we arrived in statutory operating debt and what actions have been taken by the school board and administration to prudently manage our districtís finances.

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