Letter to the Community Comptroller's Audit 12-18-08

Mmurray

Description

Minisink Valley Central School District Central Administration December 19, 2008 Dear Minisink Valley Community Member, I’d like to respond to the information contained in an article reported in the Times Herald Record. The article references the state comptroller’s office audit conducted this summer and released earlier this week. The audit speaks about the unreserved appropriated fund balance that has been built up over decades of sound financial planning. Explanation of auditors’ methodology We take great exception to the characterization found in the auditors’ report that “payroll and employee benefits exceeded expenditures by a total of $31.1 million.” In the auditor’s report, each year’s appropriation was totaled when these appropriations were actually rolled over annually. Subsequent years’ appropriations include the previous year’s amount. We do not have a $31.1 million dollar fund balance, and the state auditors know we don’t. An analogy would be the balance of a savings account in which an individual saved $1,000 a month for four months: Using the method employed by the auditors in their report, the individual would have $10,000 at the end of the four-month period of saving. We all know from our own savings accounts that this is not the case, however much we wish it were. Savings Account Balance Savings Account Balance MV Method OSC Auditors’ Method September 2008 $1000 September 2008 $1000October 2008 $2000 ...

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• Publié par: Shoep
• Nombre de lectures: 12
• Langue: English

Extrait

Minisink Valley Central School District

Central Administration

December 19, 2008

Dear Minisink Valley Community Member,

I’d like to respond to the information contained in an article reported in the

Times Herald Record.

The article references the state comptroller’s office audit conducted this summer and released

earlier this week.

The audit speaks about the unreserved appropriated fund balance that has

been built up over decades of sound financial planning.

Explanation of auditors’ methodology

We take great exception to the characterization found in the auditors’ report that “payroll and

employee benefits exceeded expenditures by a total of $31.1 million.”

In the auditor’s report,

each year’s appropriation was totaled when these appropriations were actually rolled over

annually.

Subsequent years’ appropriations

include

the previous year’s amount.

We do not have

a $31.1 million dollar fund balance, and the state auditors know we don’t.

An analogy would be the balance of a savings account in which an individual saved $1,000 a

month for four months:

Using the method employed by the auditors in their report, the individual

would have $10,000 at the end of the four-month period of saving.

We all know from our own

savings accounts that this is not the case, however much we wish it were.

Savings Account

Balance

MV Method

Savings Account

Balance

OSC Auditors’

Method

September 2008

$1000

September 2008

$1000

October 2008

$2000

October 2008

$2000

November 2008

$3000

November 2008

$3000

December 2008

$4000

December 2008

$4000

Total in Account

$4000

Total in Account

$10000

When pressed for an explanation of why they would total the yearly appropriation instead of

accurately showing a given year as

including

the same amount of money from the previous year

plus the current year’s appropriation, they could not give a logical reason nor one that would

make any mathematical sense. They chose instead to comment on page 12 of the report that

they used this method “to give the reader an understanding of its [their] significance.”

Explanation of the districts unreserved, appropriated fund balance

Boards of education spanning decades have worked hard to monitor the unreserved,

appropriated fund balance that is the subject of this audit report.

It currently stands at $6.9 million

dollars.

Our external auditors have noted it on an annual basis and have even praised the

soundness of our fiscal planning.

The district has included this unreserved appropriated fund

balance in our budget presentations and budget hearings to the community, showing it on the

revenue side of the ledger as helping to reduce the anticipated tax levy.

We have always explained this unreserved, appropriated fund balance as a “savings account”

that reflects prudent planning.

This “savings” was meant to address fluctuations in state aid, and

changes in legislative mandates such as the GASB 45 obligation to fund the post employment

benefits.

We are still waiting for legislative and/or regulatory guidance to address this liability.

Using this fund balance in challenging fiscal times

Governor Paterson’s proposal, released this week, will mean a 5 million dollar deficit for Minisink

Valley School District in the 2009-2010 school year.

We are looking at flat state aid with rising

costs for each of the next two years and an additional

Deficit Reduction Assessment

of more than

$2.6 million dollars.

Our fund balance will compensate somewhat for this loss in state aid.

However, it should be noted, that whatever portion of the fund balance we use to make up for lost

revenue from the state this year will not be available next year or in ensuing years.

Once we

spend it, it’s gone. Historically, school districts that have “spent down” their fund balance in one or

even two years have looked at tax increases of 20-30% in ensuing years.

We cannot, we will not

do this to the community.

Therefore, the prudent, fiscally responsible thing to do would be to “spend down” this fund

balance gradually to avoid wide swings in future tax levies.

We anticipate that through a

combination of applying a portion of the fund balance and reducing spending, we will be able to

keep the tax levy at a reasonable level. The district will be working hard in the coming months to

decide just how much of the fund balance should be used this year. We will also be taking

deliberate steps to reduce spending.

Weathering this economic downturn with its loss of state aid will take a two-pronged approach:

1. Using a portion of our fund balance

2. Reducing spending.

Minisink Valley is fortunate to be in a position to have both options available.

Our goal in the next

few months is to reduce spending, and to build a tight, responsible budget that will still address

the needs of our students.

The prudent application of the fund balance that is the subject of this

audit puts our district in a better position to be able to meet this goal.

The finance committee will be meeting to build the budget in a series of budget development

meetings that are open to the public.

These meetings are set for January 29, February 11,

February 26, and March 12 at 6:30 PM in Room 108 of the middle school.

Please join us.

Sincerely,

Dr. Martha Murray

Superintendent of Schools