District's audit shows fund balance use
By News-Argus Staff
Published in News on December 8, 2006 1:45 PM
Receiving its 2006 audit report Tuesday night, the Duplin County Board of Education learned that with the school system operating at a loss last year, it had been forced to draw $731,444 out of its fund balance to cover its expenses.
"It could have been a lot worse, but they had enough fund balance to absorb that," new school chief financial officer Carolyn Olivarez said.
It was the third year in a row that the district has had to dip into the fund balance -- the school system's savings account. In those three years, that fund has fallen from a high of $5 million in 2003 to $2.3 million at the start of the current fiscal year.
"The board has been budgeting more expenses than it has revenues," said Dock Davenport, a partner with accounting firm Barrow, Parris & Davenport. "The board has done some positive things with that money (increasing per-pupil spending from $6,179 in 2002 to $7,517 this year), but will have to get back to a more evenly balanced budget.
"Down the road it could eventually be a problem, but they're still in stable condition. They seem to be turning that trend around. They have budgeted less of their financial reserve in the current year than in recent years."
Ms. Olivarez agreed, noting that the problems that cropped up early last fiscal year due to a lack of oversight have been resolved, but that discontinuing the school system's reliance on the fund balance would be a gradual process.
This year, the school system has already appropriated $275,500 of its fund balance into its operating budget. Fortunately, Ms. Olivarez said, most of that is locked up in contingency funds, which means there's a good chance they won't be spent.
"We have a planned loss, but what we need to work toward is not appropriating any," she said. "That's like balancing your budget by living off your savings. That trend cannot continue, but it happens a lot of the time in schools because the board knows what needs to be done for the children and they dip into their fund balance."
Right now, though, she's not worried about the financial health of Duplin schools.
"We have a healthy fund balance," Ms. Olivarez said. "I think a cautious estimate is to keep three months of expenses, so it should be about $2.7 million, but $3 million would be better.
"It's a double-edged sword because you don't want to have too much, but you've got to have enough to be self reliant."
Overall, she continued, Duplin schools are doing well financially.
"I think they're in good shape and hopefully we'll be able to keep it that way," Ms. Olivarez said.
Helping with that, the board also found out Tuesday, will be a $1.54 million federal E-Rate discount the school system recently received with the help of U.S. Rep. Mike McIntyre, D-District 7.
The E-Rate discount provides an 87-percent discount for technology support services, such as Internet access, phone access and technology infrastructure.
"That's a large discount," Pam Godwin, director of media and technology, said. "Without that support we could not afford to pay for our technology."