Audit shows Laurel operated with poorly crafted budget
An audit shows that Laurel Highlands School District operated last fiscal year under a poorly crafted budget, spending $2.1 million more than expected. At a special meeting Tuesday, the school board accepted the annual audit for the year that ended June 30, 2002, having heard a presentation from Mike Revak and Greg Hensh of McClure & Wolf Certified Public Accountants and Consultants.
Revak said the bottom line was that the school district’s 2001-2002 budget came out with $30.7 million in actual expenditures and $28.6 million in actual revenues, a $2.1 million loss. The projected budget not only showed the anticipated revenue meeting expenses but it also figured in a $432,000 fund balance.
“Expenses exceeded revenues. That’s the bottom line we all have to look at. An additional balance was budgeted of $432,000, profit so to speak, but we ended up with a $2.1 million loss, so there was a difference of $2.5 million from what was budgeted and what was actual,” Revak said.
The auditors gave a breakdown of budget categories that showed examples of significant differences in what was written on paper and what actually happened.
Regarding revenue, Revak said a $1.3 million interfund transfer never happened, and he said he could not tell where that money was supposed to come from. The auditors said they could only speculate that the district got money in the past from such sources as a settlement over an investment fraud case, and maybe budget creators thought that money or something else would come through again.
That non-existent interfund transfer was offset a little by an additional $500,000 from the state and $465,000 from the sale of bonds, although some of that income ultimately went to settle a statewide court case over back pay owed some teachers.
Hensh said the common way to prepare a budget for the coming year is to start with the budget from the prior year and tweak the numbers according to anticipated income and expenses. The auditors pointed out that process did not happen in Laurel Highlands’ case.
Under salaries, the budget listed $17.6 million, which was about $1 million less than the prior year. The actual cost for salaries was $19.3 million.
Support services was budgeted at $8.2 million, but the actual cost was $8.9 million, and administration was budgeted at $1.5 million, but the actual cost was $1.9 million. Transportation was budgeted at $1 million, but the actual cost was $1.2 million.
One category came out less than the budgeted figure. Under other expenses, the budgeted figure was $2.4 million and the actual expense was $1.9 million.
During the presentation, the auditors pointed no fingers of blame, but several board members referred to the district’s prior business manager as the person who prepared the budget.
Ronald Aikins retired in May from the position of business manager, and the school board hired Joyce Estocak, who had held that job in the past.
The auditors, in prior audits, pointed out bookkeeping problems in the business office among their findings and in this report gave an update, saying conditions are much improved as a result of the district’s hiring a new business manager in 2002.
An audit for the 2000-2001 fiscal year revealed that the district had a negative fund balance of about $800,000. Then, the school district ended the 2001-2002 year with unpaid bills, and school officials got court approval to float a $2.97 million bond issue to cover those outstanding obligations.
Revak and Hensh said that bond issue and the deficit it covered were taken into account for the current fiscal year, allowing the school district to begin what they said will be a slow recovery process. Revak said the school district needed to offset that negative fund balance immediately and noted the school board raised taxes, with part of that rise designated to the bond issue payback.
In comparison to the prior year’s budget, this year’s budget is $33.5 million.
Superintendent Dr. Ronald Sheba said the news is not good, but the good news is that the budget numbers are now correct.
Revak said the school officials must keep control of the budget and not let it run itself, in an effort to move forward for continued operation of the district.
Besides the update on the business office finding from prior years, the auditors gave an update to a finding on cafeteria operations from prior years that involved production reports, saying the reports are now being done.
They quoted a loss of about $20,000 from the cafeteria fund, an amount they said was similar to the year before. They said the general fund subsidized the cafeteria fund by about $51,000 for the cafeteria manager’s salary and benefits, and the school board may have to consider a regular subsidy to the cafeteria fund. Hensh said the challenge is getting more students to buy cafeteria meals.