School discusses audit

By Jeff Smith

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The Hill City School District presented results and findings from the independent audit report at the Feb. 12 board of education meeting.

Casey Peterson CPAs & Financial Advisors performed the audit. Five auditors spent a week with the school district’s business office reviewing all fiscal records for the year being audited. The audit reflects revenues and expenditures made from July 1, 2016 through June 30, 2017.

“While an independent audit is required by state and federal statute, the board and central office administration view audits as an exemplary tool in terms of financial transparency,” said superintendent Mike Hanson.

Aimee Peyregne, business manager, said the audit  is usually done after August to allow the annual report to be submitted to the state and all cross year revenues and expenses to be accurately accounted for. Historically, Hill City has the audit in October.

Hanson said with the audit the school district has the opportunity to gain meaningful independent insight in fiscal planning cycles.

“Our partnership with Casey Peterson ensures the highest level of fiscal accountability and transparency to the public,” Hanson said.

The school district is proud of the annual reports as they continuously show strength in all areas of budget operations and planning.

Deirdre Budahl with Casey Peterson called in at the meeting to go over the report and see if there were any questions. The report is 87 pages.

The first finding has also been reported in past years and is related to internal control over year-end closing processes including preparation of the financial statements. Hill City school district has a small business office staff and Budahl said not all duties are divided how they could be with a larger staff.

The recommendation was that key duties and responsibilities should be distributed among different staff members to reduce the risk of error, waste or fraud, and to relieve the business manager of some responsibilities.

Another finding was related to the over expenditure of the capital outlay fund budget. 

“There are capital projects entered in later, [at] the end of the year,” Budahl said.

Budahl said it dealt with the repair of a roof and the cost was talked about as an improvement project but it was never entered in and authorized when it was supposed to be.

Casey Peterson’s recommendation was to periodically review the budget to the actual expenses and approve the budget amendments when needed.

For the year that ended June 30, 2017, the district’s unassigned fund balance in the general fund was approximately $373,649 or 10.6 percent of annual general fund revenues. This is without the Impact Aid amount.

Budahl noted that the Impact Aid is necessary in order to subsidize the special education budget, the food service program and to use for any future capital improvements.

Steve Helgeland, special education director, said moving forward there will be some cost reductions in the special education budget that will occur naturally. He said the reductions will take place in the next couple of years.

The intent is to create a budget that doesn’t have to utilize reserve funds.

“If we get in a real bind, South Dakota does have an extraordinary cost fund,”  Helgeland said.

This will allow the school district to capture some of that extra money special education needs to function.

Over the last three years the capital outlay and special education fund hasn’t had enough revenue to cover their expenditures.

All of the governmental funds had a loss of $900,000 from 2016 to 2017. The school district’s total governmental fund balances were $3,793,080.

The amount of the “unrestricted net position” has decreased. Due to the school district’s revenues being down and expenditures being up, the net position has dropped by about $664,000. Peyregne said this means they are using reserve funds to make up for shortfalls in revenue.

She said the unrestricted label simply means that they are free to do with the funds as they choose —there are no stipulations.

The capital outlay, food service, pension and special education all have restrictions. The general fund and Impact Aid do not. Forest Service and Impact Aid payments for the year were around $560,000, which was spent during the year.

The general fund was significantly lower in 2017 than it has been in previous years.

Budgets are getting tighter for school districts.

The school district has had high exposure to financial difficulties due to reliance on taxes, grants, contributions and other revenue.

“We’re seeing with the changes in the state funding formula those taxes are dropping,” Budahl said.

Eighty-one percent of revenue for the school district came from taxes for the last fiscal year. Fifty-two percent of the school budget is related to wages which is pretty typical for school districts.

One of the things Budahl wanted to point out was in special education if the budget wasn’t modified it will be out of money. She also said the capital outlay fund was operating pretty tight.

The capital outlay saw a decrease of $100,000 and the special education saw a decrease of $109,000 from the prior year budgets.

In the current year, $26,331 was transferred from the General Fund to subsidize food service operations.

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