County, schools talk fund balance

Dec. 17, 2013 @ 05:44 PM

The recent discovery of an extra $15 million in the Durham Public Schools’ unassigned fund balance, coupled with an expected 2-cent county tax increase, probably means the school district will not receive an increase in local funding next year.
That was one take away Tuesday after a quarterly joint meeting between the school board and county commissioners that was held to discuss among other things the school district’s budget process and its surprisingly flush unassigned fund balance.
“We face a 2-cent tax increase,” said Commissioner Ellen Reckhow. “I just hope the board will think about that and be cautious in terms of new programs, new projects.” 
The district currently has a $19.7 million unassigned fund balance, about $15 million more than the $4 million the school board thought it would have when it went to commissioners in the spring to ask for $4.8 million above County Manager Mike Ruffin’s funding recommendation.
The discovery of the extra money has angered and embarrassed some school board members who made impassioned pleas to commissioners for the additional money only to learn months later that the district had plenty of cash on hand.
“We were unaware that the fund balance discrepancy was at this large of a level until the CAFR [Comprehensive Annual Financial Report],” said school board chairwoman Heidi Carter.
She said the board is considering an independent review to try and determine how the school district so badly missed the mark on its unassigned fund balance.
Commissioners have expressed concern about the school district misrepresenting its finances, which forced the county to raid its coffers to find $2.4 million to fund half of the school district’s $4.8 million request for additional money.
“You have to understand that when you made that impassioned plea, we scoured our budget,” Reckhow said. “We looked high and low to find as much money as we could and came up with $2.4 million without raising the property tax.”
Reckhow also shared a story about a neighbor who is having a holiday party and asked guest to bring gifts for teachers.
She said the neighbor has children in the school system and asked teachers to create a wish list of supplies they need for classrooms.
“I looked over the wish list knowing that this big fund balance exists,” Reckhow said. “It’s fine. I’ll bring stuff. I’m just saying, it seems to me that our teachers shouldn’t be wanting for supplies,” Reckhow said.
School officials explained that a large chunk of the windfall – about $6 million – was earmarked for technology purchases while another $2 million or so went to catch up charter school payments.
Instead of paying for those items out of the district’s restricted fund balance, school officials found a way to pay for them out of the district’s regular operating budget.
So, the money set aside for technology and charter schools and other unspent money, unbeknownst to the school board, rolled over into the unassigned fund balance, leaving the district with nearly $20 million in its “rainy day” account.
Reckhow wondered how the school district’s local funding request could be so wrong that the district had almost $9 million on hand to pay for technology initiatives and to catch up on charter school payments. 
“That is a significant amount of money, and I have to say to you that the budget coming this year is going to get more scrutiny,” Reckhow said.
Superintendent Eric Becoats said that money in fund balances isn’t always spent.  
He used the $7.4 million in committed funds set aside for teacher and staff salaries in this year’s budget to make his point.
“If something changes or people are not in place, this $7.4 million, it may not be actually spent,” Becoats said. “So, I would just like to share with you, that although you commit funds, things can change throughout the year and as they change, they can impact the bottom line and how your dollars will be utilized during that fiscal year.”
Carter said the board will expect in the future to see such changes reflected in the school district’s budget amendment.
“That did not happen last year and that’s not excusable,” Carter said. “And because of that now, I, as board chair, am accepting responsibility for presenting a picture to you all that wasn’t accurate, and I don’t anticipate that will happen again.”
School board vice chairwoman Minnie Fort-Brown noted that the schools chief financial officer left the district last spring.
“I just want to make sure that we’re all clear that our CFO retired in March and left us with an impression of what our [financial] picture was,” Forte-Brown said.
She, as did others, praised new CFO Aaron Beulieu for providing greater detail about school finances.
“Now we have somebody new that’s giving us a level of detail that we’ve never experienced,” Forte-Brown said.  
Beulieu joined DPS in August, replacing Carolyn Olivarez.