District’s fund balance a surprising $19.7 million

Dec. 05, 2013 @ 09:48 PM

An annual audit of Durham Public Schools’ finances has revealed an unassigned fund balance of $19.7 million.

That’s about $15 million more than Board of Education members thought was in the district’s “rainy day” fund this spring when they approached County Commissioners for extra money to help pay the bills.

Ordinarily, such a large amount of found money would be reason to cheer, especially for a district struggling to make ends meet in tough economic times.

But there was no celebration Thursday during a meeting of the board’s administrative services committee.

Several board members expressed concern about not having an accurate picture of the district’s finances when it sought an additional $4.7 million in local funding to cover enrollment growth tied to projected charter-school growth, among other items.

Board Chairwoman Heidi Carter called for an independent investigation to help the board better understand what went wrong.

“I feel like I was put into a position last year where now I am feeling rather foolish,” she said. “We went to the county pleading poverty, saying we have additional needs and we really needed them to give us more funding, other than flat funding and they did.” 

The district has roughly $32.6 million set aside in various fund balances this year, including $7.4 million it has committed for teacher and staff salaries.

The $19.7 million in the unassigned fund balance is the equivalent of a district “savings account” and the board has great discretion in how it is spent.

Carter noted that the county even considered a tax increase (it did raise taxes 3 cents per $100,000 of property valuation) among other measures to meet the district’s needs.

She also said the board would not have spent its unassigned fund balance down to an “unhealthy level” of $4.7 million had it known about the unused $15 million stashed in other fund balance categories.

The county eventually came up with an extra $2.4 million, about half of what the district had sought.

School administrators said more than half of the $15 million – about $8.6 million -- was earmarked in the 2012 fund balance for technology improvements, which the district found a way to pay for out of its regular operating budget.

So, the money was moved from the district’s “restricted” fund balance category, meaning restricted for a specific purpose, to its unassigned fund balance in this year’s budget.

The same was said to be true for about $4.4 million set aside for teacher and staff salaries and several million more for other items.   

“I just feel like we did not have an accurate representation of what the actual financial status of this district is, and that’s a problem,” Carter said.

Superintendent Eric Becoats responded that the district used the information in the 2012 Comprehensive Annual Finance Report showing $8.6 million in the district’s restricted fund category when developing this year’s budget.

He said the CAFR isn’t updated until after the next year’s budget is written.

“I think at the time that the budget was developed we were still looking at and utilizing the information that was in the CAFR ... CAFRs are updated typically after the fiscal year is ended and after you’ve actually wrote your budget, so at this point we’re making the adjustment for the correct classification of funds based on what was not used in this past budget year, 2012-13,” Becoats said.

He said the $19.7 million brings the district more in line with the $16 million unassigned fund balance that auditors have traditionally recommended that they maintain.

But board member Natalie Beyer, who chairs the administrative services committee, said the fact still remains that the budget the board took to the county and community showed the district depleting its fund balance to around $4 million to cover its needs.

“That’s the message we went with hat in hand to the commissioners, begging for scraps of change for out students, but to now know that that was, in fact, erroneous, and that we have $15 million extra dollars that we didn’t anticipate having,” Beyer said “We could have employed people this year. We could have given teachers bonuses. We could have dreamed for Durham or we could have held tax rates down in tandem with our commissioners. That’s the concern I feel.”