District 88's

financial

condition

'healthy'

Auditor's report presented to school board

By KREMENA TODOROVA

Journal Staff Writer

NEW ULM -- District 88 ended the fiscal 2002-2003 in a healthy financial condition, according to a report presented by auditor Bob Qualseth, of Mankato-based Peterson & Company, P.A.

Qualseth briefly reviewed the district's finances using two accounting systems -- one traditionally used by Minnesota schools and a new one, used for the first time last year and more comparable to models used by for-profit businesses.

According to the traditional model, which, roughly speaking, presents a short-term picture of the district's finances, the local school system started the year with a total fund balance of about $4,108,000 and ended it with a total balance of about $4,251,000. This represents an increase of roughly $143,000.

"You started out healthy and ended in a similar fashion," Qualseth said.

The increase was due to dollars generated by an excess levy referendum, an increase in specific federal funds, and dollars not spent in some programs, according to the report.

The balance of the general fund, which includes money for core programs -- basic skills, class size reduction, operating capital, health and safety, severance pay, staff development, etc. -- increased from about $3.1 million to about $3.3 million.

Of this balance, about $2.4 million is "unreserved" -- which means it does not have to be spent on mandated programs.

Qualseth said he was satisfied with the latter number. It would allow the district to operate for about 50 days, he said. School districts are advised to maintain a balance sufficient to operate for 30-60 days, Qualseth said.

He pointed out, however, that the fund balance increase was smaller than budgeted -- largely due to unanticipated spending on mold removal.

According to the report, the health and safety fund, which paid for mold removal projects, saw a reduction of about $311,000.

The auditor also noted that food service, debt service and the district's expendable trust funds (which are not part of the general fund) also maintained healthy balances.

The community service fund, however, saw a significant drop, from about $250,000 to about $106,000, due to a shift in state policy that forced the spending of those reserves.

Qualseth also discussed a parallel accounting model whose use was mandated by the state. Roughly speaking, this model views the school district as a business, taking into account long-term assets and liabilities (for example, capital assets minus depreciation).

The new format presented a slightly different, yet also healthy, picture. It put the district's net assets at about $8.3 million, and the change in net assets (the number that would compare to the fund balance change in the traditional model) at about $282,000.

The state mandated the use of the new format for purposes such as debt guarantees -- but will not use it in determining its funding policies, said Qualseth.

In response to a question by board member Susan Nierengarten about the cost to district of following dual reporting standards, he said it was about $10,000-$15,000 for the first year and may run at $5,000-$6,000 in subsequent years.

The board also:

* Adopted revisions to various policies, to comply with changes in state law. The policies included: education vacancies, the board member replacement process, public and private personnel data, drug and alcohol testing and several others.

* Heard various reports, including a negotiations update by Nierengarten.

She said that contract talks with custodians and food service staff are heading into mediation, and talks with other employee groups have provided new information, necessitating a strategy discussion by the board.