By JOHN EBY
Dowagiac Daily News

Dowagiac Union School District has dipped below the recommended 20-percent fund balance June 30.

Auditor Mike Wilson, a certified public accountant from Norman and Paulsen in Sturgis, Monday night highlighted a “five-year snapshot” of district trends, pointing out that fund balance as a percentage of total expenditures remains slightly over 19 percent after being at 18 percent in 2008 and slightly below 18 percent in 2005.

“We recommend school districts try to maintain a 20-percent of fund balance,” Wilson said.

“Studies have shown that when you fall under that 20 percent and get around 16 and 17 percent, you’ll find the need to borrow short-term because the state does not make payments to you evenly throughout the year, nor do property taxes come in evenly throughout the year. If you can maintain this fund balance, you can be your own banker.”
“Another thing I’d like to point out,” Wilson said, under property tax revenue, “Yours decreased by about $300,000” due to personal property taxes on businesses that went under in the recession.

“Another item I’d like to point out,” he said, “if you look at total expenditures of $22 million, including general fund, athletics and food service, your total payroll was $11.6 million. Your total employee benefits were $5.5 million. Most school districts those run about 85 percent, so if you want to have any impact on your expenditures, most of that impact will have to come from payroll and benefits.”

Employee benefits ran 48 percent of payroll.

For every dollar spent in gross payroll, in other words, the district had to spend another 48 cents on employee benefits, such as Social Security tax, state retirement and health insurance.

“That’s probably average on the statewide level,” Wilson said.

“Overall, I would say your financial position, compared to other school districts, is above average.
“But I would also indicate that after this year, with the state talking about cutting $400 per student and $600 next year, you’ll need this fund balance to get through the next two fiscal years. Take your total payroll and employee benefits, add them together and divide by 26 because, on average, you have 26 pay periods a year. Compare that, then, to fund balance and ask yourself how many payrolls could you pay with that fund balance. Two? Three? Four? If you didn’t have any money coming in. That’s what fund balance represents.”

“You’re correct it does not represent funds set aside for capital improvements or major repairs,” such as roofs, he agreed with school board member Bill Lawrence.
Wilson defines fund balance as current available sources carried over to the next fiscal year.

The accounting firm gave Dowagiac a clean opinion on its financial statements with no material findings.

Wilson said the general fund balance sheet showed assets of $6.5 million, comprised of cash and cash equivalents of $3.2 million, with the district owed more than $3 million not yet received as of June 30.

“Compared to prior years,” Wilson said, “your cash position is down about $1 million and your receivables position is up about $1 million. That’s a result of the federal stabilization fund. Liabilities you incurred were about $2.2 million, mainly payroll of $1 million – summer pay for the teachers – and accrued benefits on that summer payroll of about $600,000.”

“You had about $300,000 in accounts payable,” Wilson continued. “And you had no short-term debt, which is very unusual for a school district in the state of Michigan. That left you June 30 with a general fund balance of $4.3 million. The change in that fund balance generated by revenues of $21.4 million and $20.8 million expenditures for the fiscal year ended June 30. Of which $4.7 million was in local sources – primarily property tax revenue; $14.3 million in state sources, which was down $1.2 million from the prior year, which equates to about $480 per student. It’s important to point out that the state is obviously talking about reductions in the current year and reductions for next year, but you actually had about a $480 per student reduction in state funding for the fiscal year ended June 30, 2009. Where was that made up? Federal sources of $2.4 million was up by $1.1 million. Basically, you flip-flopped state and federal funds.”
Of the $20.8 million spent, Wilson said, $13 million went to instruction – “primarily salaries and benefits for teachers and supplies. Support services were about $8 million  – primarily transportation, custodial, library, guidance department, anything that goes along to help support the school district’s operation.”
Total revenues were down about $300,000 from the previous year, the accountant said, with expenditures down about $490,000 for a $600,000 excess of revenues over expenditures. Then the district transferred $40,000 from the food service fund to cover overhead costs and $300,000 to athletic activities, or $260,000.

“Bottom line,” Wilson said, “about a $350,000 increase in fund balance. Your federal funds were up by $78,000 for free and reduced lunch applications. We’re seeing a consistent increase in students qualifying and applying.”

The school district has three outstanding bond obligations totaling $21 million that is paid from separate debt millage levied each year for that specific purpose.

There is also $76,000 remaining on employee termination benefits or early retirement severance pay.

Later in the meeting in Kincheloe Elementary School gymnasium, the school board made its first 2009-2010 budget revision.

Assistant Superintendent for Business and Operations Hal Davis reported general fund revenues decreased $34,422 to $20,888,947 while expenses increased $202,970 to $21,309,872 for a year-end deficit projected at $420,925.

“Our revenues decreased as a result of a lower-than-anticipated fall 2009 student count (of -76). This was offset partially by higher-than-projected grant fund revenues and the ARRA stabilization funds. The increased expenses are a result of the correlating expenses for the grant revenues and ARRA (American Recovery and Reinvement Act) fund expenses,” Davis stated. “Both athletics and food service accounts are balanced, with $455,954 and $1,088,258 in revenues/expenses, respectively.”