The Park Rapids School District received a "clean" 2017 audit report from CliftonLarsonAllen LLP of Alexandria. The fiscal year ended on June 30, 2017.
District Auditor Miranda Wendlandt presented a summary of the audit at Tuesday's board meeting.
CliftonLarsonAllen LLP conducted a one-week, onsite audit during the first week of September, reviewing district policies and procedures and performing compliance testing. They determined the school district's financial statements follow generally accepted auditing standards.
"We're happy to report there were no material audit adjustments as a result of our audit procedures, which is fantastic news for the district. Very good close-out procedures," said Wendlandt.
She did note one "uncorrected misstatement," which is an error that runs through the financial statement but is not material enough to make correction.
"The transaction related to our test of accounts payable. We looked at the 2018 disbursements to see if they really belonged in 2018 or in 2017, the year we were auditing," explained Wendlandt. "We noted two transactions in which the transaction was recorded as a 2017 expenditure when the transaction really related to 2018. It was recorded based on the order date as opposed to the date it was received. The projected misstatement was $58,279, which is not material to your financial statements."
CliftonLarsonAllen LLP issued an "unmodified" or "clean" opinion, which is "the highest level of assurance we can provide," Wendlandt said.
Two weaknesses are a "lack of segregation of duties" due to the size of the financial team.
"It's very typical of districts this size. Most districts your size hire the auditors to prepare the financial statements, and when financial statements are prepared by someone outside of your finance team there's a potential there would be a mistake that wouldn't get caught."
Auditors reported a "significant deficiency" in the accounts payable process because transactions were recorded based on order date instead of received date.
CliftonLarsonAllen LLP reviewed two federal grant programs: The Special Education Cluster and Child Nutrition Cluster.
They issued another "unmodified opinion," but there was one instance of noncompliance related to Special Education. Two of 26 disbursements belonged in 2018 as opposed to 2017.
"Again, originating from that accounts payable issue," Wendlandt said.
Two of 40 IEPs and 4 of the 40 evaluations did not have documentation that a second person took a look.
"So we recommend that review and approval process be documented going forward," Wendlandt said.
Of 26 disbursements, three did not have documentation that they were reviewed by the program director.
"Any time expenditures are charged to a federal grant code, we want to make sure they're allowable and the best person to know that would be the program director," she continued.
General fund trends
The positive, net change in general fund balance has increased in each of the last six years, noted Wendlandt. The increase for 2017 is $974,532.
General fund revenues were $18,489,551 as compared to $17,608,091 of expenditures.
"Revenue was higher than last year and higher than budgeted, primarily due to increases in state aid," Wendlandt said. "Expenditures did exceed last year's, but we're still under the revenue amounts. Expenditure increases were primarily in regular education and special education, meaning the money went right into the classrooms."
One key benchmark that auditors look at is the general fund's unassigned fund balance, she said.
"Right now you're at 2.5 months of expenditures in unassigned fund balance, which is right on target with fund balance policies."
At $3,714,076, the largest category is the "unassigned fund," meaning it hasn't been earmarked for any specific purposes. It increased approximately $500,000 largely due to increased Average Daily Membership and $351,737 in tax-forfeited land sales resulting from timber sales on some mature forests.
The next largest category is the "restricted general fund." Operating capital comprises the largest portion of this fund. "Other restricted" are dollars that the district has carried over from prior years for specific purposes by an outside party, such as the 3M Ingenuity Grant, Wellness Grant or donations.
The "other assigned" fund includes future facility improvements, such as a district-wide phone upgrade and HVAC update.
"Committed" funds are set aside for separation/retirement benefits.
"The general fund is very healthy," Wendlandt said.
Financial analysis as a whole
The district's total revenues were $23,504,600 for the year ended June 30, 2017. Property taxes (23 percent) and unrestricted state aid (46 percent) accounted for 69 percent of total revenue for the year. Another 24 percent came from other program-specific federal and state aid.
Total expenditures were $25,613,547 — a 32.3 percent or $5,476,979 increase. According to the auditors, it was primarily due to changes in the district's proportionate share of the net pension liability of the TRA and PERA plans. Salary increases, along with an increase in community service expenses, also contributed.
An annual debt service levy is made for bond payments of approximately $1,795,00 in principal and $1,052,000 of interest.
Expenditures exceeded revenues in the Community Service Fund by $22,695.
Revenues exceeded expenditures in the Food Service Fund by $62,221.
"Enrollment plays a vital part in the financial stability of the district," wrote CliftonLarsonAllen LLP in its independent audit report.
The school district has had enrollment growth since 2014-15, and it is expected to rise over the next three fiscal years. The basic general education formula allowance has increased by 2 percent since 2014-15 as well.
"Enrollment growth and general education formula increases are huge factors in the stability of the district budget," according to the audit report.
In other business, the school board did the following:
• Approved a contract with Group Travel Planners of Burnsville to organize the high school choir's trip to Minneapolis on March 14-18, 2018. Sixty-five students and five adults will travel on two motorcoaches. The tour package includes sight-seeing at various attractions, plus four master music classes.
• Adjusted board meeting dates due to New Year's Day, Martin Luther King Day, Presidents Day and Easter. The board will meet on Jan. 8, Jan. 22, Feb. 5, Feb. 20, April 3 and April 16. Their regular meetings in March were unaffected.
• Approved 2017-19 contracts with the technology/network systems coordinator, facilities director, transportation director, community ed director and district office personnel.
• Approved volunteer Tyler Lehrke for the boys hockey program.
• Established the Frank White Education Center as a "combined polling place" for all school district special and general elections not held on the same day as a statewide election. The resolution is a formality.
"This is something we have to do," said Board Chair Sherry Safratowich.