Park Rapids school audit shows district is in good fiscal shape

The Park Rapids school district is healthy financially, but to maintain its health it may need to tighten its belt.

An audit for the 2007-08 year found the district in good shape fiscally and gave high marks to school personnel and business manager Carol Hutchinson for keeping expenditures within budgets.

"This is a very, very good job," auditor Brian Stavenger commended the district. "If you're (expenditures) within 5 percent of revenues it's good." Park Rapids' expenditures were within one-half of 1 percent of its revenues.

"On a $16 million budget, this was a very good job," Stavenger reiterated.

And, while a $1 million fund balance at the end of the fiscal year was viewed as a positive, especially considering it was $980,000 above the previous year, auditors from Eide Bailly recommended that fund needs to grow - threefold.

The district should keep three months of operating expenses in its fund balance, or around 25 percent, Stavenger told the Park Rapids School Board Monday night as the board accepted the audit.

And growing that fund balance will cause some pain, Supt. Glenn Chiodo suggested. Just keeping up with inflation will cause the district to tighten its belt a minimum of 3 to 4 percent.

"How do we get to where we should be?" Chiodo asked. "You don't want to dip into a fund balance we worked so hard to get to."

"Focus on what you can control," Stavenger answered. State aid "is what it is," he said. "You need to control your expenditures. You need to take a hard look at how you reel in your expenditures."

Stavenger pointed out "the state revenue you get is roughly 80-85 percent of your total revenue. That's really out of your control," he said.

"So the unfortunate thing and the true reality and I hate to talk about this is that if you have to make cuts where are you going to make them?" he asked the board.

Stavenger pointed out that the district's largest expenditures are in salaries and benefits for its faculty and staff, where three-quarters of its budget is allocated. That doesn't leave much spare room to make cuts, he suggested, if the district doesn't want to jettison personnel.

"It's your teachers and it's unfortunate but that's where the majority of the money is spent," he said. "Hopefully it doesn't come to that or you can keep it to a minimum," he said of possible staff cuts.

The district has limited prospects for growing its revenues when enrollments have declined steadily, along with the accompanying state aid. So the district faces cuts to its expenditures as the only way to become healthier financially, Stavenger reiterated.

"You've taken a very, very good first step," he suggested. "But now you need to get up to the second step."

In the past year federal aid has declined 14.5 percent from fiscal year 2006-07 to 2007-08, but local aid has increased from 2.6 percent to 11.9 percent in that same time frame, largely due to an operating referendum the district passed. That five-year referendum was effective the 2007-08 school year and is set to expire June 20, 2012.

That local aid "is right within the range of statewide averages," Stavenger said. "It's where you need to be to survive at this point."

Stavenger praised efforts of the district's accounting staff to segregate various duties and implement checks and balances into the district's journal entries.

He saw only two areas of concern showing negative balances - the school lunch program and the community services program. School officials have already instigated changes to the way commodities are purchased for the meal program and cut some food service staff hours across the board to reduce costs.

The community services program, also carrying a negative fund balance, will also undergo revisions to programs such as community education, to bring it to a "minimum break-even point," Hutchinson said.

Hutchinson has been on the job one year, coming from the Detroit Lakes school district. She said it's been a challenge to work with a financially impaired district such as Park Rapids.

"They're struggling," she said of Park Rapids. "They advocate putting money into curriculum which reaches kids, whether it be teachers or books, directly connecting with the kids and that's what we're here for. And they have very strong feelings about that. We are going to struggle because there's not to be new money, but we're not alone," she said.

"You walk through this district and take a good hard look at what can be reduced ... it's going to be challenging. It's always challenging to cut."