Auditor Discusses Surplus Reduction
Board members continue to reduce surplus; get clean marks on new audit.
The outside auditor of Millburn Township School District gave Millburn schools a clean bill of health this week and noted that the surplus had been reduced for the next school year by $480,000.
Board members asked the auditor, Kathryn Mantell of Nisivoccia & Company, how the surplus – which this year is about $2.8 and next year will be about $2.3 – compares with other school districts.
At a little more than 3 percent, Millburn’s surplus, she said, is about where she would expect it to be and is on par with other districts Millburn’s size.
“When you are dealing with a $76 million budget and you’re faced with costs you didn’t anticipate, 3 percent is not a bad,” she said.
However, some districts operate with far less surplus, but she wouldn’t recommend it because they end up in trouble if unexpected expenditures arise.
In the previous year, Millburn had some issues in its audit when it came to health insurance benefits. Last year, Mantell reported to the board that district had been carrying an extra $1.5 million for prepaid health insurance for five years that was never properly reported in the books.
Because of that catch and extra money, school board members were able to hold taxes to 1.35 percent when they passed this year’s $76.5 million budget.
But this year, the auditor’s report said “all of the prior year [auditor's] recommendations have been resolved during the current fiscal year, except for the recommendation regarding student activities,” which the auditor included as a recommendation for this year.
That recommendation is that “funds collected for the Student Activities and Athletic count are deposited in a timely manner and that detailed cash ledgers are maintained for all student activities accounts, and copies of receipt are prepared and given to student activities advisors when funds are turned over to the main office."
The matter of a surplus has been long been an issue.
“People complain that we are holding too much money,” said Board President “Michael Birnberg. “We take a lot of heat every year about this – that it should be given back to the taxpayers.
Board member promised to reduce the surplus, said Jeff Waters who led the finance committee last year, and they brought it down to $200,000 less than last year’s.
“And next year we will have $500,000 less than we have now,” he said. “To the extent that we have had stated goal of winding that down, we are doing that.”
Residents complained that there is still a large surplus and times are tough and told the boar that they will have hold the line on taxes again this year, as more people lose their jobs or are otherwise adversely affect by Wall Street.
Noreen Brunini
4:32 pm on Friday, December 2, 2011
REMINDER: What this article fails to mention is that the state of NJ limits every school district to keeping a maximum surplus of 2% of the school budget . Any surplus amount above that 2% "allowable surplus" is defined by the state as EXCESS surplus (and that is what this article is discussing:EXCESS surplus). The State requires Excess Surplus be returned to taxpayers in a future budget cycle so the District does NOT have the option of keeping the excess surplus. Its interesting to note in past years the State allowed school Districts to keep up to as much as 6% of the budget as surplus and over time has whittled all school District's surplus down to 2% max. As Jeff Waters mentioned the BOE is achieving its multi-year goal of reducing the excess surplus which is a process that needs to be carefully managed so the school district does not end up in financial difficulties. Its a tricky process to reduce excess surplus without harming the "product" of the school district. I commend the board for staying the course and continuing to work on this process. It would be extremely difficult to budget any future year to within a few dollars of the allowed surplus. Interestingly, in contrast, The Township holds a surplus of about 20% of its budget and no one bats an eye or complains. I find that fascinating. I am not trying to imply it is wrong for the Township to hold such reserves, its the resident's psychology on the matter I find interesting.
LDSF
6:22 pm on Friday, December 2, 2011
This approach may become the change of financial reporting. The completion the budget by the end of the year and the budget still won't be passed until April. It seems to have the better accurate figures you would have by budgeting in January vs three months worth of forecasted figures. While grants and government contracts are designed to break even, operations may not. The question is how to value to contextualize the year-end surplus..... are these surplus the result in 'months of reserve?' how many months of spending does the surplus represent? How to justify the surplus made intentionally and how to communicate the intent to the taxpayers. The bottom line is that there's no simple solution to painful cuts.
LDSF
7:04 pm on Friday, December 2, 2011
The reserve funds are an asset on your balance sheet. This is how non-profit survives financially stable even in unstable times. The budget may put away X% in operating reserves, X% in facility reserves ( building complexes), and X% in venture reserves. These venture reserves will build a fund from which plans can be made for growth in other areas or strengthen some of the programming. This can be unrestricted money that we can use for future health. Hopefully there will be foresight and financial management practice as building reserve to use for future financial health. If staffs are less, it's more important than ever to make sure those are investment to be well-trained and appreciated. It's important to keep the most productive and dedicated employees in place, both from a morale standpoint and from a productivity standpoint.
LDSF
9:08 am on Saturday, December 3, 2011
Consider budget X% to Emergency Reserve.