Rochester Community School District Receives Financial Audit

The Rochester Community School District received an unmodified audit opinion, which is the highest level of assurance possible for the district’s financial statements. The audit was conducted in accordance with generally accepted auditing standards, government auditing standards, and the OMB Circular A-133 standards for the district’s federal grants.

“We are proud of the efforts of our Board of Education to ensure the proper fiscal management of our organization,” said Dana Taylor, deputy superintendent of business affairs. “As good stewards of the taxpayer’s dollar, we maintain a $173 million balanced budget that is sustainable, promotes growth, and supports the addition of high-quality student programs. We also manage $185 million in bond monies to enhance student and staff safety and security, improve technology, and address infrastructure needs.”

One audit finding from the previous school year indicated the need for the district to spend down the food service fund balance of approximately $1 million. A corrective action plan is in place which includes replacing aging food service equipment. There are no audit findings for the current year.

Fund Balance

During the 2017-18 school year, the district received $173 million in revenue, of which the majority (75 percent) comes from state aid. The district recorded nearly $171 million in expenditures, leaving an addition to the fund balance of approximately $2 million. A healthy fund balance enables school districts to continue operations even if there is a shortfall in state aid funding.

“Ensuring a healthy fund balance is critical to our success as an organization. With a new political environment, we are uncertain as to the resources that will be made available to Michigan schools. This fund balance allows us to have some flexibility. If funding were to be cut, we have enough resources to continue operating our organization,” said Matthew McDaniel, director of financial services.

A healthy balance also ensures the district does not have to borrow money to pay salaries. “Our fiscal year is July 1 through June 30. The state is still paying us for the previous school year during July and August, and then there’s no payment in September. This means that we’re three months into the new school year before we get our first state aid payment for that year. During that time, we are relying on our fund balance to pay salaries which account for approximately 80 percent of our budget,” said McDaniel.

Bond Projects

In addition to managing the general fund, the district is fiscally responsible for managing $185 million in capital projects, otherwise known as the bond projects. In January 2016, $127 million in bonds was issued. Bond proceeds were invested according to a construction draw schedule to maximize return and ensure adequate cash flow. A second series of bonds totaling $58 million will be sold around the May 2019 timeframe. Fund balance will decrease over the next few years as construction progresses and projects are completed.

“We are fortunate to belong to a community where members place such a high value on education. With the fourth-year bond projects currently underway, we are pleased to report that all construction efforts are on budget and on time,” said Superintendent Robert Shaner, Ph.D.

What’s Next

When the bond projects are complete, the district will need to look at other options to maintain infrastructure and technology needs. “Eighty percent of our funds go to salaries, so there’s very little wiggle room in this kind of a budget,” said Taylor. “Many districts ask for a sinking fund, which is a pay-as-you-go option used to fund capital projects. Sinking funds can only be used for facility repair and replacement. It is a good funding mechanism when districts want to take care of buildings and facilities.

“When the community passed the $185 million bond effort, it was very generous. We made a promise to take care of our infrastructure and safety and security, and that’s what we did. But the need is a lot greater. For example, the technology budget for the 2015 bond is about $30 million, which is great, but technology ages. We need another funding mechanism to protect the investment that the community made in passing the 2015 bond effort.”

“At Rochester Community Schools, we are committed to being good stewards of the taxpayer’s dollar and to ensuring our district’s long-term fiscal viability,” said Shaner. “We are extremely proud of our Board of Education’s efforts to manage our organization, and we look forward to continued opportunities to enhance the teaching and learning environment for all our students and staff.”