The board of education received bad news Monday night as the school received a fiscal clean bill of health from an external auditor, but found out about an old outstanding discrepancy.
Bonadio & Co., Granville School District’s independent external auditor, said they had no qualms about issuing Granville the highest possible marks on the audit performed earlier this year, giving the district an “unqualified opinion.”
Bonadio auditor Emily Sanders explained the ‘unqualified’ opinion means the auditors had no reservations or caveats regarding the audit.
“We found no weakness or deficiencies,” Sanders said.
However, Sanders said she found a discrepancy which would take more than $250,000 from the general fund balance to rectify.
Sanders told the board she found an error when conducting the audit dating back to 2002.
Somich said the discrepancy had been spotted by Bonadio & Co. during their first audit in 2009, but was acknowledged and noted for future examination after the school’s EXCEL project was completed.
At the time, auditors could not be certain the discrepancy with the capital funds project account was not due to something relating to EXCEL and decided to look into the matter after the latest building project was completed.
A total of $285,266 was found lacking in a capital funds project account, meaning that amount must be transferred from the general fund balance to satisfy that accounting.
Granville business manager Cathy Somich said she worked closely with Sanders in producing the annual evaluation of the school district’s finances and the two could not reconcile the error which was initially identified as $488,652.
Upon further examination $285,266 was determined to be the amount required to ‘zero out’ the capital funds project account.
After considerable digging along with the auditor, Somich said the unusual occurrence appeared to result when the 2002 capital project was completed and should have been zeroed out, but the transfer of funds to ‘zero out’ the account was not completed and the funds remained in the general fund.
While attempting to get to the bottom of the Capital Funds Project deficit, Somich said she found fund balances for the following years from 2004-2007 to be too low to allow the needed transfer without sending the district into deficit. District records show the fund balance for June of 2004 was $40,938.
“I have no information on these old Capital fund balances and our previous auditor did not share information with our current auditor, so it’s somewhat a mystery as to why the negative balances remained in the Capital Fund long after the projects were closed,” Somich said. “The monies should not have gone into the General Fund, but rather should have covered the deficit in the Capital Fund. A transfer should have been made,” she said.
Somich said she was at a loss to explain how this discrepancy had been missed by the previous external auditor, the firm of Jenkins, Law, Beecher & Bethel, LLP.
Offsetting the news $285,266 must come out of the general fund is news the district has managed to grow the fund balance since last year.
While no accounting or transaction inconsistencies were found, Sanders said the audit found Granville carries a fund balance in excess of that mandated by the state of New York.
The state dictates school districts carry a fund balance no larger than 4 percent of their budget, while Granville currently carries $5,144,463, or approximately 21 percent of the budget.
Superintendent Mark Bessen said during budget planning the fund balance a ‘savings account’ and said the district will be tapping that account over the next few years to offset steep cuts in state financial aid.
Somich said the fund balance will be used to mitigate tax impact in light of the newly enacted 2 percent tax cap.
Somich said several factors went into increasing the district’s fund balance including under spending the 2011 budget and not hiring replacements in positions where employees have retired.
Granville used $684,000 from fund balance along with spending cuts and layoffs to bring in a $24 million budget that raised taxes 1.5 percent in anticipation of Gov. Andrew Cuomo successfully enacting a 2 percent tax cap law.
Despite returning just over $90,000 to the district’s state aid in the last budget cycle, Granville has lost more than $1.6 million in two years, $800,000 last budget cycle alone, Somich said.
Somich said the Bonadio Group began performing audits for Granville in 2009 after the district went out to bid for the service.