School Budget - Fund Balance Rules

Utah Law and USOE regulation provide limits  and policies on the use of "Fund Balances" in School Budgets.   While it appears that Wasatch School District has excessive unallocated funds, it is entirely possible that the district has complied with the strict legal requirements; however, the excellent procedures of ANNUAL budgets, with certain specific and limited "fund balances," should be  applied and used and the current excess funds should be returned to the Wasatch taxpayers through an immediate property tax cut.

In the Annual audit that is done on the School District, the Independent Auditors basically report that the numbers add up correctly and proper procedures are followed.   No opinion is rendered as to how, or where, the money is spent or the prudence of the actions, merely the that the numbers balance properly.

That audit report is followed by the Wasatch District “Management's Discussion and Analysis (Unaudited).” This contains items apparently deemed of importance to management - Spending overviews, assets, balances, construction, etc. - items such as this:

Salary expenses increased 3.2% during fiscal year 2011, which is in line with the enrollment growth during the year. Employee benefits costs, however, increased 10.5% during the same time period. This increase included a substantial adjustment to the amount the District contributes to the Utah Retirement System for its employees, as well as a slight increase in the cost of health insurance. Benefits costs totaled 49.4% of salaries expenses for fiscal year 2011, as compared to 46.2% for fiscal year 2010.

An explanation then follows about financial statements: “The District's basic financial statements comprise three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. “

Contained in this explanation is this:
"Governmental funds – The focus of the District's governmental funds is to provide information on how money flows into and out of the funds and to show balances left at year-end available for spending. Under Utah law, it is illegal to budget for an undesignated fund balance. This is in alignment with the concept that the revenues provided to a District are intended to be used during the period for which they were generated. That is to say that at the beginning of a fiscal year, undesignated fund balance is budgeted to be $0. If over the course of the year, the difference between budgeted and actual revenues and expenditures leaves an unspent balance, that unspent balance must be budgeted to be used in normal operations during the next fiscal year so as to prevent a District from accumulating excess funds.”

This seems to be good budgeting philosophy: determine the amount of money you will need and the amount of taxpayers' money you will receive, allocate that money where it is needed, and if some of the money is NOT spent it can be moved to the NEXT (one) year – AND it would appear that the next year's revenue request should be REDUCED, if not needed. Then after determining the money NECESSARY to provide the funding needed, set a tax rate to provide that amount of revenue – limited, of course, by the “certified tax rate” maximum. The recent, and current philosophy, seems more attuned to: 1 - Determine how much the “certified tax rate” will bring. 2 – Spend it.

The Wasatch School District's explanation in the audit continues:

“Fund balances may (and in some cases must) be reserved or designated and carried over to the next year for specific purposes. As those specific purposes are part of next year's budget and are identified as specific reservations and/or designations of fund balances, they are not available for appropriation. Fund balances for the capital projects and other governmental funds are restricted by State law to be spent for the purpose of the fund and are not available for spending at the District's discretion.Utah law allows for an undistributed reserve fund balance not to exceed 5% of the general fund budget.

Total fund balances in the governmental funds were $13,458,556 as of June 30, 2011, and $14,161,089 as of June 30, 2010."

Regrettably it is unclear of the meaning of “governmental funds,” “general fund budget,” but if the aforementioned “governmental funds” balance of about $14 million IS the subject of the 5% limit then the budget must have been $280 million, (over fives times actual) or the funds should have a limit of nearer $2 million - or this explanation is simply lacking in clarity, or meant to confuse.

The actual Utah Code reads in part “53A-19-103.   Undistributed reserve in school board budget.
     (1) A local school board may adopt a budget with an undistributed reserve. The reserve may not exceed 5% of the maintenance and operation budget adopted by the board in accordance with a scale developed by the State Board of Education. The scale is based on the size of the school district's budget.

A power point USOE presentation teaches this:

"Unassigned Fund Balance

◦ Will only occur in the General Fund

◦ Formerly called Unreserved – Undesignated Fund Balance"

Further,

LEGAL COMPLIANCE AUDIT GUIDE Reference: GC-18

School Districts:

There is no limitation on school district fund balances except for amounts designated to meet unexpected and unspecified contingencies. Such “undistributed reserves” may not exceed 5% of the maintenance and operations budget. (53A-19-103(1))

These procedures ARE fairly complex, arcane and often difficult to comprehend, especially for the average taxpayer.   The Wasatch School Audit also contains this statement:

“This financial report is designed to provide our citizens, taxpayers, students and all other interested parties with a general overview of the District's finances and to show accountability for tax dollars. If you have questions about this report or need additional financial information, contact the Treasurer and Business Administrator, Wasatch School District, 101 East 200 North, Heber City, UT 84032. “

At the risk of being called 'negative,' through analyzing this, and previous, budgets, attempting discover information over the years, the 2007 so-called Truth in Taxation hearing, unwieldy requirements for GRAMA requests, unclear Board agendas, legislative audits and a general lack of communications concerning financial matters indicate to me that the Wasatch School District is not truly providing "citizens, taxpayers, students and all other interested parties with a general overview of the District's finances and to show accountability for tax dollars."

Robert Wren, Wasatch Taxpayer