The results from the Alamance-Burlington school system’s latest audit revealed that ABSS ended the 2023-24 fiscal year with a deficit of $1.6 million in fund balance (i.e., “rainy-day savings”) as of June 30, 2024.
ABSS chief finance officer Tony Messer, who in late October 2024 replaced the former CFO Kim McVey, confirmed for The Alamance News this week that the $1.6 million will have to be repaid to the state by the end of the current, 2024-25 fiscal year on June 30, 2025.
Messer told school board members Tuesday afternoon that the $1.6 million would need to be allocated within the school system’s budget for 2024-25 to cover the shortfall. “I definitely anticipate we will have a positive fund balance as we end June 30, 2025,” he added.
Asked to elaborate on how he intends to erase the deficit, Messer subsequently told The Alamance News, “[It will involve a] multitude of factors including the hard decision to eliminate positions that was made last year and sound financial management moving forward.”
The CFO didn’t specify what might be cut from the budget but seemed to allude to a recommendation made by the previous ABSS administration in early 2024 to eliminate some positions within ABSS.
Neither school board members nor the CFO delved into that aspect of the negative fund balance during their work session Tuesday. Instead, several board members indicated that they need more time to digest the results of the audit and would pose their questions for the CFO at a future meeting.
“It may be appropriate at the next meeting to have a time for questions with Mr. Messer,” ABSS superintendent Dr. Fleming suggested Tuesday.
The school system’s auditor, Dale Smith of the Anderson Smith & Wike accounting firm in Rockingham, on Tuesday presented the results of his firm’s annual review of the school system’s finances for the fiscal year that ended June 30, 2024.
In addition to discussing the $1.6 million deficit and the financial health of other types of funds that ABSS maintains (such as Child Nutrition and federal programs), Smith also noted that the fund balance within the general fund had declined by about $8.4 million since around the 2021-22 fiscal year.
Smith has consistently advised school board members during his annual audit presentations that – while state law doesn’t require a specific percentage of the budget to be set aside as undesignated fund balance – it’s considered best practice in accounting circles to set aside the equivalent of a month’s expenditures to cover emergencies and the like.
The auditor also outlined four “findings,” which violated the state’s School Budget and Fiscal Control Act, Generally Accepted Accounting Principles (GAAP), and/or ABSS policies (see related story, this edition).
Despite the seeming dire circumstances of the school system’s ledgers, unassigned fund balance within the budget for ABSS usually reflects the amount of county funding that state law permits to be rolled over from one fiscal year to the next. Unexpended county funding is the only type of revenue that is statutorily allowed to be carried over after each fiscal year ends on June 30.
The school system’s budget for the 2023-24 fiscal year totaled approximately $325 million, including all federal, state, and county revenue, based on the budget resolution that school board members adopted for the 2023-24 fiscal year.
Budget for current fiscal year and proposed budget for next year to be presented in two weeks
The school board has not yet adopted a budget resolution for the 2024-25 fiscal that ends on June 30, 2025.
A budget resolution for the current, 2024-25 fiscal year will be presented to school board members at their next meeting in two weeks, Messer told the newspaper Tuesday. He also said he intends to present a proposed budget for the upcoming, 2025-26 fiscal year to the board at the same meeting on January 27.
The auditor drew no inferences Tuesday in presenting his firm’s audit of the school system’s finances for the 2023-24 fiscal year.
But much of the spending that resulted in the current deficit coincided with the beginning and end of the 20-month tenure of former ABSS superintendent Dr. Dain Butler, who resigned on March 4, 2024 (see related story, this edition).
After Smith presented the audit, Messer outlined some of the decisions that he suggested may have created the $1.6 million budget hole.
“It was strategically done to overspend the state PRC 3 [Program Report Code for salaries and benefits for non-instructional support personnel] for cash flow purposes,” the CFO told the board Tuesday. “When we were dealing with a significant deficit, it was done to give us time to [replenish those funds]. I think a lot of it was over-allotment across the board…and the lack of quality financial information.”
Butler and some school board members had previously attributed the decline in fund balance and budgetary challenges to several factors.
The previous ABSS administration had pointed to: the September 30, 2024 expiration of approximately $82.7 million federal Covid-19 stimulus relief funding that ABSS received between March 2020 and March 2021; a decline in state funding, which is generally based on enrollment but also includes “categorical” funding for programs and other expenditures; and what Butler’s administration had described as years of underfunding by the county commissioners.
ABSS had the following amounts on hand in fund balance at the end of each of the following previous fiscal years, based on the school system’s audits:
- June 30, 2024: -$1,644,426;
- June 30, 2023: $102,038;
- June 30, 2022: $2,992,671;
- June 30, 2021: $3,880,712;
- June 30, 2020: $3,413,628;
- June 30, 2019: $4,547,766.
