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Audit: School system overspent last year’s budget

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The results from the Alamance-Burlington school system’s latest audit revealed that ABSS had $102,038 in fund balance (i.e., “rainy-day savings”) as of June 30, 2023.

The school system issued a press release Wednesday morning to announce a press conference, planned for Thursday afternoon, in which ABSS officials plan to discuss an “unprecedented budget crisis facing ABSS and make an urgent appeal for greater investment in public education” – not unlike the “State of Emergency” for public education funding that Gov. Roy Cooper declared on May 22 of this year.

The results from the latest audit for ABSS revealed that school board members had budgeted $1.8 million in fund balance in order to balance the budget during the 2022-23 school year – but actually spent $2.4 million in fund balance, based on highlights of the financial review that Dale Smith, of the Anderson Smith & Wike accounting firm in Rockingham, presented to the school board two weeks ago.

The auditors also determined that ABSS had gone over budget by approximately $743,000 during the fiscal year that ended June 30, based on the results of the audit that Smith presented to the board.

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The budget for ABSS in 2022-23 totaled $390,035,640, including all federal, state, and county revenue, based on the budget resolution the school board adopted in September 2022.

Over the last two fiscal years, the school system’s unassigned fund balance within the general fund portion of the budget had decreased by a total of $5.6 million, Smith pointed out.

That portion of the school system’s annual budget, unassigned fund balance, typically comes from county funding rolled over from one fiscal year to the next –the only pot of revenue that state law permits to be carried over if it’s not completely spent when each fiscal year ends on June 30.

ABSS superintendent Dr. Dain Butler told school board members at their work session, “My staff cut $7.5 million within this fiscal year; where would we be if we hadn’t done that?”

Butler reminded board members at their work session that he’d emailed them earlier this month to warn them about the dire financial situation he believes that ABSS now faces.

“What’s on our plate right now is a hiring freeze, and a potential [reduction in force],” he said at the work session, adding that there are some things “we cannot keep because Covid funding is gone – that’s my two cents.”

ABSS received approximately $82.7 million in federal Covid-19 stimulus relief funding from the three packages passed by Congress in March 2020, December 2020, and March 2021, based on a report that Dr. Ilana Dixon, the school system’s director of federal programs, presented to the board in January of this year.  As of late January, all but about $12 million in stimulus funding had been spent, she told the board at the time.

Meanwhile, ABSS chief finance officer Kim McVey confirmed to The Alamance News during the school board’s work session that the school system had $102,038 in fund balance to cover unplanned expenses as of June 30.  She said that $2.4 million had been allocated during the 2022-23 fiscal year to balance the budget but gave no other details.

By comparison, previous audits showed that ABSS had the following amounts on hand in fund balance at the end of each of the five preceding fiscal years:

  • June 30, 2022: $2,992,671;
  • June 30, 2021: $3,880,712;
  • June 30, 2020: $3,413,628;
  • June 30, 2019: $4,547,766;
  • June 30, 2018: $3,772,281.

Meanwhile, Smith, the auditor, said his firm’s financial review revealed there had been transfers between the general fund, capital outlay fund, and “other special revenue fund” (the latter of which consists of revenue from Medicaid and the NC Pre-K programs) had violated the state’s School Budget and Fiscal Control Act.

“These violations are not considered significant,” Smith said, “but you do need to record them properly.” That violation apparently stemmed from a paperwork error in how ABSS recorded payments on installment payments on yellow school buses, which are funded by the state but still have to be properly documented by the school system’s finance department, Smith told the board.

The auditors recommended that “the budget process be monitored more closely” to ensure that ABSS doesn’t take on expenses without first verifying there are sufficient funds to cover them, according to the schedule of findings and questioned costs within the audit.

The audit outlined the following breakdown of all revenue sources for ABSS during the 2022-23 fiscal year: State funding, 54 percent; county funding, 32.3 percent; and federal funding accounted for 9.8 percent of the school system’s total revenue.

There is no statutory requirement to maintain a certain percentage of the total budget on hand in unassigned fund balance, or “rainy-day savings.”

However, Smith advised the board, “Y’all really do need to try to build that fund balance back up.  The rule of thumb is y’all want to keep it around one month’s of operating expenses, which would be around $4 million.  It’s easier said than done at this point.”

Asked to provide additional details about the potential reduction in force Butler had alluded to during the work session, school board chairman Sandy Ellington-Graves said the superintendent had confirmed that a hiring freeze is currently in place for all non-teaching positions, except for those positions approved at Butler’s discretion.

“The Reduction in Force (RIF) is a measure that may be taken only if deemed absolutely necessary,” Ellington-Graves told The Alamance News in a subsequent email.  “There are no defined parameters about a RIF at this point, though Dr. Butler and his team are working with [school board attorney] Adam Mitchell to explore the most effective way to reduce our workforce – again, only if absolutely necessary.”

The school board’s  chairman had said in an earlier interview with the newspaper that ABSS currently had a “little less than 100 vacancies,” which was about the same number of vacancies that ABSS administrators had reported at the beginning of the previous, 2022-23 school year.

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