Auditors: School District's Financial Picture is Improving

The results of Dearborn Public Schools’ state-required fiscal audit for the 2011 school year painted a positive picture for the district, but one that was achieved after major cuts.

The audit–which was presented to Board of Education trustees by the district’s auditing firm, Plante & Moran–examines the district’s expenditures, revenues and other major accounts. All Michigan public schools are required to file an audit with the state each year; auditors use commonly accepted accounting practices to determine the veracity a governmental body’s internal financial controls.

This year, Plante & Moran audited and provided an unqualified opinion of the district’s financial statements and federal funds, and found no problems with the district's managements of its funds.

Auditor Jeff Dolowy said the company put the financials through a set of tested transactions to see if the district was on the right track financially.

"We started the audit back in May; we met with the finance committee, we met with the administration,” he said. “We talked about what’s going on in the district and it helps us from a planning perspective to figure out where are risks might be and where to really hone in on the audit.”

Revenues Over Expenditures

For the year ending June 30, 2011, the district reported expenditures of $166.9 million, which is about $1.7 million less than it was in 2010. Revenues from federal, state and local sources totaled $169.1 million, or $2.1 million over expenditures, which is good news, said Dolowy.

However, revenues declined in 2011 from the previous year by $600,000, even though the district gained 160 new students during this period, Dolowy said.

“What this tells you is that you’re still very reliant on the state economy," he told the Board of Education. "About 90 percent of all your dollars in the general fund come from through the foundation allowance mechanism."

One figure that is also falling is the one related to employee salaries and benefits. The audit indicates that the district spent $144 million on salaries and fringe benefits, which represents a $2 million drop from the previous year. The supplies budget increased slightly by 1 percent, to $19.9 million, in 2011.

The district to balance the books, but several employees have been called back to work.

Major Funds, Issues

The district logged $32 million in assets and $23 million in liabilities, which means it has a fund balance of about $9 million.

The district’s unrestricted fund balance was 5.3 percent of the district's expenditures, which is below the average 10.4 percent recorded by school districts in 2010. However, it’s increased by .3 percent from 2010.

The report also showed that the district is spending more of their budget in the classroom. Dearborn Schools spent 59 percent of all expenditures on classroom instruction in 2011, versus 57 percent in 2010. That equals about $3 million in additional funds in the classroom.

Dolowy said that is more or less the norm for Michigan public schools.

“With the districts that I work on you’re right within that 58 to 61 percent range,” he told the board. “I really have not seen anyone beyond 61 percent."

Trouble Ahead?

Though the school district is in good shape today, the situation next year may not be rosy.

The audit showed that Dearborn Public Schools collected $33 million in federal funding for 2011, but some American Reinvestment funds will not be available going forward.

Additionally, the state’s move to eliminate the Michigan Business tax in favor of a corporate business tax more amenable to business is creating a series of unknowns for districts, Dolowy said.

"We’ve got to get through 2012 and see how all the revenues shake out at the state level," he said, "but I think that it's one of these unknowns that’s going to cast doubt and uncertainty as far as what types of revenues are going to come through.”

School Board President James Schoolmaster congratulated Superintendent Brian Whiston regarding the audit, and thanked many groups for helping the district through rough fiscal waters.

“I would like to offer congratulations to Supt. Whiston because it was through his leadership with the contractual negotiations that we have found ourselves in a position of financial security,” he said. “And I’d also like to thank all the unions for recognizing the precarious position we found ourselves in and certainly we appreciate their sacrifices.”