Auditor: Trinity is in a dire financial situation
A 4-mill drop in Trinity Area School District’s millage rate six years ago along with a prolonged period of no tax increase and increasing expenditures contributed to the school district’s current financial woes, according to an audit performed by the accounting firm Cypher & Cypher.
Charlie Rupert of Cypher & Cypher presented the district’s 2013-14 fiscal year audit at Thursday’s school board meeting.
Of the school district’s current financial situation, Rupert said, “This is very severe. I can’t dismiss how severe this is.”
The school district ended the 2014 fiscal year with a $105,570 operating surplus.
In 2014, the school district took drastic measures to address its 2012-13 budget issues, where actual expenditures were more than $2.9 million over budgeted expenditures. Those measures included the adoption of an $825,000 debt ordinance and a memorandum of understanding with the Trinity Area teachers’ union, which calls for the district to recognize certain salaries and benefits this year.
If the school district had not taken those steps, Trinity’s operations would have finished with a $3,044,233 million deficit. In that case, according to the audit, the district’s fund balance in June 2014 would have been a negative $2.9 million.
Trinity ended the 2013-14 fiscal year with a total fund balance of $1,046,969, about 2 percent of Trinity’s general fund budget and below the amount recommended by Cypher & Cypher.
The firm recommends school districts maintain a general fund balance of between 3 and 7 percent of the general fund budget.
Rupert pointed to a decision by the school district to reduce the millage rate from 107 mills in 2007 to 105 mills in 2008 and to 103 mills in 2009. The school district did not raises taxes again until 2014. From 2008-09, when the school district decreased the millage rate, until 2013-14, the district left 17.347 mills on the table, Rupert estimated.
Over that time, the school district saw increases in costs of charter schools, special education, teachers’ salaries, benefits and pensions.
Rupert agreed with school board member Frances Eates’ description of the situation as a “perfect storm.”
“The district was set with a fund balance of five or six million bucks, spending was under what we anticipated, and revenues were coming in where we anticipated,” said Rupert.
At the same time, however, costs continued to ratchet up and the school district dipped into its savings instead of raising taxes.
“But it’s easy to sit here and second-guess previous decisions,” said Rupert.
He advised the school district to raise the tax millage, reduce spending, consider restructuring existing debt, and arrange for interim funding if necessary.
Board Vice President Kerrin McIlvaine said the finance committee was working to address the district’s finances.
“We’re trying our best,” said McIlvaine. “We’re going to have to make some really difficult decisions coming up and I would just ask that as a community you try to understand that we’re trying to do what is best for the district at all times and be financially responsible.”
The school board is scheduled to vote on its 2015-16 preliminary budget Feb. 12. It is available for inspection in the district’s business office.