School District falls in legal debt margin

Auditor issues clean opinion

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Pam Monson

    School District 209-U has received a clean opinion of its financial statements for fiscal year 2017. Among the findings, said auditor Laurie Pope, CPA, from Mack & Associates, is that the district has fallen within its legal debt margin.
    In Illinois, school districts can borrow up to 13.8 percent of the prior year’s equalized assessed value of all property in the district. The district exceeded its debt limit in 2013. When its school construction bonds were refinanced in 2012, the district’s EAV was $241 million. At that time, the district’s debt was within the limit.
    However, the district’s EAV dropped significantly in the next couple of years and as a result, the district exceeded its debt limit each year, even though it did no more borrowing. In 2013, property values had fallen enough that the district exceeded its debt limit by $1.16 million. That went down to $1.05 million in 2014, and then bounced back up to $1.36 million in 2015.
    In fiscal year 17, which ended June 30, the EAV in District 209-U was back up to $221.1 million, which means the district could carry as much as $30.5 million in debt. The annual audit shows the debt is now $27.8 million, more than $2.7 million under the legal debt margin.
    “The debt is now at a level where you have an excess of $2.7 million, so no longer is that a recommendation or something we would point out on your other matters note,” Pope commented.
    The audit indicated the district did a good job of sticking to its budget as well.
    “You’re very fiscally responsible when it comes to staying in budget, and monitoring, the oversight here is very good when it comes to monthly reporting, paying attention to budget, staying within budgetary constraints ... again, no issues there, you definitely stayed within what was allotted,” Pope said.
    The district had cash and cash equivalents of $17.7 million on June 30, down from $19 million at the end of the previous fiscal year. It’s total assets, including cash, cash equivalents, land, buildings and equipment, are $52.7 million, compared to $55 million last year. Less its debt, the district has a net worth of about $22.6 million — about $1.6 million less than in fiscal year 2016.
    The total amount of revenue received was up from the previous year at $19.1 million compared to $18.4 million in fiscal year 2016. Total expenditures were also up, at $20.4 million, from $19.9 million the year before.
    In addition, the auditors found no issues with how the district spent its $2.7 million in federal funding, including $2.1 million in impact aid, $330,113 for school nutrition programs, and $200,462 in Title 1 grants.
    The auditor did note that the preparation of the financial statement had been outsourced to an external auditor. Pope said there is some risk when outsourcing; a small disclosure could be missed or there could be another issue.
    “[It’s] nothing that we feel could be material; we feel that the district here has the internal control procedures that are so solid that we don’t find it to be an issue, but as a board you need to know that we as the auditors prepare this report,” Pope said. The Governmental Accounting Standards Board would like to see all governmental entities prepare the report and then be audited, she explained.
    “That’s not feasible for local governments this size,” she said. Out of the 140 audits Pope did this year, only one client prepared its own report.