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Canton schools superintendent says state auditors’ advice won’t save the district and its students

Posted 12/28/13

CANTON -- Canton Central School District is criticized in an audit by the state comptroller's office for cutting too deeply into reserves, but the school superintendent is not interpreting the …

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Canton schools superintendent says state auditors’ advice won’t save the district and its students

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CANTON -- Canton Central School District is criticized in an audit by the state comptroller's office for cutting too deeply into reserves, but the school superintendent is not interpreting the criticism as helpful.

The district’s response to the auditors’ recommendation that the school “should reduce reliance on fund balance as a financing source and continue to evaluate and explore ways to cut costs and increase revenues” is that “This recommendation is not practicable.”

The objective of the audit was to review the district’s financial condition, and to answer the question, “Did the board and district management effectively manage the district’s financial condition?”

Overall, the report is accepting of the budget actions, with the exception of the use of reserves.

But this was a financial audit, and not an analysis of the educational choices the board and administration faced as government aid dwindled in the aftermath of the economic downturn over the last several years.

“For the fiscal years 2009-10 through 2011-12 the district officials adopted realistic budgets and kept expenditures within budgeted appropriations,” the summary of the audit said. Acknowledging the board’s prudence, the audit said that the school board “reviewed budget-to-actual comparison reports throughout the year to monitor the budget and approved budget transfers at the monthly board meetings.

“However, the heavy reliance on appropriated fund balance as a financing source in the annual budgets has resulted in a significant reduction in the district’s unexpended surplus funds,” the audit report said.

“A key component of budgeting is fund balance, which represents moneys accumulated from prior years,” the auditors explained.

The lesson went on:

“The amount of fund balance retained at year end serves as a financial cushion for unexpected events and maintaining cash flow. District officials should monitor available fund balance to ensure it is not depleted to a stressed level.”

The audit’s cold recommendation: “District officials should reduce reliance on fund balance as a financing source and continue to evaluate and explore ways to cut costs and increase revenues.”

But the response from Canton school officials was that they were left with little choice but to draw from reserves to keep the district and its educational mission afloat.

The audit does touch on the impossible position the district is in. But its suggestions on how to deal with it do not give the district hope.

As of June 30, 2013, the audit found, the unexpended surplus funds were 3.2 percent of the following budget year's appropriations, “which is within the 4 percent limit established by law. However, the District has appropriated an average of $1.4 million each year over the last four years. If the results of operation are close to budgeted amounts for the 2013-14 fiscal year, the District will no longer have sufficient fund balance to finance the next year at this level. Consequently, it will need to replace fund balance as a financing source with recurring revenues and/or cut costs to balance future budgets.”

The report did acknowledge the impact the decline in state aid to the school had on the financial picture.

“The decline in the District’s financial condition was impacted by significant reductions in State and Federal aid. For example, State aid has decreased in each of the last three years, with an overall decrease of approximately $2.5 million (16 percent) since the 2008-09 fiscal year,” the report said.

The audit also mentioned the 55 staff laid off and the significant program cuts during the period, along with growing pressure from state authorities and local property owners to limit income in the form of property taxes. It also noted the district’s exploration of some kind of merger with the Potsdam Central School District to save money.

“What is not noted in the report,” the response from Canton Central School Superintendent William Gregory said, “is that there is nothing left to cut going forward: we are at the point where we cannot eliminate one more teaching position and put together a coherent master teaching schedule.”

“To offset the $9,170,411 reduction in state aid we have experienced via the GEA [Gap Elimination Adjustment] over the past five years, we would have had to increase taxes some 115 percent,” Gregory said in his response.

“In any event, it is a clear certainty that the District will not be able to sustain any level of acceptable academic performance…without direct, substantive and timely assistance from the state.

“Succinctly stated, absent this relief, Canton Central School will not have the capacity to remain fiscally and educationally solvent as it enters the 2014-15 school year.”