Sharon Springs Central School District – Fund Balance Management (2022M-100)

Issued Date
September 30, 2022

[read complete report - pdf]

Audit Objective

Determine whether the Sharon Springs Central School District (District) Board of Education (Board) and officials effectively managed fund balance.

Key Findings

The Board and District officials did not effectively manage fund balance, and need to improve their budgeting practices and be more transparent with District residents and taxpayers. During the audit period, the Board and District officials:

  • Annually overestimated appropriations by an average of $1.6 million, or 17 percent.
  • Informed residents and taxpayers the District would incur operating deficits totaling $3.7 million but had operating surpluses totaling $1.6 million.
  • Allowed recalculated surplus fund balance to exceed the statutory limit by $2.3 million, or 23.7 percentage points.

Annually overestimating appropriations and appropriating fund balance that is not needed to finance operations is, in effect, a reservation of fund balance that is not provided for by statute and circumvents the statutory limit. Although real property tax levies remained relatively flat during the audit period, maintaining surplus fund balance that exceeds the statutory limit results in tax levies being higher than necessary.

Key Recommendations

  • Adopt budgets that include reasonable estimates for appropriations and the amount of fund balance that will be used to fund operations.
  • Reduce surplus fund balance to comply with the statutory limit and use excess funds in a manner that benefits District taxpayers.

District officials generally agreed with our findings and indicated they plan to initiate corrective action.