A recent state Comptroller’s audit found the Delaware Academy and Central School District at Delhi over estimated its budget, had too much money in its fund balance and improperly held money in reserves.
According to the audit, auditors from the Comptroller’s office reviewed district records from July 1, 2020 through Nov. 30, 2023. The audit was extended until Dec. 19, 2023 to compare the reserve fund balances to the district’s reserve plan.
The audit stated that auditors found the board of education district did the following:
• Overestimated budgetary appropriations by a total of $5 million (8.6%) and developed budgets that appropriated fund balance to address planned budget gaps totaling approximately $2.5 million. However, the district realized operating surpluses totaling approximately $3.2 million and the planned budget gaps were not realized.
• Reported a surplus fund balance that exceeded the statutory limit by $2.2 million, or 10.4%, as of June 30, 2023. For perspective, the recalculated surplus fund balance as of June 30, 2023 exceeded the limit by $6.3 million or 29.5%.
• Improperly held $3.25 million in a debt reserve and maintained an unemployment insurance reserve with a reported balance of $267,320 that could fund 22 fulltime employees’ unemployment expenditures for the maximum benefit.
According to the audit, the district estimated its revenues reasonably, however, “appropriations were overestimated by an average of $1.7 million annually for a cumulative total of approximately $5 million, or 8.6%.” Three areas of the budget that were overestimated the most were employee health insurance by an average of $640,000; special education expenses by an average of $315,536; and retirement health insurance by an average of $118,155.
In a letter of response dated June 5, then Superintendent Kelly Zimmerman said during the 2021-2021 and 2022-2023 school years, the district faced a “volatile economic climate,” including a pandemic, increased costs, the proposal of a 20% to 30% reduction of state aid, teacher and labor shortages, expiration of federal funding relief sources and additional projected reductions in state Foundation Aid, “despite the fact that the academic, mental health, physical health, and special education needs of our students and families we serve had significantly increased.”
Auditors reviewed the 2023-24 budget and year-to-date revenues and expenditures as of Oct. 31, 2023, the audit stated. Auditors determined that the district “will most likely generate another operating surplus in 2023-24, and it will not need to use the $800,000 of surplus fund balance appropriated in the 2023-24 budget.” The audit said the board and the district official’s use of fund balance that is not needed circumvents the the statutory limit on surplus fund balance.
Auditors recommended that the district adopt budgets that were used reasonable expenditures and appropriations; review reserve balances; amend the district’s reserve plan to have a more reasonable targeted funding level for the unemployment insurance reserve; develop a plan to reduce surplus fund balance and transfer funds improperly held in the debt reserve to the general fund as surplus fund balance.
Zimmerman’s letter said the district “was beginning the work of stabilizing practices related to fund balance and reserve planning in an effort to return to pre-pandemic fiscal planning and management before the audit began.”