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Audit shows Willmar Schools has shrinking fund balance

WILLMAR -- The Willmar School District has seen its enrollment and its unreserved fund balance shrink in recent years, but it ended the 2008 fiscal year with a balance equal to 10 percent of expenditures, according to information from the district's annual audit.

Paul Harvego, an auditor from Conway, Deuth and Schmiesing, provided a summary of the audit's findings to the Willmar School Board Monday evening.

Harvego said the district had a very good audit, and things went smoothly in the firm's first year as the district's auditor.

Enrollment fell from 4,166 in 2004 to 4,039 at the end of the 2007-08 school year. The district's enrollment increased slightly from 2005 to 2006, but has fallen every other year for a decade or more. The district received 85.1 percent of its revenue from the state of Minnesota, Harvego said, and another 4.6 percent came from the federal government. "Anything the state does affects you immensely," he said.

The district spent some of its reserves last year and is doing so this year to try to preserve programs. If voters don't approve an operating levy referendum, future cuts could be severe, because the reserves would diminish rapidly, Harvego said.

Three-quarters of the district's expenditures are for salaries and benefits, which is "the most controllable area you have if you need to reduce expenditures," Harvego said.

Auditors compared Willmar's expenditures to average expenditures in school districts of a similar size and to statewide averages.

Willmar spends $601 per student on administration and support services, less than the statewide average of $752 per student and $721 per student in districts of a similar size.

"So if there's any argument about our administration being too fat, this would dispel that," said board member Dion Warne.

By contrast Willmar puts more of its money into classroom instruction -- $4,962 per student, compared to statewide average of $4,121 per student and $3,865 per student in districts of similar size.

Willmar spends more than the statewide average on special education instruction, but that number varies widely among school districts, depending on the services they provide, Harvego said.

Willmar spends more than the state average on maintaining its buildings, an indication that the district is taking care of its buildings, he said.

Board member Eric Roberts asked Harvego for his recommendation on a fund balance level. The district has a policy of maintaining a balance equal to 6 percent of expenditures.

"I think 6 to 10 percent is an average recommendation," he said. However, some school districts are not able to follow the policies they set, he said, and he works with some districts that are in danger of slipping into debt.

Most districts are relying on operating levies to keep them out of debt, he added.

The auditors flagged some accounting issues, including how some future liabilities and past expenses had been recorded.

The changes they recommended do not affect the district's current financial situation, said Business and Finance Director Pam Harrington, and they will all be addressed before the next audit.

Harrington discussed the auditors' suggestions with the board after the audit report was presented.

Some of the auditors' suggestions have to do with changing governmental accounting standards, she said. In some cases, the new auditors interpreted the standards differently from the former auditors.

Their recommendations include recording severance expenses for retiring employees differently and being more diligent about gaining state approval for food service capital requests. Each activity fund needs to have a statement of purpose on file.

Harrington said some of the issues have already been addressed, and others will be addressed during the coming year.

In other business, the board received a $4,000 grant from members of the Willmar Rotary and Willmar Lakes Rotary clubs. The money is for the Child Guide Program to pay for books, scholarships and transportation.