The Vernon Township School District continues to remain in a good financial position coming out of the COVID-19 pandemic, district Auditor Ray Sarinelli, Jr., reported at the Nov. 17 Board of Education meeting.
Sarinelli, an auditor from Nisivoccia LLP, said he wasn’t concerned about several recommendations and said the district is in a good position when the state requires districts to return to holding 2 percent fund balances.
The state in March 2021 passed a law allowing school districts to maintain 4 percent of school budgets for the 2020-21 and 2021-22 school years, after which the law will expire. School districts will only be allowed to carry 2 percent fund balances, starting in 2023-24.
The district had an unassigned fund balance of $1.2 million in 2019-20, and it jumped to $2.7 million. Sarinelli said at on June 30, 2023, the district will have to cu the fund balance to 2 percent and will have money to move to other areas.
The district started the 2021-22 school year with a total fund balance of $11,090.055.52, and saw it increase to $15,000,001.65. as the district received about $4 million in stabilization aid to offset ongoing state aid cuts.
“So had it not been for that stabilization coming into your budget, your fund balance would have been flat,” Sarinelli said.
However, within the district’s fund balance, there are sub accounts, such as excess surplus, which has to be used during the next budget year, capital reserve, maintenance reserve, unemployment reserve, encumbrances designated for the subsequent year, and the unassigned fund balance.
“Those reserves are fund balance that is held for those purposes,” Sarinelli said. “So, if you have a capital need, you can draw from your capital reserve. If you have a maintenance need you can draw down your maintenance reserve. If you have unemployment expenses, you can draw the amount of the unemployment compensation. Those are easy enough to understand.”
Board of Education member Justin Annunziata said the board has been criticized over the past several years over the growth of the fund balance. The premise of that criticism has been that the district is holding onto taxpayer dollars.
Annunziata said about $5 million of the district’s $15 million fund balance has been designated to be spent this year. The district is also doing several capital projects and pulled money from the capital reserve.
“This fund balance is not staying at $15 million,” Annunziata said. “Anybody in the community that thinks we’re sitting on a pile of taxpayer dollars and not spending it wisely, that is not the case.”
Sarinelli said his firm audits about 80 school districts, everybody’s fund balance grew over the last few years because no one knew how to budget through a pandemic.
“In your case, it kind of helped stabilize things through a time when you were having some pretty dramatic state aid losses,” Sarinelli said. “I think, now that we’re coming out of that financial growth, you are going to need to rely on that as the state continues to draw down your budget. I don’t think any of us would have wished to go through a pandemic to try and have some financial stability, but’s kind of the way it turned out.”