Allegany-Limestone Central School District – Reserve Funds and Fixed Assets (2013M-228)

Issued Date
December 20, 2013

Purpose of Audit

The purpose of our audit was to review District official’s internal controls over reserve funds and movable fixed assets for the period July 1, 2011 through July 5, 2013.

Background

The Allegany-Limestone Central School District is located in Cattaraugus County. The District is governed by the Board of Education which comprises nine elected members. The District’s general fund budgeted expenditures for the 2012-13 fiscal year were approximately $21 million.

Key Findings

  • Over the past five fiscal years District officials added approximately $1 million to reserves and increased the real property tax levy by approximately 26 percent. The Board failed to adopt a formalized plan for reserve funds that included the intent, funding levels and use of such funds. As of June 30, 2013, the District had more than $2 million in a debt service reserve that District officials could not associate with any outstanding debt.
  • Four of the District’s six general fund reserves totaling approximately $1.7 million were not supported by a plan or other documentation validating the amount retained.
  • While the Board adopted an asset policy, it has not updated it to reflect current District processes.
  • The District engaged a third-party asset tracking company to account for the District’s fixed assets, without any formal control procedures in place for this process.
  • Our review of 50 movable assets disclosed discrepancies for 16 of them valued at more than $11,000. Our review of nine assets included on the disposed asset list disclosed that five of them valued at $6,000 were still in use at the District.

Key Recommendations

  • Identify the source of all money in the debt service reserve fund and transfer all funds not attributable to outstanding indebtedness to the general fund.
  • Develop and implement a comprehensive policy for establishing and using reserve funds. Review existing reserves, determine the total amounts reserved that are not necessary and reasonable and develop a plan for using the reserve funds surplus balances identified in this report in a manner that benefits District taxpayers.
  • Update the asset policy to reflect the District’s current practices.
  • Require the asset management company to perform the services required pursuant to the contract and monitor future activity of the company to make sure it is accurate and timely.
  • Compare the physical inventory report to the District’s existing fixed assets and investigate and resolve all differences.