The Hood River County School District recently hired a consultant to review its financial department’s processes, after learning in February that last year’s expenditures exceeded its budget by $1.4 million.
William H. Dierdorff, former chief financial officer for Reynolds and North Clackamas school districts, told the school board and administration at Wednesday night’s meeting that there don’t appear to have been any inappropriate activities in the department, and the methodology used is typical.
“What was not typical was the timeliness of informing the superintendent and board,” Dierdorff said.
“I was asked to look at the business systems of the district, based on some of the activities that occurred this year related to the audit and related to the projections of the budget,” he said. “For clarification, I did not analyze the budget, do a second audit or get into the nitty-gritty.
“The areas of communication and the (number of) people involved was more limited and not as frequent as it should have been or would normally have been expected to be, and those are things that can be readily corrected to prevent future issues in the district,” he said.
Dierdorff, who was recommended by the Oregon School Boards Association, said that expectations for timely and clear communication on financial matters need to be clarified, and that budget tracking systems and financial reports need to be implemented to allow decision-makers the records and projections needed to make management decisions.
He also said that the role of the entire financial management team needs to be clarified, as well as the role of the auditor in reporting to the cabinet and board.
The finance oversight committee that the board is in the process of forming will provide needed direction and involvement, he said.
“The audits indicated that there were over-expenditures and over-receipts — there’s nothing you can do about that,” he said. “The only thing you can do is not do it again. And that would be best prevented by providing timely information and making sure that the staff and the district administration is communicating effectively and everybody knows what’s going on.”
The over-receipts Dierdorff referred to were the unexpected state revenues and higher-than-budgeted beginning balance, which cut the shortfall to a little over $250,000.
“The other issue that you’re dealing with is the fluctuation in your ADM (average daily membership; the basis for state funding), weighted,” he said. “That is not related to the projections; not related to the audit and over-expenditures and there’s nothing that finance activities of the district can do to change it.
“The best thing you can do is to project ADM just as you project finances,” he said. “One of the unusual things about ADM in the state of Oregon is that it’s not paid monthly; it’s paid at the end of the year, based on whatever happens, so if you over-project and at the end of the year you are off, the state takes the money out of your last check.
“So in that setting you have to monitor closely and project monthly to know where you’re going to be and then be able to respond when you have a sense of the direction it’s changing,” he said.
Superintendent Charlie Beck said that he and his cabinet have been looking at processes used in other school districts.
“We are looking at models of financial advisory committees,” he said. “I’ll be bringing a recommendation to the next board meeting. We’re also looking at things relating to audit, so that we can make adjustments in the way that audits are reported.”
HRCSD Financial Director Nick Hogan has already expanded the information that he presents to the board at its regular meetings and is planning other ways of improving communication.
“I’m still working on improved financial statements for monthly reporting, a three-year rolling budget projection and a summary of Comp-12 districts programs and expenditure data as requested at the last board meeting,” he said.
He asked for board guidance in two related areas, the current year’s shortage and the level of funds to retain in contingency and reserve accounts.
“As you know, I project that expenditures will exceed revenues this year, resulting in a negative ending fund balance,” he said. “We are not allowed to end the year with a negative fund balance. There are several options available to correct it, including:
n Use reserves (construction bond levy rebate and/or proceeds from the sale of Frankton) to cover the 2012-13 negative ending fund balance
n Accrue July state school fund revenues into June as allowed by state law
n Borrow money through the OSBA TANS pool or a different source
He said that as part of his review Dierdorff had suggested that the school board consider reducing the level of contingency and reserve funds, which are normally budgeted at $500,000 each.
“In the preliminary budget for next year I reduced these items to $250,000 each,” Hogan said. “I would like to ask you to discuss this item during the board meeting and let us know if you wish to reduce these items further.”
Dierdorff told the school board, “In effect, it’s kind of like borrowing money to put in savings — the reserve is there; you can either use it or save it; and if you save it you’ve got to make some budget cuts or defer some of the decisions — and that’s not necessarily a bad thing to do, you just need to be conscious that you’re doing it.”
In other business, Supt. Charlie Beck presented the board with the boundary committee’s recommendation, which were as follows:
Recommended changes between Hood River and Wy’east middle schools
n Move Wy’east Middle School boundary to Barrett Road
n Allow grandfathering of currently enrolled students
n No grandfathering of siblings not currently enrolled
n Cascade Locks School sixth-graders attend HRMS
n Consider 4 percent growth at HRMS
Balance enrollment between May Street and Westside
n Move Westside boundary to Rand Road and Sherman Avenue
n Allow grandfathering of currently enrolled students
n No siblings not currently enrolled
n Consider 1 percent growth in May Street boundary
n Consider 3 percent growth in Westside boundary
Balance enrollment at Mid Valley
n No boundary adjustment
n No new transfers allowed at Mid Valley
n No further changes in consideration of recent school merger
Balance enrollment at Parkdale and Cascade Locks
n Open transfers allowed at Parkdale and Cascade Locks
n Create magnet opportunities at Parkdale and Cascade Locks
The school board is expected to make a decision on the recommendation at its April 24 meeting.