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School Board gets explanation for $686,427 surplus

The King George School Board was provided explanations last week for why it ended up with a surplus of $686,427 to turn back to the county for fiscal year 2009-10, which ended June 30.
Wilma Ward’s report was added to the meeting by Superintendent Candace Brown as a change to the agenda of the Oct. 25 meeting.
“We were asked to explain the money that was remaining at the end of the year, and I’m going to try to break that down for you,” Ward told the School Board.
Ward works at the School Board office, having replaced financial secretary Annette Thompson after she resigned about a year ago. Thompson coincidentally resigned not long after it was reported that the division had ended the previous fiscal year 2008-09 with $1.19 million.

THREE-PART EXPLANATION     
Ward first explained that in the middle of June she was planning to end the fiscal year with about $326,000 leftover.
Ward said that money represented some savings in costs for the Virginia Retirement System (VRS) and some money left in grants, saying, “It represents school improvement funds that were used instead of through the grants to buy instructional materials, to pay for substitutes, to pay for professional development. Some of that money was used and that’s why we felt we’d have about $326,000 left.”
Subsequent to the meeting, Ward’s calculation sheet was distributed by Brown via e-mail indicating a breakdown of that projected surplus noted at $326,371.
That sheet indicated that School Improvement grant funding was used to supplant budgeted expenditures in Instruction at Potomac Elementary School and King George Elementary School.
Ward’s calculation sheet noted the following amounts and explanation:   
$2 - Debt service
$27,578 - Transportation - reduced repair cost and VRS savings
$49,697 - Operations - utilities and VRS savings     
$1,537 - Facilities - rentals and VRS savings
$25,000 – Administration, Attendance - salaries, benefits and VRS savings
$358,663 - Instructional & Technology - salaries, benefits and VRS savings
($136,106) - School Improvement Grants - used to purchase instructional materials, hire substitutes, pay for professional development and other items that were in the operating budget for Potomac and King George Elementary Schools.
It is noteworthy that the above breakdown includes $358,663 left in “Instructional & Technology.”
At the meeting on May 10 Brown requested the School Board to shift $250,000 to the Instruction category from a surplus in the utilities line in the Operation & Maintenance category.
The School Board unanimously voted to transfer the money to go toward textbooks and to request the Board of Supervisors to likewise approve that action, which it did. Ward didn’t mention that fact.  

FUNDING CAME IN LATE    
Ward also said some state funding came in late that was not expected.
“At the end of June we found out that we would have about $60,000 in additional funds that came in, in sales tax funds,” Ward said. “And then in July we received $266,000 in sales tax that was accrued back into 2010. We also received at the end of June, $30,000, almost $31,000 in e-rate refunds that we didn’t anticipate.”
School Board member Dennis Paulsen said, “I want to make that clear to everyone on the board here. That $686K is not funds that we did not spend this year. It’s a lot of overview funds that we were again not expecting to get this year.”
However, on May 18 the governor came out with a well-publicized state release regarding state funding and additional sales tax entitlements to localities.
That information went to all school divisions that same date through a memo from the state superintendent, providing an up-to-date complete breakdown on state and federal funding, so divisions could plan their end-of-year expenditures.
That May 18 memo indicated additional state funding would be coming to King George.

PURCHASES NOT RECEIVED ROLL OVER TO THE NEXT FISCAL YEAR?    
Ward noted, “We also may buy materials or buy textbooks or anything in the month of April or May and if we don’t receive it by June 30, even though there is a purchase order out there, then that cost hits us in this current year. There are things that were purchased that we didn’t receive that would change that number as well.”
School Board member Mike Rose asked, “But didn’t you make the purchase — execute the purchase order — in the fiscal year, so it would have counted?”
That’s when Brown stepped in and capped the discussion, saying, “If the item is not received by June 30 or we are not invoiced for it, it goes into the next year, regardless of when we attempted to purchase it.”
That explanation was not borne out by a call to the county finance department. Finance staff told The Journal that when expenditure items are encumbered by purchase orders near the end of the fiscal year but not received until after June 30, their payment (though physically made in the new FY) may be accrued back to the budget year in which they were encumbered by requesting that their corresponding expenditure costs be carried forward for their payment.  
That is a common practice under the modified accrual accounting practice that has been in use by the division and the county for decades.
The 2009-10 fiscal year ended on June 30, though both revenue and expenditures could be accrued back for 60 days in accordance with last year’s adopted budget.
Just as late-arriving revenues are accrued back to the appropriate fiscal year in which they were budgeted, county departments and constitutional offices annually request the finance department to accrue budgeted expenditures encumbered late in the fiscal year back to the appropriate year in which they were budgeted.
Those requests go the Board of Supervisors for re-appropriation into the new fiscal year after the audit is finalized. It is unknown why Brown and her staff do not use the practice.
 

Phyllis Cook
Staff reporter

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