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Schools warned to ‘not spend down fund balances’
by Jill Lufrano
Nov 23, 2011 | 1070 views | 0 0 comments | 4 4 recommendations | email to a friend | print
Tribune/John Byrne
Outgoing Chief Financial Officer Gary Kraemer gives his final report  to the Washoe County school trustees on Tuesday.
Tribune/John Byrne Outgoing Chief Financial Officer Gary Kraemer gives his final report to the Washoe County school trustees on Tuesday.
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RENO — The Washoe County School District’s chief financial officer made an ominous statement as he ended his final report to the Board of Trustees Tuesday night, warning them that if they don’t plan for a future of further economic misfortune, the way the district does its financial business could hurt its bond ratings.

With a minimal revenue base to draw from, outgoing Chief Financial Officer Gary Kraemer warned the district to be conservative in its planning to ward off further downturns, instead of practicing business as usual.

“The main goal is maintaining the bond rating. We are spending down fund balances in the next two years,” Kraemer said. “So, if the bond rating goes down, it would be because we took down the bond rating somewhat.”

Before the economy turned sour the district was in better shape, he said, so setting up the bonds for certain accounts made more sense. But with the economic downtown, he warned, the district might want to change how it does business by reducing spending in certain areas.

“The fund balance based on current conditions scares me,” he said. “We should try to get it back to 4 percent as soon as we can.”

Other than a downturn in the nutritional fund account, the district audit of its finances received kudos from chief accountant Tom Ciesynski.

The district received a certificate of achievement for excellence in financial reporting for the 10th year from independent firm Kafoury, Armstrong & Co., Certified Public Accountants.

The district receives most of its funding from ad valorem taxes, or property taxes, which took a hit after property tax refunds for Incline Village earlier this year, impacting the school district in various ways. The district also receives local school support taxes, state aid which comprises 73.7 percent of total revenues, federal assistance in the form of grants and other program assistance.

The district’s governmental funds reported combined ending balances of $205.7 million, a decrease of $40.6 million from the prior year.

Of this total, $1.1 million, or 0.5 percent, is nonspendable fund balance; $134 million, or 65.2 percent, constitutes restricted fund balance constrained typically by creditors, grantors, contributors, laws or legislation to be used for a specific purpose; and $70.5 million is assigned fund balance (amounts intended to be used for a specific purpose). The district had no committed or unassigned fund balance available for any purpose at June 30.

Other financial report highlights include:

• Ad valorem taxes decreased 8.2 percent from the prior year due to decreased collections and in property values.

• Local school support taxes increased 1.3 percent primarily because of a temporary legislative increase in the rate of taxable sales for school districts in Nevada along with some economic improvement.

• State revenue, as provided in the Nevada Plan or state aid guaranteed funding, decreased 8 percent. The decreased state aid results from increases in school-support tax, offset by one-third of the decreases in property taxes and finally a special legislative session that resulted in an overall reduction in state aid.

Business-type activities consist solely of the district’s Nutrition Services Enterprise Fund. In the current fiscal year, this activity decreased net assets by $388,318. Fees for meals and federal subsidies, including contributions of commodity food products, account for all revenues in this category with student charges representing 26.6 percent and federal subsidies accounting for 73.4 percent. The majority of expenses for Nutrition Services are for food purchases and salary expenses to maintain the district’s Nutrition Services program.

The decreased net assets resulted from higher operating expenses, primarily higher salaries and benefits, and the start-up costs of adding six provision II schools offset by furloughs and purchased services tied to additional staffing by the new external management company (four members) compared to the previous external manager (two members) during the year, according to the report.
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