C-A Board hears audit report, grim forecast

FLINT TWP. — The good news is that the Carman-Ainsworth Community Schools received an “unqualified” financial audit for the fiscal year ending June 30, 2012, citing the accuracy of financial statements prepared by Russell Parks, assistant superintendent of business and operations.

Parks’ Comprehensive Annual Financial Report (CAFR) earned the district for the second year in a row a Certificate of Excellence in Financial Reporting issued by the Association of School Business Official International. C-A is one of 31 districts in the state chosen to receive this award.

But there was a gloomier financial forecast in the audit presentation last week by Thomas M. Taylor, of Taylor & Morgan CPAs & Business Advisors.

Staffing levels and patterns will be affected by coming financial challenges, Taylor said. Steadily declining revenues and enrollment are key contributors but Taylor also outlined the looming financial burden of health care reform.

Taylor urged the board to begin looking at rising health insurance cost coming with implementation of the Affordable Care Act that will substantially impact the 2013-14 budget year.

“It really affects all areas of the district,’’ he said, mentioning contract negotiations, financial documentation and staffing patterns as examples.

Health care financial reporting starts in January 2013 with benefits information required on W-2 forms.

Another big change, effective January 1 2014, is that health insurance must be pro- vided to every employee who works 30 or more hours a week.

That could have an impact on staffing levels, given that there are aides, bus drivers, cafeteria help , latchkey providers and others who currently are not receiving health care benefits, Taylor said. There will be a $2,000 penalty for noncompliance.

Other changes are unknown as health care reform is still being set up in Michigan and not due to be in place until Oct. 1, 2013.

Taylor said his rationale for bringing up health reform changes is for the board to start thinking about staffing patterns for 2013-14.

“It is going to be a hot button all the way through 2013,’’ he said. “That is something which could have an impact on your budget and will definitely have an impact on your scheduling.”

As expenditures continue to exceed revenues, and the fund balance is used to make up the difference, Taylor stressed that the district’s unassigned general fund balance will dwindle to about $835,000 as of June 30, 2013 under current plans. The fund balance was $3.1 million at June 30, 2012, which was down about $2 million from the previous year and was as much as $7.5 million a few years ago.

As of June 30, 2012, the district had to borrow $4 million to meet cash flow needs for the first time in more than 15 years, the audit reported. That is due to state funding payments being pushed back until the beginning of the school year.

Eighty-six percent of district expenditures are people-related.

The board has done a great job so far of reducing costs but the reality is when cuts are made, it is going to come down to people, Taylor said.

The board took a hard look at outsourcing bus drivers and janitors for this school year but decided to retain them after labor concessions were made.

Taylor also noted that rising retirement rates are driving up the district costs. The state-mandated rate rose from 24.46 last year to 25.36 this year which adds up to an additional $275,000 in costs to the district.

“For every one hundred thousand dollars in payroll, we are spending 25 thousand for retirement costs. That is a huge number,” Taylor said, adding that the rate could go higher still.

Taylor also said the district’s sinking fund balance is continuing to go down as property taxes continue to slide but the athletic fund and food service fund are holding steady.

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