Tim Schell in his comments on the District’s Equity Fund referenced a DPI web page on Fund Balance Practices. I went to this web page and found the information on Fund Balance Practices (Equity Fund) useful and easy to understand. I hope our Board members and others who follow district budget issues take a moment to read this information.
While the Equity Fund is not a “pot of money” for annual district expenditures, this is a substantial financial fund and needs to be part of the School Board’s discussions during the annual budget process and discussions about long-term financial planning. Closer board monitoring of and board direction to the administration re the amount and uses of this fund is the board’s responsibility, and the public deserves to know and understand how the School Board is using this Fund during the annual budget process, in the School Board’s monitoring of revenues and expenditures and in the context of the district’s long-term financial planning.
At a recent board meeting, when the question came up about the Equity Fund – what is it and how is it used. The administration’s answer was to balance the books – which is indeed one role for this fund. This raised a series of questions when board members heard more about account overruns, unnexpected expenditures (rise in utility costs), which caused cash to be drawn from this Fund to balance other Funds. For example, the Equity Fund was used to balance the deficit in the Food Service fund at the end of a fiscal year. (Accounting practices for balance sheet require this.) I was perplexed that the School Board did not have a clear understanding of how this significantd fund is used and what their role/responsibility in managing this fund is.
The School Board is responsible for determining the Fund Balance they want to work with. From DPIs web page:

As part of the budget process, the board must determine fund balance amounts to be:

• retained for working cash needs, recognizing that the working cash fund also serves as district’s contingency or “rainy day” fund.
• used to fund expenditures of the next fiscal period, recognizing that if used for recurring expenditures, future budget decisions will revolve around finding resources to continue funding these expenditures.

I have not seen the School Board take up this discussion during the budget process. In fact, the board has had a separate contingency fund of less than $1 million separate from the Equity Fund. Why? And why does the school board not discuss fund overruns before they are “balanced out” using the equity fund?
The Equity Fund balance influences what interest rate district gets for short-term borrowing, bond ratings, etc. Therefore, I would like the School Board to ask the administration what their current practices are for this fund using examples from the past several years. What is the overall Fund balance target? How is this achieved and maintained?
In general, I would like to see the School Board have a clearer understanding of the Equity Fund and more closely monitor accounts within fund areas before the end of the fiscal year. For example, on a regular basis the School Board could ask for updated forecasts of expenditures and revenues for different accounts such as food services, contractors, utilities, transportation, etc.
As a starting point, I would like to see the School Board ask for a summary of changes in the Equity Fund for the past five to ten years by the various categories in this fund – reserved (committed for identified purposes), unreserved – designated (school board has identified tentative uses – working cash purposes), unreserved – undesignated fund balance (not identified). Note: It should be noted that opinions of the Wisconsin Attorney General have stated that Wisconsin governments cannot accumulate fund balances without having a specified purpose for such balances.
I’m sure the School Board, as part of various approval processes, approves the Equity Fund, but how this is done and when might merit a review tomorrow as part of the budget discussions. Also, I would like to see more discussion a) about what and how much is included in “unreserved-designated” and b) closer monitoring of budget expenditures so that the board is determining what is being used out of the equity fund to cover contingencies – and board members know this well in advance of June 30th each year.