At the Sept. 27 meeting , the Board of Trustees received its audited financial statements and was told that although the books were in good shape, the board should consider putting more aside in its contingency fund.
Upon further review, the board seemingly determined that’s not something it’s going to be implementing.
“If I was on your side of the table, not on the audit side,” auditor Brad Piercy of MNP told the board, “I would want to make sure I had at least one month of contingency reserve unequivocally set aside.”
One month of expenses for the school district is about $5.6 million.
Piercy used an example of a household budget to make his point.
“If you’re making a home budget, and everyone is making a paycheque, and you’re going through $5,000 in expenses every month, it kind of makes sense to always have $5,000 at the beginning of the month just as your cushion.”
Currently, the district has $1 million in a contingency reserve, which equates to less than one week of operating costs.
But at last week’s public meeting, Secretary-Treasurer Kevin Patrick told the board the risk of not having that money put aside doesn’t outweigh the benefits of having it available to spend during regular budget discussions.
“What I did is I basically looked through the history of my time here to see what the risk to the board is of a mid-year loss,” he said, pointing out that a mid-year unexpected expense or loss in funding would be the purpose of that fund.
The only instance Patrick could find where that contingency fund would have been useful during his time here was the cancellation of a $1-million fund that the district was planning on receiving but did not, and that situation would have been covered by the since-implemented $1-million contingency fund.
Another risk is having too much sitting in the contingency fund. Patrick told the board the amount of money school districts have in reserve is currently becoming “of interest” to the provincial government.
“My worry is that the boards having too much reserve is impacting (governmental) funding decisions,” Patrick told the board. “Although it’s good to save for a rainy day, the risk is actually fairly low – at about $1-million, which is what the board currently has – as well as there being some negatives of having a high contingency. Based on that, I don’t think a $5-million emergency contingency is needed for our district considering our unique circumstances. It may be for some entities, but for our school district, it’s better to try to focus those funds into the schools and into operations.”
Trustee Daryl Hagen agreed.
“I wouldn’t like to see us squeezing more money out of the system,” Hagen said. “This government can change its mind, like you were saying, at any time, and if it sees money, it’s going to squeeze.”
Patrick clarified that he is not saying the government is looking at clawing back funds at this point and did not mean to imply that they are.
“Attention is being paid to the reserves, but I have not heard through any avenue that they are planning on clawing that money back,” Patrick clarified.
Trustee McMann also came down on the side of spending on students rather than setting funds aside.
“I really would prefer, rather than us pad our contingency as an insurance policy against risks that we deem to be quite low, I would rather see that money circulated within the system to better serve our students.”