Kevin Patrick

SD72 should put more aside for ‘rainy day fund’

Clean audit of last years' financial reports, with one reccomendation

School District 72 (SD72) received the audited financial statements for last fiscal year at a special meeting of the Board of Trustees Tuesday, and for the second year in a row the report from auditor Brad Piercy of MNP was a positive one for the district.

“It’s a clean audit,” Piercy told the board. “We had no management letter, so there were no internal control deficiencies – meaning Kevin (Patrick, secretary-treasurer) and Karen (Geisler, assistant secretary-treasurer) are running that department in a very good manner. There were no (accounting) issues.”

There was, however, one particular recommendation made in the report which the board has been advised to consider as they move forward in their future financial planning.

“If I was on your side of the table, not on the audit side, I would want to make sure I had at least one month of contingency reserve unequivocally set aside,” Piercy told the board. “One month of expenses for you is $5.6 million, so from my personal perspective, you should have upwards of $5 million set aside.”

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 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 cost.

“As both an auditor and as an accountant working in other entities,” Piercy said, “I would say that’s one place where you should at least be having a discussion.”

The 2015-16 budget was passed in May, but the district revises that document – usually in or around February to address updated needs, revenues or expenses that it has become aware of during the school year – and Piercy recommended that they consider adding more funds to that contingency when preparing that revision.

Currently, the budget is set to continue placing $1 million into that contingency fund per year, so increasing that amount would mean those funds would have to come out of something else.

But it wouldn’t negatively affect service levels, the board was told.

“It’s just a number shuffle,” Piercy said, meaning the board would simply be taking surplus funds from one area and placing them in another.

Currently, the district has about $3.1 million in an “internally restricted reserve,” meaning that money is already earmarked for specific projects, but also has about $3.3 million in “unrestricted operating reserves,” so they could just shift another million or two out of that column into their “operational needs contingency reserve,” until they have the recommended total of one month’s operating expenses in the bank.

“While the dollars are there, set it aside,” Piercy recommended.

The benefit of doing this is mainly for administrative simplification.

“On the financial side of things, it makes an accounting office run so much smoother if you have cash in the bank, because you don’t have to worry about meeting payroll, you don’t have to be worrying about making the progress payments on seismic upgrades or construction.

“It just makes the accounting office and the clerks’ job 100 times easier when you’re not having to deal with cash calls for anything.”

“So we won’t have any more money or any less money, but we have more comfort?” asked trustee Ted Foster.

“Correct,” answered Piercy.

The board of trustees will consider the recommendation moving forward with further budgets.