MINUTES SPECIAL MEETING OF THE GARRETT COUNTY BOARD OF EDUCATION
Oakland, Maryland 21550
Thursday, September 29, 2011
Part I - Call to Order
Mr. Tom Carr, President, called the special meeting of the Board of Education to order at 6:00 p.m. Also in attendance were Mrs. Charlotte Sebold, Vice President; Mr. Rodney Durst, Dr. Donald Forrester, and Mrs. Cynthia Downton, associate members; and Mrs. Sue Waggoner, Interim Superintendent of Schools. The meeting was held at the Board of Education central office.
Part II – New Business
Mr. James Murray, CPA, of Rodeheaver & Associates, P.C., presented the financial report for the period ending June 30, 2011. He was assisted by Mr. Daniel Porter, CPA, Manager of the Board of Education audit, and Ms. Holli Owens, who was the audit’s staff accountant. Also in attendance were Mrs. Barbara Baker, Assistant Superintendent; Mr. Larry McKenzie, Director of Finance, Mr. Keith Harvey, Director of Human Resources; Ms. Judy Travis, Finance Coordinator and Mr. Scott Germain, Food and Nutrition Manager.
Mr. Murray reviewed a required communication to the Board of Education, those charged with governance, dated September 29, 2011. He explained that professional standards require that this information be provided addressing their responsibility under generally accepted auditing standards, Government Auditing Standards and OMB Circular A-133, as well as certain information related to the planned scope and timing of the audit. This letter detailed the significant audit findings. Under Qualitative Aspects of Accounting Practices, the Board of Education changed policy relating to fund balance by adopting Statement of Governmental Accounting Standards (GASB Statement) No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, in 2011. It also noted that there were not any transactions entered into by the Board during the year for which there was a lack of authoritative guidance or consensus and that all significant transactions have been recognized in the financial statements in the proper periods. Mr. Murray reported that the most sensitive estimate affecting the financial statements was management’s estimate of the net OPEB (Other Post-Employment Benefits) obligation, which is based on an actuarial valuation of the liability. He also reported that there were no significant difficulties in dealing with management in performing and completing the audit. And, all audit adjustments, reclassifications and eliminations necessary for financial reporting purposes have been agreed on by management. Those have been posted and are reflected in the report. He also informed the Board that there were not any disagreements with management during the course of the audit and that Rodeheaver & Associates is not aware of the Board consulting with any other accountants in regards to the audit. He added that there are certain management representations that are to be obtained by the auditors and all signatures have been secured in this matter.
Mr. Murray gave an overview of the report which was completed in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Mr. Murray stated the report expressed an unqualified opinion on the financial statements. He also gave a brief overview of the basic financial statements, notes to financial statements, the food service fund, supplementary program information, school construction fund, OPEB, and school activities fund.
Mr. Murray reviewed the Management’s Discussion and Analysis. He pointed out that for FY 12, the system is about $1.5 million dollars short and $2- $2.5 million dollars short for FY13. He pointed out several factors which need to be considered in working out a balanced budget. He mentioned property tax revenue and the per capita wealth factor and the impact it has on the budgetary process. Mr. Murray added that it is really important for the Board of Education and the County to work together to create a balanced budget. The other factors to keep in mind include the end of ARRA funding and Race to the Top Funds. Mr. Murray pointed out that the Other Post-Employment Benefits (OPEB) is another issue that must be taken into consideration. The current year unfunded increase in the OPEB Obligation is $1,154,429 which caused expenditures to exceed revenues in FY11.
Mr. Murray reviewed the Statement of Net Assets. The Statement of Net Assets shows Total Assets of $60,390,359 and Total Liabilities of $10,690,156, reflecting Total Net Assets of $49,700,203. This is a decrease of approximately $3,000,000 from the prior year. He explained that there was not any funding provided to cover the OPEB obligation. The current year unfunded OPEB obligation is reflected throughout the report and is approximately $1,714,741. This is an increase over the prior year of $1,154,429. This increase had a significant impact on the reported unrestricted total net assets. There is a $1,397,791 increase in the unrestricted net asset deficiency.
Mr. Murray continued to review the financial reports including the Statement of Activities. For FY11, the net cost of education is $50,370,950. This is funded through general revenues which include state and local appropriations which account for approximately 75% of the total cost. The county appropriation remained unchanged from last year and the state appropriation shows a decrease of just under $1.5 million and is expected to decrease this year. The change in net assets for FY11 was $3,007,148.
Mr. Murray reviewed the Balance Sheet - Governmental Funds. He explained that these funds consist of the Current Expense Fund, the Food Service Fund, and the School Construction Fund. The combined total net assets of all three as of June 30, 2011 were $10,033,010. The total liabilities were $8,426,776. The total funds balance was $1,606,234. Mr. Murray pointed out the Food Service Fund had a total fund balance of $295,480, which is an increase of $56,000 from the prior year. Discussion ensued about the amount available in restricted funds to carryover for the subsequent year’s budget of $381,593 Mr. Murray was questioned as to whether or not there is a standard for what the amount should be. He explained that the Government Finance Officers Association recently published a paper regarding this and it suggests a range from 2% - 5% of expenditures. The Board of Education is below the recommended amount.
Mr. Murray reviewed the Statement of Revenues, Expenditures, and Changes in Fund Balances. The current expense fund revenue is recorded at $57,348,556 and expenditures recorded at $57,292,085. The current expense fund continues to subsidize the food service health insurance and worker’s compensation cost. The net change in fund balance is $234,549 in the negative. He added that this amount is very comparable to last year. The food service fund had a net change in fund balance of $56,648. He explained that the school construction fund stands on its own and the revenues equal the expenditures. For FY 11, the amount was $302,456.
Mr. Murray reviewed the budget comparisons. This compared the original budget, the final budget, and the actual budget. He reported that revenues were under budget by $8,116. The final budget reflected a deficiency of $362,214 compared to a projected final budget excess of $381,593. He continued with the Current Expense Fund-Restricted Budget Statement of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual statement. The result of the excess of revenues over expenditures is $127,665. This is a direct result of the change of the Medical Assistance Fund Balance.
He reviewed the Food Services Fund Budget Comparison pointing out that actual revenues exceeded budgeted revenues by $230,701. Expenditures exceeded budgeted expenditures by $129,267. Taking into account the contribution from the current expense fund of $291,020 to subsidize the cost of health care premiums and workers compensation premium, the Food Service Fund ended the year with a surplus of $56,648. He reminded the Board that Food Service did not have any stimulus funding this year compared to $85,000 last year to use toward capital expenditures. He covered the changes in income for free and reduced meals, paid lunch students, and the al a carte revenues.
Mr. Murray reviewed the Statement of Fiduciary of Net Assets. Detail for this statement is reflected on the School Activities Fund Schedule. The School Activities Funds had a total net asset of $510,928 which is about $12,000 more than the end of last year.
Mr. Murray pointed out in the Notes to the Financial Statements the adoption of GASB 54 in June by the Board under Fund Equity heading. He also pointed out the adoption by the Board which addresses those people who are approved to make decisions about the appropriation of fund balances. Mr. Murray also touched on the details of the Voluntary Retirement Incentive Plan which was offered by the Board of Education on March 17, 2011 at a cost of $225,998. He also reviewed the components of the OPEB Obligation, Note 7 of the Notes to Financial Statements. Mr. Murray also discussed due dates of the financial reports by September 30, 2011.
There was a short discussion on the balance of funds at Bloomington Elementary School. Mr. McKenzie indicated that once the final expenses have been paid (one outstanding vendor to be paid for the student yearbooks) those funds will go to Broad Ford Elementary School.
Mr. Porter reviewed the Single Audit Report. He indicated that as a result of testing the major programs selected for audit there were no instances found of non-compliance. Mr. Porter also indicated that there were no internal deficiencies found in the internal controls and in the opinion of the auditors, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.
Mr. Porter continued with the Schedule of Expenditures of Federal Awards. The total of the federal awards was $7,236,631. He specifically spoke to the Board regarding the ARRA funding noting that the total for FY11 was approximately $2,600,000. He reviewed the summary of audit results located on the Schedule of Findings and Questioned Costs.
The only deficiency in internal control that is reported is that the Board has inadequate design of internal control over the preparation of its financial statements. Board personnel lack the qualification and training necessary to prepare financial statements in accordance with GAAP. The Board does not have controls in place over the selection and application of accounting principles in conformity with GAAP including sufficient expertise in selecting and applying accounting principles as an aspect of such controls. In order to remove this as a material weakness of internal control, the Board would have to put internal controls over the production of financial statements in place so that a financial report could be generated to include notes that satisfy the requirements of GAAP. The Board has evaluated the cost vs. benefit of establishing internal controls over the preparation of financial statements and acquiring the necessary skills/personnel to be able to group its accounts and purpose the adjustments, reclassification and eliminations necessary to prepare financial statements, in accordance with U.S. generally accepted accounting principles (GAAP), and determined that it is in the best interest of the Board to outsource this task to its independent auditors, and to carefully review the draft financial statements and notes prior to approving them and accepting responsibility for their content and presentation.
Mr. Porter reviewed suggestions from last year which included the creation of a procurement and fixed asset policy. He reported that Mr. McKenzie is currently in the process of creating the policy and that it will soon be submitted to the Board for adoption. Another suggestion from last year was the adoption of a Whistle Blower policy. This policy has been created and adopted by the Board of Education. The last suggestion was in regards to the change of the organization staffing and structure. This suggestion was made in order to ensure that knowledge and experience related to the Board’s information systems including the budgetary process and related controls were not lost in the transition. Mr. Porter added that there are not any current management matters to report beyond the dramatic changes in funding structure and how those will require drastic changes in the operative structure which Mr. Murray discussed earlier.
Mr. Murray thanked the Board for the opportunity to serve and be of service to the Board. He acknowledged the efforts and relationship with Mr. McKenzie, Ms. Travis and the staff for the work they’ve done over the years.
Mr. McKenzie expressed what a pleasure it was working with the staff at Rodeheaver and Associates and recognized Mrs. Travis for the amazing job that she and her staff have been doing. Mr. Durst thanked the representatives of Rodeheaver and Associates and recognized the Board of Education staff for their contributions. Mr. Murray again offered kudos to the Finance staff. Mr. Carr added that it is great to hear from the outside what is known in their hearts on the inside. He also thanked Ms. Travis, Mr. Germain, Mr. McKenzie, and Mr. Harvey for the fantastic job. Mrs. Waggoner added that the Instruction staff also plays a part and thanked them for their contribution. She continued that the Board is fortunate to have such a great team with strong leaders.
The Board took a ten minute break prior to meeting in Executive Session
Part III – Executive Session
Upon a motion by Mr. Durst, seconded by Dr. Forrester, the Board of Education unanimously agreed to move to executive session at 7:20 p.m. in accordance with Public Law 4-106 and Section 10-508 of the State Government Code for the purpose of discussing personnel matters affecting one or more individuals. Board members discussed items that included appointments, resignations, extra duty compensated coaches, emergency coaches, volunteer coaches, and a transportation item, and a field trip request.
Mrs. Barbara Baker, Assistant Superintendent, Mr. Keith Harvey, Director of Human Resources, and Mr. Larry McKenzie, Director of Finance, were present during all or part of the Executive Session.
At 8:35 p.m. the board returned to public session.
Part V – Personnel Recommendations
Mrs. Waggoner recommended approval of the following personnel matters:
Appointments: Karen Brewer, Secretary V, NX, eff. 10/3/11
Resignations: Lisa Hostetler, Secretary V, NX, eff. 09/15/11
Extra Duty Compensated Coaches: Angela Berger, Senior class Advisor, NN
Phil Carr, Head Baseball Coach, NH
Jackie Hawkins, Junior Class Advisor, NH
George Lander, Unified Tennis Co-Coach, NH
Matt Redinger, Athletic Director, SH
Kim Sanders, Senior Class Advisor, SH
Steve Savage, Head Football Coach, SH
Linda Wengerd, Unified Tennis Co-Coach, SH
Erin White, Drama Coach, SH
Hollie Wund, Junior Class Advisor, SH
Emergency Coaches: Ed Carr, Assistant Baseball Coach, NH
Becky Graham, Assistant Volleyball coach
Walter Lee, EMS Paramedic, SH
Stephanie Stephens, Head Volleyball Coach, SH
Mary Ann Umbel, Junior Class Advisor, NH
Lowell Workman, Assistant Baseball coach, NH
Volunteer Coaches: Dale Baker, Marching Band, SH
Heather Cooper, Marching Band, SH
Bob Fike, Marching Band, SH
Judy Fike, Marching Band, SH
Joyce Flinn, Marching Band, SH
Kathy Helbig, Marching Band, SH
Ruth Jobe, Marching Band, SH
Aurelia Marple, Marching Band, SH
David Marple, Marching Band, SH
Linda McClean, Marching Band, SH
Susan Newton, Volleyball coach, SH
Sue Schwab, Marching Band, SH
Randy Sisler, Marching Band, SH
- Field Trip Request: Orienteering Competition (JROTC Raiders)
October 7-8, 2011
Upon a motion by Mrs. Downton, seconded by Mr. Durst, the Board of Education unanimously approved the interim superintendent’s recommendations.
Part IV – Adjournment
There being no further business, the meeting was adjourned at 8:42 p.m.
|Mr. Thomas A. Carr||Sue Waggoner|
|Approved: November 8, 2011|