Ely School gets ‘A’ in finances

District’s undesignated fund balance jumps by another $450,000

by Tom Coombe -

Once underwater financially, the Ely School District has ditched its life jacket and now appears to be swimming comfortably.
The results of the district’s annual audit, released Monday, show that the district’s general fund took in about $700,000 more than it spent in the fiscal year that ended June 30.
Meanwhile the district’s undesignated reserve - the most consistent barometer used by school officials to gauge the district’s financial health - climbed by over $450,000.
According to the audit, the district’s undesignated reserves now total $2,610,525.
That’s up from $2,159,777 in 2016, and almost two-and-a-half times more than the $1,109,857 the district had in undesignated reserves in 2014.
A year ago, the district had what was believed to be one of the highest undesignated fund balances in district history, representing 26 percent of the district’s annual general fund expenditures.
Accountant Jen Smith of Duluth firm WIPFLi told school board members during a detailed report that the district now had 36 percent.
The audit report came on the heels of more than an hour of intense testimony and board deadlock over the proposed recreation center on the Ely campus (see related story), and the clean bill of financial health was received largely without comment.
The numbers, however, were markedly different from those board members were reviewing only a decade ago - when reserves that fell into negative balance and triggered fears of statutory operating debt designation and state intervention.
School board members had little to say about the developments and an audit report delivered by Jen Smith of Duluth firm WIPFLi, but superintendent Kevin Abrahamson was clearly pleased about a report that showed “only good news.”
For at least 20 years, school officials have looked to the audit report and the undesignated reserves to paint the picture of the district’s finances.
Major budget restructuring came to the district in the mid-to-late 2000s, when steep declines in enrollment and rising expenses raised the threat of SOD, which occurs when reserves fall to a negative balance of 2.5 percent of operating expenditures.
The approval of an operating levy referendum aided in the turnaround, and board members passed a policy calling for the district to keep at least 10 percent of operating costs in reserve.
Other than a slight hiccup in 2012, when unanticipated deficits depleted a $1.1 million reserve down to $671,334 in just one year, the Ely district has slowly climbed forward, with fortunes accelerating the last two years.
Smith said the major increase in undesignated reserves in 2017, after initial budgets called for a surplus of about $150,000 could be attributed to larger than anticipated revenues in special education aid and property taxes, and staffing costs that were lower than projected.
Counting debt service and other funds, the district ended the year with just over $3.9 million in total fund balances.
Of the undesignated reserves, the lion’s share - about $2.1 million are unassigned while the remainder are assigned for future purposes such as faculty severance pay.