KCUSD fares well in financial audit

Audit report for Kings Canyon Unified indicates the district in good financial health despite a few missteps

kings canyon unified-road sign-38-23-kg
Darren Fraser
Published February 27, 2024  • 
2:00 pm

REEDLEY – An audit of the Kings Canyon Unified School District’s (KCUSD) fiscal year (FY) 2023 governmental activities, major fund and aggregate remaining fund found no major problems, but did disclose a few accounting irregularities.

Shaun L. Rodriguez is the District’s Director of Fiscal Services. He said the audit affirms the KCUSD’s strong financial position.

“The Audit for Kings Canyon Unified was positive, with only two minor findings,” Rodriguez said. “It’s reassuring to know that the district is in a strong financial position, especially with reserves above the required 3% for economic uncertainty. Overall, the audit results are a testament to the district’s commitment to financial stewardship and accountability.”

The audit was conducted by the accounting firm of EideBailly and was completed Dec. 14, 2023. The District’s total assets for 2023 were $376.6 million; for 2022, total assets were $317.87 million.

The District’s net financial position for the year ending June 30, 2023 was $149.2 million. The net position for 2022 was $88.1 million.

According to the audit, net position is defined as the difference between assets and liabilities. These categories include amounts slated to be paid and/or received. In a similar vein, they defined the district’s operating results as the relationship between revenues and expenses.

GOVERNMENTAL ACTIVITIES

Governmental activities are where the District reports all of its services. These include K-12 education, adult education, child development activities, and the ongoing efforts to improve and maintain buildings and school sites. These activities are paid for property and state income taxes, user fees, interest income, local, state, and federal grants and general obligation bonds.

The cost of 2023 governmental activities was $194.9 million, compared to $168 million for 2022. According to the report, local taxpayers paid only $20.6 million to finance these activities because government subsidies and grants and grants and contributions from organizations financed $81.4 million. The district paid for the remaining public benefit portion of governmental activities by tapping into unrestricted federal and state funds totaling nearly $153 million.

GENERAL FUND

At the end of FY 2023, KCUSD’s governmental funds had a combined fund balance of $103.9 million – an increase of $22.8 million over 2022.

Governmental funds are composed of multiple funds, including the general fund – which is the district’s principal operating fund, school activities, charter schools, adult education, child development, cafeteria, capital facilities, county school facilities, a special reserve fund for capital outlay projects, and bond interest and redemption.

According to the audit, the $22.8 million increase was due to an increase in the general fund from $49 million in 2022 to $69.1 million in 2023, which was the result of funds from the Learning Emergency Block Grant. The second increase in governmental funds was due to a $2.6 million increase in non-major governmental funds, which included higher meal reimbursement due to increased enrollment.

Rodriguez said the biggest change from last year’s audit is the increase in expenses.

“The most significant change from last year’s audit is the noticeable increase in expenses, primarily attributed to the completion of numerous ESSER (Elementary and Secondary School Emergency Relief) projects funded by ‘one-time’ COVID relief funding,” Rodriguez said. “These projects have played a crucial role in addressing the various challenges posed by the pandemic, such as ensuring safe learning environments and enhancing safe spaces for students, staff and families.”

MISCALCULATIONS

Despite the overall good health of the district’s FY 2023 financials, the audit did find errors.

When EideBailly tested the District’s state general apportionment and related year-end accruals, it discovered “multiple miscalculations.” According to the audit, the district did not record transfers to charter schools in lieu of property taxes in the general or charter funds.

KCUSD posted an account receivable of Local Control Funding Formula (LCFF) funding for $246,185 at Kings Canyon Online charter school and $101,890 LCFF funding at Reedley Middle College High. Based on EideBailly’s LCFF calculation, neither amount should have been posted. These errors resulted in the district not preparing financial statements in accordance with Generally Accepted Accounting Principles (GAAP).

According to the audit, these conditions resulted in suspect costs. Because KCUSD did not record transfers in lieu of property taxes to charter schools, this resulted in the general fund revenues being overstated by $543,656 and the charter fund revenues being understated by $332,588. The district made the same mistake in 2022.

EideBailly concluded various reasons contributed to these discrepancies, including the use of a “complicated workbook” to determine the District’s ending balances. The firm also found that the charter fund is made up of two charter schools, which can increase the difficulty of tracking individual apportionment entries.

Rodriguez said the oversight was identified during the audit and subsequently corrected. He said as a corrective measure, the district has incorporated the process into its routine end-of-year procedures.

EideBailly found KCUSD to be in noncompliance regarding classroom teacher salaries.

According to section 41372 of the California Education Code, classroom teacher salaries must constitute 55% or more of a district’s total expenditures. The audit found the district spent just more than 43% of its expenditures on teacher salaries, resulting in a $12,019 deficiency. The audit also found that the district underpaid classroom teachers in 2022.

The audit noted that Rodriguez will attempt to identify and evaluate ways to meet the 55% requirement.

Darren Fraser
Reporter