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Serving Northern St. Louis County, Minnesota

Ely school district reduces deficit

Catie Clark
Posted 1/11/23

ELY- An improving financial outlook was the upshot of Ely school district’s annual audit, which headlined the school board meeting here on Monday. According to auditor Devin Ceglar, from …

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Ely school district reduces deficit


ELY- An improving financial outlook was the upshot of Ely school district’s annual audit, which headlined the school board meeting here on Monday. According to auditor Devin Ceglar, from Walker, Giroux, and Hahne, the district paid off nearly $5 million in deficits from the prior year. That still left the district $1 million in the red, but reflected marked progress over the course of the year.
A yearly independent audit is required by both state and federal law. Ceglar, a partner at Walker, Giroux, rounded figures during his presentation. The Timberjay has replaced those with the actual dollar amounts from the 93-page audit report.
Ceglar started with the district’s overall net position, noting that the district had total revenues of $15,087,586 and total expenses of $10,226,579, for a positive change-in-net of $4,861,007. When the $5,957,545 deficit from the 2020-2021 is subtracted from the 2021-2022 change-in-net, the district’s end-of-year net is a much-lower deficit of $1,096,538.
As of June 30, 2022, the district had a total of $17,923,332 in capital assets, which was an increase of $11,649,920 over the previous year. That amount represents not only the new construction at the district’s facilities, but also a new bus.
The district reduced its outstanding debt to $15,395,000, which is $313,000 less than the previous year. By law, the state limits the amount of debt that the district can issue to 15 percent of the market of value of all the taxable property in the district. For ISD 696, that limit is $103,191,692, which is much higher than the district’s actual debt.
The district did have some cost overruns which were much higher than what was budgeted. “The general fund lost $463,774,” Ceglar pointed out. He explained the loss by comparing the amount that the district budgeted for each line item versus the amount that was actually received or spent, calling the difference a variance.
“Typically, you want to see positive variances,” Ceglar explained. “When there are negative variances, that means that revenue didn’t come in as anticipated or expenditures were higher. So, as you can see … the total revenue (variance) was a positive $216,498 … Then when you go to expenditures, the general fund overspent by $682,272, (mainly) for district support services ($245,996), regular instruction ($396,328), and special education instruction ($137,234).”
Accounting practices
Ceglar also reported that the audit identified a few areas of “material weaknesses and significant deficiencies” in accounting practices. The audit determined that the district “did not possess the technical expertise to comply” with all of the government’s accounting reporting standards, but that the cost of training the district’s staff “exceeded the benefit that would result.” That finding is fairly typical of governmental bodies in the region.
Ceglar also noted that the district lacked the staff to achieve a complete “segregation of (accounting) duties,” so that each step in the accounting process would have a new set of eyes reviewing transactions. “Our recommendation is that, for example, four accounting steps should be done by four different people,” Ceglar remarked, “but most government entities are too small,” noting that the problem of small accounting staffs included “90 percent of all our small government clients.”
Ceglar also recommended that the district adopt an annual review of all outstanding checks, to either reissue them or turn them over to the state as unclaimed property. He also recommended that the district should adopt a more timely practice of making adjustments for interest and fund transfer corrections within one-to-two weeks of the receipt of the district’s bank statements.

In other action, the school board:
• Designated that it would meet every second and fourth Monday of each month at 6 p.m.
• Designated the Ely Echo as its official district newspaper for 2023 for the printing of legal notices. No other paper submitted a competing bid.
• Designated the Klun Law Firm as the district legal counsel for 2023. The district superintendent and chairperson of the school board were authorized to contact legal counsel at a rate of $125/hour. The rate in 2022 was $120/hour.
• Designated Boundary Waters Bank, U.S. Bank, Minnesota School Liquid Asset Fund and the PMA Financial Network as the district’s financial institutions.
• Designated Spencer Aune, Finance Manager and Jordan Huntbatch, Payroll, Benefits & Finance Coordinator, as the district staff members who are authorized to conduct electronic fund transfers for the district.
• Approved the payment of $1,250 for 2023 dues for the Range Association of Municipalities and Schools.
• Approved the 2023 Internal Revenue Service standard mileage rate of $0.655/mile for reimbursing school district travel.
• Approved the December 2022 financial report, December 2022 receipts of $2,551,720 and December 2022 disbursements of $819,159.
• Established school board compensation for 2023 at $223/month plus $30,000 life insurance for directors, $287/month plus $30,000 life insurance for the board chairperson, and an additional $64 for each board member for monthly study session. These are an increase of 7.1 percent over the previous levels, which is the current rate of inflation. The annual inflation rate for the United States was 7.1 percent for the 12 months ended November 2022 according to U.S. Labor Department consumer price index data published on Dec. 13.
• Accepted the resignation of Molly Holtz from her paraprofessional position effective Feb. 4.
• Heard from director of facilities Tim Leeson, who remarked that the pipes in the Early Childhood Family Education room burst on the day after the holiday break started, but that the pipe failure was discovered immediately, “preventing damage much worse than wet carpets.” He also reported that the historic Workman murals have been rehung.