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Clean audit: Bemidji School District financial records compliant

Despite the challenges the Bemidji School District has faced in having to borrow money because of shifts in state aid, the district received a clean audit for the 2009-10 school year.

Don Zierke, a partner with the accounting firm of Miller McDonald Inc. of Bemidji, presented the district's annual audit of the 2009-10 budget year at a school board Monday evening at Bemidji High School.

The audit revealed no significant findings, according to Zierke. It confirmed the district is in compliance and accordance with government auditing standards.

"We did find small items we discussed with Chris (Leinen, the district's director of business services) in exchanging orally, but nothing that needed to come to the board with major concerns about," Zierke said.

Zierke said that last year he did find a compliance issue with an American Indian Education grant. The 2008-09 audit report states the district did not compile the proper paperwork in support of wages and benefits paid to employees working under the Indian Elementary and Secondary School Assistance federal award program. The audit also states the district's personnel were not aware of the certification requirements.

After reviewing the procedure the district took to resolve the matter, he found the problem was solved, Zierke said.

The 2009-10 audit revealed the district's general fund had revenues of approximately $51.8 million and expenses of roughly $53 million for a net of approximately $1.1 million. With the inclusion of other post-employment benefits, the ending fund balance is approximately $5.5 million.

"We're doing better than we thought we were going to be, that's the plus side, but we still have to borrow money and figure out some solutions that are going to affect our budget," said newly appointed school board Chairman Bill Faver.

Last year, the district borrowed $9 million because of a substantial shift in state aid. This year, the district is borrowing $3.5 million, according to Leinen.

In a report compiled by Leinen, which was approved by the school board Monday, Leinen wrote, "Even if the state does not repay the loan they have taken from schools, the (state) deficit is still $4.8 billion. This represents 12 percent of the current general fund budget. Given the fact that all the one-time gimmicks have been used up, it is hard to imagine that education will not be significantly impacted by the budget balancing actions of the new legislature."

In his report, Leinen suggests four changes caused the budget forecast to become unpredictable in some areas. First, more students are entering into the district at an "aggressive" rate. Second, federal stimulus dollars used by the district were not previously budgeted for. Third, post-employment proceeds were processed through the general fund and into irrevocable trust. Fourth, other post-employment benefits were allocated across various categories of employees.

Enrollment is the single largest factor in driving school district revenues. The district's weighted average daily membership count was up from 5,333 to 5,526 students, for a gain of 193 students. About one-third of this increase is attributed to higher birth rates entering the kindergarten grade level, Leinen stated in his report. Two-thirds is due to other, less predictable factors, including economic growth, parental choice and lower dropout rates. This represents a revenue increase from the prior year of more than $1.1 million.

Student activity funds were separately audited by the Miller McDonald accounting firm. Student activity funds are generated by students to be used for the benefit of students. In 2010 these accounts made revenues of $569,013 and expenses of $570,873.

"When you add up all those activities, all of a sudden, it seems like a lot of money, but when you take a look at an individual activity, it really isn't an awful lot for these individual students," Zierke said. "Each school has various activities. Sometimes they might appear there is a large dollar amount, but by an activity level it's not that much."

Zierke told the school board he anticipates the school district needing to borrow in the short-term future because of the hold backs in funding from the state.

"I don't see things are going to change at least in the short-term," Zierke said.

To view current and previous Bemidji School District audit reports, visit