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Response to Audit

Dear Clarence School Family,

Over the past couple weeks, you may have read about a recent audit that the Office of the State Comptroller completed regarding our District’s financial condition. I want to emphasize that throughout the process, the auditors could not have been more thoughtful or professional. They were cooperative to work with, and they provided helpful recommendations that we have already begun to implement. However, because school finance is different than building a home budget or running a for-profit corporation, I wanted to talk in a bit more detail about spending plans in education. 

First, when public schools put budgets out to vote each May, they ask residents to approve a single number related to spending. Unlike most home budgets, however, approved K-12 spending plans are then broken into different codes which are used for the allocating, monitoring, and reporting of funds. This is a complex process, and during the 2021-2022 school year, the District relied on over 800 budget codes to support day-to-day operations. 

It is important to emphasize that while it can be relatively easy to determine what belongs in certain budget codes, the unpredictable nature of fuel prices, special education costs, and self-funded health insurance plans can lead to significant fluctuations in actual expenses. Because of this, schools usually err on the side of caution by including a bit of extra funding in certain budget codes. This is a standard practice in schools, and a method that helps protect student programming from unforeseen costs that might arise periodically.

Second, when districts take a conservative approach to spending over the course of a year, it is typical that they have unspent resources at the end of June. While schools can hold up to 4% of their budgets in what is called “undesignated fund balance,” they should deposit the remaining monies into other reserves for specific purposes. These reserve funds function like thoughtful “savings accounts,” and they are legal mechanisms for backing capital improvements, post-employment obligations, known risks (e.g. a potential lawsuit), and unknown hazards (e.g. a major ice storm). These reserves are key when it comes to protecting schools against potential liabilities, and it should be noted that Clarence keeps much less in reserves than “peer schools” in New York State sharing similar economic profiles and student enrollments. 

Finally, while we will be using the results from the Comptroller to review our budgeting practices and develop a long-term reserve plan, I want to stress that the past two and a half years have been anything but typical for schools. Increases in one-shot federal stimulus plans, combined with an inability of districts to fill budgeted positions, have resulted in larger than anticipated unused funds. We recognize that both of these trends are not likely to remain in the long term, and we continue to believe in a common sense budgeting approach that has helped Clarence stay at or below the tax cap, maintain minimal reserves, and provide one of the lowest tax rates in Western New York.

Hoping this finds you enjoying summer. 

Matt Frahm, Superintendent of Schools