By vincent todaro
Staff Writer
EAST BRUNSWICK — The amount of money in the school district’s fund balance is far less than it should be, according to members of the Board of Education and the district auditor.
The district has only about $700,000 in its fund balance, also known as the surplus account, an amount that is well below what is needed for contingency purposes, according to David Kaplan, the district’s auditor.
During the board’s Nov. 7 meeting, Kaplan said the district’s surplus should be at least 3 percent of its total budget. In East Brunswick’s case, that means about $3 million.
State law requires that no more than 6 percent of the total budget be used as surplus.
Board member Charles King said the board should aim to have somewhere between 3 and 6 percent as its fund balance.
With only $700,000 in the account, the district could find itself in a financial crisis if an emergency appropriation is needed. The main reason for keeping money in surplus is so that it will be there to cover any unanticipated emergencies that could arise.
Kaplan praised the district’s financial staff, however, saying the lack of surplus funds was one of the only problems he found during his audit.
"However, it’s a very troublesome fund balance," he said.
King said the situation is serious enough that the district could find itself in the same situation as Jamesburg, which has had to lay off teachers and other district employees to pay for unexpected expenditures related to special education costs.
Helmetta also recently experienced a budgetary shortfall due to unanticipated special education costs, and as a result, the Borough Council was forced to raise property taxes to bail out the school district.
East Brunswick Board Secretary Bernardo Giuliana said the diminished fund balance has been an issue for several years.
In New Jersey, there is no vehicle for districts to increase a surplus directly, he said. They have to over-budget in another area, and then move the unused portion into the fund balance in order to increase it.
However, that would not be easy for East Brunswick because its budget — defeated by voters in April and then cut by the Township Council — is already very tight, he said.
"We’re in a precarious position," Giuliana said.
He said state statute does not allow districts to use property taxes to increase fund balances, even though the practice is allowed in other states.
"Boy, they stuck us with a really lousy way to deal with it," said board member Vicki Becker.
Giuliana said the budget does not have much money available to add to surplus. He said some accounts are left with literally pennies.
Board member Patrick Sirr said part of the blame for the lack of surplus lies with the board. He said the board has directed Giuliana to draw from the fund balance to pay for things that the state was not funding.
Giuliana said the state does not give the district enough aid to offset costs.
King suggested that instead of spending 99 percent of the budget each year, the board should spend 98 percent for a couple years. That would free money to re-establish the surplus.
"It very well could happen that we wind up in a precarious situation with how we deal with an emergency," he said.
King said the surplus was at about $1 million on June 30, but has since dwindled.
As an example of a situation when the surplus was used, King said the district recently had a situation in which a school’s boiler that was being worked on had a severe problem that caused the district to have to spend $40,000. Only $30,000 had been budgeted for all of the planned boiler improvements, so the district needed to dip into its surplus for the balance.
"These things happen during the course of a year, and they are unexpected," he said. "There is no way to anticipate them.
"If we have a couple of other things happen, to have a fund balance of $700,000 is a scary proposition, honestly," King said.
At the meeting, board member Michael Danatos questioned whether the district had adequate internal controls to monitor finances, as he learned there might be $109,000 of cafeteria money missing.
King said later, however, that the money is not missing, and that a lack of training among cafeteria workers simply caused some confusion about the money.
He said the schools got new cash registers last year, but that staff members were not trained properly on how to use them. As a result, there were mistakes made in which an employee would inadvertently indicate that more money was rung up, in some cases simply by placing the decimal point in the wrong place on the receipt. When the amounts listed on the cash register receipts were compared to the money actually brought in, questions were raised as to whether money was missing, King said.
However, the amount of food inventory on hand was commensurate with the amount of money collected at the cash registers, meaning that no theft had taken place, he said.
"The auditor determined it was not a theft, and they have reprogrammed registers so they cannot make that mistake anymore," King said.
In fact, the registers cannot even handle sales of more than about $10 anymore, he said.
The district will take several steps to make sure there is no confusion in the future, he said, including spot-checking and cross-checking of cash registers.
Another problem brought up by Kaplan was missing cafeteria receipts. While noting that the auditor "was satisfied" that no money was missing, King said the registers will be checked on a more formal basis in order to make sure all tapes are accounted for.

