An independent third-party audit found Juneau School District spent at a deficit of over $620,000, in the past fiscal year and failed to adhere to district policies that could have lessened the total. (Jonson Kuhn / Juneau Empire)

An independent third-party audit found Juneau School District spent at a deficit of over $620,000, in the past fiscal year and failed to adhere to district policies that could have lessened the total. (Jonson Kuhn / Juneau Empire)

Audit shows ‘deeply concerning’ deficit for school district

Independent report says failure to follow policy contributed to negative balance.

Juneau School District spent at a deficit of over $620,000, in the past fiscal year while failing to adhere to district policies that could have lessened the total, according to an independent third-party audit presented at a recent school board meeting.

“It’s a big deal,” said Rorie Watt, CBJ city manager. “It’s a really serious issue, and I am concerned that the school district needs to resolve its budget issues and I don’t think it’s going to be easy.”

The audit found the district failed to monitor its budget as its estimated revenue for the fiscal year was coming in at much less than expected, and it did not make sufficient adjustments in time to accommodate the lack of revenue.

The district has a policy in place to help monitor and detect budgetary changes like the ones that occurred by reviewing quarterly budget reports, but the audit indicated the district did not utilize them as required in the policy, and the district’s financial reports were not “sufficient to detect and correct ” the problem.

Without the monitoring, the district fund balance went negative, and in doing so, the audit found the school district also broke its policy which requires it to keep a fund balance minimum of 1.5% of the year’s expenditures and outgoing transfers.

Superintendent Bridget Weiss, who recently announced she will be retiring at the end of June, said Tuesday evening ahead of a Juneau School District and Juneau Education Association meet and greet that she did not want to comment beyond the information that is already publicly available.

Juneau School District Board of Education President Deedie Sorensen said earlier Tuesday the audit’s finding came as a “surprise” and said she was unaware of the budget’s deficit trajectory during the fiscal year.

“It’s deeply concerning,” she said. “ I am in the process of learning as much about it as I can so that going forward — we have big decisions to make.”

Sorensen said she could not answer what led to the breaks in policy and the board’s failure to identify the deficit and act to adjust it. Sorensen said she did not feel that the board was given sufficient information from the administration to understand the significance of the deficit.

“I clearly was not as aware as I needed to be and that’s the piece that I’m working on — it’s a critical question,” she said. “My focus now is clarification and to understand what it means going forward.”

Sorensen pointed to the rise in transportation, heating and living costs in Juneau as contributing factors to the deficit that were out of the district’s hands, along with the flat “skeletonized” funding from the state as a significant hurdle.

“Every school district in the state is at the bone,” she said.

The audit confirmed costs outside of the district’s control increased significantly, including insurance and heating fuel. Projected revenues were not received as budgeted.

Sorensen said the board was “optimistic” in its projections for student enrollment — which makes up a large portion of the district’s revenues.

Sorensen said it was difficult for the district to project for the year because of the “skewed” 2020-21 enrollment numbers due to the pandemic. The audit indicated the school enrollment projections were much higher than the reality which in turn led to a more than $63,000 deficit in total governmental funds that needs to be recovered by the city.

According to the CBJ Charter, the district pulls funding from the CBJ Treasury, which means the deficit causes the district to essentially “borrows” money from the treasury which is pulled from other city funds to accommodate the negative balance.

To correct the deficit, the district will have to adjust its upcoming budget to “repay” the overspending, according to City and Borough of Juneau Finance Director Jeff Roger.

“They need to produce a budget surplus sufficient to correct their negative balance,” Rogers said.

The audit recommended the district improve its controls over its budget to ensure in the future it complies with its policies and ensures accurate and timely reports and budget amendments. It also recommended improvements to the budget documentation provided to the board for approval and reconciliation between the approved budget and the budget in the accounting.

Sorensen said in the coming meetings the school board will discuss the deficit and policy breaks and said at this time she could not answer what the school district plans to do to correct the policy breaks and deficit.

• Contact reporter Clarise Larson at clarise.larson@juneauempire.com or (651)-528-1807. Follow her on Twitter at @clariselarson.

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