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Independent RSM review finds 2021–23 revenue overestimates and declining fund balance led to multi-year deficits
Summary
RSM, commissioned by the board, reviewed fiscal years 2021–23 and found repeated budget-to-actual revenue shortfalls driven largely by overoptimistic state revenue assumptions (ADA), a $35 million drop in the general fund balance from FY21 to FY23, and limited transparency in budget inputs.
An independent review commissioned by the Keller ISD board and presented Jan. 30 concluded recurring budgeting practices and overly optimistic revenue assumptions produced multi-year general-fund deficits through fiscal 2023.
Scope and findings Audit firm RSM (Leo Munoz and Kevin Hett) said the firm analyzed district budgets and actuals for fiscal years 2016–2023, with a focused review on 2021–23. Key findings included: - Revenue shortfalls: Significant variances between budgeted and actual revenues beginning in 2021, primarily driven by state revenue assumptions tied to average daily attendance (ADA). The firm reported budgets that forecast higher ADA and state revenue than materialized. - Fund balance decline: The district’s general fund balance fell from approximately $82 million in FY21 to about $47 million in FY23, a $35 million decrease, which RSM said was largely used to fund deficits. - Budget process weaknesses: RSM reported a tendency for budget decisions to be made with limited input from cabinet-level staff and an operational pattern of passing a budget then amending it during the year to address shortfalls, rather than budgeting conservatively at the outset. - Expense drivers: While revenue shortfalls were primary, RSM also flagged expense variances for transportation, insurance, and utilities as contributors to deficits.
RSM’s conclusion and board context RSM reported it found no evidence of impropriety. The firm’s characterization focused on process and governance: budgets that relied on optimistic revenue projections, inadequate transparency and limited participation in setting assumptions, and an inclination to approve nominally balanced budgets with the expectation of in-year amendments.
What trustees asked and next steps Board members asked whether RSM had found evidence of fraud or impropriety; RSM explicitly answered no. Trustees and staff discussed corrective measures the district has implemented in recent years — including stricter efficiency efforts and a more conservative budgeting approach — and noted those changes appear to be stabilizing the district’s finances in the near term.
Ending RSM’s report was presented in executive session and summarized publicly to explain the origins of prior deficits. Trustees said they commissioned the review to understand causes and to prevent a recurrence.
