External auditors give Rochester City School District a clean opinion; board advances reports to December business meeting

The audit committee of the Rochester Board of Education heard a presentation from external auditors Drescher & Malecki on the district's financial statements for the year ended June 30, 2024, and voted to advance the annual reports for consideration at the board's Dec. 19 business meeting.

Drescher & Malecki presented an unmodified (clean) opinion on the district's financial statements, saying the statements "fairly represent" the district's financial position as of June 30, 2024. The auditors reported no corrected or uncorrected misstatements, no difficulties performing the audit and no reportable audit findings such as material weaknesses or significant deficiencies.

The audit firm emphasized that an external audit is a backward-looking snapshot for the fiscal year ending June 30, 2024, and outlined the main audit focus areas: cash and investments, receivables and revenue recognition, long-term and contingent liabilities (including workers' compensation and other postemployment benefits), federal and state grant compliance, capital assets and short-term liabilities.

Key financial highlights the auditors cited: - Cash and investments (liquid assets) in the audit scope: approximately $370,000,000. - Receivables and revenue recognized at year end: about $100,000,000. - The general fund reported revenues exceeding expenditures by roughly $61,000,000 for 2024, increasing total fund balance from about $224,000,000 to approximately $286,000,000. - Unrestricted fund balance rose to just over $254,000,000, about 27.7% of the next year's budgeted expenditures (the auditors used the district's operating budget for comparison). - Special aid (federal/state programs) revenues were approximately $254,000,000, up about $15,000,000 from the prior year; capital projects outlay was about $28,000,000 (up from $23,000,000). - The district's debt service fund showed an annual transfer of about $81,000,000 for debt payments.

Auditors warned the board that stimulus-era funds (including ARPA) are winding down and that other districts are seeing more constrained budgets going forward. They identified two operational pressures for management attention: (1) succession and staffing risks where institutional knowledge resides with few employees, and (2) the district's major implementation of a new Oracle financial software package, which auditors said commonly presents implementation and control challenges for government entities.

Board members pressed auditors and staff on enrollment and budget implications. One commissioner referenced a reported student enrollment of about 19,000 students, lower than the board's earlier assumptions of enrollment in the 20,000s; auditors and the district's representatives said declining enrollment will reduce state aid and create longer-term budget pressure, noting personnel costs are the largest share of the budget and that staffing adjustments may be required.

The audit committee moved to advance the 2024 financial reports ' including the annual comprehensive financial report (ACFR), the student activity fund report, and the federal single audit ' to the full board for consideration at the Dec. 19 business meeting. The motion was made and seconded and the committee recorded that the ayes prevailed.

Other audit-related reports noted by staff included the year-end claims audit performed by Nairaki Smith (report posted in board documents) and reviews of student activity funds and contract-for-excellence procedures. Internal audit continue work on human-capital testing (hiring, onboarding, separations, discipline and substitute management).

The auditors also reminded the board that new Governmental Accounting Standards Board (GASB) pronouncements (for example GASB 101 and related updates) will require implementation steps for future years and could affect presentation of certain obligations (for example compensated absences).