Southgate Community Schools receives clean audit; USDA guidance flags food-service fund balance

At the Oct. 28, 2025 regular meeting of the Southgate Community School District Board, auditor Daniel Clark presented the district's June 2025 financial audit and said the district received an unmodified, or "clean," opinion.

"Happy to state that the district did receive what we call an unmodified or a clean opinion," Clark said, adding that auditors found no material misstatements or material weaknesses in the financial statements.

Clark walked the board through several technical items that affected June'year results. He said a Governmental Accounting Standards Board pronouncement related to compensated absences (accrued sick, vacation and comp time) required an entity-wide beginning-balance adjustment that increased liabilities by about $4.5 million. Clark called accounting estimates for pensions, OPEB and depreciation "reasonable" and said auditors encountered no difficulties during fieldwork.

The audit also included a management-letter comment about the district's food-service fund. Under USDA guidance, Clark said, the food-service fund generally should hold no more than roughly three months of expenditures. "In your case, that would equate to about $600,000," he said. Clark reported the district's food-service fund balance at about $1.1 million and said the district should consider spending approximately $500,000 on eligible food-service items (typically equipment or similar purchases) to align with the guideline.

Clark said the district had spent significant capital dollars tied to bond projects and reported total assets of about $154 million and liabilities of about $195 million. He noted that net pension liability stood near $66.7 million (about 74% funded) and that the district's OPEB position moved to an asset in 2025 (about 143% funded), which reduced the district's annual OPEB contribution for the year.

Clark told the board the single-audit report over federal programs is complete from the audit team's testing but is being held because the federal government had not finalized its compliance supplement. "Until that is done, we have to hold the single audit," he said, and added auditors do not expect major changes when the supplement is released.

Board members asked follow-up questions about the food-service note and pension calculations. In response to a question about the food-service balance, Clark said, "it just means that you need to spend approximately $500,000 of your food service on some sort of food-service related items. Typically, it's used for equipment." When asked whether pension and OPEB calculations include current and retired employees, Clark replied both groups are included and confirmed that the plans are administered at the state level.

After the presentation the board thanked business-office staff for their work preparing for the audit. The board approved routine agenda and consent items and adjourned later in the meeting.

Next steps: auditors will file the required audit report with the Michigan Department of Education by Nov. 1 and will issue the single-audit reports after the federal compliance supplement is published.