Buffalo City School District audit: clean opinion but $36.9M audited deficit and structural budget gap

The Buffalo City School District received an unmodified ("clean") audit opinion for the fiscal year ended June 30, 2025, auditors told the Finance & Operations Committee on Oct. 3. Lumsden & McCormick partner Sarah Dayton said the firm found the district’s financial statements to be "proper and in accordance with generally accepted accounting principles," and reported no findings under government auditing standards or questioned costs in federal‑grant testing.

That favorable audit came with finance headlines. CFO James Bonds said the district originally budgeted an $83.0 million deficit; the quarter‑three projection included in the four‑year plan was $49.4 million, and the final audited deficit was $36.9 million. Bonds noted total revenues rose roughly $20.0 million year‑over‑year while total expenditures and transfers increased by about $106.0 million. The district’s general‑fund unassigned balance declined as a result.

Why it matters: the gap between the budget and audited results drives the superintendent’s weekly deficit‑reduction meetings and shaping of the 2026–27 budget. Bonds told the committee the current fiscal year calls for a projected $78.8 million deficit and that the superintendent has set targets that include cutting roughly 100 FTEs and $60.0 million in expenditures next year; the four‑year plan also contemplates closing two schools as part of structural changes.

Auditors’ details and federal funding: Dayton said the district received $107.0 million in federal funding in 2025, down from $188.0 million in 2024 after American Rescue Plan (ARP) funds ended. Because of that change, some positions and expenses once recorded in special‑aid (grant) funds shifted into the general fund in 2025, increasing reported payroll and benefit costs. The district is deemed a "low risk auditee," and the auditors tested 40% of federal expenditures this year (above the 20% minimum), focusing on programs such as Title I.

Fund‑balance items and capital moves: Bonds described assignments in the fund balance including a $50.0 million amount set aside for capital needs — $25.0 million marked for commissary lease payments and $25.0 million for a Buff State Da Vinci project that the CFO characterized as "not aidable nor bondable." The district also made an unbudgeted $15.8 million transfer from the general fund to capital projects to start Year‑1 capital work while bond proceeds were delayed.

Other notable numbers: the food service fund reported a $2.2 million deficit and ended with reserves of about $37.2 million; auditors noted the district had submitted an approved plan for using excess food‑service reserves because they exceeded state thresholds. The district reported an OPEB net liability of about $2.4 billion; TRS was reported at roughly 102% funded and ERS at about 93.8% funded.

Board questions and next steps: board members probed how much additional revenue the district would realize if the city paid interest on the district’s cash balances and raised concerns about historical commingling of funds. Auditors did not provide a firm dollar figure at the meeting; the CFO said a rough estimate in prior work was $4–5 million and described an intensive monthly reconciliation process with the city (he highlighted a $2,925 reconciling difference on roughly $444.0 million in cash balances). The superintendent said he will raise the city‑interest issue with the interim mayor.

The auditors provided a short management letter with suggested improvements — around grant accounting, bank reconciliations in capital projects, and classroom activity account controls — but reported no material weaknesses or significant deficiencies. The district plans to publish the full financial statements and supporting reports to board documents for public review.