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District auditor: reported $12.0M fund balance masks about $3M in year‑end encumbrances
Summary
The district auditor told the Vernon Township Board that unbudgeted interest and restored extraordinary state aid boosted revenues, but approximately $3,000,001 in year‑end encumbrances and subsequent payments reduce the immediately available fund balance; he recommended a fixed‑asset appraisal and noted the 2025 budget is balanced.
The Vernon Township Board of Education heard a financial audit presentation Nov. 21 from Ray Sarinelli of Nisavachia LLP that outlined gains in revenue but warned that year‑end accounting entries limit the amount of cash the district can actually spend.
"One of the very big positives that you had this year is the rise in interest rates," Sarinelli said, and he pointed to higher‑than‑budgeted interest income and an uptick in extraordinary state aid as two drivers that improved the headline revenue picture. He also explained that on‑behalf pension receipts recorded in the district audit (payments the state makes into the TPAF pension system) inflate some revenue lines without representing cash the district directly received.
Sarinelli said the audit shows a total fund balance of $12,000,006.67 at year‑end, but that the district recorded roughly $3,000,001 in year‑end encumbrances—expenses attributable to 2024 that were not yet paid in cash. "When you're looking at that $12,000,006.67, if you take the expenses that have been paid out in the subsequent year, it's really more like it's $3,000,000 less," he said, adding that the effective available balance is therefore closer to about $9,000,006.
Board members asked for clarification about the encumbrance timing and health‑benefits payments; Sarinelli and district staff explained that some payroll‑adjacent costs were delayed into the following year for cash‑flow management and that excess surplus operates on a two‑year cycle for budget planning.
Sarinelli also reviewed reserve levels — a capital reserve at about $2,500,000 and a maintenance reserve of roughly $300,000 — and said the district's unassigned fund balance stood at about $1,491,000, or roughly 2% of operations, which is the statutory limit noted in the audit documents.
On control and reporting, Sarinelli recommended the district commission a current fixed‑asset appraisal because additions and deletions to fixed‑asset records have not always been consistently recorded over many years. "The last time you had a full appraisal done was at least 15 years ago, maybe 20 years ago," he said, recommending updating records to improve accounting accuracy.
The board did not take an immediate vote on Sarinelli's recommendations during the presentation; staff said they would follow up on questions from members and consider scheduling any appraisal or reporting changes through the appropriate procurement channels. The district administration told the board it has a balanced 2025 budget in place but will continue monitoring encumbrances, excess surplus and capital needs as projects proceed.
