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District audit: general fund ends higher than budgeted; teacher-salary percentage flagged, county waiver granted
Summary
Independent auditors reported a $12.9 million increase in the general fund for 2023–24 and identified a state compliance finding that classroom teacher salaries were below the 60% guideline by ~1.6 percentage points (~$2.8M); the district applied for and received a county waiver. The board accepted the audit and corrective action plan.
Merced City School District’s independent auditors presented the 2023–24 audit at the Jan. 14 board meeting and the board unanimously accepted the report and a corrective-action plan.
Key figures and findings: Auditor Linda Yang (I. Bailey) told trustees the general fund ended the year with an increase of $12.9 million. The auditor reviewed government-wide and fund financial statements, capital-asset additions (new playgrounds were cited) and long-term liabilities (bonds, pension and OPEB liabilities). The audit shows the district’s overall ending fund balance rose but also flagged a state compliance finding related to the classroom-teacher-salary ratio.
Teacher-salary finding and waiver: Under state accounting expectations, general fund expenditures for a K–8 elementary district should allocate about 60% to classroom teacher salaries. The auditors found the district was short by approximately 1.61 percentage points — described in the presentation as roughly $2.8 million — primarily a consequence of one-time pandemic-era funding. The district applied for a waiver from the Merced County Office of Education; staff reported MCOE approved that waiver last week, and the board accepted the corrective-action plan that will be filed with the California Department of Education.
What the board discussed: Trustees asked how one-time restricted funds affect operating balances and whether restricted grant amounts can later be moved into the general fund. Chief Business Officer Linda Parker and the auditor explained the rules on restricted funds and reimbursements; Parker described the district’s budgeting response and the trend of increasing ending fund balances even as reserve percentages change.
What’s next: The board authorized payment of the auditor and approved the corrective-action steps in order to clear the state finding. Staff said they will continue to report on corrective steps and bring regular financial updates to the board.
