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Beaufort County school board approves accounting change that cuts reported food-service balance by about $2 million
Summary
The Beaufort County Board of Education authorized reclassifying the district's food service fund for financial reporting, a move CFO Tanya Crosby said will reduce the reported fund balance by roughly $2 million but will not affect the district's bond rating.
The Beaufort County Board of Education on Oct. 1 authorized an accounting change to reclassify the district's food service fund as a governmental special revenue fund for financial-reporting purposes, a move that the district's chief financial officer said will lower the fund's reported balance by about $2,000,000.
'Our auditors recommended moving it to a governmental fund,' Tanya Crosby, the district's chief financial officer, told the board, saying the shift will require a prior-period adjustment to remove proprietary-style capitalized assets and depreciation. 'It will have a $2,000,000 effect. It will lower the fund balance from $10,000,000 to 8.'
Crosby said the change stems from a structural shift in revenue and operations after widespread adoption of the Community Eligibility Provision (CEP), which this year made the district districtwide eligible so meal revenues are now primarily federal (USDA) rather than fee-based. Crosby said auditors from Malden and Jenkins advised the change and that similar conversions have occurred in other districts.
Board members asked about downside risks and optics. Crosby said the adjustment is a one-time prior-period journal entry and additional presentation changes for audited financial statements, but she said it 'is no cost to the district' and 'will not affect our bond rating' because bond-raters focus on the general and special revenue funds rather than food service.
Board Secretary moved the motion to authorize the transition, which was seconded by Carlton Dallas. The motion carried with one abstention recorded; the board recorded the vote as nine in favor and one abstention.
Crosby told the board the change will also help the district comply with USDA requirements for excess operating balances by reducing the reported surplus and positioning the district to meet spend-down plans more readily. She said the district has reinvested roughly $3,000,000 in equipment and facilities over the last three years but had to depreciate those investments under the proprietary presentation.
The board asked staff to finalize the prior-period adjustment entries and to coordinate with auditors for the fiscal-year reporting schedule. The motion authorized the accounting/reporting change effective for fiscal-year 2023-24 financial statements.
