Auditors give Toms River district "unmodified" opinion but flag food-service cash and $7M operating loss

Auditors from HFA told the Toms River Regional School District Board of Education that the districtreceived an unmodified opinion on its financial statements but faces notable budget pressures, including a repeated finding on the food-service enterprise fund and a near $7 million operating loss.

"We have an unmodified opinion on our financial statements," said Jerry Cony, partner at HFA, as he opened the annual comprehensive financial report to the board. Cony said the firm prepared a condensed three-page summary of an almost 200-page report and delayed completion briefly while awaiting pension numbers from the New Jersey Division of Pensions and a federal compliance supplement for the single audit.

Cony told the board the single-audit testing and internal-control reviews produced no findings or recommendations for federal grants and state financial assistance. He said the auditors did record one repeat management finding: the food-service management enterprise fund is holding excess cash resources beyond Department of Agriculture guidance, a situation the auditors traced in part to COVID-era federal funding and related carryover.

Board members asked how long the food-service finding might persist. Cony and staff said the district expects the issue to resolve as the enterprise fund is drawn down and through an intentional strategy that has included a reduction in meal prices to reduce the surplus; auditors projected the finding could disappear within the next one to two fiscal years.

On operating performance, auditors reported an operating loss of about $7 million for the year, driven largely by an approximate $7.5 million reduction in state aid and higher costs for private-school placements for students with disabilities. Cony noted that a one-time sale of the districtcorporate center generated roughly $15.4 million in current-fund revenue, and that without that sale the operating shortfall would have been substantially larger (auditors described an illustrative roughly $22 million loss absent the sale).

Auditors summarized fund-balance allocations and starting points for the FY27 budget process: total fund balance was presented as about $43.6 million, including approximately $6 million in capital reserve, $9 million in maintenance reserve, about $6.2 million in an unemployment reserve, and an unassigned fund-balance cap (2% rule for New Jersey school districts) of roughly $6.23 million. Cony said the unassigned amount and encumbrances are the beginning figures management will use in preparing the next-year budget.

Cony closed by praising district staff for cooperation during the audit and answering board questions about timing and next steps. The board heard the presentation, asked clarifying questions about the food-service finding and fund-balance usage, and did not take formal action at the meeting.

The board's finance committee is expected to use the auditors' figures as staff develops the FY27 budget; auditors said a final printed report would follow once remaining testing and federal compliance items were closed.