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Auditor: Watchung Borough schools receive clean audit; fund balance and grant timing highlighted
Summary
Auditor Valerie Dolan told the board the district received a clean audit with no formal recommendations, reviewed a roughly $3 million fund balance (including a ~$1.1 million capital reserve), and urged timely drawdown of federal/state grants while flagging an arbitrage reserve tied to bond interest.
Valerie Dolan, the audit partner who conducted the district’s annual audit, told the Watchung Borough Board of Education on Dec. 19 that the audit had been completed and filed and that the district received a clean audit with no formal recommendations.
Dolan summarized the district’s financial position: a total fund balance reported at just over $3 million, a capital reserve of about $1.1 million, and a state‑allowed unassigned fund balance (roughly 2% of the budget) that auditors identified as the district’s available free fund balance. She noted that a significant portion of recent fund balance growth came from interest earnings tied to referendum funds and that those interest earnings will decline as referendum funds are spent.
"You actually have a clean audit with no recommendations," Dolan said, adding that auditors had provided management suggestions rather than formal corrective actions. She explained an accounting consideration called arbitrage — the district set aside interest earnings related to tax‑exempt bonds so the district will have funds available should an IRS arbitrage payment be required at the end of the fifth year.
Dolan also reviewed grant and federal funding matters: about $450,000 in federal, state and local grants were recognized this year and federal COVID‑era grant spending has largely concluded; auditors urged districts to request grant reimbursements timely (monthly preferred, quarterly generally sufficient) to avoid using local cash for state‑held funds and to be prepared for potential federal grant audits.
Board members asked no follow‑up questions during the presentation. The auditor closed by reiterating that the audit documents include a large financial section, ten‑year comparative statistics, and a smaller management (Gray) book that contains suggestions for management attention.
