WEST ORANGE, NJ — The West Orange Board of Education was presented the district audit for the year 2017-2018 at its March 11 meeting, hearing several recommendations for how to improve in the future. The audit was presented by Donna Japhet, a partner at the firm Lerch, Vinci & Higgins. Japhet said the audit would ordinarily be presented in November or December, but the state’s new accounting standards delayed the report to March.
“The district has once again received an unmodified audit opinion, also known as a ‘clean opinion,’ which means in our opinion the financial statements are represented fairly,” Japhet said.
On June 30, the district ended the year with total fund balance of $2,985,941, an increase of approximately $1.7 million from the previous year. This increase, according to Japhet, is largely due to additional state aid the district received in 2017-2018.
Of that money, $2.5 million is being used in the current year’s budget. Of the money being used this year, approximately $504,000 has been set aside for capital reserve, $359,000 is for open order and the unassigned fund balance on a Generally Accepted Accounting Principles basis is a deficit of $377,000.
“This deficit does not mean the district is in any financial difficulty,” Japhet said. “These statements are actually on a GAAP basis and the state delays the last June state payment, so there’s an additional $2.5 million in state aid that you do not receive until the next school year.”
Japhet said, once the district receives the $2.5 million in state aid, which will counteract the deficit, the unassigned fund balance will be in the positive at $2.1 million, which is below the maximum 2-percent cap allowed.
“Under financial planning, accounting and reporting we’re recommending the district maintain its level of effort with respect to special education expenditures funded from state or local funds,” Japhet said, saying the audit would look at programs where the district spends large amounts of money. “One of the compliance requirements requires that the district is not supplanting local funds with federal funds. In other words, you have to spend more in special education each year than you spent in the prior year.”
West Orange saw a decrease in spending on its special education program in 2017-2018, and Japhet said the auditors do not consider it to be a significant deficiency or a material weakness.
She also provided recommendations for the student activities accounts, particularly at West Orange High School, Liberty Middle School and Edison Middle School.
“We’re recommending that all checks written from the high school athletic and Liberty Middle School athletic accounts contain two authorized signatures,” Japhet said. “We had instances where the checks were issued with either one or no authorized signatures.”
That same recommendation was cited in the previous year’s audit as well.
“All checks issued from the Edison Middle School account should be written in sequential order,” Japhet said. “We noted there was a block of checks issues in May and June that were issued out of sequence.”
BOE Vice President Sandra Mordecai asked Japhet for suggestions to lower the number of checks without authorized signatures, and Japhet said there has been a vast improvement.
“In prior years we had in the range of 10 recommendations just in this area, so it has really improved,” she said. “It has been isolated to just two accounts predominantly, so the repeats are going away. There is corrective action being taken.”
Business Administrator John Calavano said he has begun to review each check request made from student activities accounts.
“Before a check gets sent out, it comes to my office with all of the backup paperwork, I’ll review it and make sure the other signature is there,” he said at the meeting. “When I see there are signatures, I’ll sign it and release the check.”
BOE President Ken Alper asked how the checks were being processed at the bank without one or more authorized signatures. Calavano said there were only three or four checks out of hundreds that did not have signatures.
“In my experience a lot of times banks do not look at checks under a certain dollar threshold,” Japhet said. “They just don’t have the manpower to do that. A lot of these checks are smaller dollar amounts that are flowing through.”