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School district gets thumbs up on financial reporting

The Cloquet School District's books got a clean bill of health on Monday night as results of the district's annual audit were announced.

Jennifer Smith, a CPA with Wipfli, Inc. noted that the district received the group's highest rating, an endorsement of "unqualified," for both its general ledger and accounting for student fees.

Audited balances for the district through Oct. 21, 2013, show a total fund balance in all accounts of $7,912,692, of which $5,232.667 is in the unassigned, or reserve, fund.

Again in 2012-13, the district underestimated revenues in its budgeting while holding expenditures to below budget limits.

The district beat its anticipated revenue by $467,485 for the reporting period, while coming in at $87,109 under the budget. This resulted in a positive revenue swing of $554,594.

That brought the district's expected loss of $804,220 for the year down to $249,626, and with proceeds from a capital lease added in, the total loss for the year was $148,007 -- just 18 percent of the expected deficit.

The district also got good news in a presentation by Steve Pumper of PMA Companies, relative to the performance of the district's Other Post-Employment Benefits trust fund.

Last summer, the school board voted to place 30 percent of the $6 million fund into equity investments through PMA, and the fund took advantage of the recent spurt in the stock market to post better than expected gains.

The equity portion of the portfolio has earned 12 percent interest since the start of the year, and over 30 percent since June 1. The entire portfolio has earned over 8 percent interest this year as a result, which will extend its life.

"This is great news," Pumper told the board. "However, it should be noted that while we are showing an increase, none of that increase is realized until we withdraw the money from the equity positions."

That has already happened once this year. A gain of $75,000 was moved from the equity portfolio into the trust's fixed investment side to capture the gain and protect it from potential loss, and an additional adjustment may be made in December to capture even more gain and re-balance the portfolio so that the equity portion remains 30 percent of the fund total.

"[The equity investment] did what we needed it to do," Business Manager Kim Josephson said. "It will extend the life of the fund."

Additionally, only $117,000 was withdrawn from the fund, which is designed to pay health benefits in retirement for certain district employees, where a withdrawal of $400,000 was planned. The fund's balance is now expected to last until mid-2025 under new projections released by PMA.

"There will definitely be roller-coaster rides in equities," Pumper said, "but I'm here tonight with good news."

In other board news, Superintendent Ken Scarbrough said planning is underway to set the date for the first public meeting regarding the district's facilities issues.

He said that an early January date, most likely Monday, Jan. 6, is being considered, along with a 7 p.m. start time for the public's convenience. No date or location has been finalized as of yet.

"We want people to look at the proposals and talk about them," Scarbrough said. "There is a possibility of a lot of different things happening, but we want people to understand that this is not a done deal. We want community input and we would like several meetings before bringing a proposal to the board."

Scarbrough said meetings in January, February and March would likely be scheduled before a proposal is brought to the board for approval in April 2014.