MILLSAP – A yearly audit, presented Monday night to the school board by Gary Snow of Snow, Garrett and Company, was clean for Millsap ISD, but gave a glimpse into what he said is happening to many Texas school districts.

The district received a received a clean, unqualified opinion. In the state and federal measures, MISD had no default on bond indebtedness, no material weaknesses and there were no issues with non-compliance of federal funds.

Snow pointed out to board members a drop in the district’s fund balance and a drop in state funding.

MISD Business Manager Lori Hobbs explained the fund balance, or cash reserves. To her, this is the most important measure in determining “the financial stability of the district.”

“Unlike businesses, schools have the actual funds on hand. It accumulates over the years [reflecting] the difference between the revenues and expenses,” she said.

“The important part as far as I’m concerned is the change in the fund balance,” said Hobbs. “[2008-09 was the] second year in a row that Millsap ISD has had a decrease in our fund balance.”

“The change to the [district’s] bottom line – the profit-loss to the district – was $240,649,” she added, citing the audit.

Snow told board members that Texas wants districts to have 3 months of general fund operating expenses on hand for its fund balance. He said that Millsap ISD spends $537,000 per month from its general fund, which mostly goes to salaries and pays the monthly bills.

Snow reported that the “optimum fund balance” for the district in 2008-09 was $1.6 million.

“[The $1.6 million] is a prediction of how much money the district should have in cash on hand,” Hobbs explained to the Index. “We were $185,637 below that amount in 2008-09.”

“Those numbers look real good to me,” Snow said of the district’s funds, “It’s just funding that’s messed up. There was an actual decrease in state funding [for the 2008-09 year].”

“What I’ve seen is [the state] wants to deplete all the reserves,” he added.

“So you’re seeing this trend everywhere?” asked board Vice President Michael Stack.

“Yes, sir,” replied Snow.

“It’s not rational to require that we keep three months of expenses on hand when the state continues to reduce the funding, requiring the schools to continue to expend their fund balances,” Hobbs told the Index.

“From 2008 to 2009 there was a decrease in $601,398 in state funding to Millsap ISD and local funding only increased by $238,339,” she said. “Federal funding increased $134,050, which is a net decrease of $229,009, which is within $11,000 in the [2008-09] change of the fund balance.”

“In 2007-08 the fund balance dropped $265,203, which Snow said was about the same amount as the 2008-09 decrease,” Hobbs added. “Even though we were not at optimum he said we had a good fund balance compared to most schools that should get us to the end of the next legislative session – 2011.”

“As in the private sector school districts cannot continue to deplete their funds and remain viable and provide the educational expectations of the community,” noted Hobbs.

“The thing that would fix it is for the Legislature to provide additional funding to the districts or for the community to pass a [tax rate election],” she added. “We’re hurting the future workforce by not being able to provide public school students with the educational opportunities that wealthier schools are providing.”

“TREs had success in 2008, but are not having much in 2009,” Snow told board members.

Related to this, he added that delinquent tax revenues could be an issue for MISD

“Real estate is not trading and people are not paying taxes,” he said. “This is probably leaving some money on the table.”

“That will continue to hurt us,” Hobbs said of delinquent taxes. She said the audit showed $163,911 in delinquent taxes as of Aug. 31, 2009. The majority of Millsap ISD taxes are assessed and collected through Parker County.

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In other business board members:

• Heard a report from construction manager Charles Price of Compass Builders on rebidding the sewer plant for the new elementary school. He explained that the Texas Commission on Environmental Quality did not approve the design by Civil Solutions, submitted in October 2008, which included a sprinkler system.

“The TCEQ was afraid of the proximity of the land to the Trinity Aquifer,” he explained to board members.

Price said TCEQ changed the school sewer treatment plant design to an underground, drip irrigation system, which could cost more.

“All in all, we need to rebid it,” he said, adding that it is a 90-day process to build and install the system.

The board approved rebidding the plant to meet the requirements of TCEQ.

Price told the Index he expects the elementary school construction to be completed by late February.

• Received the district’s “highly qualified” teacher report, stating that MISD was 100 percent in compliance with the federal requirement.

The requirement is part of the 2001 No Child Left Behind Act, requiring teachers – hired after the first day of the 2002-2003 school year to teach in a Title I, Part A program – to be “highly qualified.” It also requires all teachers teaching “core academic subjects” to be highly qualified.