By KATHY CHANG
METUCHEN — It may have been a yawn session as the yearly comprehensive financial audit report on the Metuchen School District budget was presented, but it garnered much praise for a job well done.
“It’s the same boring story,” said Board President Jonathan Lifton, who thanked Schools Superintendent Vince Caputo, Business Administrator Michael Harvier and the administration for their work.
Robert Fodera and Adam Hartzel of Baker Tilly Virchow Krause, LLP presented the audit report for the school year ending June 30, 2016, at a Board of Education meeting last month.
They came back with an unmodified opinion that no corrective actions are necessary and there were no observed weaknesses and/or significant deficiencies. The board approved the results of the report at the meeting.
Hartzel said financial statements are a very complicated, highly technical matter.
“Mike [Harvier] and his team do a good job keeping the books,” he said. “We evaluate that the numbers are right and make sure all the disclosures are in the financial statements.”
Hartzel said one of the big pieces of the school budget is the general fund, which is where the operations of the district come into play.
“So for year end June 30, 2016, the general fund had a surplus of about $830,000 so that means revenues that came in exceeded the expenditures that were going out,” he said. “In that respect, you had a good year in the general fund.”
Hartzel said the district anticipated $1.9 million expenditures over revenue in its anticipated operating budget. The amended budget, which included transfers that were not anticipated throughout the year, saw a surplus of $830,000.
“That is a $2.7 million positive budgetary variance,” he said. “You had more revenues than expenditures.”
Hartzel said they gave two opinions — are the numbers fairly presented and is there compliance with federal standards?
“The district receives and expends more than $750,000 in aggregate federal financial assistance,” he said. “[That is why] we also need to do an audit on certain compliance in regards to federal standards, and New Jersey adds on its own set of audit standards in addition to the federal standards.”
Hartzel said their unmodified opinion on compliance with federal standards is the district complied with requirements of those programs they tested.
He said he did want to highlight some bad news with the Public Employees’ Retirement System [PERS] liability.
“Last year all of the defined benefits of the retirement system liabilities came into your books,” he said. “At the end of last year, the liability to the PERS retirement system was $7.8 million.”
Hartzel said it is important to note that the $7.8 million is not the current liability.
“You do not have to write out a check today or tomorrow,” he said. “It’s what employees have earned over the course of their employment, which they will receive after they retire. At June 30, 2016, the liability was $9.5 million.”
Hartzel said district officials may take a step back and say, “Wow, how did the liability jump $1.7 million?” which he said came about by a number of different factors.
“Think about the market, it was not good on June 30, , the investments of the multi-employer plan for all of New Jersey were down, it did not earn the increases from an appreciation or earning standpoint,” he said.
This factor increased the liability of the plan as a whole.
“To put $9.5 million in context, the PERS plan as a whole is underfunded by $46.2 billion,” explained Hartzel, noting that it is a long-term liability. “Your share allocated by all participants is $9.5 million.”
Hartzel noted that the liability does not impact the general fund or what the district has to pay out.
With bad news comes good news. In August of 2015, the district paid off a $13.2 million long-term debt at $12,085,000 because of how the market was structured at the time, Hartzel said.
“The district saw a premium of $1.5 million and had a good experience with a long-term debt payoff,” he said.
Fodera told the board on a positive note, the market has been good with hopes the PERS liability will go down. Board members shared in Fodera’s optimism.