Webster CSD Audit Executive Summary 2025-26.pdf

WEBSTER CENTRAL SCHOOL DISTRICT Brian Freeman, Assistant Superintendent for Business 119 South Avenue, Webster, NY 14580 (585) 216-0017 brian_freeman@webstercsd.org

Executive Summary & Independent Audit Opinion The independent CPA firm MMB+CO has completed its annual audit of the basic financial statements of the Webster Central School District, New York, for the fiscal year ended June 30, 2026. The independent auditors issued an unmodified ("clean") opinion on the District’s governmental activities, each major fund, and aggregate remaining fund information. This represents the highest level of assurance obtainable in a financial audit, confirming that the District’s financial position and financial activities are presented fairly, in all material respects, in accordance with Generally Accepted Accounting Principles (GAAP) in the United States of America. The District maintained strong budgetary control, robust reserve levels, and strict adherence to statutory spending caps throughout the fiscal year. Key financial metrics reflect healthy cash flows in the operating fund, prudent reserve management, and compliant debt issuance to fund voter-approved facility improvements.

General Fund Financial Performance & Revenue Analysis The General Fund is the primary operating fund of the District. For the fiscal year ended June 30, 2026, General Fund actual revenues exceeded amended budget projections by $10,199,396 , or 4.6% (actual revenues of $221,965,821 vs. amended budget of $211,766,425).

Key Revenue Highlights ●​ Real Property Taxes & Tax Items: Generated $128,416,006, representing 57.85% of total General Fund operating revenues. This aligned closely with budget targets with a minor variance of -$383,048. ●​ State Sources & Aid: Totaled $77,130,248, outperforming budget estimates by $4,727,877 due to strong state aid foundation formulas, BOCES aid ($848,612), and lottery aid additions. ●​ Non-Property Taxes (Sales Tax): Realized $10,782,229 compared to a budget of $8,000,000, creating a favorable variance of $2,782,229 as local commercial activity remained robust across Monroe and Wayne counties. ●​ Use of Money & Property: Generated $2,960,215, exceeding budget by $2,195,215, driven by favorable interest rate yields on short-term investments and NYCLASS liquid pool holdings.

General Fund Expenditures & Budgetary Comparison Total General Fund expenditures for FY 2025-26 were $213,766,536, staying well within the amended expenditure budget of $219,358,888. Combined with encumbrances of $288,502 and transfers-out of $1,079,430, total expenditures and commitments were $215,134,468, resulting in unencumbered budgetary savings of $5,303,850, or 2.5% of the budget.

Reserves Analysis The District's total General Fund balance as of June 30, 2026, stands at $68,172,253, broken down into restricted, assigned, and unassigned classifications. ●​ Restricted Reserves ($53,455,978): Prudent fiscal management enabled the District to maintain fully funded reserves to shield taxpayers against future volatility. Key reserves include: ○​ Employee Retirement Contribution Reserve (ERS): $12,109,513 ○​ Teachers' Retirement Contribution Reserve (TRS): $6,800,225 ○​ 2026 Capital Reserve: $9,066,478 (voter approved up to $45,000,000) ○​ Liability Reserve & Insurance Reserve: $6,054,843 and $6,037,268 ○​ Workers' Compensation & Unemployment Reserves: $5,054,939 and $1,234,563 ○​ Tax Certiorari Reserve: $5,051,088 ○​ Property Loss Reserve: $1,000,000 ○​ Employee Benefit Accrued Liability Reserve (EBALR): $1,047,061 ●​ Assigned Fund Balance ($5,788,502): Consists of $288,502 in encumbrances and $5,500,000 designated to support the tax levy in the 2026-27 annual budget. ●​ Unassigned Fund Balance ($8,927,773): Represents 3.93% of the subsequent 2026-27 voter-approved budget ($227,089,425). New York State Real Property Tax Law §1318 limits unassigned fund balances to a maximum of 4.00%. The District successfully maintained compliance with state law while safeguarding cash flow stability.

Statement of Net Position & Capital Assets The Government-Wide Financial Statements reflect the economic resources measurement focus and full accrual accounting. District-wide net position closed at ($107,623,382), an improvement of $58,606,558 over the FY 2024-25 deficit of ($166,229,940).

Key Factors Influencing Net Position ●​ Total Assets ($339,064,223): Cash and cash equivalents ($64,404,025), short-term investments ($7,328,469), receivables ($16,619,572), capital/lease assets ($225,859,365), and a Net Pension Asset in the Teachers' Retirement System (TRS) of $24,678,808. ●​ Total Liabilities ($432,701,101): Long-term obligations total $399,667,471, including serial bonds ($94,920,000), lease liabilities ($4,224,982), compensated absences ($34,301,412), ERS net pension liability ($3,501,261), and the Other Postemployment Benefits (OPEB) liability ($254,267,087). ●​ OPEB Liability Impact (GASB Statement No. 75): The District's actuarial liability for retiree health care benefits ($254,267,087) is the primary driver of the unrestricted net position deficit of ($265,003,977). NYS law provides no legal mechanism for school districts to establish an external trust fund for OPEB liabilities; expenses are paid on a pay-as-you-go operating basis. ●​ Capital & Lease Assets ($225,859,365): Net investment in capital assets stands at $98,083,224. Total capital assets include land ($2,147,912), work in progress ($30,209,804), buildings/improvements net of depreciation ($176,044,523), machinery/equipment ($11,585,981), and leased assets ($5,871,145). Work in progress expanded by $9,095,636 due to ongoing construction in the $85M voter-approved capital project.

Capital Projects, Debt Service & Other Funds The Capital Projects Fund closed the year with a temporarily negative fund balance of ($19,532,488). Total expenditures reached $23,368,773 as construction advanced rapidly on the $85M Capital Improvement Project (approved October 2023; 35% complete) alongside routine bus fleet acquisitions ($2.26M) and BOCES IT lease transactions ($5.20M). The fund deficit is standard accounting practice resulting from the issuance of short-term Bond Anticipation Notes (BANs) totaling $15,000,000, which are recorded as fund liabilities rather than revenues. The accounting deficit will be eliminated as permanent long-term serial bonds are issued.

Summary of Nonmajor & Other Special Funds ●​ School Lunch Fund: Revenues exceeded expenses by $583,148, increasing ending fund balance to $1,766,590. Expansion was aided by state and federal participation in Universal Free Meals programs. ●​ Special Aid Fund: Recognized revenues of $8,876,866 and expenditures of $9,327,383, offset by General Fund transfers of $350,619 to close with an assigned balance of $673,877 for community programs. ●​ Debt Service Fund: Maintained a restricted reserve balance of $5,065,638 for future debt principal and interest obligations. ●​ Miscellaneous Special Revenue Fund: Retains $129,813 in restricted scholarship accounts. ●​ Fiduciary Custodial Funds: Holds $499,597 in agency capacity for extra-classroom student activity clubs.

Audit Findings & Corrective Action Plan In accordance with Government Auditing Standards, MMB+CO evaluated the District's internal control structure and operational procedures. No material weaknesses or significant deficiencies were identified. The internal control comments, along with the District's formal Corrective Action Plan (CAP) are detailed below: Internal Control - Payroll: ERS Wage Reporting & Board Approval Auditor Finding: Audit sampling noted one instance where an employee's wages were not reported to the ERS system, and one instance where an employee's pay rate increase was not formally approved in Board minutes. District Corrective Action: The staff member identified was appointed over two decades ago as a part-time per diem worker under legacy onboarding protocols. Current hiring procedures mandate that all newly onboarded personnel enter through human resources system requisition forms, ensuring in-person delivery and tracking of ERS enrollment documentation. As permitted for part-time staffing positions, this individual declined retirement system election. Furthermore, compensation updates for all returning per diem and part-time staff members are annually established and formally ratified by the Board via comprehensive authorization resolutions during the annual organizational meeting. Payroll - Qualified Tax-Exempt Overtime Reporting (New Legislation) Auditor Finding: Legislative updates require school districts to calculate and report qualified tax-exempt overtime on employee W-2 forms at calendar year-end. Contractual overtime definitions may conflict with legislative criteria, necessitating automated system updates and manual crosswalk reviews. District Corrective Action: The District will collaborate with the payroll software vendor to fully implement and test automated routines for identifying tax-exempt qualified overtime in accordance with the new legislative guidelines. The payroll department will develop a standardized manual crosswalk and review process to resolve any discrepancies between contractual overtime definitions and tax-exempt legislative definitions. In addition, the department will establish an independent secondary review process conducted by designated Business Office personnel who do not work in payroll to verify all qualified overtime calculations against the payroll register before final W-2 processing in December of 2026.

Prior Year Finding Status Procurement Documentation: MMB+CO verified that the prior year recommendation regarding procurement has been fully implemented to their satisfaction. All tested procurement items contained the required number of written quotes or proper piggybacking documentation in compliance with District policy.

Future Outlook & Strategic Considerations 2026-27 Operating Budget: On May 19, 2026, voters approved the 2026-27 General Fund budget totaling $227,089,425 (passed 2,399 to 1,305). The budget incorporates a tax levy increase of 3.39%, exactly matching the District's statutory tax cap limit. Capital Improvement & Financing: The District will borrow a $15,000,000 construction Bond Anticipation Note (BAN) on October 15, 2026 (maturing July 23, 2027) to maintain liquidity for the ongoing $85M facility enhancement project. Demographics & State Aid: Over the past 5 years, the District's Combined Wealth Ratio (CWR) increased from 0.863 to 0.905, driven by a 24.48% increase in income per pupil and a 37.40% increase in full property valuation per pupil. Management will monitor state aid formula adjustments as local wealth factors shift. Zero-Emission Bus Mandate: The District is actively planning for the NYS Zero-Emission Bus Mandate (Education Law §3638), securing preliminary grants ($220,500 state aid for electric buses in FY26) to manage fleet electrification infrastructure costs efficiently.