Winsted-Lester Prairie Journal, Nov. 12, 2001
Audit says LP School has healthy fund balance; debt structure changes
By Chris Schultz
Auditor Mike Burkhardt presented the Lester Prairie School Board with its audit report for fiscal year 2000-01 Tuesday.
Burkhardt noted that according to standard or customary accounting procedures District 424's general purpose financial statements were in good order and the district ended the fiscal year with a positive fund balance of $513,329.
"There are a lot of districts out there that would love to have Lester Prairie's fund balance," Burkhardt said.
After a short introduction, Burkhardt detailed certain items of the report, and offered explanations to the board.
The bottom line of the report as of June 30, 2001 (see table) revealed a positive general fund balance for Lester Prairie schools of $727,083.
Of that amount, $513,329 was income greater than expense in fiscal year 2000-01, and $213,754 was carried over from the previous year.
Other categories such as special revenue funds and debt service fund were also detailed.
Although not surprised, the board and Supt. James Redfield were pleased by the report.
Also inlcuded in the audit report was the school's budget for 2000-01. The budget expected only a $12,516 positive general fund balance at the end of the fiscal year.
Redfield noted the additional dollars in the general fund balance can most likely be attributed to:
· cuts and reductions in spending the school district has made in previous years;
· a higher number of students enrolled in the district than what was expected when the budget was prepared;
· impact of the levy referendum passed in 1999;
· a restructuring and refinancing of the school's long-term or bonding debt.
Lester Prairie's long-term debt (see table), includes $1,280,000 of bond principal; $237,992 from the Honeywell project which made the school more energy efficient; and an energy loan from the State of Minnesota for $14,208. The bonding debt and how it was presented in the audit report is a complicated process.
According to the audit report, Lester Prairie Schools had a bonding debt of $1,290,000, issued on April 1, 1991 at an interest rate of 6.90 percent to 7.50 percent with a maturity date or the last payment due Feb. 1, 2001.
The debt was created by a voter approved bond referendum in January 1991 for the addition at the south end of the school.
In 1993, in an effort to reduce the interest rate paid on the 1991 bonds, the district borrowed $1,280,000 at 4.10 percent to 5.20 percent interest to pay off the 1991 bonds.
However, according to Redfield, who can only speculate because he was not the superintendent in 1993, due to repayment terms specified in the 1991 bonds, the district could not use the money borrowed in 1993 to pay off the 1991 bonds until fiscal year 2001 10 years after the original sales of the bonds.
Because of those terms, the 1993 bonds were placed into an escrow account with the district making only interest payments until 2001, when the money could be withdrawn to pay off the balance of the debt from 1991.
From 1991 to 1993, the district made principal and interest payments on the 1991 loan, and from 1993 to 2001, the district made interest-only payments on the 1993 loan, and continued to make principal and interest payments on the 1991 bonds or loan.
Then, in 2001, as is reflected in the table and in the audit report, the district made its interest payment on the 1993 loan, made other long-term debt payments, and paid off the 1991 loan in full, with the total expenditure being $1,485,090.
In the table from the audit report, under the debt service fund, in the "actual" column, the expenditure of $1,485,090 is listed. But the amount held in escrow to pay off the 1991 loan was not listed as revenue or in the actual column as revenue.
Redfield stated he presented the information to the auditor in a more understandable fashion, but Burkhardt did not present it that way.
In reference to the table, under debt service fund, in the actual column, that is why a negative balance of $1,262,926 is presented.
Redfield is also compiling for future publication a cost savings picture of how the refinance to the lower interest rate affected Lester Prairie School's total bond repayment amount.
Beginning in 2002, the district will begin repaying the principal of the $1,280,000 with interest on the 1993 loan (see table). The loan matures and the last payment is due in 2012.
Howard Lake-Waverly Herald & Winsted-Lester Prairie