ELMIRA CITY SCHOOL DISTRICTLocal Government

I ssue: Net Cash Resources Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553/10.555/10.559 Pass-Through Agency: NYS Department of Education Criteria: The School Food Authority shall limit its net cash resources to an amount that does not exceed three months' average expenditures for its School Lunch Fund or such other amount as may be approved by the NYS Department of Education in accordance with 7 CFR §210.9(b)(2). Condition: At June 30, 2024, net cash resources in the School Lunch Fund exceeded the allowable limit by $1,298,609. Cause: For the year ended June 30, 2024 and 2023, revenues exceeded expenditures in the School Lunch Fund by $175,273 and $382,261, respectively. Effect or Potential Effect: The School District is not in compliance with 7 CFR §210.9(b)(2). Questioned Costs: None. Context: The School District was $1,298,609 over the allowable limit at year end June 30, 2024 compared to $1,254,282 over for the year ended June 30, 2023. Repeat Finding: This finding is a repeat of Finding 2023-001 from the prior year. Recommendation: We recommend the School District review its net cash resources in the School Lunch Fund and develop a plan to reduce them to an allowable amount. Response/Board Action: The Elmira City School District has been cited for excessive net cash resources since the onset of the pandemic in 2021 and correlated increased aid reimbursements for the school feeding programs. The most notable increase to revenues for the 2023-2024 fiscal year was interest income. The districts interest revenues were 95% greater than the 2022-2023 school year. Overall revenues within the School Lunch fund only increased 4.69% over the 2022-2023 school year, while expenditures increased at 10.64%. As part of our 2022-2023 corrective action plan, a new contract was entered within our labor union for cafeteria workers. Those efforts resulted in a 37.48% expenditure increase in 2023-24 to salaries and benefits over the 2022-23 school year. The district also can demonstrate that we closed the gap between revenues and expenses by roughly 5% over the prior fiscal year. This is the result of increased spending on equipment purchases, food purchases and wages as so outlined in prior corrective action plans. Plans for the 2024-25 fiscal year include a projected budget that equates to over 22% spending over the 2023-24 expenditures. Those increases are mainly in our equipment and salary budgets. The district has plans to put out a new capital project to vote in December of 2024. While many building and facility upgrades are included, the district plans to utilize the school lunch fund for any equipment purchases related to our cafeterias within our facilities as so allowed. Our School Food Service Director, in conjunction with our School Lunch Manager will assist in the continued upgrades to school serving lines, and new initiatives within our serving programs in response to population changes and needs. They will also continue our equipment replacement cycle throughout our buildings to ensure outdated equipment is replaced timely. The School Business Official will work in conjunction with the Food Service Director and Manager to manage fund balance and expenditures throughout the year. In prior years fund balance has been appropriated to afford increased food and equipment expenses. To combat the net cash resources, we will first look to move funds within the existing budget to afford those increased expenses, oppose to moving monies from fund balance. Our plans, as so outlined above, are targeting a completion date of this finding in June 2025.

ELMIRA CITY SCHOOL DISTRICT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2023 Section III Federal Award Findings and Questioned Costs Issue: Net Cash Resources Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Number: 10.553/10.555/10.559 Pass-Through Agency: NYS Department of Education 2023-001 School Food Account - Net Cash Resources Criteria: The School Food Authority shall limit its net cash resources to an amount that does not exceed three months' average expenditures for its School Lunch Fund or such other amount as may be approved by the NYS Department of Education in accordance with 7 CFR §210.9(b)(2). Condition: At June 30, 2023, net cash resources in the School Lunch Fund exceeded the allowable limit by $1,254,282. Cause: For the year ended June 30, 2023 and 2022, revenues exceeded expenditures in the School Lunch Fund by $382,261 and $1,149,007, respectively. Effect or Potential Effect: The School District is not in compliance with 7 CFR §210.9(b)(2). Questioned Costs: None. Context: The School District was $1,254,282 over the allowable limit at year end June 30, 2023 compared to $984,093 over for the year ended June 30, 2022. Repeat Finding: This finding is a repeat of Finding 2022-001 from the prior year. Recommendation: We recommend the School District review its net cash resources in the School Lunch Fund and develop a plan to reduce them to an allowable amount. Response/Board Action: The School District has a multi-tiered plan in place to address the excessive Net Cash Resources as so reported. The overall plan includes equipment replacements, increased wages for cafeteria staff, avoiding procurement of grants as well as buying more locally sourced food. During the 2022-2023 school year, as part of the 2021-2022 corrective action, the School District appropriated $380,000 from its appropriated fund balance to afford the purchase of a new refrigerated food truck, as well as to cover increased food costs and employee benefits. Equipment replacement purchases took place in the 22-23 school year; however, due to supply chain issues $202,984 in encumbrances were carried over to the 23-24 school year as they have not yet been furnished by the vendors. The School District is in the process of finalizing a labor contract to commence in the 2023-2024 fiscal year, which will be a three year agreement. Money from this fund will be allocated towards increases to wages negotiated in that contract. The 2023-2024 School Lunch Fund budget is 47.45% higher than the 2022-2023 budget. The most notable increase to spending is within the Food Service Equipment line, to coincide with the plan to replace and cycle out aging equipment. Additional increases can be noted in the salaries, supplies, food purchases and contractual services budgetary lines. With the above in place, the School District plans to resolve the issue of excessive cash resources by the conclusion of the 2023-2024 school year.

Condition: At June 30, 2022, net cash resources in the School Lunch Funded exceeded the allowable limit by $984,093. At June 30,2021, net cash resources in the School Lunch Fund exceeded the allowable limit by $106,907. Criteria: The school food authority shall limit its net cash resources to an amount that does not exceed 3 months average expenditures for its School Lunch Fund or such other amounts as may be approved by the New York State agency in accordance with 7 CFR 210.19(a) Cause: For the Year ended June 30. 2022, revenues exceeded expenditures in the School Lunch Fund by $1,149,007. Revenue increased significantly from the prior year while expenditures only saw modest increase. Expenditures in 2020-2021 fiscal year School Lunch Fund were less by almost 24% due to COVID-19. Effect: The School District is not in compliance with 7 CFR 210.19(a). Recommendation: We recommend the School District review its net cash resources in the School Lunch Fund and develop a plan to reduce them to an allowable amount. Response/Board Action: In returning to full district operations in the 2021-2022 school year, revenues significantly increased in response to district operations. While spending increased by more than 36%, revenues increased by more than 90%. The significant increases to revenue can be correlated back to federal reimbursements for breakfast, lunch and snack. Pandemic reimbursement rates were used through 6/30/2022, resulting in an average increase of .55/lunch reimbursement. Coinciding with the return of in-person instruction, the district overall has seen a decrease in enrollment. The last full year we can compare is 2018-2019 where 715,000 lunches were served, in contrast, 2021-2022 had a total of 576,000 lunches served. In January of 2022, the district implemented an all staff mid-year wage increase. Cafeteria wages were brought to $15/hour for all entry level positions, with additional increases on accelerated steps where appropriate. This had an overall impact of roughly 10% increase in spending in the area of payroll and benefits compared to the 2020-2021 school year. Given the current fiscal environment, the district will continue to see increases to operating costs. The 2022-23 milk bid alone came in 11.6% higher than the 2021-2022 school year. Along with an increase to operational costs and routine equipment replacements, additional planning has taken place for future spending. Initial steps in the re-design of serving line pieces at the high school have begun to take place for the next year. Plans to re-do the serving lines in grades 3-6 were put on hold during COVID. Those projects will begin to be resurrected within the 2022-2023 school year.

Condition: At June 30, 2021, net cash resources in the school lunch fund exceeded the allowable limit by $106,907. Criteria: The school food authority shall limit its net cash resources to an amount that does not exceed 3 months average expenditures for its school lunch fund or such other amount as may be approved by the New York State agency in accordance with ?210.19(a). Cause: Expenditures in the School Lunch Fund were less in the 2020-2021 fiscal year by almost 24% due to COVID-19. As a result, the base used to calculate the allowable limit was considerably reduced. Also contributing to the excess cash resources was a transfer from the General Fund into the School Lunch Fund in the amount of $203,657 to partially alleviate an operating deficit of $326,328. Effect: The School District is not in compliance with 7 CFR ?210.19(a).