By all standards, the financial picture at Mackinac Island Public School is excellent, say auditors, who reported a general fund balance of $1,064,000 for the fiscal year ending June 30, 2009. Expenditures for the year were approximately $1,477,000, which means that the fund balance is about 72% of one year's expenditures, said auditor Annette Eustice of Rehmann of Cheboygan.

"Most school districts now are running between 6% and 11%. As auditors, we like to see it run at least 10% to 25%," she said during the Thursday, November 19, school board meeting.

Unlike most schools that have been negatively impacted by reduced state aid, said Ms. Eustice, the Island school is funded primarily through rural school Saving Paradise funds and the Michigan Business Tax.

Last year the Island school used about $193,000 of its savings to balance its budget.

Total net assets of the district were about $1.4 million at the end of June, or about $97,360 less than in 2008.

Through the auditing process, significant deficiencies were discovered, some of which have been reported in previous years, said Ms. Eustice.

Auditors recommended that the school follow its policy of dual signatures for checks for more than $500. The policy requires the superintendent and one board member to sign the checks.

"I would recommend you enforce your policy or, if the $500 is too low, consider modifying the policy to bring the threshold up to a more manageable level," Ms. Eustice said.

The $500 limit, however, is not unusual for school districts in this area, she added.

For the third year, auditors recommended the school improve collection of outstanding hot lunch accounts by monitoring the accounts weekly. This year the amount of money students owed the hot lunch fund was more than $4,000. Last year, it was at $3,300. Monitoring helps to get payments on a timely basis, she said.

Like other districts in the area, she recommended the Island start pre-billing parents for the meals to ensure payment. Now, the school writes off uncollectible amounts.

The Mackinac Island Education Association opened a bank account using the Federal Employer Identification Number of the school. The bank account was not recorded in the school's accounting records. Also, a nonprofit group formed to seek donations to purchase sporting trophies and has also been using the district's federal identification number. Those organizations, said Ms. Eustice, should have and use their own numbers.

"The risk is that something will occur in those accounts that you won't be aware of and because it is your federal ID number, it might be your risk," she told the board.

For the past two years, the district has not budgeted for federal revenue which it receives annually. A budget line should be established, said Ms. Eustice, to include federal funds received during the year.

Some bills historically have been paid prior to board approval to meet payment deadlines, she said. The board should adopt a formal policy describing the types of payments that can be released prior to approval by the board, which could include utility payments. Having a policy in place would prevent unauthorized payments.

As reported last year, certain teacher contracts have not been signed. The school should have signed contracts from all teachers and the contracts should be placed in personnel files, said Ms. Eustice.