MARSHALL — The Marshall Public School District presented its annual audit report for the fiscal year-end June 30, discussing district highlights, looking into the future, and a breakdown of expenditures and revenues by source.

Tamara Deutz with Hoffman & Brobst PLLP presented the report at Monday’s school board meeting.

District highlights

Deutz touched on a few highlights the district saw over the past fiscal year.

“As the district completed the year, its governmental funds, which are your general food service, community service, building construction and debt service funds, those reported an increase of approximately $986,000 in their combined fund balance … Of that $986,000 increase, about half of that was contributed to by the debt service fund,” Deutz said. “The general fund, excluding your transportation and operating capital activities, that fund balance increased about $212,000 to just over $8 million. That total fund balance amounts to 19.7% of your annual district expenditures, which exceeds your district’s fund balance goal of a minimum of 8%.”

The middle school’s theater project was also completed over the year, costing a total of $656,533 that was funded through the long-term facility maintenance budget.

The district also entered into two right-of-use lease agreements.

“One agreement was for athletic space through the Board of Trustees of Minnesota State Colleges and Universities on behalf of Southwest Minnesota State University, and the other was for educational space for the Marshall Alternative Learning Center via a sub-lease agreement with the Southwest West Central Service Cooperative,” Deutz said. “The cost associated with those lease agreements was just over $3 million.”

Looking to the future

Although the state’s general education formula has not kept up with the rate of inflation since 2003, serving as a common cause and main factor amongst school districts facing budget shortfalls, there has been a 2.75% increase in the formula.

While the new formula still falls short of inflation, the district is continuing to project an enrollment deficit over the coming years that will equate to a loss of revenue. While the district was pursuing a 10-year, $2 million operating referendum that failed, district officials noted the difference between the FY26 formula allowance and the inflation adjusted formula allowance is $1,420, or 19%, per pupil.

“Future projections are reflecting a decline in enrollment. The decrease from ’25 to ’26 is based on current fiscal year ’26 enrollment, specifically in early childhood through first grade,” Deutz said. “These numbers impact the district’s funding, because enrollment is what determines most of the school districts funding components … Growing it continues to be one of the district’s goals.”

From 2024 to 2028, there is a total projected enrollment drop of about 98 students.

Free breakfast and lunch to all district kindergarten to 12th grade students will continue to be free, regardless of family income, and is funded by the state.

“The district is in the process of renovating the high school HVAC control system. Management has budgeted the total cost of the project at approximately $737,850,” Deutz said. “As of the end of the year, the district had incurred about 299,000 of direct costs relating to that project. The project is being paid for by the general fund as part of the approved long-term facility maintenance budget, and will be completed during fiscal year ’26.”

Revenue sources and expenditures

Deutz also discussed where the district sees revenue coming in, and where expenditures take place.

“The largest source of revenue is from the state … That’s consistent with every other district. State revenue is the biggest contributor into school districts,” Deutz said. “Federal sources of revenue are one of the smallest pieces, but they are the cause of the most compliance requirements.”

There was a hefty decrease in federal funding, due to the COVID-19 pandemic funding that districts were receiving coming to a close.

“Marshall Public Schools had about $3 million in federal funding in fiscal year ’25 … Federal revenue decreased about 4%, which is about a $1.3 million decrease from fiscal year ’24,” Deutz said.

The largest amount of expenditures go toward salaries and wages, and employee benefits.

Salary and wages made up for 61% of the district’s 2025 expenditures, while employee benefits covered 20%. There was a 6% increase in equipment expenditures between 2024 and 2025 due to the new right-of-use leases.

Deutz said the expenditures overall have remained consistent over the years.

Fund highlights

Deutz detailed that the debt service fund and community service funds saw increases, while the building construction fund decreased about $8,000 due to a transfer to close the fund with the completion of related projects.

“(The) community service fund balance increased about $48,000 due to positive operations in the General Community Education and Early Childhood Family Education programs, partially offset by deficit operations in the School Readiness program,” Deutz said. “The debt service fund revenues exceeded expenditures by about $486,000. That increase is primarily due to statutory levy requirements and the mandated funding of the escrow accounts.”

A full presentation and breakdown of the audit report can be found on the school board’s agenda on the district’s website for Dec. 1, under “audit review,” or can be watched on the City of Marshall Studio 1 TV channel Youtube page for Dec. 1 as well.