» The district is in worse shape financially than first realized due to the turnover of key personnel, bad fiscal practices and lack of oversight by school board members, and the 2002-03 budget may not be balanced due to insufficient resources, poor procedures, the pressures of an escalating deficit and taxpayers who do not want their taxes raised.

   » The district plans to roll over and increase last year's $1.5 million tax or revenue anticipation note, which had already been rolled over and increased from a $500,000 note used the year before.

   » While enrollment has declined from 1,808 in 1996-97 to 1,593 this year, or 11 percent, the district has made no corresponding adjustments in teachers and other staff during the same period. During this time, expenditures have increased from $11.5 million to about $14.5, or 26 percent. Taxes increased only 8 percent and state subsidies increased 11 percent.

   » Expenditures have exceeded revenues since 1997-98.

   » The previous superintendent, Dr. Charles M. Cagno, depleted a $2 million reserve between 1999 and 2001.

   » Reynolds has obtained little in federal funding, despite the fact it is a relatively poor district.

   » Reynolds spends more money, nearly 10 percent of revenues, on transportation than any other Mercer County school district. The district stretches from West Salem Township to Delaware Township, with Pymatuning Township, Transfer and Fredonia in between.

   » Former Business Manager John Simon appeared to have used his own fiscal procedures rather than use resources from the Midwestern Intermediate Unit. Simon quit recently, without notice, in the midst of preparing the 2002-03 budget.

   » During the tenure of former Superintendent Maddox Stokes and former Business Manager Cheryl Goodemote, who both ended their terms in 1999, the district followed the normal course of developing reserve funds.

   » Warnings of a deficit from auditors Black, Bashor and Porsch went unheeded.

Some of the recommendations Keystone Research, Inc., made to the board include:

   » Preparing multi-year budgets and examining birth and early childhood population statistics to stay on top of declining enrollment figures.

   » Developing a multi-year plan to pay off debt from tax anticipation notes.

   » Refining budget preparation methods by forecasting local tax revenues based on historical data and monitoring the tax collection process.

   » Reviewing expenditures and revenues on a month-by-month basis.

   » Forming an audit committee that meets two or three times a year with professional auditors.

   » Examining the requirements of becoming a "Distressed School District" under the state school code and looking into the Act 50 Homestead Exemption, which shifts the tax burden from property taxes to earned income.