The District Audit

The auditing process for school districts is perhaps one of the most important parts of financial accountability.  This is the process that provides the information necessary to determine the FIRST rating.  Administrators and business managers spend the entire year putting procedures in place and preparing for the financial audit.

     Most administrators believe that it is advantageous to change auditors every 3 to 5 years.  This is due to the fact that auditors focus on varying areas of school finance.  Changing every few years will ensure that a district does not let any area slide out of compliance.  If we are focusing on the same things every year, then other areas may fall by the wayside and get us in trouble.

     When selecting an auditor, school districts follow the same search process they use for other areas of service.  Contacting other school districts who have used the company is a common practice.  Researching the company’s reputation is critical to making the best decision.  The superintendent would then interview the auditor, compare prices, etc before making a final decision.

     The procedures for conducting the audit vary from district to district.  Because our school district is small, the actual “auditor visit” only lasts one to two days.  Much of the exchange of information is completed electronically prior to the onsite visit.  This gives the auditor time to review documentation before coming on site.  The information sent prior to the visit includes payroll reports, account distribution journals, salary information, capital asset acquisition reports, etc.  After receiving these reports, the auditor completes much of his/her work at the office.  The main goal of reviewing this information is to determine whether or not the district has effective internal controls.

     The length of the onsite visit varies according to school district size.  In our small district, the auditor spends 2-3 days on campus.  This will be sometime during October or November, depending on the auditor’s calendar.  During the on campus visit, the auditor looks at supporting documentation for the internal controls.  This includes looking at specific check requests, purchase orders, receipts, etc.  Every single transaction above a certain materiality level (for HISD it is $10,000) are thoroughly checked for accuracy.  This amount changes every year. The auditor then picks random smaller transactions to be certain districts are following the same procedures whether the transaction involves $10 or $100,000.  Federal program documentation, bank reconciliations, personnel records are also evaluated for accuracy.  Personnel folders are check to ensure that salaries are being paid at the appropriate “step” level and that permanent folders contain the appropriate contents and documentation.  The business manager and other financial officers of the district must be available for questions and to provide the information the auditor requests.

     The results of the audit help district determine the effectiveness of their internal controls and procedures.  This includes accountability in PEIMS reports, human resources, School Board Minutes, and coding.  It is clear that the audit provides information on much more than money.  Districts discover whether or not they are in compliance with state and federal laws, spending money appropriately, and also documenting transactions in the appropriate manner.  A survey completed by staff members asks questions about anti-fraud procedures and whether or not staff members believe there is an opportunity for employees to commit fraud without being detected.  The audit is extremely thorough and provides valuable, detailed information about the effectiveness of district financial procedures.

     Upon the completion of the audit report, the auditor sends a preliminary copy of the report to the superintendent for review.  This gives the superintendent an opportunity to ask questions and/or defend any negative parts of the report.  The auditor then presents his report to the school board for approval.  This is done through a formal presentation at a regularly scheduled board meeting. The board has the opportunity to ask questions about any part of the report during the presentation before taking action to approve the final audit.  After approval, the auditor submits the report to TEA, which is then compared to the report sent to TEA by the business manager.  The district report must match the auditor report.  The deadline for submission of the final audit is January 31^st.