Friday, December 02, 2016
NOTES FROM THE SENATE, DECEMBER 2, 2016
LOCAL EDUCATION FINANCIAL AUDITS - ENSURING EDUCATION FUNDING ACCOUNTABILITY
The Education Audits Division of the Georgia Department of Audits and Accounts performs financial and compliance audits for public local education agencies -local county and municipal school systems. These audits are important pieces of operational information and annually give a report of each system's financial picture. In addition to basic financial information such as fund balance, the financial audit also provides a statement of revenues and expenditures.
Education audits each year reviews the system's financials in accordance with auditing standards generally accepted in the United States of America and standards applicable to financial audits contained in Government Auditing Standards. The audits express official opinions on the financial statements that essentially speak to the compliance and overall presentation of finances made by each system.
A FIFTH OF SYSTEMS ARE IN FINANCIAL WATCH
While financial statements demonstrate financial condition, they also highlight financial concerns. Out of 180 systems statewide, the Education Audits Division has identified 38 systems that have been deemed either moderate or high risk systems for the three most recent consecutive years (FY13- FY15) based on their financial audit findings. That's about 21% of all 180 school systems. Almost 8% --14 out of 180 systems --were deemed high risk over that three year period.
Based on FY17 full-time equivalent (FTE) counts from the Department of Education, that means over 250,000 students could be attending schools in systems that are at high to moderate risk of having financial issues if those schools continue to have financial concerns or financial mismanagement. That's about 15% of all 1.7 million FTEs reported in FY17.
According to the Education Audit Division, there are several criteria that are used to rank districts according to risk and categorize those that may experience trouble. Those criteria include:
1. Number and magnitude of audit deficiencies
2. Level of turnover in key positions
3. Quality of personnel in key positions
4. Likelihood and magnitude of fraud, waste and abuse
5. Number and magnitude of misstatements
6. Number and magnitude of accounting issues
7. Number and magnitude of reporting issues
8. Fund balance trend
Some of the high-risk schools identified in FY15 had findings ranging from issues with accounting records to high debt relative to the system, and some were even found to have fraud. The auditors perform procedures to assess the financial statements, and in doing so, also review compliance with federal and accounting requirements.
While DOAA serves as the state's auditing entity, some systems have elected to hire a private CPA firm to perform their financial audits, although DOAA plans to eventually audit all local education agencies in the future. In FY17, the General Assembly appropriated $850,000 to the Department of Audits for additional auditor positions in the Education Audits Division to fund positions that had been cut during the recession. The Department of Audits was also able to shift some of its staff to the Education Audits Division to attempt to perform the financial audits for more systems. These added staff auditors are working to complete local education audits in a more timely manner so that systems can receive audits reports that raise any issues of concern before systems are further along in the next fiscal year.
STATE SCHOOL BOARD REVIEWS RESULTS
The Georgia Department of Education State School Board also has a special Audit Committee which reviews findings by the DOAA Education Audits Division and the DOE internal audit group high and moderate risk school districts to work with districts and improve their future audit performances. The review of these audits gives the committee greater context to how systems are operating across the state.
FOURTH DISTRICT OPERATING GENERALLY WELL
We won't single out the systems facing risk, but we are proud to report that there are no chronically high or moderate risk systems in the Fourth District. Based on DOAA and DOE current analysis, none of the systems in the Fourth District were high or moderate risks in FY15 based on financial records.
There are some systems, however, that, based on audits, are working to address findings and questioned costs. These financial audits provide important information on school system operations and direct systems to work on compliance and address process concerns in subsequent years.
AN OUTLOOK FOR IMPROVEMENT
The goal, of course, is to identify financial environments and practices that are not in compliance with accounting principles or a productive fiscal environment. Systems that keep their financial house in order are ultimately acting as good stewards of taxpayer resources.
Full reports may be found at: https://www.audits.ga.gov/rsaAudits/viewMain.aud;jsessionid=8803204A3FA81AC18E969D0503051206