According to TES, each year, charter schools, education service centers, and school districts must have their annual financial and compliance report audited by an independent auditor. The resulting annual financial and compliance report must then be submitted to TEA for review. And, under the American Recovery and Reinvestment Act (ARRA), most Texas local education agencies (LEAs) are allocated supplemental federal funds. The TEA is required to perform compliance audits of these stimulus funds to ascertain compliance with federal laws, rules and other grant requirements. This makes it particularly critical that superintendents understand all aspects of school finance and the audit process.
In interviewing our CFO regarding annual audits, I learned so much about the process that I was not aware of before. The audit process is critical to keeping all business personnel/administrators and business practices honest and accountable for the district and campus finances. If strong processes are in place, it will prevent misappropriations of funds and will safeguard the monies. Audits and processes can also protect school personnel if anyone is ever accused of mismanaging or misspending district funds.
My interview results include the following:
How is the external auditor selected?
We interview applicants through a “request for qualifications” process; the superintendent and the CFO select the auditing firm based on the interview and qualifications regarding district needs. The Board does have to approve the recommendation. We like to stick with the same auditor once we find a firm that we have confidence in and who has proven themselves to be the best for our district. Many districts change firms every 3 – 5 years. We are more comfortable know the auditors know and understand our processes, needs, and goals.
We interview applicants through a “request for qualifications” process; the superintendent and the CFO select the auditing firm based on the interview and qualifications regarding district needs. The Board does have to approve the recommendation. We like to stick with the same auditor once we find a firm that we have confidence in and who has proven themselves to be the best for our district. Many districts change firms every 3 – 5 years. We are more comfortable know the auditors know and understand our processes, needs, and goals.
How does the auditor conduct the audit?
We send certain information to the firm ahead of time (our general ledger and financial records) for them to review and load into their software programs for initial analysis. Then they conduct an onsite visit for about a week to review records – they pull random files for review. The take this information back to their offices and review and develop a final report (this report has to comply with state regulations) to be presented to our Board of Trustees. Once presented, the Board approves (accepts) the audit report, and the audit report is then due to TEA 120 days after the end of the district’s fiscal year.
We send certain information to the firm ahead of time (our general ledger and financial records) for them to review and load into their software programs for initial analysis. Then they conduct an onsite visit for about a week to review records – they pull random files for review. The take this information back to their offices and review and develop a final report (this report has to comply with state regulations) to be presented to our Board of Trustees. Once presented, the Board approves (accepts) the audit report, and the audit report is then due to TEA 120 days after the end of the district’s fiscal year.
What does the audit conclude about the district financial procedures and actions?
A statement is issued regarding the integrity of the district’s finances – whether or not we financially sound. All areas of the school district’s financial procedures and activities are addressed in the report. We want an “unqualified opinion,” meaning no weaknesses were found in the practices. A letter is prepared by the auditor that identifies any major discrepancies (weaknesses) in our procedures.How are the results communicated?
The auditors meet with the Audit Committee, which is made up of 3 Board members and the superintendent. The CFO is not on this committee so that the auditors may speak candidly and discuss sensitive information regarding their findings. The audit team presents a final report of the Annual External Audit to the Board of Trustees at a regularly scheduled meeting in November or December. The results of the audit are also reported to the media and a report is also submitted to TEA.
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