In interviewing the Assistant Superintendent of Business Services from Dayton ISD, Tammy Pierce, I was able to answer questions regarding how auditors are involved with school districts. Details from these conversations are detailed below:
1. How is an external auditor selected?
An external auditor can be selected on a request for qualifications. Districts can not go out and select one on a bid because they provide professional services. In other words, you can’t select an auditor based on low bids. A request for qualifications mean that an external auditor responds and provides a district with what qualifications make them qualified to conduct an audit. The auditors respond back to a district giving the qualifications that they have that makes them qualified. Auditors can, however, provide an estimate of what they think the audit is going to cost. Most auditors have been known to bill by the hour, due to calculate profit and to cover the actually time that they spent working on the audit. If the bill is too high, a school district has the option to contact other school districts and compare their request for qualifications. This provides an opportunity to see who other districts used and how much each district may have paid. Each school district wants to get a good deal and get someone that they can trust to review their financial documents.
2. How does the auditor conduct the audit?
An auditor comes in and needs a list of checks for the school year. School districts must show in all accounts where the check number began and ended for the fiscal school year. Auditors then do a random sampling from a list of checks given to them from the district. The district is in charge of giving the appropriate checks to the auditors that they request of them. Auditors are checking for proper coding for items like functions, object code, grant funds, adequate expenditure, etc. Also, they are normally looking for a reference with the check that makes it valid, as well as documentation regarding the purchase. In most cases, they may only check 50 checks out of 50,000. Furthermore, they may also be looking to see if there are any errors regarding any financial procedures. For example, did the error take place one time out of 50 or is it continuously a mistake in a specific area? Auditors can do further investigating if there is a certain area with mistakes such as more specific sampling in any area of concerns. Mrs. Pierce stated that auditors have also viewed fiscal reports provided to the school board, certain investments (quarterly investments), and if she in compliance with the laws and regulations . Normally, the auditors are in a district for about a week to look at fixed assets, inventory, and/or depreciation. The auditors and district can send information back and forth to one another once they leave after that week.
3. What does the audit conclude about district financial procedures and actions?
The audit company gives information to the district through opinion letters. They can give opinion letters for overall financial statements, program compliance, internal control structure, federal compliance, etc. These are all part of a single audit. A single audit act is what a government goes through when you receive a certain amount of dollars for federal assistance. This triggers a Single Audit Act, which means you have to do more investigating than, for instance, a smaller district where it would be a much simpler audit involving federal money.
4. How are the results communicated?
The auditor comes to the board meeting and gives a presentation of the report from the audit. If there were any findings, then he or she would report it to the board in a management letter. A management letter addresses some concerns that might focus on areas to strengthen systems in place for the district. In Dayton ISD, Mrs. Pierce assists principals in acquiring proper approval regarding purchase orders. These are just suggestions from the auditor that can help improve some areas that may be concerns. Also the board does have the option to go visit with the auditor about any concerns that they may have with the audit.
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