So The District Has Received Its Audit…..Now What?

By: Johanna Dorrance, Shannon Nelson and Brian DuMond of Dermody, Burke & Brown, CPAs, LLC (Oct, 2012)

By now, the External Auditor will have met with the Audit Committee and/or the Board of Education to go over the district’s audited financial statements and related letters and documents.  Most likely, your auditor shared with you information that was important, but after fifteen minutes, your head may be spinning or at least ache a little.  Now that you have all of 70+ pages of financial documentation and it has been accepted and filed, what should be done with all of this information?  The incorrect answer is “To use it in the bonfire at Homecoming.”

The first thing to understand is what are the auditor’s findings, if any?  If there were findings, it is important for the board to understand what management’s response is to the findings.  Management should be preparing a response within 90 days.  As a board member, you should understand what management’s position is (whether they agree or disagree) and what they intend to do (or not do) to address the findings.  The auditors are usually correct in pointing out potential issues for the district.  However, their recommendations are not always practical.  It is possible that management can agree with the finding, but offer another solution that may be more appropriate for the district operations to run smoothly. Once management has addressed the finding(s), we suggest that the Audit Committee/Board of Education call upon their internal auditors to test management’s solution to determine that it properly addressed the concerns and that the new procedures were implemented completely and effectively.

Once the findings are addressed or if there were no findings, the financial statements may be a valuable tool as part of the budget process.  Since the audited financial statements provide actual financial data, they can be a good predictor of what the following year’s financial results may be when adjusted for known changes such as contracted salaries, TRS, ERS, and Health Insurance.  From this analysis, the board can better understand where additions or cuts may be necessary.  In short, we believe that the audited financial statements, when adjusted for known fluctuations, can help management and the board build a preliminary budget from which to begin the discussion process.

So now that the district has received its audit, don’t let it collect dust.  Put it to good use!