By Anna Hill, DeKalb Schools Board of Education Elect
The 2018 and 2019 Annual Financial Report and Independent Auditor’s Reports have been issued. I am grateful that the Department of Audits and Accounts and State Auditor Greg Griffin were willing/able to audit two years at once, especially during a worldwide pandemic.
Anna Hill
DeKalb Schools
Board of Education Elect
I encourage everyone to keep in mind we have a new Superintendent who was not employed by DCSD for FY 2018, FY 2019, and FY 2020. I have been very impressed and encouraged by Ms. Watson-Harris’s commitment to DCSD and I look forward to getting to know her after I am sworn in on January 5, 2021.
As a CPA, I thought it would be helpful to share some highlights from the 2018 and 2019 audits issued October 5, 2020 and October 16, 2020, respectively.
Please remember this situation did not get this way overnight and cannot be fixed overnight so I encourage you to exercise patience as DCSD works to complete the Corrective Action committed to in the 2018 and 2019 audits (current completion date of 12/31/20.)
Audit Results: The audit opinion for both 2018 and 2019 is that the financial statements present fairly the financial operations of DCSD.
Supporting Documents
DeKalb Schools 2018 Audit Report
DeKalb Schools 2018 Audit Report
The Findings and Questioned Costs (Section IV) are as follows.
2018:
* Material Weakness and Significant Deficiencies were identified related to internal control over financial reporting.
* Noncompliance material to financial statements were noted.
(Source: Section IV, Page 1-7; page 79-86 in the 2018 audit .pdf.)
DCSD concurred with the findings.
2019:
* Material Weakness and Significant Deficiencies were identified related to internal control over financial reporting.
* Noncompliance material to financial statements were not noted.
(Source: Section IV, Page 1-7; page 81-88 in the 2018 audit .pdf.)
DCSD concurred with the findings.
Each year, the auditors document the cause of the deficiencies as reported by DCSD. They do not perform audit procedures to confirm the cause of the deficiencies reported.
2018:
“In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of review of the financial statements and note disclosures as prepared by their consultant.”
(Section IV, Page 3; .pdf page 82.)
2019:
“In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of review of the financial statements and note disclosures as prepared by their consultant.”
(Section IV, Page 4; .pdf page 85)
Note: 2017 cause of deficiency was as follows:
“In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of review of the financial statements and note disclosures as prepared by their consultant.”
(Section IV, Page 3; .pdf page 76)
FAQs:
What is internal control and why does it matter?
Internal Control: Keep in mind that the purpose of the audit is not to express an opinion on the effectiveness of the entity’s internal control. You can google the definition of internal control, but I think this definition from Investopedia is easily understandable:
Internal controls are the mechanisms, rules, and procedures implemented by a company to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.
The AICPA (American Institute of Certified Public Accountants) explains that internal control is important because effective internal control reduces the risk of asset loss, and helps ensure that plan information is complete and accurate, financial statements are reliable, and the plan’s operations are conducted in accordance with the provisions of applicable laws and regulations.
What is a Material Weakness and Significant Deficiency in Internal Control?
Material Weakness – A material weakness is a significant error or irregularity found in a company’s financial information or internal controls. Internal controls are the rules and guidelines instituted by companies to protect their accounting information from a material weakness.
Significant Deficiency – A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting, that is less severe than a material weakness yet important enough to merit attention by those responsible for oversight of the company’s financial reporting.
What does this all mean?
In a publicly traded company, this is a good summary from the CPA Practice Advisor website about the impact of a Material Weakness:
Material weaknesses can have damaging effects on a company’s credit rating and share price, and lead to higher audit fees and loss of investor confidence. Oftentimes, there is not one simple cause for the material weakness, but rather an aggregation of control deficiencies that could yield a material misstatement in the financial statements. As a result, public companies strive to prevent such deficiencies in internal control.
Where can I read details of what led to these findings?
2018 – Section IV, pages 2-3 (.pdf pages 81-82.)
2019 – Section IV, pages 2-3 (.pdf pages 83-84.)
“Extremism in defense of liberty is no vice. Moderation in pursuit of justice is no virtue.”