School board receives feed back on high risk audit

The Hot Springs County School District’s audit report, which was reviewed at its board of trustees’ Dec. 15 meeting, drew a reaction from the community during the board’s Jan. 19 meeting.

Jean Skelton, speaking during the Jan. 19 public comment period “as a taxpayer and accountant,” said, “It was a concern to me that you were considered a high risk auditee,” before she reviewed the four points of specific concern to her, which included both “significant” and “material weaknesses,” as well as “significant deficiencies,” which she deemed “a fairly big deal to have that many on an audit.”

The first audit point was the segregation of duties, which she conceded was “pretty normal,” even as she asserted, “There are measures you can take, in an institution that has almost $12 million going through it,” to counteract such an issue.

The second point of contention for Skelton was the budget non-compliance, about which she warned, “There’s been a lot of talk in the community about this,” even though she acknowledged that it’s a clerical issue.

“I know that funds are not missing,” Skelton said. “My concern with that would be, it was obviously changed after your July board meeting, (so) were you, as a board, informed of that change?”

Skelton told the board they should have been informed, and recommended having “a true accountant” on staff in the school district’s business offices, “one that understands government accounting standards.”

The third issue Skelton cited was the capital assets, because “when you have a $1.4 million adjustment to your net position, again, did you ask, as a board, what was adjusted?”

Skelton criticized “$1.4 million of assets in your general fund” as an amount that “shouldn’t have to be put back into your fixed asset schedule. That’s a big deal.”

Skelton again recommended properly trained accounting personnel, as well as “better software,” because “the software you use should not have allowed an adjustment to a prior period.”

Skelton’s fourth issue was the expenditure control over the federal awards.

“Of the 25 transactions, 17 did not have pre-authorized approval,” Skelton said. “That’s 68%, which is 100% unacceptable.”

Four did not have invoices, to which Skelton responded, “You have to have invoices to pay an expenditure when you’re dealing with government funds. It’s not optional,” and nine could not be traced to the board minutes, which she pointed out is “36% of your transactions not coming through the board minutes. That’s a really big number.”

Skelton urged the board, “When you get that listing of those transactions, tie it to your monthly report,” since she had looked at the last 18 months of reports, and for three of those months, the reports did not tie.

“Why aren’t they tied?” Skelton asked. “They’re not tying for your January numbers, either.”

Skelton further urged the board to thoroughly review its cover sheet details, “because that’s about a million dollars every month that’s going out in payroll,” and even volunteered her own assistance.

Board Chair Sherman Skelton responded by admitting the audit was “disappointing,” even as he expressed enthusiasm for “the feedback that can help us be better,” saying “I love the suggestions.”

According to the board chair, the board and district have already made changes “that people will see to our meeting tonight,” as of Jan. 19.

“There are definitely some things we need to tighten,” Sherman Skelton said. “We look forward to getting better at that.”

When the Thermopolis Independent Record contacted both Jean Skelton and Hot Springs County School Board Chair Sherman Skelton, to see if they had anything further they wished to add, Jean Skelton said she was content to let her Jan. 19 board meeting comments speak for her, while Superintendent Dustin Hunt submitted the following statement on behalf of the district on Jan. 27, presented unedited:

Hot Springs County School District #1 will address the audit findings presented at the December meeting. The governmental accounting practices of the District will improve, and a plan is in place to do so. The Board of Trustees in cooperation with staff is addressing this issue immediately. It is important to note that the issues in the audit are clerical errors. The audit did not present fraud or missing funds. The District finished the fiscal year well into the black. The conservative approach of the Board of Trustees allowed $500,000 (July 19, 2022 board meeting minutes) savings in the general fund to be added to the Depreciation Reserve account for use with future District needs. 

Staffing shortages, turnover and federal COVID funds have increased the challenges for our financial team. The business office team has faced considerable turnover since 2019. The four positions have had 8 different employees. New business manager Jessica Benefiel who began in December has assembled a strong team that will receive additional training where clerical errors occurred.

The fiscal year runs from July 1st, through June 30th and audit findings are presented to boards by statute by December 15th. This creates a six month lag where errors can go uncorrected. Specific resolutions will be presented to the trustees in open session of the board meeting. The past audit cannot be fixed, only the practices and clerical errors that led to the findings. 

The Board has provided strong oversight of District finances within their capacity. Reviewing the Approval of Finances would not provide insight into the staff using appropriate governmental accounting practices. This is one reason districts perform audits. When we know better, we do better. The board and the staff take the issue very seriously, and will improve the clerical errors found in this audit. The HSCSD #1 Board of Trustees have a strong history of setting goals and accomplishing them. Their goals include improved accounting practices in the year to come.