An audit report for the Juneau School District covering the year of its worst financial crisis in history doesn’t seem like it’s going to have a happy ending. But there is indeed positive news — mathematically speaking — as the district finished the year with a balance sheet that’s not in the red for the first time in several years.
The independent third-party audit for the 2024 fiscal year that ended June 30 also comes after the past two audits revealed significant accounting practice concerns as well as deficits, which led to a series of budget-balancing measures including a consolidation of schools that took effect during the current fiscal year.
Accounting concerns remain in the current audit, which are labeled “significant deficiencies in internal controls” and largely related to issues at the onset of the year before crisis management began. However, the district ended the year with a surplus of about $1.9 million, equal to 3% of its $64 million operating budget for the current year, meeting a minimum reserve fund level defined in school board policy.
“The bottom line up front is we had no modified opinions, no material misstatements and that’s a testament to the work that was done from a limited staff in a very tough timeline,” Will Muldoon, a Juneau Board of Education member, summarized to the auditor presenting the results to the board’s Finance Committee during a meeting Thursday night. “And then further that all prior year findings have been worked in some manner and that is currently where we are — is that your view of these things at this time?
“Yes, that’s a good succinct summary,” replied Karen Brewer-Tarver, a partner with the Juneau-based accounting firm Elgee Rehfeld.
Getting to that balanced budget sheet took some last-minute patching by the board, which on Oct. 22 approved spending about $765,000 of surplus funds to cover year-end deficits in food service and high school activity accounts. But that was a tiny step compared to the $9.5 million deficit board members were told they were facing in early January.
That bad news was revealed about a month after the resignation of Cassee Olin as the district’s administrative services director, following an audit by Elgee Rehfeld that showed “deeply concerning” accounting practices for a second straight year. A subsequent review of the district’s finances in late December and early January by Lisa Pearce, a consultant who later was hired as the district’s chief financial officer, indicated there were millions of dollars of errors in both revenue and expenditure assumptions in the fiscal 2024 budget.
Deliberate cost-saving measures including a hiring freeze and program cuts were furthered by dozens of staff resignations and health care insurance costs for the year being $3.5 million lower than expected. In addition, the Juneau Assembly agreed to take over $3.9 million of maintenance and other costs for “shared facilities” used by both the city and school district for purposes such as recreational activities.
The consolidation of schools, while in part enabled by staffing and other cost savings made during the past fiscal year, did not directly affect the bottom line for that year. However, it did help allow the board to approve a balanced budget as required by state law for fiscal 2025.
The audit report presented Thursday lists two “significant deficiencies in internal controls” during the past fiscal year:
• “Financial Reporting – Budget Preparation, Monitoring and Reporting.” The finding states, in part, “the Superintendent or designee did not design or implement monitoring controls sufficient to detect and correct errors in the budget input in the accounting system or ensure that internal procedures for proposing budget amendments were in place and occurred in a timely manner.”
• “Compliance, Other Matter – Reporting – Pupil Transportation program.” The finding notes “Controls were not designed or implemented to ensure compliance with the annual reporting requirement.”
Other faults cited in the fiscal 2023 audit were deemed partially or fully resolved. District officials have noted a new accounting system brought fully into operation by Pearce should address many previous issues.
In addition, the report presented to the school board makes several recommendations based on observations of the district’s situation during the past year.
“During the past fiscal year, the School District has experienced a number of significant difficulties,” the report states. “Budget and operating complications, and the vacancy in the Director of Administrative Services position, impeded progress toward an improved accounting and reporting system and slowed progress in the resolution of other related matters previously discussed with management. We believe these other matters are still valid and are of concern.”
Among the actions that should be considered by district administrators — including a new CFO following Pearce’s announcement she plans to resign when a successor is in place — include hiring more accounting staff for the shorthanded department, according to the report.
Also recommended are:
• “Centralization of certain tasks could bring cost savings through utilization of software, standardization of documentation and streamlined approval processes.”
• “Evaluate the current accounting policies, procedures and processes to ensure they continue to address internal control risks appropriately. Modifications to documented policies and procedures should be completed in a timely manner and communicated to those impacted.”
• “Continue to provide training with accounting software and work to develop a set of monthly financial reports and dashboard reports to meet monitoring needs of the administration, finance committee and the School Board.”
• “Continue to explore options for addressing cash handling risk and reducing administrative time, such as reducing cash collections for student activities and school events by utilizing online payment options.”
• Contact Mark Sabbatini at mark.sabbatini@juneauempire.com or (907) 957-2306.
