BELLE — A recent audit of the Maries County R-2 School District revealed four state findings and one federal award finding due to missing financial information.

Both the board and the auditors on Dec. 19 attributed the missing information to data crashing, new software, and employee turnover.

The audit that was presented by Graves and Associates’ Lindsay Graves and further explained by company founder Lynn Graves found that there was not enough time before the required submission Dec. 31 to reconcile nearly 14 months or more of financial statements.

“We are coming back to you all this year with what we call a disclaimer of an opinion,” Lindsay Graves said. “We have historically come to you guys with an unmodified opinion, which is when nothing comes forth in the audit that would render any modifications.”

She explained that the unmodified opinion is a clean opinion, but this year they are coming back with a disclaimer of opinion.

“Both on your financial statements and scheduled expenditures of federal awards — we are not providing an opinion on them,” Graves said. “The reason for that is the condition of the accounting records that we had when we came here October 1 to do the fieldwork. We were not able to get records that provided us with a reconciliation of cash with what we believed was a material amount.”

While Graves and Associates confirmed the amount of funds in the bank, they could not reconcile that amount with the district’s bookkeeping such as outstanding deposits or checks.

As a result, the management letter of the audit reported material weakness findings.

“Finding number three explains the reconciliation of cash, and at the bottom, it says ‘response/current status and completion date,’” Graves said.

The first and second findings in the management letter are familiar to the Maries R-2 District and many other rural districts with small staff: lack of segregation of duties and the oversight of the financial reporting process.

Disclaimer of opinion because of material weakness

“We have previously and historically reported these to you all as significant deficiencies,” Graves said. “Material weakness is the highest level of finding. You have significant deficiency and then controlled deficiency.”

She said in the past, they had controlled deficiency — nothing came to the auditor’s attention — the district had a lack of segregation of duties due to their size. Because of the issues with reconciling the cash this year, the first and second findings have been escalated to material weakness status.

While the first three findings have to do with the financial statement the fourth finding is a federal award finding that is separate but related to the financials.

“We have to audit your federal programs on a rotating basis, and you are subject to a federal audit if you have spent over $750,000 a year, that triggers the single audit,” she said, adding that last year, the board did not spend that much. “This year, based on as best as we could tell, you were subject — spending over $800,000.”

Title One, Child Nutrition, Special Education, and IDEA are the typical federal programs that are audited within a school district. The auditor looks at allowable cost and activity, collects samples, and determines where the money was spent and what it is allowed within the federal guidelines.

“We determined that Title One and Child Nutrition Food Services needed to be audited as a major program this year,” Graves said. “We issued what we call an “except for opinion” on those two programs. That is, other than those two expenses on whether they were allowable or not, all the other compliance requirements we were required to look at we didn’t have any findings.”

Food service applications compared to the income guidelines didn’t have any issues, but the auditor couldn’t comment on the financial aspects as to what the money was spent on.

“We don’t know what was spent,” Graves said. “Under professional standards, this is what we are held to.”

The last finding under the management letter is an examination finding that audits some of the district’s state statistics such as transportation and attendance.

“The only thing we have this year is that DESE (Department of Elementary and Secondary Education) requires that the audit report be published in the local newspaper within 30 days of receipt and that didn’t happen last year,” she said. “I have had it happen with a number of my districts. I have never seen DESE have repercussions on that, but it doesn’t mean it won’t.”

The official audit is not completed as yet, since Graves and Associates only made the decision to file a “disclaimer of opinion” on Tuesday, Dec. 17. They promised to complete it in another week and so it can be submitted to DESE prior to Dec. 31.

“Management will be able to provide a response on these findings, and an expected completion date,” she said.

Possible repercussions from DESE

A corrective action plan is also required from the board for the final audit report.

No state compliance findings were reported or management disagreements. However, the auditor reported significant delays in receiving corrected information from employees.

Graves did warn the board that there could be repercussions to their audit from DESE, to an extent that she couldn’t predict.

“So what would the repercussions be if we did push it into January trying to get the cash reconciled?” Graves asked. “DESE would potentially withhold some of your funding.”

Graves said she believes the repercussions of a disclaimer of opinion between the state and federal regulations, if the district doesn’t have the issue rectified by Dec. 31, 2020, there may be further repercussions.

“But I don’t know that 100 percent, I am going off of some basic information from DESE’s website that we were looking at today,” she said.

Board President Joey Butler II asked if it was fair to say the reason this report is not satisfactory is because of the same reasons the district has received in years past? The findings of not having enough staff to cover it and now it happened?

What happened according to auditor

While Graves said no, Lynn Graves says maybe.

“To a degree, yes,” he said. “Put this whole thing in perspective. Lenice (Superintendent Dr. Lenice Basham) is new here and inherited the situation. Rhonda (Witte, administrative secretary) is new to this position and in most cases, as Lindsay mentioned, we have seen about a 75 percent turnover in long-term, veteran, inhouse bookkeepers.”

Graves went on to say the vast majority of these cases, the person coming in — the district was able to make sure that the person leaving really helped and worked with the transition for an extended period of time. He mentioned the seasoned bookkeeper at the Rolla School District trained her replacement for nearly a year.

“Rhonda didn’t have that benefit,” Lynn Graves said. “In 44 of years of doing this, this is very rare. I have probably had 10 or less cases, and then two this year.”

Lynn Graves said the other circumstance is to prevent potential embezzling, and that is not the circumstance here.

“It’s just a learning curve situation,” Lynn Graves said. “Finding confident, qualified, accounting personnel out there is extremely difficult.”

He said that even in their accounting firms, they have had to “grow their own” employees, taking interns as they are graduating.

Director Kendra Sanders asked, “The majority of the findings are the way they are because the cash reconciliation wasn’t done or completed, and the other findings because you couldn’t validate the expenditures that occurred? So the cash reconciliation is still not done? Even currently, we don’t have cash reconciliation because we don’t have a true balance?”

Sanders asked how much time it would take to complete.

“I don’t know, because when we looked, it looked like it was off as far back as October 2018,” Graves said. “About the time that the school transitioned employees.”

“That’s when it crashed,” Director Tom Kinsey said.

Graves said that is as far back as she looked. Lynn Graves suggested they go back to July 1, 2018, and move forward, because that was one of the last few months that the long-time bookkeeper had been there. Get it corrected by month, and then just keep going.

Software, transition and data crash

Dawn Hicks asked when they lost everything, and Witte determined it was April 2018, adding that in May they lost all payroll from May, June, July, and August.

“It was reconciled in May before the crash, and we have had issues every since,” Witte said. “Peggy (Terrill, former administrative secretary) and I worked through the summer to correct issues, and when she left, we were still working on issues.”

Witte said at the time they had to shut down the purchase orders and everything was manually put in at the front and then coming to her to issue checks. But it wasn’t coming back correctly.

Basham said she went to the bank that morning (Dec. 19) and printed statements. They would go back, and go month to month until it was reconciled.

Correcting the accounting error

“We have a process of how to do it, so I will start on it,” Basham said. “We will start with the first month we thought was clean and go from there. We are aware.”

Graves and Associates said they would work to get the audit wrapped up and submitted to DESE.