Auditor says LCSD receives 'clean' audit

Oct. 25—The CPA handling Lauderdale County School District's financial audit says the district's audit is "clean in my opinion" and that a review of the district by the state auditor's office failed to turn up anything of great concern.

Charles L. Shivers, a CPA from Ridgeland, is in his last year of a three-year contract to conduct the district's annual financial audit, as required by the state.

"The opinion on the financial statements is what we would refer to as a clean opinion. They are free of material noncompliance," Shivers said of the contract audit, in addressing the county school board during last week's monthly meeting.

"In layman's terms, it is a clean audit," he said.

He also addressed a Limited Internal Control and Compliance Review for the year ended June 30, 2022, released by the state's auditor's office on Oct. 3, the same day as the district's school bond vote.

"The things I see here in this report are quite similar to what I see in other reports for school districts like this. They have this checklist of things they are looking at," he said. "All in all, it really is not a bad report in my mind."

In the limited compliance review, the state auditor's office noted nine findings for fiscal year 2022 and made recommendations for the school district.

In the first finding, the review found that nine student activity fund deposits were not made in a timely manner, and that there was a net shortage of $554 between deposits and ticket sales for varsity basketball and football games among all four county schools.

"Nine deposits out of 10 or nine deposits out of 100, I don't know," said Shivers, adding the review did not list specifics. "And the timeliness of it, were we a day late or were we two weeks late?"

He said it is difficult to interpret the finding without knowing if there were any extenuating circumstances. For example, a Friday night football game before the Labor Day weekend would mean the gate revenues probably would not be deposited until the following Tuesday since banks are closed on the holiday. That would constituent a violation of the school policy, he said.

Also, Shivers said it is not unusual for gate revenues to be over or under because someone makes incorrect change or a spectator tells the school to keep their change, which again would cause the numbers to be off. With four school campuses in the district and the number of sporting events held during a school year, he was not concerned with a discrepancy of $554.

The school district responded to the auditor's office that it has taken steps to strengthen controls over athletic event funds, including timely deposits and proper receipting, as suggested and no repeat finding was found by the auditor's department.

In a second finding, the auditor's department noted that eight 16th Section lease payments were not deposited in a timely manner; taxes, totaling $2,926 were not current on six leases, yet the agreements were not terminated; three lease payments were more than 60 days past due; and the district received only partial payments on two leases with the full payments paid more than 60 days late.

"If they fail to make the lease payment on time, then the board has an obligation to terminate the lease or extend it based on extenuating circumstances," Shivers said.

However, the school board is not responsible for ensuring taxes are being paid promptly on 16th Section Land leases, he said. "I see that as a county problem. This should be addressed at that level."

Shivers said school boards do have the right to extend lease payment dates under extenuating circumstances if they vote to do so.

'We see that quite often in the Delta because the lease may be due Sept. 30 but they are not selling crops until the middle of October, so they sometimes give them until the end of December," he said.

The school district responded to the auditor's office that it has strengthened internal controls to ensure proper payment is received on 16th Section leases within 60 days and that taxes are current and payments are property receipted. No repeat findings were reported.

In a third finding, the auditor's review recommended the school district ensure compliance with state laws over budget approval. The review noted the school district approved the 2021-2022 original budget on Aug. 10, 2021, projecting a negative fund balance totaling $5.6 million at the end of the year for 22 funds and then noted an amended 2021-2022 budget that included negative year-end fund balances totaling $15.7 million for 11 funds.

Nearly $14 million of that projected negative fund balance involved the second and third-rounds of federal COVID-19 relief funds which had been approved by Congress, but had yet to be obligated by the school district.

"They indicate a negative fund balance at the year-end totaling $15 million, but you go down to the very last sentence and this is the key part of the thing here," Shivers said, reading from the review, "the actual fund balances at June 30, 2022, were not negative. They are talking about a budgeting matter not the actual issue at year end. So, I am not overly concerned with that at all. I am not sure why they went down that road to the extent that they did. I don't see that as a issue at all."

The district responded that it would correct the balances on its budget to match the actual fund balance amount at the district's end of fiscal year procedures, and no repeat findings were found by the auditor's office.

The review also found that one bank account was not properly reconciled; the district is not renting its district owned residential homes at actual fair market value and the district was paying the electric bill on one of the residential homes; six certified employees did not have evidence of a background check in their files; one certified employee's contract did not match her approved salary; five retirees were paid more than the allowed salary by PERS; five forms did not contain the complete retirement date so the auditor could not verify if the retiree was hired 90 days after retirement; 16 district cellphones and 12 mobile hotspots were not capitalized and included on the capital asset listing; 194 employees who handle cash were not bonded, including cafeteria cashiers, gatekeepers, secretaries and bookkeepers; and 21 surety bonds for school board members, administrators and district officials were continuation bonds with indefinite time limits rather than for annual periods.

The district corrected these findings and no repeat findings were found, according to the review.

The state auditor, however, did note that at the time of its report Lauderdale County had failed to turn over to the county schools all of the privilege taxes from heavy trucks, railcars and rental cars owed to the district, Shivers said.

"They did do you a great favor. Looks to me like if the money did come in that you got about $1.3 million from the county," he said. "They were not properly settling the privilege taxes on heavy trucks, railcars and rental cars."

"The heavy trucks, the state auditor's is saying there is some $815,000 and some change that the county owes you. On the railcars, $225,000 and some change, and rental cars, $229,000 and some change," he said.

When asked, LCSD Business Manager Tracy Luke said the district had received some of that money but not all of it.

"The law is very specific with regard to the board of supervisors and to how they are to allocate those funds," Shivers said of the reports. "... It does look like the state auditor ventured off into that and hopefully you will get your money."

Contact Glenda Sanders at gsanders@themeridianstar.com.