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School Superintendent Explains Audit
Monday, 11 October 2010

October 11--  The school superintendent in Montgomery County says a state audit regarding school system finances is technically true, but not all of the story.

The latest audit said the system had a deficit of more than $150,000 at the end of fiscal year 2009 while the school sysem was reporting a surplus of about $175,000.

"I'd like to say that, number one, we're not currently in deficit spending.  We ended 2010 with a very small balance of a little over $19,000.  I'd also make the case that we've never been in deficit spending if you apply the same rules to fiscal years 2009 and 2008," said school superintendent Dr. Lynn Batten.

Dr. Batten says says the discrepancy reported in the Vidalia newspaper is because a different team of state auditors interpreted accounting rules differently when the latest audit was done.

"We used the same method of calculating accruals in 2008 and 2009, and the '08 auditors said you're okay.  The '09 auditors said 'no' at this point in time and when I go back and look, there is a defiinite calculation the state makes in terms of fiscal years, so we are now in compliance with all of the requirements of the auditors for fiscal year 2010.  The statements I made in terms of where we are financially, we're on the plus side of the ledger, but we don't have a lot of room for error in 2011," he reports.

One member of the school board, Deloris James of Alston, says members of the school board received copies of the audit in late September and she wishes it had been discussed at the October board meeting.

The school board is encouraging voters to support continuation of a one percent sales tax for education in the November election, and James is afraid of the impact perceptions of the audit may have on the vote.  "I just feel like this negative publicity this close to the ESPLOST election is a serious situation," she notes.

James has asked Dr. Batten to hold a called meeting of the school board to discuss the audit, but has been turned down, she says.  She also feels the board should have been invited to the audit team's outbriefing which was presented to school board chairman Randall Morris and Dr. Batten.

Press Release Issue - The school system issued the following press release Monday through board attorney Tom Everett.

"The recent article by Kathy Bradford of the Advance reported that auditors for the State of Georgia noted a discrepancy in the Montgomery County School System fund balance reported for fiscal year 2009, which resulted in a finding of deficit spending.  While the article correctly stated the results of the audit, further examination will reveal that no fraud occurred and that no funds were lost.


           Each school district in Georgia receives a significant portion of its annual funding from the State of Georgia in the form of QBE funding, based upon student enrollment figures.  The cause for the auditors’ recent audit finding was their disallowance of a portion of QBE revenue for July and August of 2009, as reported to the Montgomery County School System by the State of Georgia and as budgeted for by the Montgomery County School System. 


When the annual budget is formulated and passed each year by a board of education, it must often budget for funds to be received in the future which are not always clearly established at the time the budget is formulated.  In the case of the Montgomery County School System, since its fiscal year ends on June 30 of each year, it must regularly estimate the amount of QBE funds that it will obtain from the State of Georgia in the form of QBE funds for July and August of each calendar year, although those figures are not finalized. 


The Montgomery County School System has estimated its July and August QBE income based upon prior QBE funding for several years and this method has never been cited by the auditors for the State of Georgia for all prior years, during the school system’s annual audit.  However, this year, the team of auditors sent by the State of Georgia disallowed over $200,000.00 of the QBE income estimated for July and August of 2009, which resulted in a significant drop in reported income for the 2009 fiscal year and left the Montgomery County School System with a “deficit spending” status for 2009. The auditors required that the disallowed accrual be added to the 2010 fiscal year revenues.


The report of deficit spending was the result of an audit determination and the Montgomery County School System has not been spending more than it takes in by means of funding and no fraud has occurred.


            The Montgomery County School System has adjusted its 2010 fiscal year budget to factor in the 2009 audit findings and the current 2010 fiscal year fund balance is accurately reported.  While a fund balance currently exists, it is very small, due to significant funding reductions by the State of Georgia in the last two years and the Montgomery County School Board’s efforts to avoid any increase in local property taxes.


The audit letter further reported a finding, noting deficiencies with bank account reconciliations.  The school system was cited for this deficiency as a result of the auditors’ determination that too few school system personnel handle the banking and financial duties of the school system.  In an effort to save expenses the Montgomery County School System has consolidated many positions and job duties at its administrative office in recent years, resulting in fewer people handling the school system’s financial matters.  The auditors prefer a greater separation of tasks, where more employees handle each step of the school system’s financial actions, such as deposits, bill paying, and reconciliation of all accounts.  The school system is in the process of addressing this condition and will balance the need for checks and balances regarding financial matters with the school system’s need for fiscal responsibility to local taxpayers.


Although the audit findings may initially be a cause for alarm for some in our community, there has been no evidence or allegation of fraud by the auditors and each audit issue shall be addressed by the Montgomery County School System.  The Montgomery County School System is committed to fiscal responsibility and has taken appropriate steps to address the auditors’ concerns.


                                                                                                Lynn Batten



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