Washington State Auditor: No Findings from 2017-18 Audit of KSD Financials
On an annual basis, the State Auditor’s Office (SAO) performs financial and accountability audits of the District. At a special meeting of the Kent School District Board of Directors on Tuesday, May 28, 2019, Audit Managers from the Office of the Washington State Auditor shared the results of their September 1, 2017 through August 31, 2018 (FY18) financial audit.
There were no findings from the audit. Although not included in the final state auditor’s report, a management letter from Office of Washington State Auditor was issued addressing the following three areas:
- Transfers out of the Capital Project Fund
The transfers out of the capital project fund in the 2017-18 school year were communicated to the Office of the Washington State Auditor as a matter of public concern. During the State audit, supporting documentation for the $3,638,518 transferred out of the Capital Project Fund was reviewed, and the State determined these costs were an allowable use of Capital Project funds. Further, the State Auditor’s Office noted the 2017-18 School District Accounting Manual (SDAM) did not explicitly require Board approval for this type of transfer; as a result, the State determined this transfer did not require Board approval. The 2019-20 SDAM has been updated to state that, "a properly executed board resolution authorizing an interfund transfer is required." The State recommend the District continue to follow the prescribed accounting guidelines as determined by the SDAM.
- Payroll costs funded by the Capital Project Fund
The State audit identified six employees whose payroll and benefits costs were partially funded by the Capital Project Fund, totaling $242,440. The State determined these allocations appeared reasonable based on our understanding gained during the audit, known capital project activity, and related duties of identified staff. However, the State recommended the District maintain adequate documentation to support cost allocations between funds.
- Revenue recognition of property tax
In fiscal year 2016-17, the district benefited from a thirteenth month of property tax collection due to a change in accounting method. The district had been planning to collect 11 months in a future year to complete the transition. The State Auditors have determined that the district make the adjustment in the 2017-18 fiscal year. This does not constitute an audit finding, and the state Auditor deemed the adjustment immaterial. No revenue is lost in this adjustment. The negative adjustment in revenue of $703,752 for FY18 becomes a positive adjustment in FY19. The state recommended the District make this change and continue to improve its internal control over financial statement preparation.
“We are committed to the fiscal health and sustainability of our district for the benefit of each and every student,” shared Superintendent Dr. Calvin J. Watts upon learning the results of the audit findings on May 28, “the results of this audit are further evidence that our staff is dedicated to the mission, vision and core values of our organization. While there is still much work to be done, I am confident that we are on the path to fiscal solvency.”
The 2017-18 Kent School District audit report will be available on the Washington State Auditor’s Office website. The estimated cost of the annual audit was $75,000, actual audit costs will be approximately $18,000 higher as a result of the work required to adequately address public concerns directly sent to the State Auditor.