No discrepancies in Red Oak School District audit

Nolte, Cornman & Johnson P.C. released an audit report on the Red Oak Community School District in Red Oak.
The audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Red Oak Community School District’s basic financial  statements. The firm previously audited the financial statements for the nine years ended June 30, 2023, and expressed unmodified opinions on those financial statements.  
The district’s total net position increased from $20,700,861 on June 30, 2023, to  $21,005,230 on June 30, 2024. Total revenues decreased 2.17% from $19,175,738 in fiscal year 2023 to $18,759,079 in fiscal year 2024, while total expenses increased 5.36% from $17,515,215 in fiscal year 2023 to $18,454,710 in fiscal year 2024. A significant decrease in revenues from operating grants, contributions and restricted interest was the primary reason for the decrease in total revenues. The largest increase in total expenses occurred in the instruction and support services functional areas.
General fund revenues decreased from $14,191,892 in fiscal year 2023 to $13,861,014 in fiscal year 2024, while general fund expenditures increased from $14,046,758 in fiscal year 2023 to $14,482,394 in fiscal year 2024. The district’s general fund balance decreased from $4,985,202, at June 30, 2023, to $4,363,822 at June 30, 2024.
The decrease in total general fund revenues was mainly due to a decrease in federal  funding compared to the prior year. The increase in total general fund expenditures mainly occurred in the instruction functional area.
No instances of non compliance were noted; however, the firm noted some internal control deficiencies.
Management is responsible for establishing and maintain ing internal control. A good system of internal control provides for adequate segregation of duties so no one individual handles a transaction from its inception to completion. In order to maintain proper internal control, duties should be segregated so the authorization, custody and recording of transactions are not under the control of the same employee. This segregation of duties helps prevent losses from employee error or dishonesty and maximizes the accuracy of the district’s financial statements. 
The firm noted one individual has control over one or more of the following areas for the district: cash - initiating cash receipt and disbursement transactions and handling and recording cash; investments - investing, detailed recordkeeping, custody of investments and reconciling earnings; receipts - collecting, recording, depositing, journalizing, posting and reconciling; disbursements - purchase order processing, check preparation, mailing and recording; capital assets - recording and reconciling; wire transfers - processing and approving; financial reporting - preparing, reconciling and approving; journal entries - writing, posting and approval
The cause of this is because the district has a limited number of employees and procedures have not been designed to adequately segregate duties or provide compensating controls through  additional oversight of transactions and processes.  As an effect, there is an inadequate segregation of duties, which could adversely affect the district’s ability to prevent or detect and correct misstatements, errors, or misappropriation on a timely basis by employees in the normal course of performing their assigned functions. 
The firm issued the following recommendation: they realize that with a limited number of office employees, segregation of duties is difficult. However, the District should review its control procedures to obtain the maximum internal control possible under the circumstances. 
The ROCSD responded that it currently has three positions in the office: payroll/HR,  accounts payable/receivable/child nutrition, and business manager, and the district makes sure that there are eyes on all transactions. For example: No deposits leave the office without a second person initiating, checks sent out are second checked and mailed by our payroll person. Journal entries are now inspected and have been initiated by accounts payable. Mail that comes in is opened and distributed by our payroll person. The district says it is making every effort to spread duties and have a second set of eyes on all aspects in the business office. The response was accepted.
Under other findings related to required statutory reporting, the firm noted that regarding the certified budget, expenditures for the year ended June 30, 2023 exceeded the amended certified budget amounts in the instruction and other expenditures functions, as well as in total. The recommendation of the firm is that the certified budget should have been amended in accordance with Chapter 24.9 of the Code of Iowa before disbursements were allowed to exceed the budget.
The ROCSD responded that it will watch expenditures more closely to amend the budget appropriately before overspending and ensuring this doesn’t happen in the future. The response was accepted.
As far as questionable expenditures, no expenditures were found that may not meet the requirements of public purpose as defined in an Attorney General’s opinion dated April 25, 1979.
Travel expense: No expenditures of district money for travel expenses of spouses of District officials or employees were noted. No travel advances to district officials or  employees were noted. However, the firm noted mileage reimbursements for travel not being reimbursed at the rate specified in the board policy. The recommendation of the firm was that the district should review procedures to ensure compliance with rates established by board policy. The ROCSD responded that it has updated its  mileage reimbursement to 70 cents per mile. The district will make corrections on reimbursement sheets to note this change. The response was accepted.
Board Minutes: The firm noted no transactions requiring board approval which have not been approved by the Board. However, it noted instances of board minutes not furnished for publication within two weeks following adjournment as required by Chapter 279.35 of the Code of Iowa. The firm recommended the district should furnish a copy of board proceedings for publication within two weeks of each meeting in compliance with Chapter 279.35 of the Code of Iowa. The district acknowledges that the board minutes were published late and will make a concerted effort to publish all meeting minutes in a timely manner. The response was accepted.
Certified enrollment: The firm noted the enrollment data certified to the Iowa Department of Education was overstated by  2.00 students and understated  by  2.00  students, for a net effect of 0.00. The recommendation was for the district to contact the Iowa Department of Education and the Iowa Department of Management to resolve this matter. The district’s responded that auditors will contact the Iowa Department of Education and the Iowa Department of Management to resolve this matter. The response was accepted.
Officiating contracts: It was noted during the audit that the board president was not signing activity fund officiating contracts. According to Chapter 291.1 of the  Code  of  Iowa,  the board president shall sign all contracts entered into by the district. It was recommended that the district should have the board president sign all contracts entered into by the district to be in accordance with Chapter 291.1 of the Code of Iowa. The district responded that it has been in contact with its board, and now has the board president’s signature on all officiates’ claims/contracts. The response was accepted.
A copy of the audit report is available for review on the Auditor of State’s web site at auditor.iowa.gov/audit-reports.