Auditors Report to the Board Scott Oling, Partner January 9, 2018 - PowerPoint PPT Presentation

Mount Vernon City School District Auditors’ Report to the Board Scott Oling, Partner January 9, 2018

Types of Audits School District Undergoes Internal Audit – Performed to assist board in ensuring that the School District’s risk is • identified and appropriate internal controls are in place and are working (this function is performed by Tobin & Co., CPA’s) Claims Audit – Required by Education Law Sections 1724 and 1950. Allows School Boards • to adopt a resolution to appoint a claims auditor to review each claim prior to payment. Claims auditor can be district employee or an outside contractor, but cannot be the internal auditor or external auditor. External Auditor – The audit performed by PKF O’Connor Davies, LLP. Performed in • accordance with New York State Education Department requirements, auditing standards generally accepted in the United States of America promulgated by the American Institute of Certified Public Accountants (AICPA) and in accordance with Government Auditing Standards issued by Comptroller General of the United States. 2

Our Responsibility Under Generally Accepted Auditing Standards • Perform the audit in accordance with generally accepted auditing standards and ensure that the audit was designed to achieve reasonable rather than absolute assurance that the financial statements are free from material misstatements • Communicate in writing deficiencies in internal control that we consider to be (1) significant deficiencies, (2) material weaknesses and (3) control deficiencies— our audit identified solely control deficiencies • Advise management of appropriateness of accounting policies and their application— appear appropriate for the district • Communicate any fraud or illegal acts that were noted during the course of our audit, however, our audit cannot be relied upon to identify all instances of fraud or illegal acts— no instances/suspicion or allegations of fraud were noted 3

Communications of Other Matters • Unmodified Opinion on Financial Statements • Internal Accounting Controls - reviewed within the context of our audit • Management’s Judgments and Accounting Estimates— appear appropriate • Audit Adjustments— no uncorrected adjustments. • Other Information in Documents Containing Audited Financial Statements —Management’s Discussion and Analysis ( MD&A) • Difficulties encountered during audit— no unresolved matters • No Disagreements with Management • No Consultation by Management with Other Accountants with the exception of the Internal Auditors as required • Independence not impaired 4

Financial Statement Highlights – General Fund Revenue and Expenditures Summary Year Ended June 30, 2017 Variance with Final Budget Original Final Encumbr- Positive Budget Budget Actual ances (Negative) REVENUES Total Revenues $ 236,048,281 $ 235,732,419 $ 239,155,352 $ $ 3,422,933 EXPENDITURES Total Expenditures 236,912,408 238,964,265 236,975,464 408,006 1,580,795 Excess (Deficiency) of Revenues Over Expenditures (864,127) (3,231,846) 2,179,888 (408,006) 5,003,728 OTHER FINANCING SOURCES (USES) Insurance recoveries 125,000 125,000 218,470 - 93,470 Transfers in - - 633,549 - 633,549 Transfers out (4,448,239) (6,698,951) (6,698,951) - - Total Other Financing Uses (4,323,239) (6,573,951) (5,846,932) - 727,019 Net Change in Fund Balance (5,187,366) (9,805,797) (3,667,044) $ (408,006) $ 5,730,747 FUND BALANCE Beginning of Year 5,187,366 9,805,797 36,682,867 End of Year $ - $ - $ 33,015,823 Source: School district’s June 30, 2017 financial statements page 62. 5

Fund Balance Comparison – General Fund June 30, June 30, 2017 2016 General General Fund Fund Restricted: Tax certiorari $ 5,629,534 $ 5,819,241 Employee benefit accrued liability 1,023,622 1,515,288 Retirement system contributions 2,024,175 2,759,000 Unemployment benefits 74,357 98,814 Debt service 5,977,503 8,949,206 Workers' compensation benefits 317,145 782,839 Total Restricted 15,046,336 19,924,388 Assigned: Purchases on order: General government support 359,580 2,488,371 Instruction 45,357 107,307 Transportation 3,069 15,134 408,006 2,610,812 Subsequent year's expenditures 6,332,450 2,576,554 Total Assigned 6,740,456 5,187,366 Unassigned 11,229,031 11,571,113 Total Fund Balances $ 33,015,823 $ 36,682,867 Source: School district’s June 30, 2017 financial statements page 52. 6

Other Post Employment Benefit Obligation Amortization Component: Actuarial Accrued Liability as of July 1, 2016 $ 165,381,902 Assets at Market Value - Unfunded Actuarial Accrued Liability ("UAAL") $ 165,381,902 The number of participants as of June 30, 2017 was as follows: Funded Ratio 0.00% Employees Covered Payroll (Active plan members) $ 112,713,944 Active Employees 1,362 UAAL as a Percentage of Covered Payroll 146.73% Retired Employees 730 Annual Required Contribution $ 12,555,621 Interest on Net OPEB Obligation 3,098,171 Adjustment to Annual Required Contribution (2,320,815) 2,092 Annual OPEB Cost 13,332,977 Contributions Made (7,194,163) Increase in Net OPEB Obligation 6,138,814 Net OPEB Obligation - Beginning of Year 61,963,417 Net OPEB Obligation - End of Year 68,102,231 $ Note: For June 30, 2018, School District will have to comply with the new OPEB provisions in GASB Statement No. 75. Be sure your actuary is prepared to provide this new information. Source: School district’s June 30, 2017 financial statements pages 47-49. 7

Proportionate Share of State Retirement Systems Obligations Recorded in accordance with Governmental Accounting Standards Board • Statement No. 68 “Accounting and Financial Reporting for Pensions”. School District required to record in its entity-wide statements its proportionate • share of the net pension assets/liabilities of the New York State ERS and TRS systems. NYS ERS has a net pension liability of $9.4 billion at March 31, 2017 down from • $16.1 billion at March 31, 2016. School District reflected its proportionate share of this liability of $5.4 million in its entity-wide statements, down from $8.5 million in the prior year. ERS uses a discount rate assumption of 7.0%. NYS TRS has a net pension liability of $1.1 billion at June 30, 2016 down from • $10.4 billion net pension asset at June 30, 2015. School District reflected its proportionate share of this liability of $6.5 million in its entity-wide statements, compared to a $62.9 million asset in the prior year. This was primarily caused by a change in the discount rate assumption from 8% to 7.5%. Source: School district’s June 30, 2017 financial statements pages 40-47. 8

Communications of Internal Control Related Matters – Definition of Terms • Material weakness — A deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. • S ignificant deficiency — A deficiency or combination of deficiencies in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. • C ontrol deficiency — A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. 9

Findings Identified During our Audit of Mount Vernon School District No Material Weaknesses identified No Significant Deficiencies Identified Minor Control Deficiencies Identified: § Unassigned fund balance in General Fund exceeds 4% limit allowed by New York State by approximately $1.4 million. (In prior year, School District exceeded limit by $2.0 million). School District management has a plan to get School District back in compliance. § School Lunch Fund – excessive fund balance ($1.6 million vs. 3 month average expenditure of $1.4 million) – Management has a plan to address this issue. 10

Filing Requirement Section 3601 of the Education Law requires the audit report to be filed with the • State Education Department by October 15 th . (New web based portal created by NYSED audit services division requiring upload of various documents including audit report and management letter). Filed timely by School District finance department personnel. 30 day grace period allowed if not filed by October 15 th . • If not filed by November 15 th , state aid apportionment due the district in • December is withheld pending receipt of audit report (occurred in district several years ago when fixed asset listing was not available for audit in a timely manner). Board of Education must adopt resolution accepting audit report, management • letter and extraclassroom report and submit that to NYS through the NYSED portal as soon as possible, along with any corrective action plan. 11

Questions/Discussion 12