Auditor: Franklin schools receives noncompliance citation

After seven years of perfect state audits, the Franklin City Schools received a noncompliance citation in its latest audit.

The Auditor of State’s Office released the district’s annual audit for the year ending June 30, 2017 and reported finding some transactions not properly posted in the financial statements during its calculation of its retirement pension liabilities in its financial statements.

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Specifically, the audit said the school district did not properly report Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The school district did not properly calculate Pension Expense and related Deferred Inflows and Outflows, including:

• Deferred Outflows for Pension was understated by $1,561,625;

• Deferred Inflows for Pension was overstated by $537,120;

• Pension Expense was overstated by $2,098,745.

The audit said, “these errors indicate a lack of monitoring of the School District’s financial activity. Failure to accurately monitor and post financial activity can lead to material misstatements in financial reporting, and increases the risk that errors, theft, and fraud could occur and not be detected in a timely manner.”

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The district’s response to the audit said it was the accounting for GASB 68 were the result of an accumulation of errors from several years. Upon receiving notification of the error in fiscal year 2017, the School District made the necessary adjustments to its financial statements. In addition, the School District has sought guidance from the Auditor of State’s office on the correct calculations to appropriately account for GASB 68. The School District will be following the guidance the Auditor of State provided.”

Jana Bellamy, district treasurer, said the discrepancy was a minor issue due to a miscalculation by the vendor that was hired to convert the district’s finances to Generally Accepted Accounting Principles to calculate the district’s retirement pension liability. Bellamy said the Auditors Office disagreed and the district corrected the error.

In the future, the accounting and financial reporting for pensions required will have a second review performed, she said. Bellamy also said the Auditor’s Office provided the district’s GAAP Converter with the spreadsheets to use for pension calculations. GAAP converter has made corrections and has information for future fiscal years.

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