Garrett County Board adopts FY2025 annual financial report; auditors cite $7.08M restatement and OPEB liabilities

The Garrett County Board of Education on Sept. 29 voted to adopt the district—s FY2025 annual financial report, receiving an unmodified audit opinion from Rode Huber Group while auditors highlighted a material, retrospective restatement tied to a new Governmental Accounting Standards Board (GASB) accounting standard for compensated absences.

Ashley (presenting finance staff) told the board she was certifying the financial statements "provide fair representation" and highlighted a small increase in the unrestricted current expense fund balance that will provide flexibility for the Bradford project. Auditors from Rode Huber Group said the independent audit resulted in an unmodified opinion. Auditor remarks directed the board to an "emphasis of matter" paragraph related to the adoption of GASB guidance on compensated absences, which required a retroactive restatement that decreased the district's net position by $7,082,449.

Lead auditor remarks detailed the accounting effect and other nonstandard items. The new compensated-absences accounting required an actuarial valuation and produced the $7,082,449 restatement recorded in the government-wide statements; auditors said the restatement does not affect the fund-level budgets used for operating decisions. Auditors also reported no significant deficiencies or material weaknesses in internal control over financial reporting.

Auditors and board members discussed other large liabilities. Rode Huber Group confirmed the district—s other post-employment benefits (OPEB) liability reported in the notes is approximately $30,000,005.20. Auditors explained the discount rate used in the actuarial valuation (4.81 percent) and noted that because the OPEB plan is not fully funded the discount rate is lower than it would be for a funded plan; raising the discount rate would materially reduce the reported liability but would require consistent funding and a different fiduciary position.

Board members discussed whether to begin regular funding of OPEB to change the actuarial assumptions and lower the liability over time. One board member noted the district had made occasional lump-sum contributions in prior years; presenters said the trust contained roughly $2,300,000 and that the district has historically paid OPEB benefits on a pay-as-you-go basis. Auditors said a contribution policy and working with the actuary could support a different discount rate in future valuations.

The auditors also noted several fund-level audit adjustments and disclosures: approximately $3,300,000 of state payments made "on behalf of" the teachers' retirement fund were recorded as noncash adjustments; certain leases were recognized under new accounting methods; and the school construction fund required year-end adjustments to zero the fund balance. The single audit (federal compliance testing) was not issued at the same time because the federal Office of Management and Budget had delayed release of the compliance supplement; auditors said the single audit would be completed and submitted to the Maryland State Department of Education (MSDE) by the Dec. 31 deadline once the supplement was finalized.

The board moved to adopt the annual financial report (excluding the single audit) and approved the report in public session. The motion was seconded by board member Rodney and the board adopted the financial report as presented.

Board members and auditors agreed to consider developing a funding policy for OPEB during the FY2027 budget process, and district staff said they would work with the actuary and return to the board with options.