Cartwright board accepts 2023-24 audited financial report after review of IRS penalty findings and internal-control gaps

The Cartwright Elementary District Governing Board voted to accept the district’s annual comprehensive financial report for the year ended June 30, 2024, after a presentation by the district’s external auditor and a prolonged discussion about internal controls, tax filings and payroll oversight.

Heinfeld Meach partner Jennifer Shields told the board the firm issued an unmodified opinion on the financial statements, meaning the auditor’s report was "unmodified." Shields said the audit work included the single-audit reporting package required by federal uniform guidance and testing of federal programs, and she reported no findings of noncompliance for the federal programs tested. She also told the board the audit identified one internal-control deficiency related to delayed IRS payroll filings and associated penalties.

The auditor explained an accounting detail that was not recorded on the district’s statements: a proportionate share of an asset in the Arizona State Retirement System’s health-benefit-supplement program. Shields said that amount attributable to the district was approximately $4,000,000 for the year ended June 30, 2024; the auditors characterized that item as an uncorrected misstatement that management and the auditors decided not to record because it did not change the district’s available resources.

Board members and speakers pressed district staff about the audit finding tied to payroll-tax filings. Shields described a breakdown in controls that led to late filings of the IRS Form 941 for two quarters early in the fiscal year; the late filings prompted IRS penalties. District staff said the filing problem stemmed from personnel turnover and a lack of consistent process; the district subsequently corrected filing processes later in the fiscal year.

Acting Director of Business Services Dr. Ethridge and Acting Superintendent Steve Watson answered board questions about corrective steps. During discussion the district’s business director said that some earlier IRS-related penalties dated to 2017 and that a later set of penalties was added for misfilings in 2023; the district worked with legal counsel and ultimately paid the assessed fines after pursuing appeals. Dr. Ethridge also described other payroll-related adjustments the district is addressing; he said an amount not withheld into ASRS was about $55,000 and that the related penalty was roughly $5,000.

Members of the public and board members asked for additional transparency about personnel actions tied to the matters raised in the audit (for example, the status of the district’s chief financial officer and other employees). Board members requested and staff agreed to produce follow-up materials, including an organizational workflow for payroll and purchasing and a plan for ironing out remaining control gaps.

The board vote to accept the 2023–24 annual comprehensive financial report passed. Roll-call statements recorded in the meeting transcript: Miss Romero abstained; Miss Hernandez voted aye; Miss Garcia abstained; other board members present voted to accept the report and the item carried.

The board directed staff to provide follow-up briefings and materials showing workflow and corrective actions; staff said processes were already changed to prevent repeated late federal payroll filings and that they would present additional documentation at future meetings.