Audit office: school activity fund balances fairly stated, but controls need strengthening

The Fairfax County School Board Audit Committee heard Nov. 17 that cash balances for the division’s local school activity funds are "fairly stated," but that controls over receipts and deposit entries need tightening.

Britney Hamilton, presenting OAG’s FY25 local school activity funds (LSAF) performance audit, said the office analyzed transactions across 202 school sites and found that 103 sites had no exceptions, 55 had exceptions in three or fewer areas and 44 were not in the transaction sample. "We were able to determine that cash balances are fairly stated," Hamilton said, while noting three observations that warrant corrective action.

The first observation involved recurring accounting exceptions—unsigned or undated bank reconciliations and documentation gaps. The second focused on cash‑receipts weaknesses: deposit forms not pre‑numbered, insufficient independent verification when financial technicians receive documents, and lack of a schedule/log for activities that collect funds. The third identified a control gap in Great Plains, where deposit dates can be entered from a prior accounting period without system flags, creating a risk that deposits could be recorded in the wrong period.

Hamilton said the exceptions were site‑level and did not rise to a material misstatement affecting the division’s financial statements, but recommended management strengthen processes, adopt pre‑numbered or electronic receipt systems, and add system‑based restrictions or supervisor approval for backdated entries in Great Plains.

Committee members pressed staff on large carryover balances at some schools. Comptroller staff said school activity accounts are typically fee‑based and held for the purpose for which they were raised—scholarships, equipment, club activities or other restricted uses—and therefore may carry over year to year until expenditures match the intended purpose. Members noted an aggregate of tens of millions of dollars in local activity funds and asked for clearer division guidance on balances and spend‑down practices.

The audit also flagged an atypical instance where a change fund for a single sporting event exceeded operational needs and was not reconciled separately; OAG said it identified one secondary school for follow‑up and will monitor remediation. The comptroller’s office reminded the committee that change funds are generally a few hundred dollars and must not be commingled with event receipts.

As part of the audit program, OAG also reported year‑to‑year improvements in several categories (fewer schools with deficit year‑end balances, fewer untimely payments), while cautioning that areas such as safeguarding of assets and timely deposit still require attention. Hamilton said OAG integrates continuous monitoring exceptions into the comprehensive LSAF audit and communicates corrective actions to individual sites.

The audit team noted recommendations to increase adoption of electronic ticketing and payment equipment (eTix and card/digital payment acceptance) to reduce cash handling and improve traceability.

In a related agenda item, OAG presented a West Springfield business process audit that identified two findings: seven deposit slips not entered into Great Plains in a timely manner (high risk) and three cash disbursements made outside the purchasing process (low risk); management concurred with the findings.

The committee did not take formal action on the LSAF recommendations at the meeting; follow‑up reporting and OAG’s FY27 risk assessment were scheduled for future committee meetings.