Auditors give Elk River School District a clean opinion; new accounting rule increases entity'wide liabilities by about $18 million

Mr. Reagan, the lead auditor, told the Elk River School District Board that auditors issued an unmodified opinion on the district's financial statements for the year ended June 30, 2025. "We did, issue an unmodified opinion on your financial statements again this year," he said.

He said a change in government accounting reporting of compensated absences (sick leave, PTO and vacation) required the district to accrue those liabilities on entity-wide statements rather than only recording long-term sick-leave liabilities at termination. That change "caused a restatement of your net position of just under $18,000,000," Mr. Reagan said. He emphasized the change affects the district's entity-wide (accrual) statements and does not alter how the general fund is accounted for or how cash is spent at the fund level.

The auditor also said the district earned more than $750,000 in federal awards this year, which normally requires a separate single audit of federal expenditures. "We're not allowed to issue that separate ... single audit until [the federal compliance supplement] is out there," Mr. Reagan said, explaining that the 2025 compliance supplement had not been finalized by federal agencies. He noted the Minnesota Department of Education has indicated the federal deadline has been moved and the single audit is expected to be issued by March 31, 2026 if guidance is finalized.

On internal control and compliance testing, Mr. Reagan reported no internal control weaknesses and no instances of noncompliance in the tests performed, but he flagged one routine timing issue: one sampled invoice was not forwarded to the business office and therefore was not paid within the statutory 35-day payment window. "Once it got to the business office, it did get paid timely, but that delay ... caused it to be longer than 35 days," he said.

The presentation reviewed fund-level details: roughly $92 million in general fund cash at year end (down about $6.5 million), total fund balances of about $72.3 million (down about $8.8 million), and an unassigned fund balance of approximately $17.8 million (about 6.5% of budget). Mr. Reagan explained components of restricted, committed and assigned fund balances and how midyear budget amendments and site carryovers affect year-end reporting.

Board members asked for clarification about how the compensated-absences accrual appears in financial statements. Mr. Reagan reiterated that the accrual changes the measurement of long-term liabilities in entity-wide, full-accrual statements but "will not change how that liability hits your general fund." He answered procedural questions about audit timing and the additional work required for actuarial estimates and audit steps.

The audit presentation concluded with the board thanking the audit team. The single audit remains pending until federal guidance is finalized; the district and auditors said they expect issuance by March 31, 2026 if the compliance supplement is released as anticipated.