Iowa City school leaders acknowledge procedural failures after public outcry over $10 million interfund loan

Community members pressed the Iowa City Community School District board on alleged financial mismanagement Wednesday, centering on a $10,000,000 interfund loan taken in August and later retroactively approved.

Emily Campbell, a district graduate and former auditor, told the board she had ‘‘serious concerns about financial oversight by both district leadership and the board,’’ saying auditors’ reports describing material weaknesses were not provided in September and that quarterly financial reports contained errors and unexplained differences in starting and ending balances.

Several speakers urged outside review. Maka Pilcher Hayek, a former district board member, said the slide deck on the loan ‘‘provides 0 explanation of why the admin took out an unauthorized loan for $10,000,000 last August’’ and called for the board to retain an external accounting firm. Matt Hayek, an attorney and former mayor, cited an Iowa Department of Education rule saying an interfund loan ‘‘must be accomplished through official board action and may not be accomplished until the board, by resolution, authorizes the loan.’’

Superintendent Matt Degner responded directly to public comment, saying the district ‘‘did not follow the appropriate board procedures, and I take responsibility for that shortcoming.’’ He added that the issue is not purely a timing matter and described a structural cash-flow concern. Degner said the district had posted for a CPA chief financial officer and an assistant controller, is working with PFM consulting to review business office practices, and is coordinating with the state Department of Education and legal counsel to correct processes.

At the financial oversight committee update, Director Lingo summarized cash-flow drivers (timing of local property tax and state aid) and said the district is below the board’s target for an unspent authorized balance. The committee described a short-term need for a $3 million to $5 million loan and said the August loan is expected to be repaid by June 30. Directors and staff discussed delayed audits, corrective-action timelines and whether outside accounting work should report directly to the board.

Board members and community commenters pushed for clearer, auditable financial reports. Director Pratt said the quarter report now carries a front-page disclaimer identifying the numbers as unaudited and said sources will be shown more clearly going forward. Board members asked for corrected quarterly tables, access to auditors, and assurances that future outside reviews would provide independent analysis for the board.

Procedural business at the meeting proceeded: the consent agenda and multiple policy items were approved by roll-call/online vote with all directors recorded as voting in favor. The board scheduled additional budget work sessions and a regular meeting later in the month to consider short-term cash-flow strategies and potential budget reductions.

The board did not take a formal new vote tonight on the August interfund loan itself; public commenters described a prior retroactive approval and sought more information. The district plans follow-up meetings and outside reviews; the board flagged audit completion and corrected reports as prerequisites to definitive financial decisions.