North Marion board hears auditor's clean opinion as district reveals PERS reporting errors affecting 146 staff

The North Marion SD 15 board heard an unmodified (clean) opinion from its external auditor and a separate district report that identified widespread mismatches between payroll records and Oregon Public Employees Retirement System (PERS) reporting that affect staff retirement accounts.

The auditor, speaking for firm TKW, told the board the financial statements are presented fairly in accordance with U.S. GAAP and that the single-audit tested about $2,100,000 in federal expenditures. The auditor reported two significant deficiencies in internal controls: one related to leave balances and one related to allowable costs in the Title I payroll sample (two months recorded as Title I expenditures totaling $750). The auditor also noted an uncorrected immaterial misstatement involving fair-value reporting of an investment pool.

Separately, the district's business manager (identified in the meeting as Kim) described a records review covering January through October 2025 that found 189 individual payroll records in which earnings reported to PERS were less than they should have been; 12 months with no PERS record though the employee received pay that month; 10 records in which PERS showed earnings but the employee had no pay that month; and 28 records where reported earnings were higher than payroll. Those discrepancies impact 146 distinct staff members, Kim said, and district corrections are underway with PERS's assistance.

Kim told staff have been notified where discrepancies were identified and that the district is continuing a prior-year records review. To prevent future errors the district is implementing a three-way reconciliation process: generate PERS reports from payroll, compare the posted PERS records to what was transmitted, and track member statuses in the payroll system. Kim said some corrections are complex and require PERS support and that prior pension estimates for affected employees may change as records are corrected.

During questions, several board members pressed the auditor and district staff about why sampling did not catch the issues sooner and expressed concern about employee impacts. The auditor explained that financial-statement audits are risk-based and rely on sampling and tests of controls; some errors can escape detection in sampling even when they are consequential to individuals. Board members asked for help understanding the dollar scope for affected employees and for a path to increase confidence in controls.

The district also noted accounting changes that affected prior-year presentation: implementation of GASB standards on compensated absences and risk disclosures increased recognized liabilities and required restatement of beginning balances. The business manager said the district had a reported increase in pension-related liabilities but that prior pension bonds reduce near-term contribution rates.

The board voted afterward to accept the audit report for the fiscal year ending 06/30/2025.