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District auditor gives "unmodified" opinion but flags $1.3M deficit, overdraft and restricted‑fund misuse
Summary
District auditor Denise Keane reported an unmodified audit opinion but identified material findings: a -$1.3 million unassigned general fund balance, a reported $1.6 million bank overdraft, and use of restricted capital/construction funds to cover general operating expenses, which the auditor said violates state law. The board heard the findings and discussed corrective monitoring steps.
Denise Keane, the district's auditor, presented the highlights of a 92‑page audit and said the financial statements received an "unmodified opinion," meaning the statements are presented fairly in all material respects.
But Keane told the board the audit also included material findings the district must address. She pointed to a negative unassigned general fund balance of $1.3 million and a bank overdraft of $1.6 million, both of which she said stem in part from paying operating costs from restricted capital and construction accounts. "You're really using restricted funds to cover your general operating expenses, which is really not allowed," Keane said.
Keane explained that a larger negative line on the balance sheet — about $6 million in the audit presentation — largely reflects pension and OPEB liabilities that are included under accounting rules but are not amounts the district must pay in the short term. Still, she urged the board to focus on cash‑flow and budget monitoring. "When you look at the real numbers ... your unassigned fund balance is a -1.3 million," she said, adding that the district budgeted a $2.1 million deficit but finished closer to a $1.3 million shortfall.
Keane also reviewed federal funding: the audit lists roughly $2.5 million in federal funds for the year, including about $156,000 remaining from prior COVID allocations that the district had spent during the fiscal year. She raised two items classified as material findings: the general fund overdraft and a budget/expenditure excess that requires board attention. Management points and recommendations appear later in the report for board follow‑up.
Board members asked for clarifications about page references and noted the audit's late timing — Keane said federal compliance guidance arrived late this year, delaying testing and reporting. Keane told the board she is available to answer questions and offered to continue work with district staff if the board chooses to contract her services again.
What happens next: Keane recommended that the board and administration monitor monthly budget performance, correct use of restricted accounts, and address the audit's management points over time. The board said it will review the audit details and follow up on budget corrections and compliance steps.
Ending: The audit presentation closed with Keane noting progress on long‑term pension liabilities and offering to provide balance‑sheet updates; board members thanked her and moved on to other agenda items.
