State auditors issue disclaimer of opinion for Williston Basin School District No. 7; board approves FY23–24 audits

The Williston Basin School District No. 7 board on July 8 heard a state auditor warn that auditors could not reach a basic opinion on the district’s financial statements for fiscal years 2023 and 2024 and recommended a set of corrective actions, then approved the FY23–24 audits.

Mike Sher, audit manager for the State Auditor’s Office, told the board that "in both years, we issued a disclaimer of opinion," meaning auditors were unable to obtain sufficient evidence to form an opinion. Sher cited missing monthly bank reconciliations, material unreconciled cash differences that grew to about $6,000,000 for 2023 before adjustments, and other documentation gaps that prevented verification of ledger activity.

The district received 14 formal recommendations across the financial statement audit and the federal single-audit, Sher said. He identified large or unexplained ledger omissions, including $2,300,000 in state and federal revenue from the Department of Public Instruction that had not been recorded and $378,000 in Williams County property tax revenue that did not appear on the ledger. Federal single-audit testing also found unsupported expenses in Title I and ESSER samples (audit samples returned tens or hundreds of thousands of dollars of questioned costs), and procurement documentation was insufficient for selection of a construction manager at risk on a career-technical education project (JE Dunn, contract cited at about $19,900,000).

Sher said the audit team did not identify evidence of fraud in the FY23–24 testing: "Our audit for 23–24 did not identify any fraud that occurred in the audit," he said, while noting that audits cannot provide absolute assurance because they do not test every transaction. Sher advised management to pursue follow-up with the IRS on apparent payroll-payment discrepancies, including an apparent February 2023 overpayment that the bank records suggested exceeded the reported payroll-tax liability by roughly $2,000,000, and a smaller overpayment in late 2023 of about $143,000.

District finance staff and the business manager told the board they are implementing corrective steps, including electronic document scanning, segregation of duties where feasible, and a plan to complete and catch up audits for FY25 and FY26 so the district is current. The business manager said many of the staff responsible for the earlier periods no longer work in the district and that some issues reflected late or missing filings and timing differences.

Board president read a prepared statement stressing that the audit reflects an earlier period and that current district leadership has increased transparency and begun corrective action: "The audit findings released Wednesday, July 8, reflect the previous period in the history of [School District No.] 7, not the district we see today," the president said.

Votes at a glance: The board voted to approve the FY23–24 fiscal-year audits and adopted the superintendent consent agenda by roll call during the meeting (motions and roll calls were recorded by the board clerk). Management said it will work with the auditors on the governance communication and on implementing the recommendations; the auditors said follow-up audits are planned to confirm improvement.

What happens next: The auditors provided a governance-communication package to the board with specific audit adjustments and recommended controls; district management said it will pursue IRS clarification on suspected overpayments, continue its corrective actions, and expects the next audits to reflect progress.