Sept 14, 2004 (FY2003-04)

[Guest sullinss]

Proceedings of the Audit Committee

District No. 2, Yellowstone County and

High School District No. 2, Yellowstone County

Billings, Montana

 

September 14, 2004

 

Call to Order

 

Chair Jane McCracken called the Audit Committee to order at 12:08 p.m. on Tuesday, September 14, 2004, in Room 216 of the Lincoln Center. Committee members in attendance were Jane McCracken, Dale Getz, Mike Dimich, and Conrad Stroebe. Member Dick Fellows was absent. Also in attendance were Dan Martin, Business Manager/Clerk Thomas Harper, and John Jacobsen of Eide Bailly.

 

Bi-Tech Review

 

Thomas Harper advised we have been on the Bi-Tech system for several years but have not explored all the functionality of the program. We bought a web-based version of software last spring but have not implemented it. A Bi-Tech consultant will be on-site in October to review our process with the intent of improving efficiency.

 

Audit Scope

 

John Jacobsen of Eide Bailly stated the auditor’s responsibility under generally accepted auditing standards is to give an opinion on the financial statements and to make sure they are fairly stated and materially correct. They do extensive testing to answer all requirements set forth by OPI compliance mandates and compliance standards that relate to each of the federal programs. Two years ago there were problems with compliance exceptions from major federal programs. Past problems were related to particular teacher documentation of time and effort related to federal monies that was repetitive. There was no wrong doing regarding money. A formula was applied to determine if it was a significant amount of money affected which determines if it’s a major compliance issue. We are required to have a clean audit for two years after that to lift that designation. John stated the year before last there was major improvement. There were minor exceptions, but overall we were in compliance. Last year was our first clean year; there were no qualifications to any opinions. Most of the time and effort documentation has been resolved.

 

Thomas Harper said processes are in place to resolve the past time and effort documentation problem, and follow-up is being done to ensure it is being done correctly.

 

SAS 99 is a statement on audit standards relating to a requirement for fraud detection. Auditors assess the risk of fraud. If a risk of fraud is found, the design of the audit would need to be changed to look for it.

 

Thomas stated the District conducts periodic internal inventory. John stated the auditors’ follow-up on inventory; but, from an overall standpoint, inventory is regarded as a minor item from a supply standpoint. From a financial statement standpoint, it is not considered material or a great risk.

 

Thomas stated Olness & Associates provided approximately 120 hours of assistance. The Trustees Summary is used to create a trial balance that we load into another system to create the GASB 34 financials. Bi-Tech has the ability to produce financials, but the way our account structure is set up, makes it worthless. We take information from the system, then put it in the OPI system, and then load it into Olness’ software to create financials. To bring this function in-house, we’ll need assistance from Bi-Tech to eliminate one of these steps.

 

The audit timeline FY 2003-04 starts September 20th with two weeks of field work. The auditors plan to have a preliminary draft by the end of October. The Audit Committee will need to have a draft by November 12th. We will need a draft by December 1st for the Business Committee agenda. The Business Committee meets on December 6 and the Board meeting will be December 20th.

 

This will be the first audit year to have comparative statements. Thomas recommends the comparisons be done in the MD&A section. John sees the comparisons in the MD&A as the preferable method of managing the entity.

 

Conrad Stroebe believes the MD&A should address the graduation rate through performance objectives. He is asking management to tie in performance to the financial statements and perhaps consider graduation rate or the No Child Left Behind financial impact.

 

The majority of committee members believes this request to be outside the context of this committee and is not addressed in the charter. Some aspects are addressed in the fall report, and it may be more appropriate to discuss this at a COLT meeting. John stated GASB 34 requirements related to MD&A is extremely narrow and fairly definite in allowable content.

 

Sarbanes-Oxley and Local School Districts

 

John stated Sarbanes Oxley is really meant to protect shareholders within large corporations that are publicly traded. Verbiage in Sarbanes-Oxley extends to entities that may have public debt taxpayers are expected to repay. As time progresses, it will become clearer what the intent of Congress was as to how far this extends. No one expects it to extend to school districts even though school districts have a significant amount of public debt. One result of Sarbanes-Oxley is the required formation of the Audit Committee. Sarbanes-Oxley has its own standards establishing clear rules auditors must follow for a publicly traded company in addition to GAO independent standards and other rules from the Department of Labor, and other agencies.

 

Committee Members

 

The charter states two community members are required for the Audit Committee. The Chair would like to have an additional community member on the committee that has auditing or an accounting background. There may be someone from the Business Advisory Group or other committee applicants that may be interested. A public announcement at the televised Board meeting would be helpful.

 

Approval of Audit Committee Minutes of June 22, 2004

 

Dale Getz introduced a motion to approve the Audit Committee minutes of June 22, 2004. Jane McCracken seconded the motion. The motion carried unanimously.

 

Adjournment

 

There being no further business, the meeting was adjourned at 1:02 p.m.

 

 

 

 

Jane McCracken, Chair

 

 

 

 

Sherrill Sullins, Recorder