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Professional Opinion

How volunteer audit committees can protect districts

Checks and balances put in place now can help solve problems later
Charles K. Trainor says an audit committee is an in-house, fail-safe mechanism that helps superintendents and the school board to identify risks and suggest solutions.
Charles K. Trainor says an audit committee is an in-house, fail-safe mechanism that helps superintendents and the school board to identify risks and suggest solutions.

Tough economic conditions and shrinking revenues have increased competition for public funds. As a result, school districts are under intense scrutiny from state regulators and local taxpayers; any fiscal mismanagement receives harsh criticism.

With ever expanding responsibilities, the district administrator’s job is a complex one. Besides overseeing an effective educational program, the administrator must be knowledgeable in a variety of areas. From relevant state and federal regulations and best business practices to legal matters, safety, food services, insurance coverage and transportation, the administrator keeps many balls in the air.

Superintendents may rightly think there are not enough hours in a week to juggle all of these responsibilities themselves. But help is available. Recruiting a community-based, volunteer audit committee is an inexpensive strategy that ensures a district will not only identify risks but also develop solutions to mitigate them before outside auditors conduct their examinations.

Looking for risks

School districts face numerous potential risks. For example, student safety during dismissal must be ensured. Personnel records must be kept private. Financial transactions must be guarded against theft. And staff attendance must be monitored for accuracy.

Regulatory auditors verify a district’s financial reports and evaluate internal control procedures in an effort to promote safety, maintain privacy, limit waste and identify fraud. Such audits prevent loss of tax dollars and ensure students receive appropriate services. However, unfavorable reports can generate publicity that stirs controversy and erodes public support.

When taxpayer confidence declines, bond referendums may fail, resulting in overcrowded classrooms and delayed safety updates. Budget defeats may force districts to close schools, slash programs or lay off teachers. In addition, the public’s mistrust of an administrative team can haunt a district for years.

Audit committees

What can be done to identify and minimize risk in a district? Following best practices developed in the corporate world, many districts recruit expert help in the form of audit committees. Reporting directly to the school board, this committee supports the board’s oversight function. Forward thinking administrators embrace this strategy.

An audit committee can evaluate current district operating procedures and suggest control measures to eliminate or minimize identified risks. Clearly, this group must be composed of knowledgeable, experienced individuals.

Committee structure

Structure the audit committee carefully. Candidates must be supportive and motivated to help the district prosper. Look for relevant expertise. Consider including an accountant, an IT manager or a banker to supplement the professional knowledge and experience of the administrative team and board members.

Communication is essential. The audit committee chairperson and superintendent must develop a close working relationship based on the highest ethical standards and mutual respect for each other’s role. Include these ideals in the audit committee charter.

Manage risk

Sometimes ideal control measures are not possible due to financial or staffing constraints. In such cases, closely monitor risk areas for problems. If an outside regulator identifies a control weakness, explain that the situation has been previously identified and permanent measures will be implemented when funds become available. Until that time, the situation will be closely monitored.

This is a far more defensible position, and a better public relations response, than claiming ignorance of the risk.

An audit committee is an in-house, fail-safe mechanism that helps superintendents and the school board to identify risks and suggest solutions. Everyone benefits. Administrators collaborate with experts to identify internal control lapses that can derail a career. Board members demonstrate willingness to provide transparent government. Taxpayers are confident that the team uses best practice concepts to ensure the safety of district funds. Best of all, students benefit when district operations support the services they need for a productive future.

The audit committee can provide cheap insurance that mitigates risk. It’s a resource available for the asking.

Charles K. Trainor is president of Management Audit Consultants, specializing in internal auditing and risk assessment for the education community.