Flint, MI— A recent audit of Flint Community Schools finances came with good and bad news.
The audit showed a positive fund balance after the 2019-2020 school year—a significant improvement from years prior. But Plante Moran, the public accounting firm that performed the audit, noted that Flint Schools is planning to operate at a budget deficit during the 2020-2021 school year.
Operating at a budget deficit is a violation of state law, said Holly Stefanski, Assurance Senior Manager for Plante Moran.
“Because of that, we are required to identify that as a non-compliance finding in our audit,” she said.
In June, the board approved an initial 2020-2021 budget that projected a $12.8 million deficit. Due to the pandemic, Flint Schools ended up saving $4.7 million in operating costs, lowering the deficit to $8.2 million.
Flint Schools has higher than normal expenditures for a district with a student population of 4,000, Kimber Smail, an assurance partner with Plante Moran said.
Since 2009, student enrollment has decreased by 70% and the district has had to spend money to scale back and right-size.
“It has resulted in significant federal losses…the district’s still catching up with the pace that the enrollment was declining at,” and Smail said.
Other than the deficit, Stefanski identified two other significant findings.
One was a “significant deficiency related to internal controls over financial reporting.”
Stefanski said this finding only applied to a portion of the year and was resolved once Chief Financial Officer CarrieSekelsky was hired on last year.
“You transitioned from your business office being operated by an outside party to being completely in-house led by Carrie…and they made tremendous progress. All of the past findings and the issues that we have had in previous years that we’ve encountered were either mitigated to a point that was manageable…or were eliminated completely,” Stefanski said.
Flint Schools was working with Saginaw-based accounting firm Rehmann Robson prior to Sekelsky. The board voted to end the contract due to the company’s poor performance, Treasurer of Flint Schools Board of Education Danielle Green said.
“They were doing a crappy job. And we got rid of them because they cost us million dollars a year and wanted to double their fees” Green said.
Last month, Sekelsky discovered Flint Schools had been shorted approximately $2 million in tax revenue over the past 10 years, an oversight by the district’s former accounting firm.
Sekelsky resigned from her position at Flint Schools on Nov. 6 for an assistant superintendent position in Clio. Ayunna Dompreh is currently serving as interim executive director of finance.
Plante Moran’s third finding concerned the district’s contract with the Crim Foundation, a non-profit that partners with schools to create programs for youth.
“This has been a finding for the past couple of years. And it pertains to the way that the contract is written. It doesn’t line up with the rules that would be required under the federal uniform guidance standards or the state’s standards for procurements and contract monitoring,” Stefanski said.
The district and the Crim Foundation have been actively working to revise the contract, Stefanski said.
The 2020 Audit is not finalized as the U.S. Government has yet to issue audit standards on the recent coronavirus relief grants. Stefanski said it will likely be final by the end of November.
Michigan secured approximately $390 million in Elementary and Secondary Schools Emergency Relief dollars to alleviate the costs of educating students during a pandemic. The funds were included as part of the $2 trillion federal Coronavirus Aid, Relief, and Economic Security Act.
In August, Governor Gretchen Whitmer passed a series of Return to Learn bills which outlined how Michigan schools could use CARES Act dollars. She reserved $65 million for districts with a high population of economically disadvantaged students.