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Audits of Walker County Schools Omit Key Required Information
This is not only a blatant failure by Walker County School Management but has also likely had adverse financial consequences for the district.
When citizens are upset about a tax hike by the Walker County Board of Education last year or a steep school millage rate in general, what do they do?
Getting to know the district financial statements is a good place to start. In other words, find out how the many millions collected by the school system each year are spent.
Sadly, annual audits of school districts have long been complex documents better suited to financial professionals rather than the average citizen. These documents can be hundreds of pages long and contain jargon few people are familiar with, except for CPAs.
Fortunately, the Governmental Accounting Standards Board (GASB) recognized this and introduced an element from corporate finance to address the complexity problem. A rule change required governments to include a plain language section in the audit that provides an objective and easily readable analysis of the government's financial activities. It's called Management's Discussion and Analysis (MD&A). In school districts, the superintendent usually prepares it with the financial staff.
If it's done well, it can explain and answer many citizens' concerns without any need to delve deeply into the numbers. It's an opportunity for management to explain how and why financial decisions are made.
Some governments meet this requirement better than others. The best MD&As speak in a narrative voice and explains complex topics in simple clear language that everyone can understand.
Unfortunately, Walker County Schools are not one of those governments. The following paragraph is included in every audit available (2014-2021) on the district's website. Emphasis added.
Required Supplementary Information
Management has omitted the Management's Discussion and Analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context.
In fact, Walker County Schools are one of only seven public school districts in the state that have failed to include this required section of the audit every year since 2016. Less than 20 failed to include it in 2021. There are 180 school districts in Georgia.
This is not only an ongoing blatant failure by Walker County School Management but has also likely had adverse financial consequences for the district.
Researchers at Rutgers University surveyed municipal credit analysts and found that "not only do they read the MD&A, but they consider a boilerplate MD&A a potential sign of careless management. In their view, if a government doesn't take the time to explain itself, it must not care what the market thinks of it. In addition, jurisdictions with MD&As that explained financial trends tended to receive higher bond ratings. One analyst characterized this as, "If we think we know your full story, we tend to see you as less risky."
Continuous and intentional omission of the MD&A is undoubtedly worse and surely cost the school district in recent bond deals.
In addition to this management failure, Walker County Schools continues to disregard state law and board ethics policies. One might even say that the leaders don't care about accounting rules, state laws, or public accountability.
Look at the test scores. Look at the student achievement data. Look at the finances. You be the judge.
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Marlow, Justin, “What’s In Your CAFR?” Governing, February 2014, page 63