Auditors find problems with Royal school reports

ROYAL CITY - State auditors found problems with how the Royal School District prepares its financial reports.

The Washington State Auditor's Office issued the finding as part of its audit of the district. The office regularly examines the records of governmental agencies examining financial reports, accountability and compliance with state laws, according to the report. The auditors examined the district's records from September 2009 to August 2010.

Auditors found seven areas in the district's financial statements with mistakes. The report states staff didn't follow the instructions in the state's accounting manual for school districts and no one reviewed the financial statements to identify errors, according to the report.

"District management relied on training and procedures given to them by prior management and did not gain sufficient understanding in these areas," according to the report.

The largest of the areas was reports on "compensated absences." District Business Manager Clinton Sherman said the district is required to report times when employees use sick leave or other times when they receive compensation for being absent. The formula the district used to report the absences was incorrect.

"We accidentally overstated our liability," he said. "We were accidentally making ourselves look like we were worse off than we were ... It's really as simple as a formula on a spreadsheet."

The report states the district hasn't calculated the figure correctly for the past eight years. For the current year, the figure was $1.7 million more than it should have been.

Sherman said it wasn't likely the district would have received a finding if the number wasn't as large as it was. When he asked why the auditors didn't find the problem earlier, they told him they examine different items every time.

"Sometimes things slip through. That's why we're audited every year," he said. "I don't know how it slipped through. There's no malice in it. It's very simple to fix."

The report also states the district didn't report the amount of grant funds it expected to receive at the end of the year in the amount of $218,000. Auditors also pointed out problems with reporting on 16 federal programs, stating the district spent $182,584 more than it reported in six programs and spent $53,566 less than it reported in eight programs.

Sherman explained the problems with the federal grants came from him over analyzing the figures to avoid problems from the previous year.

"I was overly concerned with the thing we had the prior year and, in doing so, I created a whole different issue," he said.