Explanation provided for county, school system audit

Published 10:04 am Saturday, November 5, 2022

Deputy Southampton County Administrator and Chief Financial Officer Lynette C. Lowe provided the county’s Board of Supervisors on Tuesday, Oct. 25, with an overview of the county’s annual audit and how it addresses the finances of Southampton County Public Schools.

The school division made available a news release Monday, Oct. 24, that, while also offering additional details, conveyed some of the same points that Lowe mentioned during her presentation.

“The county of Southampton contracts with an independent audit firm annually to perform procedures and to issue a comprehensive financial report,” Lowe told supervisors. “This annual report includes financial statements of all receipts and all disbursements made within the fiscal year that is being audited.”

She said it is important to know that an audit does not look at every single transaction. 

“A random sample is taken based on the size of the funds, the number of transactions and guidelines by the auditor of public accounts,” she said. “If within these samples there are issues or problems found, then the auditor is required to expand its audit and to look at more transactions. If they were to find more issues, then it would be a potential for the auditor to not issue an opinion or to withdraw from the engagement.

“We have never had that happen within the 12 years I’ve been here, nor any of the years prior to me,” she added.

Lowe said that another item to note is that the Southampton County school system is a component unit of the county’s financial system. 

“And you may wonder what makes it a component unit, and that is the fact that the schools have a separate governing board that is separate from the county of Southampton’s board,” she said. “There is one set of financial statements issued covering all local funds, all state funds and all federal funds for both the county and for the school board.”

The SCPS news release opened by noting that beginning with fiscal year 2021, the school division participates in the same auditing processes and procedures as Southampton County’s financial auditing. 

SCPS officials stated that the school system’s auditing process is contained under the covering agreement between Southampton County and the South Hill-based auditing firm Creedle, Jones & Associates.

Lowe encouraged people with questions on what is included in the county’s financial audit to visit the county website — SouthamptonCounty.org — where she said there are audits provided from a significant number of years.

Drawing from an audit report that she held in her hands at the board meeting, Lowe said she was going to let supervisors know some of the things that are listed in there that pertain specifically to the school board’s financial items. 

“There’s their changes in capital assets, there’s changes in long-term debt, there’s the statement of net position, there’s a disclosure statement that the Southampton County School Board is a component unit, there’s a listing of funds that are under the school board’s supervision,” she said.

She noted this listing of funds includes four: the school operating fund, the school food services fund, the school endowment fund and the school activity funds.

Continuing with her list of school system financial items, Lowe said the report “shows depreciation and asset changes, pension benefits, there’s a schedule of other post-employment benefits for school employees, there’s the balance sheet, there’s the statement of revenues, expenditures and fund balances, there are budget comparisons of school board funds, and there’s a schedule of federal awards.”

She explained that because there are more than $750,000 of federal funds that flow through Southampton County, the county is required to have what is called a Single Audit.

“You may ask, ‘What is a Single Audit?’” she said. “It’s performing three duties at one time. So of those federal funds, we have a financial compliance per governmental standards, we have the auditor of public accounts guidance, which is mainly compliance testing, and we have uniform guidance standards on the testing of the federal funds.

“So those three items are performed on the major categories of federal funds, per the standards,” she added.

She said that the Single Audit pulls together all federal funds — those of the county, of social services and of the school system.

In the SCPS release, the school division stated that within the scope of Creedle, Jones & Associates, they conduct an audit that inspects financial aspects that are beyond the basic accepted standards with supplemental reports of Required Supplementary Information and Management’s Discussion and Analysis. 

“These reports, along with the Single Audit, will result in a written report that is, upon its completion, addressed to the Board of Supervisors of the county of Southampton, Virginia,” the release stated. “Creedle, Jones & Associates states within their agreement with Southampton County that if ‘circumstances occur related to the condition of your records, the availability of sufficient appropriate audit evidence, or the existence of a significant risk of material misstatement of the financial statement caused by error, fraudulent reporting, or misappropriation of assets, which in our professional judgment prevent us from completing the audit or forming an opinion on the financial statements, we retain the right to take any course of action permitted by professional standards, including declining to express an opinion or issue reports, or withdrawing from the engagement.’”

At the conclusion of her presentation, Lowe dedicated her focus to school activity funds.

“I can tell you that in the summer of 2022, the school system did revamp its school activity manual,” she said. “I can also tell you that as of July 1, 2020, their audit firm changed for the school activity funds to the same auditor that the county has, which is Creedle, Jones & Associates.”

She said that as of fiscal year 2021, that was the first year that the auditor of public accounts required school activity funds to be included in the county audit.

“You may also wonder what type of testing happens with the school activity funds, and it’s basically at this point the same testing that goes through the regular operating funds, which are all of the local, federal and state funds,” she said.

The SCPS release noted that school activity funds receive a much more thorough auditing manner, as prescribed by new auditing standards that were placed in effect on July 1, 2020.

Lowe said that the people that deal with these activity funds have been through training within the past year. 

“So I feel like they’re more up to date now with the requirements,” she said.

Drewryville District Supervisor David B. Everett asked Lowe if she conducted the training.

“I did not, but a very experienced person did based on guidelines from the auditor,” she said.

To clarify one of Lowe’s points, Boykins District Supervisor Carl J. Faison asked, “The person who does the auditing for the county collaborates and does for the school system too?”

“Correct,” Lowe replied.

“The whole school system?” Jerusalem District Supervisor and Board Chair Dr. Alan W. Edwards asked.

“Correct,” Lowe replied.

“So there is an audit done, and there are no irregularities?” Faison asked.

“There have been no irregularities discovered, no,” Lowe said. “Like I said, it’s a sample; if the sample revealed anything, then it would go further, but that has not happened.”