Staff errors led to a series of financial missteps at the North Carolina Department of Public Instruction, according to the results of a new audit from the office of N.C. State Auditor Beth Wood.
The audit found that “department management did not have adequate internal controls, including review procedures, to ensure accurate financial reporting,” and that the department’s “review over the financial statements failed to identify several significant misstatements.”
The report covers the 2019-2020 and 2020-2021 fiscal years. Specific errors mentioned include:
- General Fund federal revenues and intergovernmental receivables were understated by $35.5 million because grant revenues that were earned as of June 30, 2020, were not recorded.
- Public School Insurance Fund revenues and expenses were overstated by $26.3 million because reinsurance recoveries were not offset with claims expense.
- Public School Insurance Fund assets (prepaid reinsurance) were understated and operating expenses were overstated by $10.9 million because the reinsurance policy for the subsequent fiscal year was incorrectly expensed.
- Public School Insurance Fund investments and investment earnings were understated by $4.0 million because the investment balance was not adjusted for fair value changes at year-end.
- Capital Projects Fund financial statements were out of balance by $2.0 million for the fiscal year ended June 30, 2020.
The audit recommended that priority “is given to the design and implementation of monitoring plans and activities, including a thorough review of the financial statements to ensure accurate and complete financial reporting.” The audit also recommended that “financial reporting staff are adequately trained and possess expertise for compiling accurate financial statements.”
A response to the audit from N.C. Superintendent of Public Instruction Catherine Truitt acknowledged her office’s agreement with its findings and identified the steps being taken to correct the errors.
“The current staff have made considerable improvements in the last two years,” Truitt wrote. “DPI continues to recruit for high level managers and accountants to fill the current vacancies, and has been successful in several cases, albeit a challenging employment market … We feel confident that with the continued focus on accounting controls, the deficiencies will not only be addressed, but all of the DPI financial operations will be strengthened.”