The Madison County Commissioners voted unanimously last week to order an audit of the Ennis School District’s books dating back to 2005.
The request for the audit came from county treasurer Shelly Burke, who has been concerned about how the school district has been spending money for the past several years.
Burke’s concerns center around the new school project, which is being paid for in part by money from Ennis School District’s Adult Education and Transportation funds.
“I don’t think that’s normal at all,” Burke said Tuesday. “The taxpayers don’t vote for transportation, they don’t vote for adult education, they do vote for a building reserve.”
Questions surrounding the school district’s finances are at the heart of a civil lawsuit filed by Ennis resident David Kelley against the Ennis School Board and superintendent Doug Walsh.
Kelley’s lawsuit claims, in part, that the school board inappropriately spent money out of the district’s transportation and adult education funds on the new school, which is nearing the end of phase one of construction.
The school board maintains that the money was and continues to be spent in accordance with Montana law.
Initially, the commissioners weren’t unanimous about the audit, said Madison County Commissioner Jim Hart, who himself is a retired Ennis schoolteacher.
Hart wasn’t in favor of the idea, but was swayed by the idea that doing an independent audit may put some questions to rest that have been swirling around the school board.
The school district has audits done on an annual basis and nothing illegal has turned up in those audits. And last fall, the Montana Office of Public Instruction reviewed the Ennis School District’s audits and found nothing illegal.
“Ultimately the question about the need for an audit is out there and my thought is whatever is found will come up with the same conclusion OPI has, that nothing illegal is going on,” Hart said. “I was going to vote no, like I said, and then I simply said I’ll agree with this because it will get things out on the table.”
The county will pay for the audit, but the cost is still unknown.
Madison County Commissioner Dave Schulz supported the request for an audit because the issue keeps coming up and has been a big concern for Burke.
“She has been bringing this to our attention a number of times for the last six to eight months and maybe even longer,” Schulz said. “I just felt we needed to support her request. She’s an elected official and she works closely with the school districts.”
The question of whether or not the commissioners had the authority to order the audit was brought up at the meeting, but Madison County Attorney Chris Christensen believes the authority is there in Montana law.
“The commissioners have the general authority over public funds used in the county,” Christensen said.
However, the audit will wind up being a waste of taxpayer money, said Ennis School Board Chairman Marc Glines.
“There are many other ways money could be spent better than redoing an audit that was done not once but twice this year,” Glines said. “We’re more than happy to submit to another audit. It’s just a shame the way it’s done. People of Madison County should be concerned about that.”
The second audit Glines referenced was actually a peer review of the school district’s auditor, which was done this year as required by the state. Each governmental auditor in Montana must be peer reviewed every three years.
A peer review is different than an audit, said Ross Stalcup, who has audited the Ennis School District’s books for the past several years. A peer review is done to ensure an auditor is following the appropriate practices when conducting audits, he said.
“It’s just a normal, reoccurring thing,” Stalcup said.
In a letter to the school board and the county attorney’s office last summer, deputy state superintendent Dennis Parman said he didn’t find anything illegal in how the Ennis School District is conducting their business. And after another recent review of past audits and budget information, Parman still comes to the same conclusion.
“We haven’t been provided with anything that would drive us to say that given the information we’ve reviewed here that we think there’s something that’s happened that was improper,” he said.
The problem for Burke is that state law says money levied for a certain purpose, like adult education and transportation, must be spent for those purposes.
Stalcup agrees and when the school board started moving money from the transportation and adult education portions of their budget into the district’s flex fund to pay for the school construction, he raised the question with the school board and their attorney.
The school’s attorney crafted an opinion supporting the school board’s transfer of funds into the flex fund and that money being spent on the new school building, he said. That opinion and the letter from Parman at OPI were included with his audit report.
One thing that isn’t clear is what the commissioner’s audit will look for and if it will look for anything different that the regular audits done by Stalcup.
“If the county commissioners are requesting a special audit, in the vernacular of people who do audits that’s not the same kind of audit that occurs on an annual basis,” Parman said. “That annual audit only goes so deep. A special audit could go much deeper.”
The regular audits school districts are required to perform provide a good overview of the district’s books, he said. Red flags can certainly arise and it’s not uncommon for the auditor to suggest a district make changes to their financial process.
“Its main accomplishment is to give an opinion as to whether the financial statements are fairly presented,” said Dennis Peck, an auditor in Dillon who has done school audits for the last 30 years.
The annual audit will also look at whether the school district is operating in accordance with the laws of the state, Peck said.
If the commissioners are concerned with some specific funds within the Ennis School District’s budget, then they should look directly at those funds, he said.
“I think they should probably look at the areas that are in question,” Peck said. “They could come in and say we want procedures to address these funds.”
If a new audit does find something, Parman and OPI would obviously be interested. He and his staff continue to look into Ennis financial records as part of an internal review.
“So far we haven’t found anything that’s raised to the threshold for us that says ‘hey we missed that’ or ‘here’s something new,’” he said.
The next step for the county will be to find an auditor and worked with them on the scope of the audit.