1. The legal requirements and Process performance of lisd
Internal Audit in LISD
The legal requirements and Process performance of lisd

2. Legal Requirements
The Board shall select the internal auditor if a district employs an internal auditor. The internal auditor shall report directly to the board. Education Code

3. Legal Requirements
Public information is available, at a minimum, to the public during a district’s normal business hours. Gov’t Code An audit working paper of an audit performed by the district auditor, including any audit relating to the criminal history background check of a public school employee, is excepted from public disclosure. If information in an audit working paper is also maintained in another record, that other record is not excepted. Gov’t Code

4. State Requirements
The financial statement audit is performed to determine (a) whether the financial statements present fairly the financial position, results of operations, and cash flows or changes in financial positions of the school district in accordance with generally accepted accounting principles, and (b) whether the school district has complied with laws and regulations for those transactions and events that may have a material effect on the financial statements. A single audit must be performed in all instances when a school district expends $500,000 or more from federal awards. Texas Education Agency’s Financial Accountability School Resource Guide

5. The Three Lines of Defense

6. Internal Audit vs. External Audit
Copyright © 2017 by The Institute of Internal Auditors, Inc. All rights reserved.

7. Comparison of Auditors
External Auditor
Internal Auditor
Employed by the Board of Trustees
Requirement by the State
Scope of work set by Federal and State government
Audit is focused on finances
Tasked with providing reasonable assurance about whether the financial statements are fairly presented
Employed by the Board of Trustees
Not a requirement of the State
Scope of work is approved by the Board of Trustees
Audit is focused on the adding value and improving district operations
Tasked with looking for inefficient practices, fraud, and corruption

8. Key Areas of Internal Review
Club/organization minutes
Compliance with all guidelines
Cash management / safes
Conflicts of interest
District guidelines
Fundraisers
Network access
Procurement
Use of taxpayer funds
Internal controls
Procedures
Contracts
Credit card usage
Dual controls
Efficiency
Employment / hiring practices
Reimbursements
STAAR / EOC testing
Timesheet review / approval
Trends

9. Key Areas of External Review
Board minutes
Budget and cash management
Compliance with all laws
Grant management
Maintenance of effort
Procurement
Use of taxpayer funds
Financial statement accuracy
Internal controls
Payroll accuracy / coding
Questionnaires
Board
Management
Related party transactions
State aid reconciliation
Recording of settle-up
Spending requirements
Third party confirmations
Litigation
Tax collections

10. Differences in Types of External Audits
Annual Financial Report (AFR)
Comprehensive AFR (CAFR)
Minimum requirement for school districts
Basic financial statements
Required supplementary information
Highest level of transparency in financial reporting
Includes everything in an AFR along with the following:
Combining & individual statements
Schedules & statistical tables

11. Key Points of LISD Audit
General Fund
$ 16,223,659 surplus
$137,207,633 in fund balance
Debt Service Fund
$ 9,611,287 surplus
$ 35,269,223 in fund balance
Unmodified opinion
Highest level of assurance
Clean audit report
No financial statement findings
Compliance with all laws/rules

12. What is the Purpose of Fund Balance?
Covering cash flow deficits in the fall until property taxes are collected in January
Legislative cuts and unfunded mandates
Lower interest rates on district bonds
Ongoing support for educational programs
Unforeseen expenditures and disasters

13. Fund Balance Guidelines
The State provides guidance to schools that each district should have two months of cash disbursements to cover any cash flow deficits – no focus is given to the debt service fund.
The foresight of the LISD Board includes the following expectations of administration for fund balance:
Maintain two months of operating funds in reserve
Goal shall be to have three months of operating funds in reserve
Maintain at least 20 percent of the next year’s interest & sinking requirements
Goal shall be to have 30 percent of next year’s interest & sinking requirements

14. Questions?
Answers