YPSILANTI, MI - An annual audit of district finances revealed Ypsilanti Community Schools had not established appropriate controls to ensure its budget was properly monitored. A presentation of a draft audit to the YCS School Board by Finance Director Damien Butler during a special Jan. 8 meeting showed auditor Yeo & Yeo had four findings of "material weakness" on internal controls of district finances that need to be corrected. While it had not officially been completed at the time, the presentation of the 2022-23 fiscal year audit findings was given to update board members on what corrective actions are being taken to address the district's internal financial controls. Although the school board initially moved to approve the audit in its draft form, the motion was rescinded after some board members expressed concerns about approving it as presented. A finalized version of the audit is expected to be up for approval during the board's next meeting on Jan. 22. Turnover in the district finance office, including the four-and-a-half-month gap between his arrival and former finance director Priya Nayak's departure, resulted in financial information that was incorrectly entered into the the system, Butler said. "There was information that we created that wasn't (entered)," Butler said. "We got that information in after the year closed. We have to pay more attention to that moving forward." There were material weaknesses in the district's financial reporting, as YCS incurred overages in instruction, general administration, operations and maintenance, transportation, athletics and community services budgets during the past year, one finding of the draft audit showed. The draft audit also showed the 2022-23 budget presented to the YCS School Board for approval did not follow classification outlined by the Michigan School Accounting Manual and it was not imported into the district's accounting software. "The school district has not established appropriate controls to ensure that the budget is maintained during the year," the draft audit states. "The budget was not properly monitored allowing the overages to exist." Despite the findings of material weaknesses, Butler noted the audit does reflect the district is in good financial standing with a current fund balance of more than $9.2 million. "The audit has taken longer than usual because of gaps in training internally," Butler said. "It is not a reflection of our financial standing." Butler outlined steps the district plans to take to correct the issues, including training with new software for all business office employees, completing amendments for all updates to budgets and collective and individual training focused on year-end close out procedures. Transitions in the finance department resulted in some gaps in the audit that are "to be expected," expressing confidence in Butler that the issues would not persist, Board President Celeste Hawkins said. "We know our path to get these findings corrected will be resolved," Hawkins said. The audit has since been completed and that district financial information is being filed with the MDE Office of Financial Management, YCS Superintendent Alena Zachery-Ross said, noting the audit showed the district is in good financial standing. "Turnover of Business Office staff members and other critical contributors during the 2022-23 school year has impacted processes and exchange of financial information," she said. "In some cases, information needed to be researched and validated before it could be used by the auditors." Zachery-Ross said she's confident the business office has standard operating procedures and staffing in place to ensure sound fiscal management of the school district in the future. "Like many school districts across Michigan, Ypsilanti Community Schools faced staffing challenges - including in its finance department - due to workforce shortages last school year," she said. "Through the concerted efforts of the district's leadership team, we have made vital staff additions to the finance department to ensure continued sound fiscal management." Financial statements initially misstated During the audit, the school district's internal controls did not detect all adjustments necessary to properly record year-end balances. As a result, the school district's financial statements were initially misstated, according to the draft audit. Multiple adjustments identified by both auditors and YCS were provided in order to reach proper year-end balances during the audit. The draft audit noted there were three trial balances reported after the audit began, as well as five versions of the schedule of expenditures of federal awards provided, before sufficient balances were able to be audited. The school district's final budget also could not be provided in the proper format. The audit also had repeat findings that YCS had not established controls to ensure its payroll records for the State Office of Retirement Systems (ORS) were properly reconciled. As a result, there is an increased risk that information reported to and payments made to the office are not appropriate, the draft audit stated. YCS is responsible for ensuring that the amounts reported to the ORS agree with the school district's payroll records. The audit showed there was no report provided to the ORS for five of 13 samples of new hires and no report provided for one of two exiting employees. "We noted variances between amounts calculated to be paid and amounts paid to ORS in every pay date during the year that was required to be addressed," the draft audit states. The audit recommended that YCS establish policies and procedures to ensure amounts reported to ORS are reconciled to the school district's payroll records for each pay period. In the past, Butler said YCS had input employee information into the system to the ORS by hand. In the future, the district will enter the information through its New World technological interface to better account for changes to the ORS system, Butler said. A fourth finding of material weakness from the audit showed YCS' point of sale system for school lunch records could not be reconciled or agree to the reimbursement requests for the auditors' sample of three claims. The lack of reconciliation or other records to explain the difference could have resulted in the school district over or under requesting reimbursement from the Michigan Department of Education, the draft audit stated. YCS board member Gillian Gainsley said after reviewing the financial figures and changes the district has in place with its new accounting software, she was pleased to hear the finance team was being proactive to address issues from the audit. "As much as we're disappointed that this (audit) has taken as long as it has ... I came out of that meeting confident we were on a good path to resolving some of these issues," Gainsley said. Want more Ann Arbor-area news? Bookmark the local Ann Arbor news page or sign up for the free "3@3 Ann Arbor" daily newsletter.