Williston school district receives independent audit report from state

"Our responsibility is to express opinions on these financial statements based on our audit," the independent auditor stated.

The District #1 was folded into Williston Basin School District #7 (WBSD7) after a voter-approved merger of Districts 1 and 8. WBSD7 was formed in mid-2021 as a result of the merger. Seven board members from Districts 1 and 8 were elected nearly two years ago to form the new school board for WBSD7.

The Independent Auditor's Report concluded, "The School District did not maintain adequate accounting records to provide sufficient information for the preparation of the financial statements."

The independent auditor distinguished between the "effectiveness" of Williston District 1's internal control system of accounting and a "material weakness" ("deficiency") in its accounting process.

According to the independent auditor, a "deficiency" is less severe than a material weakness, "yet important enough to merit attention by those charged with governance."

The distinction addresses whether a given school district's accounting system is deliberately set up to deceive management or employees, or prevent them from detecting and correcting misstatements on a timely basis.

The independent auditor made clear: "We do not express an opinion on the effectiveness of the Williston Public School District No. 1’s internal control."

However, the auditor's report states: "We identified certain deficiencies in internal control over compliance...that we consider to be material weaknesses."

The state audit stems from discrepancies in WBSD1's financial accounting for the year 2021.

Among the report findings:

• "Untimely and inaccurate" bank reconciliation errors;
• "An excessive amount of unsupported adjusting journal entries";
• "Recorded material fund equity adjustments for the student activities fund totaling $147,650 into the general ledger. The district did not maintain supporting documentation or obtain approval for these adjustments";
• Inadequate "support documentation for the district’s accounts payable and accounts receivable that were recorded in the trial balance as of June 30, 2021";
• Failure to "maintain a detailed capital asset listing that would include additions, deletions, depreciation, and construction in progress (CIP)";
• "Misclassified special assessment debt payments" within "building fund" and failure to include in financial statements as of June 30, 2021, "special assessment debt totaling $6,262,486";
• "Misclassified expenditures that were tested totaling $628,448 which resulted in a 36% error in the sample. This error projected to the population results in a potential error of $2,920,622. Part of the $628,448 includes a $621,458 special assessment principal and interest payment that was improperly coded as district wide services in the building fund."

State Auditor Gallion made clear: "The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance."

The state audit, released Feb. 1, lists (as "School Officials") Chris Jundt, Board President; Kyle Renner, Board Vice-President; John Kasmer, Board Member; Cory Swint, Board Member; Heather Wheeler, Board Member; Sarah Williams, Board Member; and Lori Olson Interim Superintendent/Curriculum Director.

In a statement released the same day the audit report was issued, WBSD7 Superintendent Dr. Richard Faidley notified the public the state auditor's office had "concluded its audit of Williston School District One’s June 30, 2021, financial statements."

Dr. Faidley, who was offered the position of WBSD7 superintendent in July 2022, was not employed by District 1 at the time of the financial discrepancies in question.

District 1 discrepancies came under public scrutiny in July 2022, after Sherri Heser, WBSD7 business manager at the time, submitted her resignation, which the school board accepted.

A July 27, 2022 Williston Herald article stated: "Heser reported to the school board that a $2 to $4 million discrepancy was found by her in the reconciliation of accounts held by District 1 and transferred to District 7. This was after auditors had told the board that only a $400,000 discrepancy was present and that this could have been due to a clerical error."

It remains unclear whether Heser resigned after discovering accounting errors in financial records made prior to her appointment to the business manager position. Heser could not be reached for comment about the Feb. 1, 2023 state audit report of District 7's 2021 financial reporting.

The state auditor's report makes clear school management is responsible for the accurate accounting, "preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error."

The auditor issued a disclaimer at the beginning of its report to clarify that a $318,150 "unsupported adjustment" to cash amounts recorded on banking records had yet to be substantiated.

The Disclaimer of Opinion states: "We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an opinion on the financial statements. Accordingly, we do not express an opinion on the financial statements of Williston Public School District No. 1."

As a basis for the Disclaimer of Opinion, the report stated: "The Williston Public School District No. 1 does not maintain adequate accounting records to provide sufficient information for the preparation of the financial statements."

In addition, the report investigated an assertion that, "Manual adjusting journal entries into the general ledger were excessive, unsupported, and lacked approval."

In his letter to the public, Superintendent Faidley wrote: "A summary of the audit report includes 21 audit findings, all of which the current administration has responded to and provided the State Auditor's Office (SAO) with a corrective action plan to address each of these audit findings."

Among the audit findings alluded to, the report found:

• "Williston Public School District No. 1 complied, in all material respects, with the types of compliance requirements...that could have a direct and material effect on the Coronavirus Relief Fund program for the year ended June 30, 2021."
• "We were unable to obtain sufficient appropriate audit evidence to provide an audit opinion on Williston Public School District No. 1’s compliance with material compliance requirements on the Elementary and Secondary School Emergency Relief Fund program."
• "In our opinion, Williston Public School District No. 1 complied, in all material respects, with the types of compliance requirements...that could have a direct and material effect on the Child Nutrition Cluster for the year ended June 30, 2021."

In his letter, Faidley assured the public the district's "current administration and school board are committed to implementing" corrective action plans. He also explained the district's accounting processes and procedures will be reviewed and changed as appropriate to prevent any future auditing discrepancies.

"We are also committed to establishing our community’s confidence in WBSD7’s fiduciary responsibilities," Faidley concluded.

Williston Herald staff will meet with Dr. Faidley in the coming week to review and report details of the state auditor's findings.