[Mpls] $29,000 glitches

[Steve Brandt]

Mark Hanson asked if Minneapolis Pulbic Schools has an internal audit department or an outside auditor.

I do not believe that MPS has an internal auditor.  The district does have internal controls, as many large organizations do.  These are designed to provide a measure of internal check on uwarranted expenditures.  But their effectiveness depends on the controls, how well the finance and budget departments are staffed, and whether higher-ups heed what these departments recommend.  Outside auditors have told the district previously that it is understaffed in the finance area, and I believe there were some hires there earlier this year.

An internal audit is no substitute for an outside audit.  The difficulty with outside auditing, as I understand it, is that it is an effort to check on typical transactions on a sample basis.  The goal for an auditor is to be able to say whether these representatrive transactions indicate that the financial statements either fairly represent the finances of the organization, or that the auditor is not confident that they do.  Auditors also suggest procedures that will strengthen financial controls or financial health.  State and federal auditors also audit grants to the district.

Just like reporters, auditors also benefit from tips on things to look into.   My strong impression is that previous outside audits didn't uncover this issue.   I'm confident that Deloitte Touche, the district's outside auditor, is now aware of this issue.  The internal memo that raised the issue about Audrey Johnson's health insurance premiums was written in May of this year.  The audit for that fiscal year ended in June typically is presented in December or January.  Often, related party transactions involving the officer or director of a private corporation are disclosed in SEC or other filings, and the same obligation is imposed on government agencies, according to accountants whom I consulted.  However, the threshold for mandating the reporting of them is "materiality," which can be a slippery concept.

Those who want to view the district's most recent outside audit may do so at: http://financeandbudget.mpls.k12.mn.us/Annual_Financial_Report.html 

Steve Brandt
Star Tribune