Audit documents and discussions surrounding them in November and December shined a light on Covington Independent Public Schools’ reliance on state funding. Attention to rising compliance costs and costs related to facility construction also stood out the board’s talks on district finances.
“I’m mad,” said Board of Education President Tom Haggard at the December meeting.
Haggard’s comment occurred during a discussion of additional expenses associated with the district’s contract with financial services firm Barnes Denning, whose Kentucky office is based in Crestview Hills and who prepared the district’s legally required financial audit for fiscal year 2023.
District Finance Director Annette Burtschy presented the new expenses to the board: 5,100 additional dollars for the implementation of new software necessary to furnish data analysis required by the Governmental Accounting Standards Board, or GASB, a private, nongovernmental professional organization that sets the go-to standards for accounting and auditing in the United States.
“Fortunately or unfortunately, we have had new GASB standards that the accounting [and] auditing board passes down to auditors,” Burtschy told the board, “which they pass down to us.”
Haggard’s comment wasn’t directed at Burtschy herself — he made that very clear — but rather at what he said is the “crazy system that we have to deal with.”
“From our original [fiscal year 2022] auditor quote, our price has gone up 49%,” Haggard said.
Haggard talked about conversations he’d had in the district’s budgetary committee meetings, where he learned that the timing of information released by the Kentucky Department of Education on reporting standards can sometimes prevent local districts from having enough time to seek competitive bids for auditors. Burtschy affirmed this and added that the number of auditors overall has declined, making it even harder to secure a good deal.
“I think Barnes Dennig does a great job; I’m not saying they don’t do a great job, but I do feel a bit held hostage that we can’t try to competitively bid this,” Haggard said, “with a contract that’s gone up 49% in one year.”
This conversation happened in the shadow of the district’s November meeting, where the board was informed of the winning bid for a ventilation project at Holmes High School that clocked in at $7.1 million, about $3 million more than the project’s original estimate of $4.2 million. The board voted to approve the project, but not before board member Stephen Gastright told district staff that he would not approve any more building projects without seeing updated cost estimates.
Moreover, the struggle to find competitive bids for building and maintenance projects came up in board discussions earlier in the year.
In May, for instance, board member Kareem Simpson drew attention to the district’s bidding practices after the board approved repairs to the district bus depot and the gym at Glenn O. Swing Elementary. Simpson said the district needed to shore up its bidding procedures to ensure that maintenance costs didn’t become unmanageable.
The results of the audit itself revealed a mixed picture.
One of Barnes Dennig’s accountants, Daniel Damonte, presented the audit at the November meeting. By Barnes Dennig’s reckoning, the district had stable accounting practices, and the audit yielded no evidence of fraud or other crime.
But the report also shined light on the district’s recent reliance on state and federal funding rather than local tax dollars. The revenues for the district’s general fund, which is the district’s primary operating fund, only began exceeding its expenses in fiscal year 2021. In fiscal year 2023, Damonte said, the main reason revenues continued to overtake expenses was “related to increases in federal and state revenues…”
Management discussion notes from the audit report suggest the district is especially worried about the potential loss of state funding in the face of declining student enrollment and pressures to fund the state’s public retirement system. Inflation has also loomed in background of many of the financial discussions throughout the past two years.
Finally, calendar year 2024 will also see the sun-setting of federal COVID relief funds sent to schools throughout the nation.
Audit documents show that the general fund brought in about $21 million in property taxes in the fiscal year 2023 and about $31 million in grants and entitlements (compared to fiscal year 2022’s $9 million in grants and entitlements). Instruction costs are the highest cost expenditure category in the district’s general fund, clocking in at about $35 million in fiscal year 2023. The district’s average teacher salary was $49,379.
Read Barnes Dennig’s full financial audit report here.
The next meeting of the Covington Independent Public School Board of Education will begin at 5:30 p.m. at Glenn O. Swing Elementary on West 19th Street on Thursday, Jan. 11, 2024.