A recent accounts payable audit revealed numerous material weaknesses in the Flint, Michigan, School District's accounting practices, according to the Flint Journal.
The deficiencies included sub-par record-keeping and mismanagement of grant money, which resulted in a $3.7 million budget deficit. Auditors also found improperly reconciled balance sheets. Account reconciliation ensures that spending can be matched to approved disbursements. Insufficient or nonexistent balance sheet controls can make an organization more vulnerable to embezzlement or allow good faith mistakes to continue without being rectified.
Additionally, the district does not have a live AP system to track payments it owes, and journal entries are not adequately monitored, which introduces the potential for inaccurate or duplicate payments.
A total of eight shortcomings were identified by the AP audit – a higher than average number, according to David Martell, executive director of Michigan School Business Officials.
"That many problems in a school district audit is not a normal finding," he told the news source.
Conducting regular internal AP audits can help identify areas of weakness or noncompliance before outside auditors get involved.