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Helmut Schmidt, Published August 19 2010

West Fargo district fixes $1.3M in building fund errors

About $1.3 million in accounting errors on kindergarten center construction projects were found and fixed in the West Fargo School District’s books, members of the district’s budget committee were told Wednesday.

The findings are good news and bad news for the district, Business Manager Mark Lemer said.

The good news is that the errors in the building fund don’t appear to have affected the district’s general fund budget. Plus, fixing the errors gives the School Board accurate numbers for decision-making, Lemer said.

The bad news is that the errors must be reported to the state auditor’s office. That could bring sanctions as light as a note in the audit findings or as serious as a formal finding, which could trigger a wider audit of the district’s finances, Lemer said.

The auditor’s office has been informed of the error, Lemer said.

Superintendent David Flowers said it was important to be as “transparent and clear” as possible with the public about the errors. He said he hopes that self-reporting the problem, and Lemer’s solid reputation in the education finance community, will encourage the state’s auditors to keep the consequences light.

The errors were related to how $1.1 million in expenses for building an addition to the Lodoen Kindergarten Center and construction of the Osgood Kindergarten Center were accounted for, as well as $200,000 spent to remove contaminated soil from the Lodoen site, Lemer said.

In both cases, expenses were assigned to the wrong areas of the building fund ledger, he said.

Lemer said the mistakes don’t represent mismanagement by the previous business manager or superintendent, but could have misled the board and auditors about how much money was actually available.

At first, Lemer said it appeared there was

$2.4 million in the state construction and capital projects reserve fund. After the restatement, there is $1.1 million available.

Lemer said if the board members had made decisions using the incorrect figure, they might have agreed to projects not supported by the true revenues available.

The kindergarten facility construction fund was readjusted from a negative $1.4 million balance, to a negative $104,000 balance. The construction expenses were transferred to the state construction and capital projects reserve fund, where they should have been charged in the first place, Lemer said.

Lemer said $240,000 in negative balances for construction of the kindergarten facilities, Sheyenne Ninth-Grade Center and Aurora Elementary will also be transferred to the state construction and capital projects reserve because funds from the district’s 10-mill construction tax levy can legally be used to pay for those expenses.

A negative $30,000 balance in the special assessments fund will be cleared up by adjusting future levies, Lemer said.

Lemer said representatives of the state auditor’s office will examine the district’s books Sept. 27 to Oct. 1. It will take about 45 days to get the audit results.

Readers can reach Forum reporter Helmut Schmidt at (701) 241-5583