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Superintendent Kathy Ludwig says there won't be repercussions from state funding delay due to reserves. The school board approved the rehiring of Pauly Rogers & Co to finish the audit.

After missing the Oregon Department of Education's financial audit deadline due to issues with an auditing firm, the West Linn-Wilsonville School Board is working to complete the process so it can receive state funding

The WLWV school district needed to file its audit by Jan. 3, 2021, to the Oregon Department of Education to meet the deadline. However, it did not do so and was not given funds for the next academic year — as of yet. An audit is a mandatory aspect of a school district financial evaluation. In Oregon, each public school district must file and complete a copy of its audit report with the state within six months of the end of the fiscal year. In 2021, June 30 marked the end of the year.

A few days prior to a special board meeting on Thursday, April 14,, the district terminated its contract with Portland accounting company Talbot Korvola & Warwick (TKW) due to the uncertainty of when the audit form would be complete.

On Dec. 16, TKW requested for an extension to Jan. 31 and mid-way through January requested to extend the audit deadline to March 31.

This deadline was extended another time to April 25.

When a district misses the deadline, the state can withhold its State School Fund payment. According to the district business office report, the 2021-22 General Fund balance is projected to be approximately $15,459,439, or 11.5% of the total revenues of the district after subtracting the one-time expenditure of $1.7 million for staff compensation.

Superintendent Kathy Ludwig said the district missed the deadline for a variety of reasons, including complications related to working with a new firm.

Historically the district establishes long-term relationships with auditing companies. This allows the two parties to get to know d how their counterparts work, according to Ludwig.

The district worked with Pauly Rogers & Co for about 20 years but, around 2017, the school board decided to rotate auditors and change firms. Wilcox Arredondo was then selected as the new auditor. In 2021, the firm alerted the district that it was closing its doors and would no longer be available to audit the district's upcoming form. The previous school board then hired TKW as the district's new auditing firm.

"Whether it's a combination of how we were operating, the way they operate, staffing, the pandemic, a lot of new grants, it became clear as we were in the process that managing our audit was taking time … the learning curve was high for us and for them," said Ludwig.

The state will release funds to the district once its audit is completed from the previous year. In the meantime, Ludwig said the financial hold will have little impact on the district's operation.

"Fortunately, we have enough money in our reserve that we are fine financially to operate, to make payroll, to do the business of the district," Ludwig said during the board meeting, when she presented a possible solution that would speed up the auditing process.

Ludwig confirmed that the district hired former partner Pauly Rogers & Co of Tigard to complete the 2022-23 audit and proposed the board approve hiring the firm to finish last year's audit as well. Because of the firm's familiarity with the district and its large staff, the company said it was confident in its ability to complete the audit in a timely manner.

A lengthy discussion occurred as board members mulled over the pros and cons of hiring the new firm. Board member Louis Taylor asked whether there would be any negative effect on the budget if Pauly Rogers was to take over auditing responsibilities.

Chief Financial Officer Son Le Hughes said no, and that the district would pay TKW no more than $30,000 for the work it completed, about $10,000 less than what the district would normally pay a company — which is about $41,500. If the district paid Pauly Rogers the same amount, it would go over the estimated budget by about $21,500, which is "not a big problem," according to Hughes.

Pauly Rogers will take about two to three months to finish the audit, according to Ludwig, after the school board approved the company's hiring.


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