To those not familiar with the audit term “unqualified” it means the financial statements present fairly, in all material respects, the financial position of the governmental activities. The entire opinion provided by the firm is located on Page 2 of the audit report located at www.audit.state.oh.us/auditsearch/results.aspx
I have heard two common questions posed by the release of this latest clean audit report. First, why did we present our financial statements in a cash basis format instead of in a Generally Accepted Accounting Principles, or GAAP, format? Ohio Administrative Code requires that all governments in Ohio present their financial statements in a GAAP format. If presented in any other format the entity will receive a citation in their report.
Why would we consciously decide to receive a citation of the OAC? The cost to convert to a GAAP basis and to have the audit completed is $15,000 or one-third the cost of a teacher. In these tough economic times when we are cutting in all areas we decided to forgo the GAAP costs and present our financials in a cash basis format. All cash activity of the district is still present in the financials.
What you lose is a detailing of receivables, payables and fixed assets. “Fifteen percent of our GAAP required clients are reporting on a cash basis now”, noted Jason Uhrig, principal at Uhrig and Associates.
The audit procedures completed by the CPA firm were no different than if we had presented the financials in a GAAP format except they did not have to audit receivables, payables and fixed assets.
Second, the cover letter from the Auditor of State’s Office located at the beginning of the audit report says they cannot render an opinion on the accompanying report. Is that because of not reporting on GAAP? NO! The Auditor of State does not render an opinion on any financial statements audited by an Independent CPA firm.
Since the Auditor of State contracted our annually required audit out to a CPA firm the state does not render an opinion. We received the same letter for the 2008 statements which were completed in a GAAP format.
When our financial condition improves I certainly recommend the District return to GAAP basis reporting as it provides more detail of the district’s finances to the reader of the audit report.
Tim Dettwiller is treasurer of Springboro Community Schools.