CFO Advice: Audit is a Year-Round Sport

Setting your schools up for a successful audit

by Jon Schwartz

We recently caught up with Delphine Sherman, chief financial officer at Aspire Public Schools. Aspire serves over 16,000 students across 40 schools in California and Tennessee. Delphine is in her eighth year at Aspire and is respected by her team as a strong and compassionate leader.

“We love our auditors, but they are hard on us. And that’s a good thing,” says Sherman. Public school systems can run into trouble when they hire the cheapest or easiest auditor who miss poor financial practices and/or weak internal controls. Sherman never wants surprises during the audit and works closely with her auditor to ensure Aspire is carefully stewarding public funds.

Here are five tips from Sherman on setting your school system up for a successful audit:

  1. Have continuous contact with your auditors throughout the year — embrace them. Aspire contemplated a complex real estate transaction so Sherman contacted her auditors before she signed the lease and asked, “What are the accounting and tax implications of signing this lease? How will you audit this?” Bringing auditors in from the beginning allows for proper accounting the first time around and avoids surprises during audit season. Sherman consults her auditors throughout the year on a wide variety of topics, including complex transactions, new federal programs, changes to audit guidelines, implementation of new systems, etc.
  2. Have a thorough checklist for your monthly/quarterly close. Aspire has two staff members who handle closing for the entire organization and they found a checklist was the best way to keep entries from getting missed (e.g., deferred rent, 403(b) adjustment accruals, etc.). See an example of Aspire’s close checklist. Sherman is a fan of Atul Gawande’s Checklist Manifesto and how they can be used to improve complex procedures.
  3. Set yourself up for an easier end-of-year audit. Aspire views its audit as a year-round sport. By properly accounting for transactions early and executing thorough quarterly closes, the team avoids an end-of-year crunch. And Sherman can spend more of her time “dipsticking” Aspire’s accounting for errors in the way federal expenditures, timesheets and other high-stakes audit areas are reported.
  4. Celebrate your accounting staff. Audit reports never make the NYT bestseller list, but they are one of the most important documents going to authorizers, boards, funders and the public. “Ninety-eight percent of our organization has no idea how hard our team works for a clean audit, so it’s important that we celebrate the team that is doing this work,” says Sherman. She tries to recognize her team at home office staff meetings and gives them time to talk about the overall scope of their work (e.g., number of transactions). She also brings them to the audit committee meeting where the draft audit is presented so they can interact with the board and be thanked. “There is no magic here. We need to continuously celebrate our people. And it has to be more than just an e-mail,” says Sherman.
  5. Have a great audit committee. “We have an amazing audit chair and the committee spent two hours reviewing the report, meeting with our auditors, and asking great questions,” says Sherman. Aspire’s audit is getting harder for a variety of reasons: the organization expanded to Tennessee in 2013, real estate financings are getting more complicated, and audit requirements are steadily increasing. It is critical that the board is engaged and understands Aspire’s financial position and compliance risks as the audit’s complexity increases. “But audit committees should never be in the general ledger,” advises Sherman. “They need to be far enough out of the weeds that they can ask probing questions and be really strategic.” [See our blog: Great Charter School Board Treasurers Do These Things]
  6. Bonus from IDEA Public Schools — give your auditors a calendar. IDEA serves roughly 30k students in TX and issues public debt to fund its facilities. At the beginning of each audit season, IDEA hands their auditors a calendar of what tasks need to be completed by when to ensure the audit stays on schedule.

Artifact: Aspire Accounting Close Checklist
Artifact: IDEA Public Schools Audit Calendar

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