Key Takeaways
- School districts gain greater audit value from firms that deliver risk assessment, governance insight and school district expertise beyond compliance requirements.
- Audit quality varies by firm; experienced school district auditors strengthen financial reporting, identify operational risks and enhance board oversight and stakeholder confidence.
- When selecting an audit firm, boards should prioritize responsiveness, technical expertise, communication and school district experience over fees alone to support fiduciary responsibilities.
A school district’s annual financial statement audit is a required exercise and an important tool for accountability, transparency and public confidence. For many districts, the audit process creates additional work for the business office and, at times, uncertainty for administrators and board members. Engaging the right firm to perform the audit is an important decision that requires a thoughtful approach.
Going through a search process to engage an audit firm can be time-consuming and stressful. Did we hire the right firm? Do they have enough experience auditing school districts? Do they understand the financial reporting, state aid, grant compliance, budgeting pressures and governance responsibilities unique to public education? They were the most cost-effective, but are we really getting the best value?
Why Audit Quality Matters
For some, audits are regarded as a commodity that results in the issuance of an auditor’s opinion on the fair presentation of the school district’s financial statements in a standardized format. Although an audit opinion is standardized, the comprehensive quality of the audit work, the depth of the audit firm’s school district expertise, the industry-specific insights they provide to the board and administration and their ability to identify operational and compliance risks are not standardized.
If audits are indeed commodities, every firm would identify the same risks, communicate them the same way, provide the same insights and recommendations and furnish the same financial statement user confidence. Of course, in reality, that is not always the case, where differences in quality, expertise and additional governance oversight can be significant, particularly for school districts operating in a highly visible public environment.
For school districts, these differences matter. Districts manage taxpayer resources, navigate evolving regulatory and reporting requirements and are accountable to boards, communities, taxpayers, bondholders, regulators and other stakeholders. A strong audit firm brings more than a checklist approach. It provides perspective on internal controls, budgetary practices, financial trends, emerging risks, compliance requirements and opportunities to improve financial operations.
Audit Firm Selection
Fortunately, in most cases, searches for new audit firms are generally not an annual occurrence. They can be initiated for any number of reasons, including dissatisfaction with the district’s current firm, a “good governance” practice to ensure the district is receiving adequate service at a fair price or an existing board policy that requires a search process at established intervals.
Regardless of the reason, selecting a new audit firm is not always easy and should include consideration of several factors. The best value a school district can derive from its audit firm occurs when their mutual relationship is based on a strategic partnership — one where the best interests of the district, its students, taxpayers and community take precedence. The best audit firms are less like vendors and more like trusted advisors. With this type of relationship, the audit is no longer merely a compliance exercise.
An excellent audit delivers assurance, insight, governance value and recommendations for operational improvement while strengthening public trust in the school district’s management of its financial resources.
Qualities to Seek When Looking for an Audit Firm
Operational qualities and reputation of the prospective audit firm go well beyond fees. School districts should consider the following when searching for a new firm:
- Are the responsible partners actively engaged on the assignment?
- Is firm leadership involved in risk discussions with administration and, where appropriate, the board or audit committee?
- Are technical specialists accessible when complex accounting, reporting or compliance matters arise?
- Is the firm reputable in the school district environment and recognized as an experienced specialist?
- Does the firm understand the financial, operational and compliance issues specific to public school districts?
- Is the firm responsive to questions and concerns throughout the year, not only during audit fieldwork?
- Does the firm encourage year-round communication with its clients?
- Does the firm communicate clearly with the board, superintendent, business administrator and finance team?
- Does the firm provide insight into financial outcomes, ratios and other metrics, cybersecurity risks, internal control weaknesses, grant compliance matters and best practices?
- Does the firm use technology to facilitate the audit process and reduce the administrative burden on district personnel?
- Are timelines met regularly, including deadlines tied to board reporting, regulatory filings and other required submissions?
- Does the firm provide training and thought leadership on topics relevant to school district finance, governance and compliance?
- Is the firm regularly peer reviewed and receives no letters of comments?
Choosing the “Right” Audit Firm
Ultimately, the board makes the decision to engage an audit firm based on their predetermined criteria. But is the real value of choosing the right firm also carefully considered? A school district may receive an audit report on the fair presentation of its financial statements that looks like others, but the real value of an audit is not the report itself.
The value is in the level of the firm’s school district expertise, the integrity and thoroughness of the audit process, including a robust risk assessment, the insights provided and the effective communication to the board, audit committee and finance team that reinforces their fiduciary responsibilities.
For school districts, the right audit firm can help strengthen transparency, improve oversight, identify risks before they become larger issues and support confidence among stakeholders who rely on the district to manage public resources responsibly.
We Can Help
PKF O’Connor Davies serves more than 80 school district clients, helping districts navigate audit requirements, financial reporting, compliance obligations and operational challenges with a deep understanding of the public education environment.
Todd R. Saler, CPA, RMA, PSA
Partner
tsaler@pkfod.com | 856.782.2889
Amy R. Neimeister, CPA, RMA, PSA
Partner
aneimeister@pkfod.com | 856.454.2325
Michael P. Craigen, Jr., CPA, RMA, PSA
Partner
mcraigen@pkfod.com | 856.454.3086