NTF ISSUE PAPER: OMAHA PUBLIC SCHOOLS AUDIT ALARMING

NTF issue paper: ops97.doc. 12-20.
NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:
OMAHA PUBLIC SCHOOLS AUDIT ALARMING.

BACKGROUND
. Nebraska law prescribes budget practices and procedures subdivisions like school districts must adopt. The Omaha Public School District hired Seim Johnson to perform audits dated August and November, 2020. Examination of these audit reports should alarm not only OPS resident taxpayers but also state taxpayers who help subsidize OPS with state aid. No comment yet by OPS board members regarding this audit.

NOVEMBER REPORT
. The initial good news was that general fund expenditures were $75.3 million under budget. However, total liabilities increased $191.2 million to $1.8 billion, while total assets increased by only $156.2 million to total $1.4 billion. Total general fund revenue of $725.2 million in FY 2020 compared to $700.2 million in 2019 while higher program expenses of $788.8 million in FY 2020 outpaced $766 million in FY 2019 (Seim Johnson OPS Audit, 11-2020, pp. 8-9). The OP$ grossly underfunded net pension liability increased $54.6 million to $848.1 million. The OP$ portion of the net pension liability totals 89.7%, state taxpayers paying the remainder. In 2020, the OPS pension fund appeared funded at only 59.55% (Seim Johnson OPS Audit, 11-2020, pp.11-13).

AUGUST REPORTS
. This audit identified problems in internal accounting controls that auditors believed material weaknesses and significant deficiencies. The firm recommended that OPS review its financial preparation processes to identify efficiencies to allow the district to produce more accurate and timely financial statements. Regarding the district spending about $95 million in federal grants during FY 2019-2020, the firm noted that specific federal and state grant programs administered by OPS through the state education dept. were not timely submitted as requests for utilizing grant funds spent for specific programs. Such lapses cause delays in cash flows with the grant fund, requiring the funds to temporarily borrow money from the General Fund to help meet cash flows. The firm recommended that OPS improve processes and procedures regarding administration of grants to ensure sufficient cash flows maintained for grant administration (Seim Johnson OPS Audit, 8-20, pp. 17-19). The audit tests necessitated having to report noncompliance under Government Accounting Standards. The firm found internal control deficiencies, continuing that the design and operation of OPS internal controls should allow employees to prevent or detect misstatements on a timely basis, whereas OPS apparently continually misstated appropriate capitalization of assets and depreciation expenses. Seim Johnson discovered that OPS maintains a separate asset management module in its accounting system that interfaces with the general ledger but not utilized correctly. In addition, a software upgrade caused problems within the asset management module of the accounting system. Specific capital asset additions not properly entered into the accounting system, resulting in errors not detected or corrected by internal controls. The firm recommended strengthening internal controls over financial reporting processes relating to capital assets (Seim Johnson OPS Audit, 8-20, pp. 80-81). Expenditures for FY 2019-2020 exceeded the amounts budgeted in the OPS debt service fund. Debt refinancing costs exceeded budgeted expenditures based on debt refinancing transactions. OPS incurred higher than budgeted spending for payments made upon advance refunding of its 2010 general obligation bonds ((Seim Johnson OPS Audit, 8-20, p. 83).

TAKE ACTION NOW
. OPS will continue to soak resident property taxpayers and state taxpayers for increased revenue, unless taxpayers successfully lobby OPS board members to reform their budgeting processes and cut costs. Email netaxpayers@gmail.com for a list of current board members and lobbying materials and join our NTF Education Watch Project.

Research, documentation, and analysis for this issue paper done by Nebraska Taxpayers for Freedom. This material copyrighted by Nebraska Taxpayers for Freedom, with express prior permission granted for its use by other groups in the NE Conservative Coalition Network. 12-20. C

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