Audit Insights - School Board Management Software Solution...an Audit of Financial Statements Performed in Accordance with ... General Fund Financial Highlights General Fund – Fund

Audit InsightsUnderstanding Your Financial Reports

Audit Insights

DallasIndependent School DistrictYear Ended June 30, 2019

2

Overview

• Introduction• Auditor Communications and Auditor Results

including General Fund Financial Highlights• Questions • Appendix

– Audit Schedule and Process– Financial Highlights– Standards Implemented in FY19– Management Letter and Communication Letter to

Those Charged with Governance

3

Overview

• Introductions• Audit Process• Required

Communications• Results• Strengths

• Opportunities for Improvement

• Financial Highlights• New Accounting

Pronouncements• Questions

Introductions

4

The Firm of TexasLargest independent CPA firm based in the Southwest

100+ Partners

700+ Employees

7 TexasLocations

- Auditor of more Public School Districts in the state than any other Public Accounting Firm.

- Auditor of the five largest Districts in the state.- Auditor of over 50 Texas Public Schools and Charter

Schools.

5

Engagement Leadership

Jerry Gaither Partner, Assurance Services

Jennifer Ripka Partner, Assurance Services

Forty one years of public accounting experienceDedicated to serving public

sector clients

Twelve years of public accounting experienceDedicated to serving public

sector clients

Nine years of public accounting experienceDedicated to serving public

sector clients

Available Throughout the Year to Discuss Issues

Claire Wootton Senior Manager, Assurance Services

TRANSITION SLIDE TITLE

Auditor Communications and Audit Results

Results• We issued the Independent Auditor’s Report on the financial

statements Unmodified Opinion

• We issued the Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Two significant deficiencies

Finding 2019-001 – Recording Bond Related Accounts Payables Finding 2019-002 – Reconciling Benefits Related Liabilities

No material weaknesses noted

• We issued the Independent Auditor’s Report on Compliance for Each Major Program and Report on Internal Control Over Compliance in Accordance with Uniform Guidance Unmodified Opinion Finding 2019-003 – Title I, Part A

Activities Allowed or Unallowed – Significant Deficiency in Controls over Compliance and Compliance

7

Results• We issued a letter to those charged with governance

including our required communications Auditor’s Responsibility under Generally Accepted Auditing Standards

(GAAS) Auditor’s Responsibility under Government Auditing Standards Auditor’s Responsibility under Uniform Guidance

• We issued a letter to management which expressed our consideration of the District’s internal controls over financial reporting Four recommendations

8

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General Fund Financial Highlights

General Fund – Fund Balance(Exhibit C-1)

$14.3 , 2%$107.9 , 15%

$590.8 , 83%

FY 2019 Fund Balance

Unspendable Assigned Unassigned

$8.9 , 2%

$112.4 , 30%

$251.2 , 68%

FY 2018 Fund Balance

Unspendable Assigned Unassigned

33

General Fund Financial HighlightsGeneral Fund – Fund Balance- Continued

• Fund balance totaled $713M an increase of $340.5M as a result of revenues exceeding expenditures by $271.8M, net transfers from other funds of $67.8M, premium paid on remarketing of $500 thousand, and proceeds from sale of assets of $326 thousand.

• The transfer of $75M was from the Debt Service fund. In 2017, the District transferred $75 million from the General Fund to the Debt Service Fund for the future payment of the 2015 Multi-Modal Limited Maintenance Tax Notes. In 2019, these tax notes were refunded with general obligation bonds. At this time, the District released the assigned funds in the Debt Service Fund and transferred the $75 million to the General Fund.

• Unassigned fund balance increased $339.5M to $590.8M which was approximately 41% of current year general fund expenditures.

• Assigned fund balance decreased primarily due to the transfer of $7.167M to the debt service fund related to the Qualified School Construction Notes.

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General Fund Financial Highlights

General Fund – Budget and ActualGeneral Fund Highlights (Exhibit G-1)• General Fund actual

revenues exceeded budgeted revenues by $49.2M. • Primarily due to a change in the

timing of SHARS payments.

• General Fund budgeted expenditures exceeded actual expenditures by $91.8M.• Function 91 exceeded budget

due to unforeseen increased Chapter 41 Recapture Costs.

• General Fund had a favorable budget variance of $141.3M.

$1,250,000 $1,300,000 $1,350,000 $1,400,000 $1,450,000 $1,500,000 $1,550,000 $1,600,000 $1,650,000 $1,700,000 $1,750,000

Budget and Actual(in thousands of dollars)

FinalBudget

ActualAmounts

Significant Deficiencies• Finding 2019-001

– Significant Deficiency in Internal Controls- Recording Bond Related Accounts Payables• During our search for unrecorded liabilities, we identified bond-related invoices

with service dates related to the fiscal year under audit that were not properly included in accounts payable as of fiscal year end and invoices with service dates subsequent to the fiscal year under audit improperly included in accounts payable as of fiscal year end.

• Recommendation- The District’s Construction Services Department should enhance procedures to ensure that any invoices received after the general ledger close process are reviewed to determine proper inclusion/exclusion in accounts payable as of fiscal year end.

• Finding 2019-002– Significant Deficiency in Internal Controls- Reconciling Benefits Related Liabilities

• During our review of liability balances, we identified a liability account with a debit balance due to the overpayment of TRS medical plan benefits payments. Upon further review it was noted a portion of the balance needed to be reclassified to accounts receivable and the remaining portion needed to be written off by the District.

• Recommendation- The District should enhance its procedures to monitor and reconcile this account monthly to ensure overpayments are properly accounted for. 9

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Single Audit Finding• Finding 2019-003

– 84.010A – Title I, Part A Department of Education, passed through the State Department of Education

– Activities Allowed or Unallowed - Significant Deficiency in Controls over Compliance and Compliance• During our review of a sample of 60 Title I payroll disbursements, we noted one

instance (instance number 1) of a non-federally funded employee’s benefits charged to the Title I program and one instance (instance number 2) of an employee’s supplemental pay coded to the Title I program when the activity did not support being coded to the program.

• For instance number 1, after the change to the Notice of Assignment, which moved the District employee’s assignment to the general fund, the District failed to move the employee’s benefits therefore the benefits were charged to the Title I program. For instance number 2, the supplemental pay was approved by the timekeeper but improperly keyed into the wrong fund, subsequently being incorrectly charged to the Title I program.

• Recommendation - Strengthen the communication process during the reassignment of employees and expand upon the controls that exist to include reviewing for additional personnel costs that may have not been moved during the reassignment process. Ensure that District timekeeper personnel are adequately trained and understand the importance of proper coding and review over supplemental pay.

Recommendations• During the course of the audit, Weaver identified opportunities for

improvement which were communicated in the management letter.

– Weaver, LLP identified cash received and deposited subsequent to year end improperly classified as cash as of year end. Weaver, LLP recommends the District review the process for accounts with object code 1118 (referred to as “check scanner” accounts) and adopt procedures to ensure that the District only report cash received and deposits in transit as reported cash as of year end.

– Weaver, LLP identified the claims reserve per the worker's compensation calculation for worker's compensation did not agree to the actuarial report provided by Milliman, the worker’s compensation actuary. Weaver, LLP recommends that District enhance procedures to ensure that the claims reserve is reviewed to that the claims reserve reflects the total liability determined by the actuary.

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Recommendations

– Weaver, LLP identified information technology equipment and capital projects purchased utilizing bond funds were not properly transferred from construction in progress (CIP) to the appropriate capital asset category and depreciated as of year end. Weaver, LLP recommends that District enhance procedures to ensure all capital assets placed in service are moved to the appropriate capital asset category and depreciated based on the District’s capitalization policy.

– Weaver, LLP recommends that the District review the current capital asset procedures related to the capitalization of classroom technology as it was noted many of the items included in construction in progress were individually below the capitalization threshold and were placed in service with lives that exceed the useful life of the items.

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• During the prior year audit, Weaver identified one significant deficiency related to the single audit. See below:– 2018-001- Significant Deficiency in Internal Controls- Payment

Authorization for Utility Expenditures Prior to Review • Recommendation- Implement a formal written process

outlining the process for reviewing and reconciling utility expenditures including a specified timeframe in which the review and reconciliation process will take place. – Follow-up- Upon receipt, the invoice data is uploaded - either

manually or electronically depending on utility type - into the energy software platform. A validation report is generated for each utility type in an effort to identify outliers. Outliers are reviewed by the Energy and Sustainability department and utility providers are notified of any discrepancies.

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Follow-up on Prior Year Items

Follow-up on Prior Year Items• During the prior year audit, Weaver identified opportunities for

improvement which were communicated in the management letter. Progress on these items are as follows:– Prior year comment: Weaver, LLP identified that the process for

disposing of assets can include the use of the “DISD Fixed Asset Transfer and Disposal Form” in Oracle or other forms of documentation in replace of the “DISD Fixed Asset Transfer and Disposal Form”. Weaver, LLP identified four instances in which sampled child nutrition capital assets disposed of during the fiscal year included Microsoft Excel and email documentation. Weaver, LLP recommends that the District review the current process and formally document the process for disposing of capital assets outside of the use of “DISD Fixed Asset Transfer and Disposal Form”. • Follow-up: District updated process for disposals to include formal

documentation of all asset transfers and disposals.

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Follow-up on Prior Year Items– Prior year comment: Weaver, LLP identified one child nutrition

capital asset in which the documented District tag number varied from the tag number on the asset. The asset was verified through the use of the VIN number. Weaver, LLP recommends the District stress the importance of proper asset management with District staff and contractors. • Follow-up: Trainings were completed with District departments

– Prior year comment: Weaver, LLP recommends that the District require formal evidence that Human Capital Management (HCM) personnel reviews Oracle to ensure that board approved contract salaries are properly entered. • Follow-up: Through the walkthrough of payroll controls in FY19, We

noted the existence of written documentation surrounding the review of salaries through Oracle.

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Follow-up on Prior Year Items– Prior year comment: Weaver, LLP recommends that the District

require the end user to include historical information or a documented strategic plan including dollar amounts to be included with the information provided to Procurement as support for the “Amount Limit” or the “Amount Not to Exceed” for contracts. • Follow-up: The Procurement Department requests this information and

any information provided is then included as support for the “Amount Limit” or the “Amount Not to Exceed”.

– Prior year comment: Weaver, LLP identified the supporting documentation provided by Dallas ISD Construction Services related to construction in progress (CIP) did not reconcile to Oracle. Weaver, LLP recommends that Dallas ISD Construction Services reconcile their records to Oracle in a timely manner. • Follow-up: CIP reconciled to Oracle and to the Fixed Assets module in

FY19.

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Material Audit Adjustments

– Material audit adjustments include:• An adjusting entry to record invoices with service dates

prior to year end as accounts payable.• And adjusting entry to reclass TRS benefits payments to

accounts receivable and write off the remaining debit balance included in the liability account.

• An adjusting entry to adjust the claims reserve to the liability balance as listed on the Milliman actuarial report.

• An adjusting entry to record the transfer of assets placed in service and depreciate the assets based on the District’s capitalization policy.

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Jerry Gaither, CPAPartner, Assurance ServicesDirect: (972) 448.6918Email: [email protected]

Jennifer Ripka, CPAPartner, Assurance ServicesDirect: (972) 448.9268Email: [email protected]

DISCUSSION

Contact us:

APPENDIX

Audit Schedule and Process

Engagement Timeline

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Initial Audit Planning

Planning Audit Committee

MeetingMay 2

Final FieldworkAugust 26-October 18

Board MeetingNovember 21

Discuss Developments/

Issues

Continuous Communication

Audit Committee Presentation

November 15

Interim FieldworkMay 13 - June 28

Weekly meetings were held through out the process with District staff to discuss status of items requested and work performed.

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Audit Process

Audit Standards — Performed the audit in accordance with Generally Accepted Auditing Standards (GAAS) and Generally Accepted Government Auditing Standards (GAGAS)

Single Audit — Performed the single audit of federal awards in accordance with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance)

Compliance — Performed tests of the District’s compliance with certain provisions of laws, regulations, contracts and grant agreements, including items such as compliance with PFIA and TEA State Compliance requirements.

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Audit Process Risk-based approach focused on specific risks, such as:

• Federal and state grant revenues and expenditures• State Foundation School Program revenue and related estimates• Construction in progress, purchasing requirements, bids and capital

assets• Payables, accrued liabilities, and expenditures

Additionally, significant audit areas include:

• Cash and investments• Capital assets• Long-term debt

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Audit Process Walkthroughs of accounting controls over significant transaction cycles

(see planning presentation with the Audit Committee on May 2nd for a list of cycles reviewed)

The performance of tests of internal control over compliance, as well as, tests for compliance related to major federal financial assistance programs. (Title I, II, and III)

Fraud interviews

Compliance testing

• Public Funds Investment Act

• TEA State Compliance requirements

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Audit Process Capital Projects/Construction testing

Bid/Procurement testing

Tests of controls over:• Cash disbursements • Payroll

Follow up on prior year recommendations

IT Control testing

Substantive testing of account balances using a combination of vouching of material transactions, sampling, and analytical procedures

Review of the Comprehensive Annual Financial Report

Financial Highlights

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Financial HighlightsComparison of Revenues by Source-General Fund

(Exhibit C-2)

$1,366.3 , 81%

$226.5 , 13%

$105.0 , 6%FY 2019 Revenues

Total Local and Intermediate Sources

State Program Revenues

Federal Program Revenues

$1,132.0 , 78%

$242.9 , 17%

$74.3 , 5%FY 2018 Revenues

Total Local and Intermediate Sources

State Program Revenues

Federal Program Revenues

Fiscal year 2019 revenues totaled $1.7 billion, an increase of $248.6 million or 17% compared to 2018.- Local Revenue increased $234.3M (primarily due to increases in tax revenue of $241M,

increase in investment revenue of $11.4M and decrease of E-Rate revenue of $17.9M)- State Revenue decreased $16.5M (due to decreases in State Aid funding)- Federal Revenue increased $30.8M (primarily due to increased SHARS revenue)

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(5 year comparison in millions of dollars)

$‐

$200.0

$400.0

$600.0

$800.0

$1,000.0

$1,200.0

$1,400.0

$1,600.0

Total Local and Intermediate Sources State Program Revenues Federal Program Revenues

2015

2016

2017

2018

2019

Comparison of Revenues-General Fund (Exhibit C-2)

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Financial HighlightsComparison of Expenditures-General Fund

(Exhibit C-2)

$826.8

$128.2

$157.0

$42.0

$183.3

$3.5 $9.6

$2.7

$72.9

FY 2019 ExpendituresInstruction, Curriculum, MediaServices, and Staff Development

Instructional and SchoolLeadership

Student Support, Food Services,and Co‐Curricular

General Administration

Facilities Maintenance, Security,and Data Processing

Community Services

Debt Service

Facilities Acquisition andConstruction

Intergovernmental Charges

$837.1

$123.3

$145.6

$43.6

$190.8 $3.4

$8.4 $23.3

$5.0

FY 2018 ExpendituresInstruction, Curriculum, MediaServices, and Staff Development

Instructional and School Leadership

Student Support, Food Services,and Co‐Curricular

General Administration

Facilities Maintenance, Security,and Data Processing

Community Services

Debt Service

Facilities Acquisition andConstruction

Intergovernmental Charges

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Financial HighlightsComparison of Expenditures-General Fund- continued

(Exhibit C-2)

Fiscal year 2019 expenditures totaled $1.4 billion, a decrease of $45.5 million or 3.3% compared to 2018.

Significant changes were as follows:• Instruction, Curriculum, and Media Services decreased $9.8M due to changes in

computer leases in addition to decreases in contracted services and payroll.• Student Pupil Transportation increased $11.5M due to transition of the bus service

to DISD, including increases in payroll, supplies and maintenance, and a decrease in contracted services.

• Facilities Acquisition and Construction decreased $20.5M due to decrease in maintenance and related move‐in costs from the new building at 9400 N. Central Expy. In addition, capital outlay decreased.

• Intergovernmental Expenditures increased $67.3M due to the Chapter 41 Recapture costs in FY19.

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$‐ $100.0 $200.0 $300.0 $400.0 $500.0 $600.0 $700.0 $800.0 $900.0

20152016201720182019

(5 year comparison in millions of dollars)

Comparison of Expenditures-General Fund (Exhibit C-2)

35


$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

2 Year Comparison(in thousands of dollars)

FY 2018

FY 2019

Debt Service Fund Highlights (Exhibit C-2)• Revenues exceeded expenditures by $13.1

million.• Fund balance decreased by $54 million primarily

due to the $75M budgeted transfer out to General Fund, combined with an increase in revenues of $22.9M and a $7.2 million budgeted transfer in from the general fund for Qualified School Construction Notes.

• The District had proceeds from issuance of $68.025M in refunding bonds, which refunded $75M of Series 2015 MTN.

• Actual revenues exceeded budgeted revenues by $8.9 million.

• Budgeted expenditures exceeded actual expenditures by $115 thousand.

• The District defeased a total of $60.2M in debt through cash defeasances in FY19.

• The Debt Service Fund had a favorable budget variance of $9 million.

• Fund balance includes $138.8M in restricted and $43M in assigned fund balance for the repayment of 2013 QSCB Bonds.

36


$-

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000


FY 2018FY 2019

Capital Projects Fund Highlights (Exhibit C-2)• Expenditures exceeded revenues by

$300.5M.• The District issued $800 thousand of

commercial paper in FY19.• Fund balance decreased by $299.7M.• Capital Projects Fund ending fund

balance was $197.4 million.

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$-

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000


FY 2018FY 2019

Non Major Funds Highlights (Exhibit C-2)• Non Major funds consist of federal, state, and local

special revenue funds with the majority of the funds on a cost reimbursement basis.

• Fund balance decreased by $4.3M primarily due to Food Service decrease of $4.9M.

• Fund balance of Special Revenue Funds are as follows:– National Breakfast and Lunch Program- $16M– Medicaid Administration Claims- $3.2M– Texas Successful School Program- $27K– Advanced Placement Incentives- $129.6K– Other State Special Revenue Funds- $24.9K– Campus Activity Funds- $5.3M– Other Local Special Revenue Funds- $3.1M

• The District expended $243.2M of federal expenditures predominantly in the Non Major Funds. See the Schedule of Expenditures of Federal Awards, pages 152-153.

• Revenues of the Food Services Program of $108.7M were $12.1M below budget.

• Expenditures of the Food Services Fund of $113.6M were $9.6M below budget.

• The Food Service Fund had an unfavorable budget variance of $2.4M and a decrease in fund balance of $4.9M.

• Food Service Fund ending fund balance was $16M.

38


$-

$5,000

$10,000

$15,000

$20,000

$25,000


FY 2018FY 2019

Internal Service Funds Highlights (Exhibit D-2)• The District’s Internal Services Funds include

the Graphics Shop, Risk Management, and Auto Liability Insurance.

• The Graphic’s Shop revenues exceeded expenditures by $40K and had an ending net position of $298.7K.

• The Risk Management Fund’s revenues exceeded expenditures by $4.3M and had an ending net position of $18.2M.

• The Auto Liability Insurance fund began in FY19, with revenues exceeding expenditures by $796K, which equaled its ending net position.

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Financial HighlightsCapital Assets and Long-Term Debt

Capital Assets • Total Capital Assets increased $178.4M or 6.54% in FY 2019.• The change in capital assets is primarily driven by capital outlay purchases of

$178.4M offset by the disposal and depreciation of assets during the fiscal year. • There were two management letter comments in FY2019 regarding

Capital Assets

Long-Term Debt• The District remarketed $75M Series 2015 MTN as Series 2015 Remarketing in

August 2018.• In February 2019, the District issued $68.025M in Series 2019 Refunding Bonds.

Proceeds were used to refund the $75M Series 2015 MTN bonds.• Bonds and notes payable decreased $139.4M or 4.9% over the prior year.

• This included $60.2M in defeased debt.• Net Pension Liability increased $256.8M or 69%.

• Driven by changes in the assumptions used by the plan actuary. See Note M of the CAFR for more information.

• Net OPEB Liability increased $86.8M or 14%.

Looking forward to Standards Effective in FY20 and Beyond

Standards Effective in FY20

Fiduciary Activities

The primary objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported.

It establishes criteria for identifying fiduciary activities of all state and local governments.

41

GASB 84:

Effective for periods beginning after 12/15/2018

Standards Effective in FY21

Leases

This statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that were previously classified as operating leases.

Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset.

42

GASB 87:

Effective for periods beginning after 12/15/2019

43

Overview

• Introductions• Audit Process• Required

Communications• Results• Strengths

• Opportunities for Improvement

• Financial Highlights• New Accounting

Pronouncements• Questions

Management Letter and Communication Letter to Those Charged with Governance

Austin | Conroe | Dallas | Fort Worth | Houston Los Angeles | Midland | New York City | San Antonio

Weaver and Tidwell, L.L.P. 2300 North Field Street, Suite 1000 | Dallas, Texas 75201

Main: 972.490.1970 | Fax: 972.702.8321 CPAs AND ADVISORS | WEAVER.COM

November 6, 2019 Mr. Dwayne Thompson, Chief Financial Officer Dallas Independent School District In planning and performing our audit of the basic financial statements of Dallas Independent School District (the “District”) as of and for the year ended June 30, 2019, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, we considered the District’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A reasonable possibility exists when the likelihood of an event occurring is either reasonably possible or probable as defined as follows:

Reasonably possible. The chance of the future event or events occurring is more than remote but less than likely.

Probable. The future event or events are likely to occur. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Our audit was also not designed to identify deficiencies in internal control that might be significant deficiencies. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We communicated the significant deficiencies identified during our audit in a separate communication dated November 6, 2019. The items listed on attached schedule are recommendations that have been discussed with District staff during the course of our audit. We will be happy to discuss the issues in further detail and assist in developing strategies to enhance controls or process improvements. The purpose of this communication, which is an integral part of our audit, is to describe, for management and those charged with governance, the scope of our testing of internal control and the results of that testing. Accordingly, this communication is not intended to be and should not be used for any other purpose.

WEAVER AND TIDWELL, L.L.P.

Dallas Independent School District November 6, 2019

Page 2

Schedule of Recommendations

1. Weaver, LLP identified cash received and deposited subsequent to year end improperlyclassified as cash as of year end. Weaver, LLP recommends the District review the process foraccounts with object code 1118 (referred to as “check scanner” accounts) and adoptprocedures to ensure that the District only report cash received and deposits in transit asreported cash as of year end.

2. Weaver, LLP identified the claims reserve per the worker's compensation calculation for worker'scompensation did not agree to the actuarial report provided by Milliman, the worker’scompensation actuary. See adjustment (AJE 1003) below. Weaver, LLP recommends thatDistrict enhance procedures to ensure that the claims reserve is reviewed to that the claimsreserve reflects the total liability determined by the actuary.

Account Description Debit Credit

Adjusting Journal Entries JE # 1003

753416143 Wkrs Comp - Undistributed - Risk Management 3,892,555.00753002123 Other Liabilities - RG - General 1,042,705.00753002211 Wkrs Comp Rsv - RG - General 2,849,850.00

Total 3,892,555.00 3,892,555.00

To adjust the claims reserve to the liability as listed on the Milliman actuarial report.

3. Weaver, LLP identified information technology equipment and capital projects purchasedutilizing bond funds were not properly transferred from construction in progress (CIP) to theappropriate capital asset category and depreciated as of year end. See adjustment (AJE 1004)below. Weaver, LLP recommends that District enhance procedures to ensure all capital assetsplaced in service are moved to the appropriate capital asset category and depreciated basedon the District’s capitalization policy.



901001521 Building Improvements 37,135,378.00

901216444 Depreciation 369.00

901336444 Depreciation 1,928.00


901516444 Depreciation 9,291.00


901126444 Depreciation 2,669.00

901316444 Depreciation 3,297.00

901116444 Depreciation 114,098.00


901236444 Depreciation 11,289.00

901356444 Depreciation 10,876.00



901001571 Accumulated Depreciation- Building Improvements 156,228.00

901001599 Fixed Asset Clearing 37,135,378.00

37,291,606.00 37,291,606.00

To record the transfer of assets placed in serv ice to building improvements and depreciate the assets based on the District's capitalization policy.

Dallas Independent School District November 6, 2019

Page 3

4. Weaver, LLP recommends that the District review the current capital asset procedures related tothe capitalization of classroom technology as it was noted many of the items included inconstruction in progress were individually below the capitalization threshold and were placed inservice with lives that exceed the useful life of the items.

Austin | Conroe | Dallas | Fort Worth | Houston Los Angeles | Midland | New York City | San Antonio

Weaver and Tidwell, L.L.P. 2300 North Field Street, Suite 1000 | Dallas, Texas 75201

Main: 972.490.1970 | Fax: 972.702.8321 CPAs AND ADVISORS | WEAVER.COM

November 6, 2019 To the Audit Committee Dallas Independent School District We have audited the financial statements of Dallas Independent School District (the “District”) as of and for the year ended June 30, 2019, and have issued our report thereon dated November 6, 2019. Professional standards require that we advise you of the following matters relating to our audit. Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter dated March 11, 2019, our responsibility, as described by professional standards, is to form and express an opinion(s) about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities. Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of the District solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you. We have provided our findings regarding significant control deficiencies over financial reporting and other matters noted during our audit in a separate letter to you dated November 6, 2019. Planned Scope and Timing of the Audit We conducted our audit consistent with the planned scope and timing we previously communicated to you. Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and our network firms have complied with all relevant ethical requirements regarding independence.

Dallas Independent School District November 6, 2019 Page 2

Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the District is included in Note A to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the fiscal year. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus. Significant Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments. The most sensitive accounting estimates affecting the financial statements are: The amount of state foundation revenue a school district earns for a year may vary until all values in the state aid formula become available. Availability can be as late as midway into the next fiscal year and it is at least reasonably possible that the foundation revenue estimate will change. The District has utilized all relevant information, which includes factors such as average daily attendance and property tax collections, to record foundation revenue. Management’s estimate of the allowance for uncollectible taxes is based on delinquent accounts receivable of the 9 years prior to the current year and taking into consideration the collections related to those years and any adjustments. Management’s estimate of the net pension liability, other post-employment benefits liability, and accrued workers compensation claims which are based on actuarial calculations provided by management specialists. We evaluated the key factors and assumptions used to develop these estimates and determined that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units. Significant Difficulties Encountered during the Audit We encountered no significant difficulties in dealing with management relating to the performance of the audit. Uncorrected and Corrected Misstatements For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. Management has corrected all identified mistatements.


In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attention of management as a result of our audit procedures. Material misstatements that we identified as a result of our audit procedures were brought to the attention of, and corrected by, management are included in Exhibit A of this letter. Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the District’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit. Representations Requested from Management We have requested certain written representations from management dated November 6, 2019. Management’s Consultations with Other Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters. Other Significant Matters, Findings, or Issues In the normal course of our professional association with the District, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, operating and regulatory conditions affecting the entity, and operational plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as the District’s auditors. Other Information in Documents Containing Audited Financial Statements Pursuant to professional standards, our responsibility as auditors for other information in documents containing the District’s audited financial statements does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have: We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements.


We have applied certain audit procedures to the combining and other statements, required Texas Education Agency required schedules, and the schedule of expenditures of federal awards in accordance with auditing standards generally accepted in the United States of America which consisted of auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures. Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements. This report is intended solely for the information and use of the Audit Committee, Board of Trustees, and management of the District and is not intended to be and should not be used by anyone other than these specified parties. WEAVER AND TIDWELL, L.L.P.


Exhibit A Audit Adjustments Corrected By Management



638001111 Cash Due To/From - RG - General 955,997.00

199002111 Vendor Accounts Payable - RG - General 955,997.00636816629 Bldg Purch/Cnstr/Imprv - Undistributed - CAEA FOR HazMat Contracts - Bryan 640,844.00637816629 Bldg Purch/Cnstr/Imprv - Undistributed - Generic - Bryan Adams High School 90,208.00637816649 Furn/Equip < 5K/unit - Undistributed - Hillcrest High School 250,030.00636002111 Vendor Accounts Payable - RG - General 640,844.00637002111 Vendor Accounts Payable - RG - General 273,281.00637002116 Retainage Payable - RG - New Tech High School at B F Darrell 66,957.00

199001111 Cash Due To/From - RG - General 955,997.00

638816399 Gen Sup - Undistributed - IT Administration 955,997.00

Total 2,893,076.00 2,893,076.00


199001299 Other Receivables - RG - General 1,623,593.00199116142 Health/Life Ins - Basic Educational Services - Bryan Adams High School 1,132,178.00199002118 Group Health Cigna - RG - Blue Cross/Blue Shield - General 2,755,771.00

Total 2,755,771.00 2,755,771.00


753416143 Wkrs Comp - Undistributed - Risk Management 3,892,555.00753002123 Other Liabilities - RG - General 1,042,705.00753002211 Wkrs Comp Rsv - RG - General 2,849,850.00

Total 3,892,555.00 3,892,555.00


901001521 Building Improvements 37,135,378.00


901336444 Depreciation 1,928.00


901516444 Depreciation 9,291.00


901126444 Depreciation 2,669.00

901316444 Depreciation 3,297.00

901116444 Depreciation 114,098.00


901236444 Depreciation 11,289.00

901356444 Depreciation 10,876.00



901001571 Accumulated Depreciation- Building Improvements 156,228.00

901001599 Fixed Asset Clearing 37,135,378.00

37,291,606.00 37,291,606.00

To record invoices with serv ice dates prior to yearend as accounts payable.

To reclass TRS benefit payments to accounts receivable and to write off the remaining debit accounts

To adjust the claims reserve to the liability as listed on the Milliman actuarial report.

To record the transfer of assets placed in serv ice to building improvements and depreciate the assets based on the District's capitalization policy.

Thank you!

We appreciate the opportunity to serve Dallas ISD and look forward to working with you next year.