Auditors give Franklin County an unmodified opinion; report finds $3M school operating shortfall and internal‑control issues

An independent audit of Franklin County’s 2025 financial statements drew praise and caution at the Board of Supervisors meeting on Jan. 20. Auditor Gordon Stone told the board the auditors issued an unmodified ("unqualified") opinion on the county’s financial statements and on federal grants, meaning they consider the statements materially correct. At the same time the audit included a government‑auditing‑standards finding related to internal control over financial reporting and several recommended adjustments to the school board’s books.

Stone explained the most consequential adjustment involved school operating accounting and payroll timing: auditors and staff identified roughly $3.0 million in over‑expenditures in the school operating fund that required a transfer from county funds to cover checks that had been written. "We did have a finding... we recommended several material adjustments to the school board's books," Stone said. He described a $1.0 million cash timing adjustment tied to payroll clearing accounts that increased reported school expenditures; after the adjustments the school operating fund showed a negative cash balance of about $3.19 million.

Finance staff and the board discussed where this shortfall came from, and auditors said the over‑expenditure did not appear to be deliberate concealment but rather a reporting and control problem that the school and county must address. Staff also highlighted a separate projected reduction in state education aid — roughly $2.3 million — resulting from a revised Local Composite Index (LCI) in the governor's proposed biennial budget; that loss, combined with department requests totaling several million dollars, leaves budget pressures for the coming fiscal year.

Chair Smith asked whether the board needed to "accept" the audit; the county attorney advised that the audit itself need not be formally approved but that a certification to the Auditor of Public Accounts is required. The board voted in favor of placing the audit in the public record and completing the needed certification.

Supervisors asked for follow‑up steps: staff said they will work with the school board on corrective entries, tighten controls and reconcile delinquent tax reporting. Several residents attending the meeting urged the Board to fully fund Phase 3 of a teacher compensation study; supervisors said deeper budget conversations and a joint work session with the school board are forthcoming.

The audit report and the board’s discussion set a near‑term calendar: staff will continue to refine revenue projections, provide more detailed delinquent‑tax reports on request, and prepare for budget work sessions between the administrator’s March proposal and an anticipated April adoption.