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Auditors say Isle of Wight County Schools incurred a larger-than-acknowledged deficit from the prior school year.

IWCS exceeded its budgeted operating expenses by $703,151 according to a draft audit of the county’s 2022-23 finances. The listed dollar amount is roughly $100,000 higher than the $603,163 shortfall IWCS Superintendent Theo Cramer acknowledged in August.

Cramer and IWCS Chief Financial Officer Larisa Harris had reported a reduced deficit of $438,506 in mid-September, which the School Board voted in December to further reduce by reallocating $213,466 in unspent textbook funds from the prior year. The move should have shrunk the shortfall to roughly $225,000 but according to the audit, the school division’s 2022-23 books remained $345,717 in the red as of Jan. 2.

Though the accounting firm Robertson Farmer Cox ultimately issued the county an “unmodified” or clean opinion, its auditors deemed discrepancies in the school division’s books to constitute a “material weakness.”

According to Robertson Farmer Cox auditor Aaron Hawkins, an unmodified or clean opinion means an organization’s financial statements “can be relied upon” for accuracy. While that’s the case now, it wasn’t when IWCS first turned over the financial data auditors requested, Hawkins contends.

On Jan. 4, Hawkins told Isle of Wight’s Board of Supervisors, which serves as the school division’s local funding authority, that this year “we were presented with amounts that were incorrect.”

Robertson Farmer Cox classifies accounting errors as either a “significant deficiency” or a “material weakness,” the latter being the most serious. A material weakness, according to the audit, occurs when one or more deficiencies create “a reasonable possibility that a material misstatement of the County’s financial statements will not be prevented, or detected and corrected on a timely basis.” 

“The result of material misstatements would be that the county could look like it has better or worse fiscal health than it appears based on the presented statements,’ County Administrator Randy Keaton explained in a Jan. 4 email to The Smithfield Times.

Hawkins and Supervisor William McCarty, the supervisors’ immediate past chairman, said a material weakness finding can potentially have an impact on the county’s bond rating, a municipal-level equivalent of a credit score, the next time it attempts to borrow money – something Isle of Wight may need to do if and when the supervisors move forward with plans to replace the division’s 1960s-era Westside Elementary with a new school.

According to Keaton, the last time Isle of Wight saw a material weakness finding on its audit report was in 2018. That report, completed by P.B. Mares LLC, had taken issue with a lack of timely reconciliation of the county’s financial statements.

The 2023 audit’s second finding against IWCS alleges “one instance of noncompliance” that’s “required to be reported under Government Auditing Standards.” Specifically, Virginia public school divisions are required to submit financial data from the prior school year annually on Sept. 15 as a component of a document known as the annual school report. Most divisions request an extension to Sept. 30, Hawkins said. Isle of Wight, however, had still not submitted the document as of Dec. 31.

“We have worked very hard as a board with our county administrator, our staff … to clean up messes that they didn’t create,” McCarty said. “For us to get the worst report from you guys since I’ve been an elected person in this county, it’s alarming to me.”

Supervisor Rudolph Jefferson also described Robertson Farmer Cox’s report as “the worst audit report that I have witnessed since I’ve been on this board.

Cramer, in August, attributed the deficit to overspending on transportation and substitute teacher wages, coupled with a nearly $945,000 reduction in state funding. Cramer and his staff had initially attributed the state funding cut to a 2% decrease in enrollment from the 5,568 students IWCS had expected, but later acknowledged an ex-employee of the division’s finance department had mistakenly listed in a 2022 report to the Virginia Department of Education that IWCS would give its teachers 2.5% raises rather than the state-mandated 5%. The error, which Deputy Superintendent Christopher Coleman certified without catching during his brief time as the division’s acting leader before Cramer’s arrival in August of that year, shorted the division half of the $1.1 million state funding supplement it should have been able to receive for giving the full raise.

Isle of Wight County Schools declined to comment on the draft audit but is scheduled to discuss the matter at the Jan. 11 School Board meeting.