Draft audit shows Northwest Arctic school district $1 million ahead, flags weakness in books

The Northwest Arctic Borough School District added $1,041,010 to its School Operating Fund in the year that ended June 30, according to a final draft audit presented to the Board of Education on Thursday. The district had budgeted to draw about $2 million from the fund. Auditors also found a material weakness in how the district closes its books at year end.

The School Operating Fund is the district's main fund for running schools. The district serves Ambler, Buckland, Deering, Kiana, Kivalina, Kobuk, Kotzebue, Noatak, Noorvik, Selawik and Shungnak.

The final budget planned a draw of $2,021,650. Instead, the fund grew from $10.6 million to $11.7 million. That is about $3.1 million better than the final budget.

Spending came in at $70.1 million, $3.8 million under budget. Building operations and maintenance ran $1,027,933 under budget. The draft says this was mainly because the district spent less on heating oil and did not fill several positions. Revenue was $593,575 short of budget. State money was $899,856 short, and federal money was $555,698 short.

The borough paid $10.2 million into the operating fund, close to the final budget.

Across all the district's governmental funds, the total balance fell $312,413, to $17,989,193.

A material weakness means a gap in a district's controls creates a reasonable possibility that a serious error in the financial statements could go uncaught. Auditors found that several Capital Project Funds, which track building and construction projects, were not fully reconciled or presented under U.S. accounting standards. Correcting them led to material adjustments in the statements.

The auditor gives the cause as "Management's lack of preparedness and properly reconciling year end account balances." It recommends clearer assignments of who does what when the books are closed and says the district should "obtain some accounting assistance to get audit ready." The FY25 draft, presented Nov. 12, 2025, reported no material weakness.

The district agreed with the finding. The auditor's letter to the board says management made all of the auditor's proposed corrections. The overall opinion is clean, with no going-concern warning. The district still qualifies as a low-risk auditee, with no findings on its federal awards.

Under its corrective plan, the district will write monthly, quarterly and annual procedures for closing the books within 30 days. Quarterly checks begin in January 2027, and the proposed completion date is June 30, 2027.

The draft is marked "FINAL DRAFT, FOR DISCUSSION PURPOSES ONLY." Records do not show when the board will accept the final audit.