Northwest Arctic schools finish $1 million ahead as auditors flag bookkeeping

The Northwest Arctic Borough School District planned to pull about $2 million from its main operating fund last school year. Instead, it added about $1 million, according to a draft audit presented to the school board Thursday.

But the auditors also flagged a serious problem in how the district closes its books at the end of the year.

The district runs schools in Kotzebue and 10 villages: Ambler, Buckland, Deering, Kiana, Kivalina, Kobuk, Noatak, Noorvik, Selawik and Shungnak.

Its operating fund grew from $10.6 million to $11.7 million in the year that ended June 30. That's about $3.1 million better than the budget planned.

The gain came from spending less than planned. The district spent $70.1 million, $3.8 million under budget. Building operations and maintenance alone came in about $1 million under, mainly because the district spent less on heating oil and left several positions unfilled, the audit says.

The bookkeeping problem is what auditors call a material weakness: a gap in controls that creates a reasonable chance a serious error in the financial statements could slip through.

Auditors found that several of the funds the district uses to track building and construction projects weren't fully reconciled or presented under standard accounting rules. Fixing them meant significant corrections to the statements.

The auditor attributed it to "Management's lack of preparedness and properly reconciling year end account balances." It recommended clearer assignments for who does what when the books close, and said the district should "obtain some accounting assistance to get audit ready." Last year's audit found no material weakness.

The district agreed with the finding and made all of the auditor's corrections, according to the auditor's letter to the board. The audit's overall opinion is clean, and the district still qualifies as a low-risk recipient of federal money, with no findings on its federal grants.

Under its plan to fix the problem, the district will write procedures for closing its books each month, quarter and year within 30 days. Quarterly checks start in January 2027, with the work set to be done by June 30, 2027.

On the revenue side, the district took in $593,575 less than budgeted. State money came in $899,856 short and federal money $555,698 short. The borough contributed $10.2 million, close to what was budgeted.

Across all of the district's governmental funds, the total balance fell $312,413, to about $18 million.

The audit is still marked as a draft, and records don't show when the board will accept the final version.