Lisbon School board member Abbe Stensland has requested from the state auditor an investigatory audit into the student activities fund at Lisbon Schools.
“No one on the board was going to dissuade me from making this request,” Stensland said. “I hope the investigatory audit will put concerns and speculation to rest about the activities account.”
Citizen Todd Nelson and other members of the Lisbon Booster Club were seeking an investigatory audit into the accounts, after noting discrepancies between the profits on items sold at the concession stands the past several fiscal years.
At the June 8 school board meeting, Stacy Hunter with the Lisbon Booster Club read a prepared statement on why an investigatory audit should be conducted.
“No action on this item is not a solution,” Hunter said. “The students—but also parents, taxpayers, teachers, and community–deserve to have proper procedures in place and to know their money is property accounted for.”
Nelson and others are not accusing anyone of crimes or wrongdoing, but feel an investigatory audit by the State Auditor’s office is the best course of action to lay issues to rest about the discrepancies seen in the accounts.
Nelson, in an interview conducted prior to the school board meeting, outlined that concession stand deposits compared to product purchases were 1.62 percent (a roughly 62 percent profit margin) in fiscal year 2019. In fiscal year 2020, concession stand deposits declined to 1.49 percent (a 49 percent profit margin), and in 2021, concession stand deposits declined to 1.43 percent, a 43 percent profit margin.
This year’s concession stands deposits compared to product purchases were approximately 1.40 percent, a 40 percent profit margin.
The school board noted at the August 2021 meeting that the activities fund had been beset by a number of factors, including no revenue from gate admission during COVID-19 in 2020 but still paying for officials for sports contests that were held, and lower concession sales due to the pandemic the past few years (as well as declining attendance at many events). That led to the account operating in the red at the end of the school year at roughly $28,000.
The district utilized general fund monies to bring the activities fund balance back to zero in August, something the Iowa legislature allowed school districts to do this year due to the impact of COVID-19..
The district held a fundraiser in late fall to help bolster funds to the activity account on top of the concession revenues and gate admissions to sporting events.
The discrepancy of profits from concession stands came under review by Nelson in late December 2021 and early January of this year.
Nelson noted in his review that many of the products sold at the concession stand are sold at a higher mark up to garner profits. With the markups on items like 200 percent on hamburgers and 290 percent on brats and hot dogs, the profit margin for concession stand should be much higher than the 43 percent margin currently being reported in deposits.
“I know that there are things, like pizza that gets marked down towards the end of an event, in an effort to make some profit off of the food item before it goes to waste, but even there, the sales of those last few pizza slices should be breaking even to the cost of the item originally,” Nelson said.
The issue of discrepancies in profit was put in stark contrast when the Lisbon Booster Club ran a concession stand and made a 170 percent profit on the concession stand (a $5,844 deposit versus product costs of $2,161) using the same prices.
The profits from concession stands in fiscal year 2021 were $28,905 compared to product costs of $20,104.50, contributing to that 43 percent profit margin. Nelson argued that if the school’s profit margin were the same as the margin earned by the Booster Club, the deposits should have been closer to $54,282.15, a discrepancy of $25,377 for that year. The revenues could have been similarly underreported in other years.
Nelson did understand COVID-19 had an impact on attendance and concession sales in 2020 and portions of 2021, but he argued if there were any items sold at concession stands, they should have still generated revenue that reflected the mark-up in costs.
One of Nelson’s other concerns is that there are not appropriate cash handling processes by the district for concession stands at the moment.
“When I asked Bob Hill [who was running the concession stand at the home track meet May 12] if he has ever been asked to keep track of cash records of the amounts he turns in at the end of any event, he said he had not been asked to do so,” Nelson said. “That means more than three months after the initial irregularity was reported, there have still not been procedures in place to handle cash receipts.”
Nelson and others have offered resources to help the district apply simple cash handling procedures with his report in January.
Nelson and others were also stymied in getting this matter addressed by the school board. He presented his evidence of concession stand revenue discrepancies following the January meeting of the school board to board member John Prasil.
On Feb. 1, he further met with board president Jen Caspers and vice president Allan Mallie about the matter. The duo asked for his patience as the district investigated the matter.
In late March, he inquired on the status of an investigatory audit. At that time, Nelson was informed the audit wouldn’t be completed until after tax season was concluded.
“I understood, as an accountant, that meant this audit wasn’t ordered before tax season had been underway,” Nelson said. “I get that an audit may have had to wait until after tax season was concluded for certified public accountants to investigate.”
Nelson followed up with the district two days after this year’s tax season concluded (April 20) about the possibility of an investigatory audit being completed. He was met with a further three weeks of no new information from the school board members he had contacted.
On May 11, Nelson was informed the audit was in process and would be completed by the end of May. Nelson asked to see the audit scope or letter of contract, to see what type of audit was being conducted.
On May 12, Nelson was notified that the audit would be handled as part of the annual audit for the district.
For Nelson, an annual audit would not catch a discrepancy of this nature as four previous annual audits had not caught the issue. Nelson noted an annual audit would catch the deposits and expenses in the account, but it wouldn’t necessarily catch the ongoing discrepancies.
On May 26, Nelson asked for the matter to be added to the June meeting agenda. The item was not placed on the June 8 school board agenda, which is when Nelson reached out publicly on the matter to other entities, five months after his initial report to members of the school district.
Nelson also reached out to the state auditor’s office the week of May 26 about the financial irregularities he had seen, and the state auditor’s office noted that this irregularity is worth investigating. If a school board member were to make a request for an investigatory audit with the state auditor’s office, the office would be willing to complete an investigation.
If no board members had made a request for an investigatory audit, Nelson and others would have had to collect signatures to get the audit conducted.