No fraud found in Vicksburg Warren School District’s loss of S&P bond rating

Published 1:27 pm Tuesday, July 27, 2021

The Vicksburg Warren School District recently lost its Standard and Poor (S&P) A+ bond rating, but according to the district and the CPA firm conducting its compliance audit, no foul play is suspected.

S&P’s bond credit ratings represent the creditworthiness of corporate or government bonds. The reason the bond rating was pulled, according to VWSD Director of Communications Christi Kilroy, is because the school district’s 2019 audit has not been finalized.

“The 2019 audit was delayed because it was suspended during the state auditor’s audit last year,” Kilroy said in a statement. “This in no way affects any of the bonds that have already been committed or the work that is going on in the District.”

Borrowing by school districts is highly restricted and must conform to Mississippi state law. Currently, the district has maximized its borrowing power, thanks to the facilities bond issue that was passed in 2018.

According to David Bridgers, Jr., of Bridgers, Goodman, Baird and Clarke, PLLC, this situation is common for school districts. Bridgers served as the school district’s auditor for a number of years and has been auditing schools for more than three decades. His firm is handling the 2019 audit on behalf of the school district.

To better understand the situation, Bridgers said one must first understand the difference between a financial audit versus a compliance audit.

“The state auditor requires compliance around state laws and regulations. The financial end of it is to express opinion on financial statements,” Bridgers said. “It’s not to catch fraud. A compliance audit is designed to detect noncompliance with state laws and regulations.”

According to Bridgers, the issue is more of a “bookkeeping matter,” and there is no known evidence of fraud.

A check with the office of Mississippi State Auditor Shad White also confirmed no intentional fraud was detected in the 2019 audit of VWSD. The state auditor’s office did not conduct the compliance audit, media relations manager Logan Reeves said, but instead acted as a third party in the matter.

“All we do is review (the audit) and approve it. Quality Control is the division of our office where this is handled,” Reeves said. “When we look at municipal audit reports, there are all kinds of reasons for delays. Our compliance audit has long been complete.”

Most of the time, once audits are complete, bond ratings are restored unless there are serious financial or compliance issues.

According to Kilroy, the school district continues to increase its fund balance and currently has a balance of over $26 million. The fund balance has increased every year since 2014 when the balance was just over $4 million —  except for last year when additional funds were needed to cover COVID-19 response expenses. She said the lost funds last year will be restored with federal ESSER funds, estimated at more than $25 million over the next three years.

Bridgers affirmed that this situation is common among school districts and is not a problem unique to VWSD.

“I’ve been auditing schools for 30 or 40 years. It’s not uncommon for these school districts to be late on their audits because of accounting problems,” he said. “There was no intent for fraud. It happens to a lot of school districts every year.”

The next meeting of the Vicksburg Warren School District Board of Trustees is Thursday, July 29 at 5:30 p.m. Seating is limited, and the meeting will also be live-streamed on the VWSD Facebook page.