School Districts Local Funds FY23

Performance Audits – Fiscal Year Ended June 30, 2023

February 13, 2026

Executive Summary

Background

The Delaware Office of Auditor of Accounts (AOA) presents performance audits of the local funds of Delaware School Districts for the fiscal year 2023.

Performance audits are used to evaluate the efficiency and effectiveness of an organization’s operations. The objective of this performance audit is to provide management, the School District Board of Education and the State of Delaware with information to improve performance, public accountability, and transparency.

The purpose of this performance audit is to determine whether the District’s operations over the collection and spending of local school district property tax funds complied with relevant laws and regulations. Our performance audit addressed the following areas:

The tax rate setting process
Payments for services and supplies
Employee compensation and payroll processing

The Auditor of Accounts is mandated by 29 Del. C., §2906(f) to perform annual audits of local school district tax funds. Under Delaware Code, school districts may levy and collect taxes for school purposes upon the assessed value of all taxable real estate in the district.

Key Information and Findings

The District allocates the local property tax funds received by their intended purpose (current expense, debt service, tuition, and match taxes). We found that the allocation was consistent with the tax rates approved by the Board of Education. The four components of local school tax revenue allocations are summarized below:

Findings may involve deficiencies in internal control; noncompliance with provisions of laws, regulations, contracts, and grant agreements; or instances of fraud. Performance audit testing of the Districts’ expenditures did not uncover fraud, waste or abuse. The audits relied on various sources of information and methods to obtain an understanding of and assess Local Funds’ processes for the School Districts, including inquiry, document reviews, risk assessment, and identification and performance assessment of key controls.

Three of the nineteen School Districts audited had no findings (Delmar, Lake Forest, and Laurel School Districts)

Common findings across sixteen School Districts include:

Districts’ purchases of materials & non-professional services did not follow state procurement laws
Districts’ payrolls lacked proper reviews and approvals
Districts’ payroll policies do not properly segregate responsibilities of the payroll function

Other findings found in an individual School District include:

District’s debt service reserve exceeds 110% of Total Debt Expenditures for the Following Year
District debt service reserve balances did not comply with State of Delaware requirements and were insufficient to fund debt service when due during the fiscal year
District internal transfers of Tuition Tax funds for transportation services lacked supporting documentation
District purchases of professional services did not comply with State and Local conflict of interest policies

Risks associated with the common findings include:

Districts risk overspending public funds or engaging in unfair or non‑competitive purchasing because materials and service purchases are not following required state procurement laws
Districts risk payroll errors, fraud, or unauthorized payments because payrolls are not being properly reviewed or approved
Districts risk payroll mistakes or intentional misuse of funds because payroll duties are not properly separated among different staff

Other associated risks include:

The district risks tying up excess funds that could be used for operations or other priorities because its debt service reserve is larger than what state guidelines allow
The district risks missing required debt payments and violating state financial rules because its debt service reserve balances do not meet Delaware’s requirements and are too low to cover payments when due
The district risks unethical or biased contracting decisions based on noncompliance with state and local conflict of interest rules

Full Audit Reports

Category: 2. State Agencies and Schools, Audit Reports, Department of Education, Fiscal Year 2023, School Districts

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