I went the the Audit portion of the Audit and Finance Committee meeting on Tuesday. This was a good meeting and especially so because of the arrival of the A&F's two new volunteer public advisors (looking for one but got two and that's even better).
One is Joe Paperman, a UW business instructor with great credentials; worked at NC, worked as a controller, PhD in Finance and Accounting from Cornell, son in SPS. The other member is Pete Endrusky (I'm sure I have his last name spelling improperly but haven't heard back from Sherry yet on the spelling). He hails from Boeing and he, too, is well credentialled. He has been a controller in many areas, is a CPA, worked at Deloitte Touche (huge global financial services company) and two years in Germany for Dimier Chrysler.
Sherry noted in her introduction to these advisors that this was one of the SAO audit finding suggestions.
Highlights of meeting:
- Bill Martin and Ronic Lirio were going over issues from the State audit of capital management. It was interesting to hear Mr. Endrusky jump in and ask if they had an overall spreadsheet where they could see at once, the status of projects, how many had contract modificiations, where they were on their timelines, etc. The answer was no but Ron English jumped in to say that they did do it monthly for each project for the BEX oversight committee. Mr. Endrusky said you might miss the big picture if you weren't clearly able to see where the whole program stood at a point in time. Michael said that it was a complex situation with many varied projects. He suggested that they do create that kind of tool to be able to show the Board as well as the public. He said this was in reference to Garfield (which really went over its budget). Oddly, there seemed to be a bit of a pushback from staff on a document where you could view the status of all projects but Sherry said she thought a one-page snapshot would be good to have. Mr. Martin said they could do it and leave BTA for later.
- Professor Paperman stated that BTA is also important especially since there are so many projects. Mr. Martin stated that BTA is smaller and less "political" and there are many more change orders in BEX than BTA. (It is kind of an apples to oranges comparison but frankly, it's all a lot of money that should be tracked with accountability and transparency. What's the big state secret?)
- Betty said she just didn't understand how a project like Garfield went on and on and how do you know when it ends. (Trust Betty to ask the most straight-forward questions - I love that about her.) Mr. Martin then stated (much to my surprise) that we are still closing out BEX I! He claimed that Garfield wasn't to be a full rebuild, blah, blah. Okay, it was a remodel but that doesn't change the fact that it went out of control. They still have an on-going claim with the contractor.
- There was some issue over invoices and who enforces them with Mr. English giving an example of the district paying one $55k invoice twice. Michael said that the "shocking and disappointing" lack of oversight on the Small Business Program can't happen anymore. He said that Accounting should challenge and challenge hard any invoice that isn't done correctly. He said that it seemed like Accounting, in the end, always gave Facilities what they asked for in the invoice.
- There was some discussion over the fact that there were big cost increases in both Garfield and Cleveland ($2M each) but the Board wasn't notified until the money had been spent (or contracted for). Mr. English said there was to be another training for at least 60 staffers on not doing this kind of activity and how to do it. Sherry said this is something that should be under the wing of HR to make sure new staff know the rules.
- They are introducing a very tough new policy on debarment. This is when a governmental agency tells a vendor they will suspend doing business with them for a period of time based on the vendors' behavior or lack of veracity. For example, several vendors of the SBW would not cooperate with the Auditor's investigation. That refusal to help would be cause to not hire them again. Also, conviction for a criminal offense as part of trying to make illegal gains from a contract with SPS as well as embezzlement, theft, forgery, bribery, etc. would be a basis to terminate a contract. I hope they would use it in guiding who they hire in the future. Michael wants to take this to the full Board for introduction. I applaud the district for taking these steps.
- Mr. Boesche made the clouds part and the angels sing for me when he referenced using the Moss Adams report as a guide to his work. (It now appears on on the Audit Response log.) He said that people who made past errors are no longer here and that the biggest single issues for a half-day retreat on Friday was to address cultural change. One change is that there will be a department of Internal Audit that will report directly to the A&F Committee and the Board (not the CFO).
- Michael seemed to get frustrated at one point. (He was really pushing back on staff.) He said that other districts don't seem to have the problems we do. He said we have audits and changes get made and yet it doesn't seem to help. We need to be able to control our basic business functions. He said we have fundamental problems like purchasing a state-of-the art software for HR and they can't make it work. (I heard payroll has some issues as well with their software.)
- Betty asked about the overpayments to staff that were revealed by the audit in July 2010. Ronic said $117k was recovered but was forced to admit that $197k went to collections and we may not get it back because some staff has left the district.
- There was mention of some big June travel for a number of staff. I'll have to find out what this is.
- There was a small discussion about asset tracking like laptops. There is some sort of contract with parents and students at Cleveland over their laptop with the Tech people. (In another thread, I'll address the issue of the laptops because I did receive an interesting reply from SE Executive Director Michael Tolley.)
- There was also the issue of contracts that got underway without the proper signature. Mr. Harmon said that they might be using electronic signature that are time-stamped.
- Sherry reported on meetings with the City of Seattle. She said the director of finance and chief auditor gave them valuable feedback about the internal auditor position, both about interview questions and where to post the job description. They urged that the IA take direction from the Board but be administratively attached to the Superintendent. Mr. Boesche stated that this will be the only true IA department of any district in the state.