There were four conditions the Auditor's office found serious enough to call findings:
- The District’s inadequate internal controls over Associated Student Body activities resulted in a loss of public funds.
- The District’s inadequate internal controls over Associated Student Body activities put funds at risk for loss and resulted in noncompliance with state law.
- The District paid $36,000 for charges that were unsupported, overbilled and outside the scope of contract.
- The District does not have sufficient policies and controls for the Science,Technology, Engineering and Math computer program to ensure laptops issued to students are safeguarded. The District also is not recovering the costs to replace lost or stolen laptops.
ASB (Associated Student Body)
There are two findings here. The thing to keep in mind for ASB is that while the amounts may seem small this is money raised by students. They have to work very hard to earn this money and to lose it because of lack of oversight by adults, both at the school level and the district level, is very sad.
In 2009-2010, the district's ASBs made and collect about $4.1M. This is from dances, athletic events, yearbooks, fundraisers for clubs and school store sales.
One finding has to do with how much money they can carry over from year to year. In December 2010, the district notified the SAO about a potential misappropriation at Garfield. That led to the SAO looking at activities and fundraisers at 6 high schools, 1 middle school and the payments recorded in the ASB fund. All of them were over for carryover funds from the amounts authorized by the School Board.
What is quite serious is that Franklin's bank statement in Feb. 2011 showed a balance of $565 but the balance on record at the district was $6k. No one can figure out what happened to that money. As Charlie reported, the Franklin ASB had not submitted a claim for reimbursement since 2006. The custodian of the account said she didn't know how. What !?!
Also, ASB governing bodies were not approving purchases in advance as required by law. One time a payment over $4k was made without an invoice and the ASB advisor attached an e-mail instead.
The district also did not comply with state law about ASB charitable fundraisers. (These are for an entity other than ASB.) Requirements must be met or else the money must then go to the ASB. The SAO examiner 5 charitable fundraisers and all five failed at least one requirement.
There were also issue with ASB travel expenditures and making advance payments for travel (which is inviolation of state law. The issue in this case was travel by students at Eckstein to Japan. One item on this that was particularly serious is that no out-of-state/country travel can occur without authorization by the CAO which did not occur in this case.
A lesser part is ASB governing bodies not recording ASB minutes. This is legally required and is also an important historical record. They also prepared ASB budgets without input from the student body government.
For fundraising and other events, none of the 6 high schools complied with District ASB procedures or the ASB manual. Basically, there was no way to determine if the money made it into a district bank account.
There was also an issue with yearbooks. One school could not account for 40 yearbooks worth about $1600 and another for 11 yearbooks worth about $555.
Athletics fees waivers are also problematic. At least two of the high schools waived 38-70% of fees without written waivers. Additionally, no one reconciles athletic fees to make sure students have paid and where the money goes.
From the audit:
At the school levels, principals and other administrators are not ensuring staff complies with ASB requirements and are not providing oversight of activities to ensure schools comply with ASB procedures and safeguard ASB money.
Before the audit, the Central Office was aware that schools frequently do not make timely deposits; do not replenish their checking accounts monthly; do not comply with District procedures and do not record all ASB activity in the general ledger. The Central Office does not hold staff accountable when it finds noncompliance.
Staff was not familiar with state law when establishing the ASB advance travel checking account.
The second ASB finding was that the district's internal controls over ASB activities "resulted in a loss of public funds." This is the issue that Charlie pointed out with Garfield's fiscal specialist not making deposits in a timely manner and had been investigated. While trying to train a new employee, the District ASB accountant had gone to Garfield and found the fiscal specialist's offic had checks and cash totally $56k in unsecured locations. Reviewing the money, the district found that about $6k was collected in receipts but was missing. The Auditor was unable to determine if more money was missing due to receipts not found. No one could trace the loss because so many people had access to the office.
That employee was placed on paid administrative leave in December 2010 and it was reported yesterday that that employee has now left the district.
The district also discovered that invoices totalling $168k had not been paid. This resulted in finance charges of over $5k including over $1k in late fees that the ASB now has to pay.
There was also another issue at Garfield with a fundraiser that ended up with a loss of over $12k.
From the audit:
We recommend the District:
Hold staff accountable when District policies or procedures are not followed.
Ensure employees follow the District’s ASB procedures manual.
Perform reconciliations of ASB activities to ensure all money is deposited. This reconciliation should be reviewed and verified by someone other than the person responsible for completing the reconciliation.
Ensure school principals provide the necessary oversight of ASB activities.
Again, it's 2011. When will this sink in and why does the district have to be told to hold people accountable? (In defense of the principals and ASB advisors, they have a lot on their plates but if they need help, they should ask for a parent volunteer.)
Finding 3 was around a tutoring contract with the Urban League. This one is deeply troubling because:
1) it involves the Urban League who had previous trouble in the Pottergate scandal. How they receive another contract with the district so soon after Pottergate is a mystery but I perceive some cronyism going on and boy, that needs to stop.
2) the Auditor found that one vendor from the small business program had a "contract to conduct student disciplinary hearings" (but was not paid through that program). Why are we contracting out student disciplinary hearings? Honestly, how much work is the district doing on its own without vendors and consultants?
3) this contract was approved by the Ex Director of the region. The Ex Director of that region is Michael Tolley. According to the SAO, he allowed the vendor to provide services before the contract was signed and approved. The Urban League also billed in 10 equal installments of $80k which for tutoring is weird.
From the audit:
The Education Director circumvented internal controls, and his review of invoices was
The district terminated the contract and has frozen payments to this vendor until detailed billing is submitted and reviewed.
The fourth finding was around the laptops for STEM at Cleveland. This was another tough one because we find that the district paid over $1k for each laptop. That seems incredibly high for a bulk purchase. The SAO found the following:
- the program handbook states parents/guardian and student could be held responsible for the cost of repair/loss and the contract they sign says will be.
- the tracking software did not seem to aid in recovering laptops quickly. I previously reported this issue from a Board committee meeting. The district did NOT report the loss to the SAO in a timely manner as required by law.
- the district waiver the $100 fee to cover damage and loss on computers for 76% of students.
- Twelve of 30 students who reported missing computers got new ones without paying replacement costs OR a deposit for a new computer. One student lost the second computer issues.
- Two laptops issued had not been recorded in the school's tracking system and only got on the system when the SAO pointed it out. (For cryin' out loud, it's only the first year and they can't make sure every single laptop is in the system?)
- the district told the SAO that it didn't plan to seek replacement costs (which would be warranty and other equipment) from parents/students since the company does when it finds the computers. This is not true. The company only pays for the computer.
- The district was not properly coding rental revenue. The issue here is that related expenses can be paid back from revenue and put into the General Fund. However any amount made beyond that should go into Debt Service or Capital Projects. It looks like the district took the entire rental money from the Memorial Stadium parking lot - $1.7M - and put it into the General Fund. The costs for the parking lot could be paid back in to the General Fund but the rest should have gone to debt service or capital. Neat trick to get more money into the General Fund. This occurred during the 2009-2010 year and my perception is it was at the bidden of whoever was directing the district at that time. Otherwise this would have shown up in previous audits.
- Oh yeah, that retirement dinner that I went on and on about? Turns out that district employees brought 43 guests and the cost was over $2k. That is not allowable. "Therefore, this expenditure is a gift of public funds." I rest my case.
- The district paid over $1k for an employee's transmission in his personal truck and arch supports for his work boots.
- Misuse of sick leave. An employee at Garfield (again) was a track coach at a private school and had used 16 days of paid sick leave on days that coincided with the private school's track events. From the audit:
One of the last items was the Home School Resource Center enrollment reporting. The SAO hasn't audited many alternative programs and so did a random check of one. The Home School Resource Center received $762,007 for 146.69 students. Apparently, the School Board is supposed to, by state regulation, review and adopt written policies for each ALE program for things like a student learning plan, staffing raios, etc. The district was allowing individual schools to write their own and the Board does not review or approve them.
The SAO did a sample testing of the number of FTE students in the Home School Resource Center and believes that about 137 of them are probably not valid and that the district likely received more than $714k which it will have to pay back to OSPI (if this is upheld).
I hope this is one issue where the SAO is wrong because if not, it is a lot of money to pay back and you have wonder how that many students could be overcounted at one school.
Michael - The Board has not kept (ASB) policies up to date and "my sense is the cost of doing business has gone up over 30 years." He also said the issue of the Executive Director actions was "troubling."
Kay asked about the principal not being called by the Ex Director about the tutoring issue. Dr. Enfield said "we are figuring this out right now. "
I had previously reported that Director Patu had been firm at a committee meeting over making sure work was done before signing off on paying a vendor and it looks like her spidey sense was right on. She asked again yesterday, "Where is the follow-thru on these vendors and their work?" She, too, was troubled that this was okayed by an Ex. Director.
Harium, in defensive of not asking for the $100 deposit for the laptops, said that they knew this going in. He said that it did not alarm him to give a waiver to F/RL students and that "it was our intent and recovery was one of the risks." He said students deserved the opportunity to have laptops.
Kay answered back saying she agreed about the opportunity but "we have to hold all students accountable." She worried over the assignment of the next 400 laptops for the coming school year. Michael pointed out that other districts have these same kinds of losses but worries over sustaining the program of laptops.
Then one key issue came up. As I previously reported, the Cleveland principal was having students "work off" the money owed for the laptop loss/damage. The Auditor said this was okay but she needed to adher to the Fair Labor Standards Act and issue 1099s, etc. I don't think she's doing that so expect another audit finding next time around.
Kathie Technow, Accounting Manager, said about the travel issues that they don't have quarterly reviews and they have "significant" numbers of employees traveling at any given time.