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APA School District Examinations

APA School District Examinations. Libby Carlin, CPA Assistant Auditor of Public Accounts (502) 564-5841. APA Role in School Districts. Education work is an initiative and commitment of Auditor Edelen

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APA School District Examinations

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  1. APA School District Examinations Libby Carlin, CPA Assistant Auditor of Public Accounts (502) 564-5841

  2. APA Role in School Districts • Education work is an initiative and commitment of Auditor Edelen • State Auditor is the statutory chair of the State Committee for School District Audits (KRS 156.265(1)) • APA works on an annual project with KDE to review school district audits for technical purposes • To date, the APA has completed 16 examinations of school districts in the last 2 years; 3 others currently under way • Also, completed school finance officer study

  3. APA Special Examinations • Largely begin as complaint driven examinations, no “fishing expeditions” • Performed by auditors trained in both special examinations and financial audits • Some areas are outside the scope of an annual financial audit; however, some findings indicate need for greater scrutiny and communication during annual audits

  4. Special Examinations Results have led to indictments of two former superintendents due to abuse of public trust and theft. Why it’s important: Protection of taxpayer dollars is our mission, but beyond that education dollars lost to waste, fraud, or abuse impacts the students. Example district: • District had 85% of students on free and reduced lunch • Superintendent refused to let sports groups travel due to budgetary constraints • Superintendent double, triple and quadruple-dipped in travel reimbursements (credit card use, fuel from bus garage, travel reimbursement, and reimbursed by external associations) • In total, Superintendent’s restitution to the district was ordered at more than $400,000.

  5. Examination Results • Payroll/Personnel related problems • Salary adjustments without board approval and/or without contract modifications • Benefits paid in excess of contracts (fuel from bus garage, car allowances, pay-outs of accumulated vacation days, etc) • Overpayment of wages • Modified school calendar to omit instructional days, leading to payment for days not actually worked.

  6. Examination Results • Travel costs not in line with board policies • Nonessential/unauthorized staff or spouses and other non-staff individuals attending conferences • Reimbursements for personal expenditures on travel vouchers (extended trips, snacks, car rentals for extended days, alcohol charges, etc) • Fraud/abuse in travel reimbursements (double dipping and more) • Excessive expenditures, problematic when there is no per diem limits and district reimburses actual cost • No receipts or obscured receipts

  7. Examination Results • Procurement problems • Failure to follow MPC when adopted • Failure to bid contracts when required • Conflicts of interest • Awarding scholarships to relatives • Inappropriate vendor “gifts” (conferences, etc) • Utilizing district assets (food, facilities, supplies) for personal businesses

  8. Examination Results • Federal grant noncompliance • Moving funds around, obscuring expenditure details • Using federal grants for unallowed purposes • Misuse of activity funds – funds must be used for the benefit of students • Sweet 16 expenses of almost $36k, 40 people, most not related to athletics program, some were not employees of the district • Building projects (equipment shed, etc)

  9. Finance Officer Report • Performed to assess issues raised in House Bill 154 (amendment of 160.431) • HB 154, in part, would require finance officers to obtain a minimum of 10 hours in finance training annually

  10. Finance Officer Report • Two audit reports identified weaknesses in accounting personnel lacking expertise to detect/correct errors • One-third of finance officers did not have educational backgrounds in accounting of finance (58 school districts) • 33 districts had finance officers with backgrounds in non-accounting fields (former teachers, principals, superintendents)

  11. What can you do? • Perform a good assessment of finance officer knowledge and expertise. • Pay particular attention to superintendent contracts, payments and benefits • Compare salary and benefit adjustments for other employees to board minutes • Communicate honestly to the board if you have concerns regarding culture or cooperation • Communicate weaknesses in expense reimbursements, weak or unclear board policies, or other internal controls • Single audits – consider transfers of expenditures in/out of grant funds to be a high risk area • Offer additional training for board members to improve financial literacy • Make sure the board is clear about areas not included in your scope • Contact the APA or KDE if you need help brainstorming or identify a red flag that you aren’t sure how to approach

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