A state audit of the Pine Bluff School District found weaknesses in internal controls over both financial reporting and major programs and significant deficiencies in internal controls.
The Arkansas Division of Legislative Audit recently released its findings for the district for the fiscal year that ended June 30, 2011.
Deputy legislative auditor Larry W. Hunter brought up several issues in a letter to school district officials and school board members that preceded the report.
These issues included the board’s decision to require that Superintendent Jerry O. Payne reimburse back to the district the majority of the funds he was advanced for moving expenses.
“As part of a three-year contract, the District agreed to reimburse Superintendent Jerry Payne up to $10,000 for documented moving expenses,” the letter said. “Subsequently, the District’s Board authorized a $10,000 cash advance to Mr. Payne, who later submitted documentation totaling $19,308. With the exception of a rented U-Haul costing $396, the majority of the documentation was for personal expenses, including new furniture, appliances, linens, and home decor. In addition, Mr. Payne submitted a travel log totaling 8,140 miles for 12 trips related to his relocation from Pine Grove, La., for the period June 11, 2011, through December 11, 2011.”
Hunter cited the Internal Revenue Service Publication 521 for Moving Expenses and stated that reasonable moving expenses that can be deducted on an income tax return consist of the moving of household goods and personal effects, including in-transit storage expenses and traveling, including lodging, but not meals, to a new home.
“We recommend the Board review IRS regulations pertaining to allowable moving expenses, examine the documentation Mr. Payne provided to support moving expenses, and determine the funds due the District that are not considered allowable moving expenses,” Hunter wrote. “Subsequently, the Board directed Superintendent Payne to reimburse the District $9,447. On Feb. 21, 2012, Payne remitted this amount to the District.”
Hunter also discussed several aspects of district fund expenditures.
“During our examination of other aggregate funds expenditures, we noted the following exceptions: The District was unable to provide supporting documentation for seven of 23 checks examined. Installation costs totaling $1,193,693 for an artificial football turf and track surface were not capitalized. Operating expenses of $91,943 were improperly coded to the capital projects fund.”
The audit also uncovered problems with receipts that included no listing of receipt ranges on deposit slips, the child nutrition department not issuing receipts for all revenue received with no indication of check/cash composition on receipts, Southwood Elementary receipting certain funds twice, Southwood and Cheney Elementary not depositing receipts in a timely manner and the removal of 52 receipts from the business office receipt book.
Hunter wrote that the district was unable to locate three of 10 equipment items during the audit’s equipment verification process.
Auditors found that financial accounting duties were not adequately separated among employees, specifically finding that all bank reconciliations and journal entries were prepared by the same employee responsible for the maintenance of accounting records and depositing money, without compensating controls.
Auditors also found that payroll checks were prepared by the same employee responsible for changes to the payroll amounts, without compensating controls.
Compensating controls are defined as safeguards that act to minimize the risk of an existing weakness in the system causing a failure in some aspect of the system.
Auditors reported that in response to these findings the school district agreed to implement corrective procedures to the extent possible.
Auditors found that federal stimulus money provided under the American Recovery and Reinvestment Act for special education in 13 categories exceeded the budget by $88,097 more than the 10 percent allowed without prior approval from the Arkansas Department of Education and the submission of budget amendments or adjustments.
Auditors found that non-ARRA special education expenditures for seven budget categories exceeded the budget by $136,101 more than the 10 percent allowed.
Auditors reported that in response to these findings the district’s director of special services and the director of business and finance are reviewing expense reports quarterly to make sure the expenditures are staying within the budgeted amounts and will file an amendment with the ADE if necessary.
Similarly, the auditors found that the district’s Improving Teacher Quality program expenditures as part of the Arkansas Comprehensive School Improvement Plan for three categories exceeded the budget by $90,844, which is more than the 10 percent allowed without prior approval from the ADE and the submission of budget amendments or adjustments.
Auditors reported that in response to these findings the district director of state and federal programs assisted by the director of business/finance will review expenditure reports quarterly to make sure the expenses are within the budgeted amounts and will file an amendment with the ADE if necessary.
Auditors found that the district did not consult with a private school that had agreed to participate with the district in the development of a program for private school children in a timely manner.
Auditors reported that the district director of state and federal programs contacted and met with private school officials for the 2011-2012 school year to determine what services are needed.
Auditors found that the district did not properly maintain records for equipment acquired with federal awards, including the failure to update for disposition of items no longer in use.
The report indicated that the district has already updated the procedures for fixed assets to ensure more accurate records of equipment.
Auditors found that unallowable costs were paid from the State Fiscal Stabilization Program totalling $3,179 and from the Improving Teacher Quality Program totaling $2,007 for the year ending June 30, 2011.
The State Fiscal Stabilization Program included $2,321 of undocumented expenditures and $858 for administrative office supplies that should have been recorded in the district’s general fund.
The Improving Teacher Quality Program unallowable expenditures included $1,629 for the purchase of a computer which should have been expensed in the general fund and a $378 expense for meals that had no supporting documentation.
The auditors reported that all departments in the district are working together to make sure all expenditures meet the guidelines for each funding source.
Auditors found that the district did not include the Arkansas Public School Computer Network clerk’s salary in its ACSIP plan and that it did not maintain periodic time certifications for this employee whose salary was paid entirely from Improving Teacher Quality funds, with total questioned costs of $20, 943.
The audit report explained that the district was unable to provide documentation to verify that the APSCN clerk’s salary was an allowable cost under the Improving Teacher Quality program and to substantiate the time charged to this program.
The report indicated that the director of state and federal programs will review the ACSIP plan to make sure all current or projected salaries are included in the plan as well as maintain time certification sheets on all required employees.
Auditors found that equipment purchased with federal program funds was not being used in the federal programs for which it was acquired and explained that the problem was caused by a lack of internal controls and management oversight.
The report indicated that the district was in the process of installing all equipment identified in the audit.