Shoreline School District budget officials made the district’s 2001-2002 financial position look better than it actually was by inappropriately charging an expense into the next school year’s budget, according to a state auditors report released Aug. 29.
Auditors also found that the district did not sufficiently control cash receipting and cash balances in the business office or in the all-day kindergarten program. The district also violated state bidding laws by having district maintenance workers do renovations at Cedarbrook Elementary School rather than putting the $120,000 project out to competitive bid. State law requires the bidding process for any repair work over $15,000.
Auditors did not find any wrongdoing however, and gave the district credit for responding to the findings.
Superintendent Jim Welsh said the district has learned from this audit, and is making necessary changes to assure these issues don’t happen again.
“It has really pointed out to us some weaknesses in our procedures and practices and we have worked diligently to straightening up these issues,” Welsh said.
Of particular concern to the auditors was an expense to Shoreline Community College the district delayed reporting. By inappropriately charging the $466,000 expense into the next school year, the 2001-2002 general fund appeared to have a positive balance of $27,153 at the fiscal year’s end.
After the financial statements were adjusted, the district showed a deficit of $439,204. The bill was for the district’s career education option program in which high school students elect to go to the college for classes. The services were rendered by the college in the spring of 2002, the bill came in late August and it was paid in September, after the beginning of the 2002-2003 fiscal year, Welsh said.
Welsh said vagueness in a board policy and a finance staff encumbered by high turn over and lack of training in year-end budget cut-off procedures caused the expense to be carried over inappropriately.
“Since 1998 the district has had a policy that allows carry-over expenditures from one year to the next. We found out that what we had on the books as board policy turned out to be inaccurate, so we are in the process of correcting that policy,” Welsh said.
Significant turnover in key personnel is also to blame, he said.
“We’ve had turnover in accounting staff who didn’t know what accrual was and were operating by rote. The way the board policy was written, it could easily have been misconstrued.”
Auditors agreed that employee turn over was a likely cause, and stated so in the report.
Welsh came to the district in July 2001 to face some difficult financial challenges — nearly a $1.4 million deficit, due, in part, to poor fiscal management in the previous year and poor oversight due to high superintendent turnover in the past five years.
In Oct. 2001 Welsh brought in a management consultant to work on the budget and in January 2002 the district’s chief financial officer, Clarence Kwock, resigned several months before his scheduled retirement. For more than half of the 2001-2002 school year the district had no chief financial officer.
John Scudder was hired as chief financial officer in August 2002. As the budget was being finalized that month, officials discovered that because of bookkeeping mistakes and miscommunication over the year, $7.2 million in expenses had been left out of the budget. The numbers had to be crunched in the last weeks of the fiscal year to get the budget to balance.
Auditors found that during the 2001-2002 school year the the district business office did not have sufficient controls over issuing receipts, logging cash deposits or receiving payments for day care and day kindergarten activities. Also, actual bank deposits and student body accounts were not reconciled adequately or timely.
Scudder said turnover in the finance department caused the district to continue operating that way until auditors brought attention to the situation.
Scudder said he and a newly hired finance manager are making sure procedures are in place and staff is trained to control cash handling and bank reconciliation.
“We are working on improving accounting controls and developing internal audits at the school level, business office and at all-day kindergartens,” Scudder said.
The district established a new position — comptroller — to ensure better monitoring of the budget and expenditures. Welsh convened a financial management review committee made up of employee group representatives and community members to oversee the district’s budgeting on a monthly basis.
District officials disagree with one of the audits findings. During renovations at Cedarbrook Elementary School the district charged $120,000 to its capital projects fund for in-house maintenance and staff to do the work. State law requires repair work or improvements over $15,000 go out for competitive bid.
Paul Flemming, district comptroller, said the district didn’t realize the project had to go to bid.
“We feel we saved taxpayers money and got the job done by using our own personnel,” Flemming said. “We didn’t believe it was more cost effective to use our own staff on this, and it was not something that had to go to bid, but in the future we will adhere to what the state says, for any future project,” Flemming said.
Cheryl Ricevuto, president of the Shoreline Education Association, said the teacher’s union is concerned with the audit’s findings.
“My biggest concern is that while there has been some turnover, this is not a new school district. We hope the errors brought to the district’s attention will be fixed and that those changes and corrections will be public so that we can be confident we don’t run into this problem again,” Ricevuto said.
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