Report No. 2009-76
Complete Audit Report
The following findings were included in our audit report on the Pleasant Hope R-VI School District.
The district spent more than it received during the 2006-2007 budget year, resulting in a decline of the district's ending fund balance in the Combined Operating Funds. As a result of the decline in the district's fund balance, the district approached the Department of Elementary and Secondary Education (DESE) "financially stressed" classification. The district's overspending was primarily caused by the construction of the sports complex.
While the district's financial condition improved during the 2007-2008 school year, the district obtained a $250,000 loan, approved carrying some payroll payments into the next year to reflect a more positive fund balance, and did not transfer monies from the General Fund to the Special Revenue Fund each month as required by state law and DESE policy. In addition, tax rates were levied incorrectly during the 2007 tax year resulting in approximately $107,000 being owed to the Capital Projects Fund from the district's General Fund. Also, the School Board amended its budgets after the actual disbursements had exceeded the original budgeted amounts, and budgets prepared by the district were not accurate and complete making it difficult for the district to effectively monitor its financial condition.
The district did not prepare comprehensive formal plans or adequate cost estimates and monitor the overall costs for the sports complex project which cost over $400,000 to construct. The district did not retain adequate documentation of the various bids received or the selection process for awarding bids for many of the costs related to the sports complex project. The district also temporarily hired three employees of a local contractor to avoid paying prevailing wages.
It is questionable if one board member complied with the district's nepotism and conflict of interest policy. The board member was awarded a no-bid contract for a bus route prior to resigning from the School Board.
The district does not have formal written bidding policies and procedures, and bids were not always solicited or bid documentation was not retained for several items and professional services. The district sold bonds through a negotiated instead of competitive sale, and the board did not select the underwriter or bond counsel competitively.
Bids have not been solicited for transportation services in several years, and the district does not prepare IRS Forms 1099 Miscellaneous for payments made to the bus drivers. The district's 13 bus drivers were paid approximately $352,000 during the 2007-2008 school year.
The district has not adopted formal policies and procedures for the use of its credit cards, and the board has failed to implement recommendations related to district credit cards made by its independent auditor during the past two audits. The school district has 16 credit cards, and purchases on the cards totaled approximately $55,000 during the 2007-2008 school year.
The school district has not established policies and procedures regarding additional compensation. As a result, the district paid various employees additional compensation and did not include the payments on the employees’ W-2 forms or subject the payments to payroll tax withholdings. In addition, extra duty contracts were not entered into and documentation was not prepared to support additional compensation paid.
Improvement is needed over payroll policies and procedures. Duties are not adequately segregated and timesheets and leave records were not adequately maintained. Some employees had negative leave balances at the end of the school year. District policy provides for employees to be paid for unused sick leave at the end of each school year as an incentive for not taking leave, but also compensates the employees again for unused sick leave at the time employment is terminated or at retirement. Some personnel handbooks did not agree to approved board policies.
The district has not established adequate policies for handling meal collections. In addition, controls over other district receipts, petty cash, change funds, and vending machine proceeds need improvement.
The district did not document how some issues discussed and votes taken in closed meetings were allowable under the Sunshine Law. Board meeting minutes did not always include sufficient detail of matters discussed, and minutes did not always appear accurate. District business was occasionally conducted outside of regular open meetings, minutes were not always prepared for study sessions, and minutes were not signed by the preparer.
Also included in the audit report are findings related to disbursements, fuel purchases, cellular phones, accounting procedures and district policies, school safety issues, and capital asset records and procedures.