YELLOW SHEET
Office of the State Auditor of Missouri
Claire McCaskill
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YELLOW SHEET Office of the State Auditor of Missouri |
Report No. 2000-15
March 9, 2000
The following problems were discovered as a result of an audit conducted by our office of the Francis Howell School District, St . Charles, Missouri.
During the two years ended June 30, 1999, the district received and spent over $6 million in basic state aid to which it was not entitled. This was caused by an error in the reporting of the district's average daily attendance data to the Department of Elementary and Secondary Education and an entitlement calculation error.
The district's attendance system records full-day attendance for kindergarten students. Because kindergarten students attend only one-half of each day, the district must divide the recorded attendance hours for kindergarten students in half before calculating the average daily attendance and reporting it to the Department of Elementary and Secondary Education. For the 1997-98 school year, the district failed to divide the kindergarten attendance hours in half.
The district does not have written policies and procedures governing the reporting of attendance data to the Department of Elementary and Secondary Education. Written policies and procedures are necessary to outline district employees' responsibilities in the attendance reporting and the review process. Without following a specific process, the district cannot ensure all steps are taken to ensure the accuracy of information reported to the Department of Elementary and Secondary Education. This concern was also noted by the district's independent auditors in the 1998-1999 audit report.
The district did not take adequate procedures to correct the attendance reporting errors when detected in October 1998. As a result, the district continued to be overpaid by the Department of Elementary and Secondary Education until the adjustment was made in June 1999. The district did not adequately estimate the effects of the 1997-98 error and the 1998-99 overestimate of eligible pupils and make the necessary budget adjustments. This situation was a contributing factor in the district becoming "Financially Stressed" for the year ended June 30, 1999.
During the last five years, the district has experienced significant growth in the revenues and expenditures of the operating funds. Despite the growth in district revenues, the district has spent more than it received during three out of the last five years.
Controls over expenditures are lacking or inadequate. Bidding procedures were not always followed, payments were made without the required purchase orders or vendor invoices, and some expenditures appeared excessive or unnecessary for district operations.
In July 1998, the district approved an administrative salary schedule covering the two years ending June 30, 2000. Administrators were given significant pay increases and ten additional administrators were hired, resulting in an increase in administrator salary expense of approximately $899,000 during the year ended June 30, 1999. For the year ending June 30, 2000, pay increases were provided through the salary schedule and although the district reduced the number of administrators by four, this will result in a net increase in administrator salary expense of approximately $236,000.
The district has implemented some budget reductions for the year ending June 30, 2000. This budget includes projected operating revenues and expenditures of approximately $113.6 million each. With these projections, the estimated operating funds balance will continue to be approximately 1.7 percent of expenditures and the district will continue to be designated "Financially Stressed" for the year ending June 30, 2000.
As noted in the "Review of 1999 Property Tax Rates" issued by the Missouri State Auditor on December 29, 1999, the 1999 property tax rate levied by the district for operating funds exceeded the tax rate ceiling by three cents per $100 in assessed valuation. The district levied a property tax rate of $3.95 for operating funds, although the tax rate ceiling certified by the State Auditor was only $3.92. Based on the 1999 assessed valuation of $1,178,417,048, the district will receive approximately $354,000 more than legally permissible. Our office recommends the School Board not levy amounts in excess of the ceiling and reduce future levies to reflect this overcharge.
The district does not have a policy prohibiting the acceptance of gifts and gratuities from district vendors. During 1998 and 1999, district employees and board members received personal benefits from the district's construction management firm totaling $1,272. This included golf tournament registration fees and a dinner for board members. During these years, the district conducted two selection processes for construction management services in which this firm was selected on both occasions. The acceptance of gifts from this firm could give an appearance of a conflict of interest or lack of independence of board members and district administrators.
The district's student transportation vendor paid $1,013 for lodging for the board President and former Finance Director to attend a customer forum conference in Miami, Florida. The conference was held on a Friday, and the lodging included attendance at a Professional Golfers Association (PGA) tournament sponsored by the vendor. An appearance of a conflict of interest could harm public confidence in the board and reduce the board's effectiveness. A policy prohibiting these types of situations should be developed.
The school board provided the former Superintendent with a $42,000 cash advance upon signing a 31 month contract which began February 1, 1996. Under the terms of the contract, the former Superintendent would pay back the advance through payroll deductions of $7,000 per year over a six year period. Semi-monthly payroll deductions of $292 began in July 1996. The board should consider increasing the payroll deductions to ensure the advance is paid back in the time period noted in the separation agreement. In the future, the board should refrain from entering into such agreements.
During the year ended June 30, 1999, the district had four accounts with a credit card company. Two of these accounts were in the district's name, while the other two accounts were in the name of the former Superintendent and the former Finance Director. Employees could use the two district accounts for various expenditures such as travel expenses, registrations, and supplies. Some informal procedures relating to the credit card accounts were developed. Our review of credit card payments noted the following concerns:
There were at least 118 charges totaling $19,941 made to the credit card accounts which were not supported by receipts or credit card slips.
The statement and related receipts for one payment of $5,457 to a credit card account could not be located.
Purchase orders were not prepared for purchases on the credit card accounts.
The purpose of the expenditure was not documented for numerous charges to the credit card accounts. As a result, the propriety of the expenditure could not be determined.
The district does not have a formal written policy for the usage of cellular telephones and pagers. During the year ended June 30, 1999 the district incurred costs of approximately $55,000 for monthly services and equipment purchases for 74 cellular phones and 66 pagers. The phones and pagers were issued to various employees and board members and could be used for district business as well as personal use.
The district has engaged a firm since January 1990 to provide construction management services for all of its construction projects. This firm works with the district in the scheduling, planning, and design and construction management of construction projects. Payments to this firm during the year ended June 30, 1999 totaled approximately $720,000. Our office recommends the School Board conduct a formal selection process for construction management services for all construction projects as required by district policy and state law. In addition, all documentation of the process should be retained.
The school district does not always follow its bidding policies. The district's procurement policy requires that formal, written bids be obtained for all purchases which involve an expenditure of more than $5,000. The school district contracts with a transportation company to provide bus transportation for its students. The district has not solicited bids for transportation services since 1985. Procedures are not in place to adequately monitor transportation costs.