YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

June 28, 1999
Report No. 99-41

The following findings are a result of an audit conducted by our office in response to the request of petitioners from the St. Charles R-VI School District, in St. Charles County, Missouri. The Yellow Sheet points out those findings the state auditor found particularly noteworthy.

During the last five years, the district has experienced growth in the revenues and expenditures of its operating funds. Despite the growth in district revenues, the district has spent more than it received three out of the last five years resulting in a decline of ending balances in its operating funds.

During the two years ended June 30, 1998, the district was designated "Financially Stressed" by the Missouri Department of Elementary and Secondary Education (DESE). "Financially Stressed" means the district's operating fund balances are below three percent of the expenditures in its operating funds.

Prior to the 1998-99 school year, the district entered into agreements with the teachers, administrators, and support staff that required the school district to distribute as supplemental payments to all three groups any "excess balances" in excess of five percent in the operating funds at the end of the year. The district distributed approximately $667,000 in September 1995 for "excess balances" accumulated during the 1994-95 school year. The restrictive agreements prevented the district from accumulating reserves in excess of five percent in the operating funds.

By maintaining such small ending balances in the operating funds, the district severely limited its ability to handle any unexpected shortfalls in revenue or unforseen expense. To ensure the district resources are adequate, the district should develop adequate reserves and review any restrictive agreements that limit the district's operating balances.

The district did a poor job budgeting and monitoring its financial position for the 1996-97 school year. The district has done a better job monitoring its financial position beginning with the 1997-98 school year and utilizing the budget document as a tool to monitor and control district finances. Financial reports currently identify the district's financial position and any significant changes that are reflected in board approved budget adjustments. The approved 1998-99 budget projects balances in operating funds will be sufficient to remove the district from being categorized as "Financially Stressed".

Although improvement has been noted, the district continues to have some problems documenting approval of all change orders and work orders to its construction projects. The district has an informal policy stating board approval is necessary for all change orders and work orders.

The written policy allows the Superintendent to approval any change orders or work orders not exceeding $25,000 with a report to follow at the next scheduled board meeting.

During our review, we noted four change orders and work orders, totaling $61,800, which had not been approved by the school board. Three of the orders had been approved by the Superintendent; however, there was no board approval as required by district policy.

The district hired a firm to serve as both the architect and construction manager for all of its construction projects. This situation did not allow for an independent review of designs.

Bids were not obtained or bid documentation was not kept for several of the district's purchases, including its transportation contract, the finishing work of the district's building trade house, and the lease of modular units used for temporary classrooms.

In regard to the modular units, had the district lease-purchased or purchased the units, the district could have saved between $101,000 and $203,000 on a second lease.

Our review of the district also found that the administrators' salary schedule is not utilized by the district. Improvements are needed for procedures dealing with the distribution of intent letters to teachers, and documentation of employee termination records.

About the District:

The district operates two high schools (9-12), two middle schools (6-8), and seven elementary schools (K-5), an area vocational technical school, an administrative/adult education-customized training center, maintenance and receiving center and a building for an "at-risk" program. Enrollment was approximately 6,620 for the 1997-98 school year. The district employees approximately 716 full and part-time employees, including 25 administrators, 470 teachers, and 221 support staff.

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