Results of R-III audit made public
Representatives of the Missouri State Auditor's Office delivered the Wheaton R-III School District audit report during a special public meeting on July 7.
"We got some real positive responses from the school board," said Tom Kremer, state director of audits. "We did not agree on all things, but I believe that makes the audit balanced."
State auditors found a variety of weaknesses in the district's conduct over the last four years.
During the 2002-03 and 2003-04 school year, the district spent more than it received, which resulted in a decline of the ending fund balance.
With the decrease in funds, the school board approved carrying two months of payroll into the 2003-04 and 2004-05 school years, which misrepresented the district's financial condition on the Annual Secretary to the Board Report.
If the district's finances would have been represented correctly, it could have been declared financially stressed by the Department of Elementary and Secondary Education (DESE).
"The district had some hard times," said Kremer, "but the district has gotten behind a lot of those hard times.
"The biggest problem the district has seen is the self-funded insurance plan," said Kremer. "The district had a lot of losses and spent a lot of money to keep the self-funded health insurance afloat."
In July of 2001, the school board approved a self-funded health insurance plan, which made the district responsible for paying claims up to individual deductible amounts.
Although the district purchased reinsurance to obtain reimbursement for claims over the individual deductible amount, the self-insurance fund expenditures exceeded revenues in the three years that the district insurance was self-funded.
"The last couple of years the budget has been more clean, and financial growth is continuing," said Kremer. "This district is better off then we believed early on in the audit process. We want to give everybody comfort in knowing that it looks like things are looking up."
Ending fund balances in the years 2001 through 2004, ranged between $91,524 and $264,879. The 2005 budget showed an ending fund balance of $407,117 and the projected fund balance for the 2005-06 school year was $869,623.
"The school board is monitoring the district's financial condition by receiving monthly reports, communicating with the superintendent regarding financial matters and planning for the future by looking at future needs," the school board responded in the audit report.
The financial distress caused by the self-funded insurance plan between 2001 and 2003 forced administrators to cut several district-funded programs during the 2003-04 school year. Over the last two school years, administrators have reinstated most of the programs.
"The district believes it will be fully accredited next year," said Kremer. "The school has currently met the MSIP standards."
The fourth cycle MSIP standards, which were recently applied to the district's 2005 Annual Performance Report (APR), qualify the district for a full waiver of the fourth cycle review. The district could see a change in accreditation after the 2006 APR is released in the fall.
The district must meet eight of the 13 MSIP standards. According to the 2005 APR data, the district has met 11 of the 13 standards.
The audit also identified the following concerns with the Wheaton R-III School District:
During the 2004-05 school year, $31,400 was paid to 38 employees for attending meetings and workshops and for after-school tutoring. The district failed to enter into extra duty contracts, require employees to document their time and the pay was not included on W-2 forms.
A former superintendent, who resigned in January of 2003, was paid $34,000 in severance pay, but the superintendent's contract did not stipulate severance pay. The board did not document reasoning for the payment or a legal opinion to support the decision.
In 2004, the district refinanced $420,000 in general obligation bonds through a negotiated instead of a competitive sale. Although state law does not require competitive bond sales, lower interest costs suggest competitive sales are in the best interest of school districts.
Monthly listings of expenditures, which are reviewed by the school board, do not include payroll or expenditures paid prior to the meeting.
The district has 16 discount store credit cards, two bank credit cards, an office supply card and a craft store credit card. During the 2004-05 school year, purchases on the cards totaled around $61,800 and the district carried balances on several of its credit card accounts throughout the school year incurring late fees and finance charges.
Some board members violated the district's conflict of interest policy by approving payments and additional compensation to relatives, sales to relatives and payments to themselves.
The district employed a librarian during the 2004-05 and 2005-06 school years and two teachers during the 2005-06 school year that were not properly certified by DESE. In addition, the librarian, who does not have a bachelor of science degree, received a salary, which requires a bachelor's degree with four years of service within the district.
A few students have been attending the Wheaton R-III School District who live outside the district's boundaries without paying non-resident tuition.
According to responses in the audit report, the school board has corrected many of the concerns listed in the audit.
"Procedures are presently in place to ensure all employee payments representing compen-sation in the normal course of business are recorded on W-2 wages," said the school board. "The district will collect contracts and or documentation of attendance as appropriate to allow for an appropriate review prior to authorizing additional compensation."
The board will consider the necessity of including severance payments in future employment contracts, and all classified employees will begin preparing signed timesheets during the 2006-07 school year.
The board will pursue open competition in any future bond sales and adopt a more comprehensive bid policy for other types of expenditures.
Although the school board presently approves all bills, board members will start documenting the bill approval process by identifying the bills approved by number. The board president will initial the listing of bills approved and the board will review the bill approval policies to ensure good accounting practices are maintained.
"Credit card usage is presently being monitored more closely, receipt slips are being reviewed prior to payment and payments are being made in a timely manner," said the school board. "The board and adminis-tration will review policy as it relates to who has access to cards, who approves the purchases and what the credit limit should be."
Auditors also recommended the board evaluate the need for each credit card and cancel any unnecessary cards.
"Board members share a heightened awareness of nepotism and conflict of interest in light of recent events," said the school board. "Efforts are being made by all parties to eliminate any further problems."
The board also stated that certification requirements were met by all staff members during the 2005-06 school year and that the librarian has been taken off the salary schedule for the 2006-07 school year.
"Ongoing efforts are being made with local government agencies to address residency issues with present students," said the school board.
In utilizing the present map and student records, the board was unaware that some students were not residents. District administrators plan to contact county assessors' offices to verify student residency in the district.
The audit gave additional recommendations related to timesheets, payroll functions, written contracts, expenditures, meeting minutes, appointment policies, accounting controls, budgets and general fixed assets.
"The auditors found some things that we knew they would find and pointed out issues where we can definitely improve policies and tweak the way things are done," said Jim Cummins, superintendent. "I think the audit results were helpful overall. It pointed out that things are moving in a positive direction.
"I feel we are moving in the right direction, and it is good to get this behind us," said Cummins.
Cummins took the position as Wheaton superintendent in July of 2005. Cindy Brandt, who was promoted to interim superintendent after Pete Vanzant resigned in January of 2003, served as superintendent until June of 2005.
The Wheaton R-III School District audit will cost the district around $15,000. The complete audit report is available on-line at www.auditor.mo.gov.