News
The Des Moines school district last year laid off one of its two internal auditors, and since then, there have been fewer special audits of schools and programs and less oversight of how schools conduct business, a Des Moines Register review of internal audits shows.
In addition, mismanagement of money at schools has gone unresolved.
The Register's review was prompted by the resignation earlier this month of Steven Laudick, a member of the district's four-member audit committee. Laudick, a Des Moines certified public accountant, had been on the committee since 2006.
In his resignation letter, Laudick wrote that he was disappointed when the district's second auditor's position was eliminated. "I felt that their decision to do so without seeking our counsel violated the Charter of the Audit Committee, and felt it was an imprudent decision that could only cause long-term damage to the district," Laudick wrote. "I no longer feel comfortable providing attestation to management's steps to minimize the risk of exposure to the district."
The need for a second internal auditor was prompted several years ago by the discovery that the district had misspent more than $300,000 in federal grant money.
The position was cut last year as part of budget reductions.
Now one person ensures that the more than $400 million in state and federal aid the Des Moines school district receives each year is properly spent and that the hundreds of thousands of dollars in lunch, book and other fees collected at each of the district's 66 buildings is accounted for.
"If you have an independent professional like that who says, 'I smell something wrong here, guys,' then that is a significant thing to be concerned about," said Charlie Trainor, a certified internal auditor and fraud examiner for schools who does training for the Virginia-based National School Boards Association. "That should send bells and whistles off to the school board."
Fewer internal audits
The Register's analysis shows a nearly 25 percent drop in the number of internal audits performed through the first three quarters of this fiscal year compared with the same period in the previous fiscal year. During the same periods, the percentage of audits that turned up violations increased.
Violations in the past two years have included the financial mismanagement of student meal accounts, unreported missing money and principals who approved their own reimbursement for expenses, the review of internal audits shows. Additionally, the district overpaid service providers on multiple occasions and staff failed to properly fill out timecards and report personal time off.
Follow-up audits at sites that previously had problems showed a majority had not resolved their issues, the review shows. Three of the five return audits at schools in the past two fiscal years uncovered violations similar to those that were originally identified, records show.
In addition, reports from multiple routine audits noted continuing violations that dated back as many as seven years. For example, a special review of financial records at North High School noted continuing problems with depositing money in a timely manner that dated back to 2003. A report from the auditor's visit noted a lack of receipts for money that was collected and money that went undeposited for as long as four months. The most recent audit uncovered nearly $64,500 in undeposited cash and checks, with some dating back five or more months before the auditor's visit.
A special audit at Phillips Traditional School in 2008 showed $904 of prepaid meal receipts was not properly credited to student accounts, prompting police and officials from the state auditor's office to get involved. Officials identified 757 instances in which the payment posted to a student's account did not match amounts recorded on daily sales records. A follow-up audit eight months later found the school was still not maintaining proper records.
Findings from multiple financial reviews led to police investigations, and at least one case prompted involvement from the state auditor, according to reports from the site visits.
"A district our size is not well-served with one internal auditor, especially given the recent changes where you have everyone fearing for their job," Laudick said in an interview with the Register.
"There is tension between employees and administrators. That just increases the opportunity for people to make risky decisions."
Panel not consulted
Laudick first voiced concerns last year when officials announced plans to lay off an internal auditor who earned $59,100 a year. Administrators informed the audit committee, which is responsible for making sure the district has proper controls to avoid mismanagement, after the fact instead of seeking their input into the decision, he said.
At the time, Superintendent Nancy Sebring said she hoped to use federal stimulus dollars to restore the position. That didn't happen, and further budget reductions this year left Laudick with little hope the district would restore the position.
Laudick submitted his resignation this month.
He said he no longer felt comfortable in his role on the audit committee as he watched problems go unresolved and the quality of audits slip because of time restrictions that made it impossible for the internal auditor to do more than scratch the surface.
The school board approved it without discussion.
Sebring did not return telephone calls or e-mail requests seeking comment.
Earlier problems
Former Des Moines superintendent Eric Witherspoon first recommended the district add a second internal auditor in 2002 after the district misspent more than $340,000 in federal grant money meant for remedial math and reading programs on office furniture and items such as champagne cakes, potato and taco bars, photo albums and a hair dryer.
It was among a string of money mismanagement problems uncovered in the district at the time.
Those issues have improved in recent years, something officials partly attribute to the hiring of the second auditor four years ago, said Robert Wootten, who has served on the audit committee for the past decade. There are fewer violations that require follow-up audits, and the findings from site visits have been less serious, he said.
"There are bound to be mistakes, and there have been," Wootten said. "But there has been nothing that I would consider to be seriously insufficient."
Wootten said he is more concerned with extensive yearly audits conducted by an outside firm, because they turn up large misuses of money. Des Moines has had clean yearly audits in recent years, earning the district national recognition.
But yearly audits don't always catch the misuse of money, because auditors only look at a sampling of financial records.
The Cedar Rapids school district, like Des Moines, received clean audit reports from 2002 to 2008 and national awards, district officials said. However, officials discovered after police received an anonymous tip that an employee had embezzled nearly $500,000 during the same time period.
The finding prompted leaders in Cedar Rapids to add an internal auditor, making it the second in the state to employ one. They did so at the same time they cut 60 teaching positions in an effort to save $5 million.
"I understand it's difficult to add positions at the same time you are cutting teachers," Cedar Rapids Superintendent Dave Benson said. "But the reality is the public trust in our ability to manage public money is paramount."
There are no guidelines for how many internal auditors a district should employ based on its size. However, a large urban district such as Des Moines isn't adequately served by one person, said Trainor, the auditor who works with the National School Boards Association.
One internal audit can take weeks to complete, depending on what building or program is being reviewed, Trainor said. For example, he said it can take him nearly 40 hours to just do interviews when he audits small schools.
Laudick, the committee member who resigned, said, "The decisions the board has made do not support a strong financial system. The Des Moines school district is ill-served by having only one auditor. I feel this is the case after seeing the problems repeated over and over again."
Violations discovered
In the fiscal year that ended on June 30, 2009, the Des Moines school district conducted 53 internal audits, of which 31 uncovered violations. So far this fiscal year, 32 audits have been completed, 21 of which turned up violations.
Common violations found during routine audits included principals approving their own reimbursement for expenses, staff not depositing cash and checks in a timely manner, money being stored in unsecured areas, deficit spending from school funds, and administrators failing to review financial records on a regular and timely basis.
The following are special audits that were conducted during both fiscal years:
Phillips Traditional School student meal account: An internal audit was launched in 2008 after a parent contacted the school alleging an incorrect deficit in her child's meal account. The auditor reviewed meal sales from July 1, 2006, through March 26, 2008, and found $904 had not been properly posted to student accounts. Additionally, he identified 757 instances in which the payment posted to student accounts did not match the amount recorded on daily sales records. The internal auditor worked with the district's lawyer and the state auditor's office in his investigation, and the matter was turned over to the police. The food service clerk involved left her assigned building and did not return to duty.
Callanan Middle School: School administrators reported $600 in cash was missing from an unlocked desk drawer, prompting an investigation in September 2008. The office manager said she inadvertently left the drawer unlocked over the weekend, and when she returned the following Monday, the money was missing. Internal auditors found school officials waited nine days to report the lost funds. The matter was turned over to police.
Community relations: District leaders requested an audit after they learned some sales receipts from the community relations department had not been deposited. The audit, conducted in October 2008, found $3,600 was not deposited in district accounts or charged to internal accounts. The money was found in desk drawers and boxes and included 145 checks, some dated 27 months earlier. At least $60 could not be accounted for, and a $35 overpayment was made to a vendor.
North High School: District administrators requested an audit after a parent reported that an item ordered during a cheerleading fundraiser had not been received. From Oct. 2, 2009, to Oct. 27, 2009, the internal auditor found $44,215 in cash and checks that had not been deposited. Most of the checks were dated one to two months prior to the audit, but 15 were dated five or more months beforehand. Another $19,375 in undeposited funds was later found, including a $16,000 donation for student scholarships that was dated nearly two months prior to the audit.
English Language Learners program: An audit was conducted at the request of Twyla Woods, the district's chief of staff, after supervision for the program changed. The auditor reviewed time and attendance records for fiscal year 2008 for all ELL employees. He found 55 of the 83 time sheets tested were not signed by a principal or administrator, and five were not signed by the employee. One employee used 14 hours of comp time that had not been earned, and there was no evidence it was repaid. Another employee accrued comp time by not reporting lunch periods. There was no evidence the ELL administrator had formally approved any earned comp time.
In addition, mismanagement of money at schools has gone unresolved.
The Register's review was prompted by the resignation earlier this month of Steven Laudick, a member of the district's four-member audit committee. Laudick, a Des Moines certified public accountant, had been on the committee since 2006.
In his resignation letter, Laudick wrote that he was disappointed when the district's second auditor's position was eliminated. "I felt that their decision to do so without seeking our counsel violated the Charter of the Audit Committee, and felt it was an imprudent decision that could only cause long-term damage to the district," Laudick wrote. "I no longer feel comfortable providing attestation to management's steps to minimize the risk of exposure to the district."
The need for a second internal auditor was prompted several years ago by the discovery that the district had misspent more than $300,000 in federal grant money.
The position was cut last year as part of budget reductions.
Now one person ensures that the more than $400 million in state and federal aid the Des Moines school district receives each year is properly spent and that the hundreds of thousands of dollars in lunch, book and other fees collected at each of the district's 66 buildings is accounted for.
"If you have an independent professional like that who says, 'I smell something wrong here, guys,' then that is a significant thing to be concerned about," said Charlie Trainor, a certified internal auditor and fraud examiner for schools who does training for the Virginia-based National School Boards Association. "That should send bells and whistles off to the school board."
Fewer internal audits
The Register's analysis shows a nearly 25 percent drop in the number of internal audits performed through the first three quarters of this fiscal year compared with the same period in the previous fiscal year. During the same periods, the percentage of audits that turned up violations increased.
Violations in the past two years have included the financial mismanagement of student meal accounts, unreported missing money and principals who approved their own reimbursement for expenses, the review of internal audits shows. Additionally, the district overpaid service providers on multiple occasions and staff failed to properly fill out timecards and report personal time off.
Follow-up audits at sites that previously had problems showed a majority had not resolved their issues, the review shows. Three of the five return audits at schools in the past two fiscal years uncovered violations similar to those that were originally identified, records show.
In addition, reports from multiple routine audits noted continuing violations that dated back as many as seven years. For example, a special review of financial records at North High School noted continuing problems with depositing money in a timely manner that dated back to 2003. A report from the auditor's visit noted a lack of receipts for money that was collected and money that went undeposited for as long as four months. The most recent audit uncovered nearly $64,500 in undeposited cash and checks, with some dating back five or more months before the auditor's visit.
A special audit at Phillips Traditional School in 2008 showed $904 of prepaid meal receipts was not properly credited to student accounts, prompting police and officials from the state auditor's office to get involved. Officials identified 757 instances in which the payment posted to a student's account did not match amounts recorded on daily sales records. A follow-up audit eight months later found the school was still not maintaining proper records.
Findings from multiple financial reviews led to police investigations, and at least one case prompted involvement from the state auditor, according to reports from the site visits.
"A district our size is not well-served with one internal auditor, especially given the recent changes where you have everyone fearing for their job," Laudick said in an interview with the Register.
"There is tension between employees and administrators. That just increases the opportunity for people to make risky decisions."
Panel not consulted
Laudick first voiced concerns last year when officials announced plans to lay off an internal auditor who earned $59,100 a year. Administrators informed the audit committee, which is responsible for making sure the district has proper controls to avoid mismanagement, after the fact instead of seeking their input into the decision, he said.
At the time, Superintendent Nancy Sebring said she hoped to use federal stimulus dollars to restore the position. That didn't happen, and further budget reductions this year left Laudick with little hope the district would restore the position.
Laudick submitted his resignation this month.
He said he no longer felt comfortable in his role on the audit committee as he watched problems go unresolved and the quality of audits slip because of time restrictions that made it impossible for the internal auditor to do more than scratch the surface.
The school board approved it without discussion.
Sebring did not return telephone calls or e-mail requests seeking comment.
Earlier problems
Former Des Moines superintendent Eric Witherspoon first recommended the district add a second internal auditor in 2002 after the district misspent more than $340,000 in federal grant money meant for remedial math and reading programs on office furniture and items such as champagne cakes, potato and taco bars, photo albums and a hair dryer.
It was among a string of money mismanagement problems uncovered in the district at the time.
Those issues have improved in recent years, something officials partly attribute to the hiring of the second auditor four years ago, said Robert Wootten, who has served on the audit committee for the past decade. There are fewer violations that require follow-up audits, and the findings from site visits have been less serious, he said.
"There are bound to be mistakes, and there have been," Wootten said. "But there has been nothing that I would consider to be seriously insufficient."
Wootten said he is more concerned with extensive yearly audits conducted by an outside firm, because they turn up large misuses of money. Des Moines has had clean yearly audits in recent years, earning the district national recognition.
But yearly audits don't always catch the misuse of money, because auditors only look at a sampling of financial records.
The Cedar Rapids school district, like Des Moines, received clean audit reports from 2002 to 2008 and national awards, district officials said. However, officials discovered after police received an anonymous tip that an employee had embezzled nearly $500,000 during the same time period.
The finding prompted leaders in Cedar Rapids to add an internal auditor, making it the second in the state to employ one. They did so at the same time they cut 60 teaching positions in an effort to save $5 million.
"I understand it's difficult to add positions at the same time you are cutting teachers," Cedar Rapids Superintendent Dave Benson said. "But the reality is the public trust in our ability to manage public money is paramount."
There are no guidelines for how many internal auditors a district should employ based on its size. However, a large urban district such as Des Moines isn't adequately served by one person, said Trainor, the auditor who works with the National School Boards Association.
One internal audit can take weeks to complete, depending on what building or program is being reviewed, Trainor said. For example, he said it can take him nearly 40 hours to just do interviews when he audits small schools.
Laudick, the committee member who resigned, said, "The decisions the board has made do not support a strong financial system. The Des Moines school district is ill-served by having only one auditor. I feel this is the case after seeing the problems repeated over and over again."
Violations discovered
In the fiscal year that ended on June 30, 2009, the Des Moines school district conducted 53 internal audits, of which 31 uncovered violations. So far this fiscal year, 32 audits have been completed, 21 of which turned up violations.
Common violations found during routine audits included principals approving their own reimbursement for expenses, staff not depositing cash and checks in a timely manner, money being stored in unsecured areas, deficit spending from school funds, and administrators failing to review financial records on a regular and timely basis.
The following are special audits that were conducted during both fiscal years:
Phillips Traditional School student meal account: An internal audit was launched in 2008 after a parent contacted the school alleging an incorrect deficit in her child's meal account. The auditor reviewed meal sales from July 1, 2006, through March 26, 2008, and found $904 had not been properly posted to student accounts. Additionally, he identified 757 instances in which the payment posted to student accounts did not match the amount recorded on daily sales records. The internal auditor worked with the district's lawyer and the state auditor's office in his investigation, and the matter was turned over to the police. The food service clerk involved left her assigned building and did not return to duty.
Callanan Middle School: School administrators reported $600 in cash was missing from an unlocked desk drawer, prompting an investigation in September 2008. The office manager said she inadvertently left the drawer unlocked over the weekend, and when she returned the following Monday, the money was missing. Internal auditors found school officials waited nine days to report the lost funds. The matter was turned over to police.
Community relations: District leaders requested an audit after they learned some sales receipts from the community relations department had not been deposited. The audit, conducted in October 2008, found $3,600 was not deposited in district accounts or charged to internal accounts. The money was found in desk drawers and boxes and included 145 checks, some dated 27 months earlier. At least $60 could not be accounted for, and a $35 overpayment was made to a vendor.
North High School: District administrators requested an audit after a parent reported that an item ordered during a cheerleading fundraiser had not been received. From Oct. 2, 2009, to Oct. 27, 2009, the internal auditor found $44,215 in cash and checks that had not been deposited. Most of the checks were dated one to two months prior to the audit, but 15 were dated five or more months beforehand. Another $19,375 in undeposited funds was later found, including a $16,000 donation for student scholarships that was dated nearly two months prior to the audit.
English Language Learners program: An audit was conducted at the request of Twyla Woods, the district's chief of staff, after supervision for the program changed. The auditor reviewed time and attendance records for fiscal year 2008 for all ELL employees. He found 55 of the 83 time sheets tested were not signed by a principal or administrator, and five were not signed by the employee. One employee used 14 hours of comp time that had not been earned, and there was no evidence it was repaid. Another employee accrued comp time by not reporting lunch periods. There was no evidence the ELL administrator had formally approved any earned comp time.
