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UPDATED: SP bookkeeping under fire

SOUTH POINT — Certain funding programs for students in the South Point school district could be a possible casualty if specified fiscal practices in the district aren’t changed, according to state officials.

Once again, the State Auditor’s office has deemed the district “unauditable,” the second time this year. Schools officials say they are working to correct the problems.

A report released one day before the Christmas holiday by Auditor of State Mary Taylor states there was more than a half-million dollars in questioned costs that were improperly charged to IDEA (Individuals with Disabilities Education Act) and Title I programs. Title I targets low-achieving elementary and secondary students, often in high poverty areas.

In several instances the status of financial documents was in question. The December report that focuses on fiscal years 2005 and 2006

lists 24 citations — either for noncompliance, material weakness or questioned cost — the latter, if not resolved, could put future state and federal funding to the school at risk.

“Serious concerns regarding the district’s management of federal grant funds is a recurring issue and should be addressed and corrected,” Taylor said in a release.

On May 17, the district was declared unauditable for the 2006 fiscal year. On Dec. 12, the same classification was made for the 2007 fiscal year. That inquiry is ongoing.

“Because their records were in such disarray, the auditors were unable to determine their financial standings. This is a serious concern,” said Steve Faulkner, deputy press secretary. “We are essentially releasing a review. We can’t use the word audit.

“We make note of several instances where financial documents or records were

missing, incomplete or inaccurate. It could lead to a situation that could lead to future financial distress for the district.”

For fiscal year 2006, the district reported net assets of

more than $25 million, with the lion’s share — or 72 percent — of revenue for governmental activities coming from grants and entitlements. The next largest source of such revenue is property tax that makes up 13 percent.

However, the district’s major source of such revenue could be affected if accounting practices and oversights are not improved, Faulkner said.

In fiscal year 2006, South Point spent close to a half-million less than it received in state funding for special education, according to the Ohio Department of Education.

“Based on our review, it appears it did not spend the $487,516,” Faulkner said. “It could have been spent and improperly coded. This is a concern too. If they are not spending what they have been allotted for special education programs, they could lose that money for the future. They jeopardize losing that.”

As far as federal funding, the monies scrutinized in the report that was prepared by Balestra, Harr & Scherer CPAs concern grants from IDEA and Title I. Such grants come under regulations that require the funds be spent within a certain time frame, be spent on specified items and be properly documented as to their spending.

“When we go to federal funds, the issues are how they are recording transactions for federal funds. They did not do that properly,” Faulkner said. “By not filing the proper reports and forms, they jeopardize receiving funding for these essential programs. … This may result in a temporary suspension in the flow of federal funds.”

Almost an additional half-million in grants was the focus of this report as a questioned cost.

“That is a bookkeeping issue,” Faulkner said. “We identified $425,175 that wasn’t properly recorded or reported.

When we say report, they have to report funds to the granting agency. They reported it inaccurately.”

Also the district overcharged almost $70,000 in employee retirement contribution payments to IDEA and Title I accounts.

“Certain employees were overcompensated,” Faulkner said.

For fiscal year 2006, the district was entitled to $541,593 from IDEA-B allocation. District records state that $425,031 was spent, but it made a request for reimbursement of only $319,116.

“The district essentially forfeited $222,477 in IDEA-B funding that was not approved to be carried forward to the next grant year,” the report states.

Also cited in the report was the district’s failure to provide proof that its treasurer, Daniel McDavid, is bonded and that accurate monthly bank reconciliations were made.

Superintendent Ken Cook was reached Thursday afternoon at the board offices.

“That report had already been reviewed by us with the auditor,” Cook said. “ I think the person you need to talk to is Dan McDavid.”

McDavid issued a statement Friday morning that stated: “The district is aware of deficiences in its financial reporting. A meeting on Oct. 30, 2007, initiated by the treasurer was held with the Ohio Department of Education to help rectify the issues.

“From that meeting a course of action was decided upon and the district has been forwarding financial records to the Ohio Department of Education. The board of education formulated a remediation plan which is in the process of being implemented to prevent further such occurrences.

“Balestra and Co. has been hired to assist the district.”

The state report outlined a corrective plan of action. In it was stated that bond will be obtained for the auditor; that bank reconciliations were performed and a detailed list will be provided to the auditor; and a director of special education has been appointed to oversee the funds.