State auditor rips South Point schools

Published 10:34 am Tuesday, November 18, 2008

SOUTH POINT — Ohio Auditor Mary Taylor late last week released the Fiscal Year 2007 audit of the South Point Local School District.

State officials said local school officials may have mismanaged more than $62,000 in federal grant funds, overpaid one employee’s insurance premiums and had numerous instances of sloppy record keeping.

Although some of the blame was apportioned to former school district treasurer Dan McDavid, who resigned earlier this year, state officials also said the school board needed to keep closer tabs on school spending.

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This comes less than a year after the district was declared “unauditable.” School officials said they know there were problems in the past and they are working to correct them.

The 2007 audit identifies $62,291 in federal grant funds that were either improperly recorded and reported or spent outside the allowable time period. The report notes that the district did not have proper accounting procedures in place to manage federal funds.

In regards to special education Idea grant monies, state officials said, “Program funds are reported to the State of Ohio. There are two forms the school district must file: (a) project cash request (PCR) (and a) final expenditure report (FER). The final expenditure report submitted for Title I for grant year 2007 was not accurate per the District’s accounting records.”

The district had problems with its Safe And Drug Free Schools, technology grants and other such grants. State auditors said the funds given were not used in the time period for which they were given.

Mismanagement of federal grants could result in the loss of future federal funding, state officials noted.

Some of the other findings in the audit:

— One employee was not charged appropriately for health insurance costs. The employee was hired on Aug.16, 2004 and elected to take the district’s family health insurance from Jan. 1, 2005 through the present. This employee’s spouse was then hired in August 2006 and was listed as dependent on his wife’s family insurance policy.

From January 2005 through December 2006, the first-hired employee rightly paid 25 percent of her premium as required. In December 2006, McDavid instructed the payroll clerk to pay 100 percent of the employee’s family health insurance premium, a benefit to which she was not entitled. This continued until May 2008.

As a result of this, the first-hired employee was overpaid a total of $7,323.29 from January 2005 through April 2008. According to state law, McDavid approved the change and is therefore liable for the $7,323.29 discrepancy. McDavid is no longer treasurer for the district.

— The audit also showed “incomplete and inaccurate bank reconciliations.”

—McDavid was rapped for not being properly bonded and noted his personnel file was missing from the district office. It was also noted employment contracts and salary notices were not on file for certain employees and administrative personnel.

—The district failed to report its payroll to Ohio Bureau of Worker’s Compensation (BWC) by the required filing deadline. This resulted in BWC overestimating the district’s payroll amount and in turn caused the district’s premium to be higher than it should have been.

The District also failed to file its third-quarter tax return (Form 941) for 2006 until June, 2008. This caused the IRS to have inaccurate information on file regarding the district’s Medicare wages and income tax withholdings, resulting in discrepancies between amounts reported on 941s and Forms W-2/W2-G/1099R.

“Improper record keeping and lax financial oversight continue to plague the South Point Local School District,” Taylor said in a release. “I encourage school officials to review and implement the recommendations outlined in this report as they seek to improve accountability and efficiency.”

— Proper forms were not completed and on file for all student fund-raising activities. “The lack of these forms could result in an inability to account for amounts paid into the school district treasurer’s office or to support expenditures made from the student activity account. Additionally, budgets were not prepared at the beginning of the fiscal year by student activity organizations and submitted to the board of education for approval to document approval of the activity and proposed fund-raising activity,” the report said.

The state also noted that McDavid did not give activity advisers necessary financial statements that would have enabled them to better keep track of finances for their club.

— The district did not use tally sheets to document ticket sales for many of its athletic events. The only athletic events for which tally sheets were routinely used were football and boys and girls basketball.

“According to the treasurer, tally sheets are not utilized for the other sporting events because the district does not require payment to enter the event,” the audit said. “However, tickets are sold to individuals who want to pay, and those receipts are classified as “donations” since payment is not required. Failure to account for ticket sales substantially increases the risk that fraudulent activity or mistakes will occur.”

While McDavid got much of the blame, auditors said school board members had failed to monitor financial activity accurately.

“We recommend the board of education take a more active role in monitoring the financial activity and results of audits for the school district,” the audit read. “The minute record should indicate what financial information the board of education is approving and copies should be maintained. The board of education should consider establishing an audit committee as an additional tool for monitoring the financial activity of the school district.”

School board member John Sherman directed Tribune inquiries to Superintendent Ken Cook, who did not return a call seeking comment. Fellow board member Mary Cogan said she and others of the board are concerned about the audit and had met with state officials a month ago to discuss it, so she knew the 2007 report would not be favorable.

“A lot of us are about finances. I have operated a small business more than 13 years and have had rental property for more than 20. I understand the need for accountability. We now have an awesome, ethical, honest treasurer (Terri Baker) and she tells us the good, the bad and the ugly,” Cogan said. “We are blessed to have her. We can ask questions and get straight answers,” Cogan said.

Baker said many of the items listed on the audit are no longer a problem.

“I do feel like we’re moving forward,” Baker said. “There are always going to be issues but a great many of the items discussed in the report have been rectified. I don’t want to say they were easy fixes but they were standard items that took a board resolution or just oversight to correct.”