Two financial findings, or problems, were reported in a recent audit of the William S. Hart Union High School District for the 2016-17 fiscal year.
These findings related to the district’s segregation of duties in the payroll department and the district’s time certification for special education programs.
The concerns were addressed with staff before the completion of the audit, Hart district officials said Wednesday, at the district’s regular Governing Board meeting.
“There were some audit findings noted in the report and, as noted, corrected action plans for two of the findings were reviewed with the appropriate staff and employees prior to completion of the audit,” district CFO Ralph Peschek said Wednesday.
Peschek said this correction process includes reviewing the findings with the appropriate administrator to assure that they have an understanding of the findings and what steps must be taken to correct processes and procedures.
“Administrators then develop action plans to implement changes recommended in the audit document in a timely manner,” Peschek said.
Despite these findings, the Hart district was still found to have complied, in all material respects, with governmental requirements for the fiscal year and that the district followed acceptable accounting principles.
“All three opinions were unmodified. So effectively what that means is there was nothing that came to our attention that led us to believe they were not materially stated, that they were not accurate,” said Scott Gustafsson, a partner of Vavrinek, Trine, Day & Co., the firm that performed the audit, at the Governing Board meeting.
Financial Statement Finding
This was the second time the Hart district was found to have a “significant deficiency” in regards to its segregation of duties in the payroll department. A similar finding was reported in the district’s 2015-16 annual audit.
By definition, a significant deficiency is “less severe than a material weakness, yet important enough to merit attention by those charged with governance,” according to the audit report.
The finding was reported because the district’s payroll specialists have full access to Human Resources and Payroll modules, and because management has the ability to create and enter employee data and approve the payroll to be processed, according to the audit.
This occurred because of the recent changes and turnover in the Business Services, Human Resources and Payroll departments.
The finding placed no costs in question, but did increase the likelihood of a misstatement due to error or fraud.
To fix the problem, the district’s corrective action plan includes having management review and clarify the duties and responsibilities of the payroll and human resource staff to eliminate any internal control issues. It also includes removing the payroll department’s ability to create and enter employee data.
Federal Awards Findings
The audit also found a material weakness and significant deficiency in the district’s federal awards program related to the special education cluster.
“There was a finding related to the federal program that we did look at this year for the special education cluster, and that had to do with time certification,” Gustafsson said at the board meeting. “I believe that issue is being resolved right now if it hasn’t been already.”
Under federal requirements, charges to federal awards on salaries and wages must be based on a record that reflects the work performed.
The audit found that the district did not have sufficient controls in place to ensure that employees working on multiple activities maintained time accounting documentation. When 40 employees were selected by Vavrinek, Trine, Day & Co. for testing, all 40 were missing all or portions of their time accounting documentation for the fiscal year.
The salaries of these employees appear to be reasonable, but the district did not supply the supporting documentation for these salaries and for federal compliance, resulting in questioned costs of $6 million, according to the audit report.
To remedy the problem with the time accounting documentation, the Chief Financial Officer and Director of Special Education developed an action plan.
This plan includes conducting biannual time studies on staff for staff working in program areas supported with federal funding resources, and keeping the signed documents on file.
“Program administrators review staffing and hours worked in support of the federal program,” Peschek said. “After the administrator confirms that hours worked and allocated to federal program funds are accurate, they certify those expenditures.”
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