Don’t you wish there was someone was out there making sure the folks who use taxpayer dollars to operate our public schools are safeguarding our money and using it in the most efficient way possible?
A team of Certified Public Accountants in the Maryland General Assembly’s Office of Legislative Audits have done just that by issuing their first audit of Harford County Public Schools in May of this year.
The Harford County public school system is the 10th in the state to be studied in compliance with a 2004 state law. According to the report issued by the auditors, HCPS does many things right when it comes to financial management. Adequate processes are in place and best practices were found throughout the system in areas including accounts receivable, the use of federal funds and food services management, among others. But in just about every one of the 11 broad categories of study, the auditors also found areas of concern, including the following notable examples:
While a number of best practices were identified in transportation services resulting in reasonable costs per mile in comparison with other school systems, a cost-benefit analysis of the decision to outsource bus services was inexplicably never performed or could not be documented by HCPS. The auditors indicated the failure to adjust bus contract rates to market conditions led to an extra $3 million in payments for 336 new buses put into operation since 1996. Without further adjustment to these contracts, an additional and unnecessary $6 million will be spent over the next 10 years.
“Significant weaknesses” were found in the internal controls over the automated procurement and disbursement system which handled $143 million in FY 2006. Concerns included unrestricted access to the system for many employees who did not need such access to perform their duties, opening the possibility that vendors could be added, purchase orders could be generated and the receipt of goods could be recorded without authorization and without a review process in place to detect fraud.
Proper documentation was not maintained for construction projects worth $59.6 million. No documentation could be found to support a $1.7 million award to one construction manager. Another contract worth $2.2 million was awarded by the Board of Education to what they were told was the top-ranked firm, when in fact the vendor presented to the board had tied with another vendor for the top score. Since the supporting documentation was not provided, the board was unaware of the other firm or why one vendor had been recommended to them over the other. Auditors also tested nine bid openings and found that the names of the individuals in attendance were not recorded, allowing the potential for improper awards to go undetected.
Several best practices were identified in the area of school facilities including the use of a Capital Improvement Plan, a preventive maintenance program, monitoring of capital projects and the use of alternative financing for the new administration building. However, an energy management program in place since 2001 had never undergone a cost-benefit analysis and auditors found that over a six year period ending in 2006, the energy savings were actually outpaced by the cost of the program by $200,000. Perhaps the recent spike in energy prices will tip the balance back our way, but the auditors recommended regular analysis to find out for sure.
Fuel costs for system-owned vehicles also could have been reduced by anywhere from $28,000 to $45,000 in a one year period studied, had the school system performed cost comparisons prior to deciding against participating in a regional purchasing cooperative. The auditors recommended that such comparisons be undertaken and documented in the future.
HCPS provided credit cards to 491 employees and developed a comprehensive credit card procedures manual for their use. Purchases totaling $10 million were made with the cards during the 2006 calendar year. But the auditors found the initial distribution of cards was not properly controlled and documentation related to travel and other credit card uses needed improvement, especially since monthly invoices were being paid directly by the school system. For example, the auditors uncovered travel expenses for 6 family members and expenditures made for a student organization that had not been reimbursed as required by HCPS policy, leading to the recovery of some of these costs.
The auditors noted that HCPS had received the “Distinguished Budget Presentation Award” from the Government Finance Officers Association for the last five years. And that the board receives regular budget updates and is served by both an audit committee and an internal auditor. However, they also found the internal auditor’s work had been directed toward the relatively minor area of student activity funds worth approximately $6.6 million, rather than on more significant areas totaling $474 million, including procurement and transportation as noted above.
Some contracts worth over $100,000 were found not to have been approved by the Superintendent or the Board in violation of policy. One ongoing contract with a service provider resulted in payments totaling $2.8 million over a six year period without approval.
Finally, auditors recommended the establishment of a whistleblower policy and a hotline to uncover fraud and abuse and the expansion of the Board’s Ethics Policy to include employees responsible for major purchases.
The complete audit of HCPS can be found at http://www.ola.state.md.us/Reports/Schools/HarfSchools08.pdf, along with the response from Superintendent Jacqueline C. Haas to each of the 20 recommendations contained in the report, all but one of which she concurred were in need of corrective action. According to Dr. Haas, some of the recommendations have already been addressed, others are being addressed and still others are planned for some time in the future.
Which makes it hard to understand why one Board of Education member is reportedly “very upset” not over the audit results, but over the audit per se, according to Councilman Dion Guthrie. Guthrie discussed the audit at last night’s council meeting and called for the Board of Education to come to the Council to review the report in greater detail. Whether or not the Board will comply with that request remains to be seen. In the meantime, if you happen to be a taxpayer, you’ve at least gotta love those CPAs.
Nothing really new here. This audit looks similar to most audits of this level that I’ve seen for government or private organizations. From the same website, you can look at the audits completed for the other counties and Harford reads similar or better that those. In general, all audits should find areas for “improvement” or to be “enhanced”. The thing to be wary of are statements that “need immediate attention” or “significant findings”.
It’s good to see the state pencil pushers are finally being put to good use. It would be nice to see the paced picked up though. Eleven audits in three years. At this rate, each system will be audited every 7-8 years. It should be closer to a three year cycle.
Incidentally, not all the auditors are CPAs nor should they need to be.
Parent, taxpayer and businessman says
Nice try jj. Please!!
Can your post have been any more transparent in its attempt to create a false reality and downplay the seriousness of the audit findings? If HCPS or the Board thinks they can deflect this one by having someone like you post that these audit findings are no big deal, they’ve got another thing coming. As usual, there is reality, and there is HCPS’s reality.
I am a businessperson and these audit findings are very alarming on many levels. And they completely undermine the claims of fiscal perfection made by a certain boardmember when he hit the campaign trail in his effort over the past year to kill the democracy in education initiative and maintain the broken status quo.
But we are not surprised. Nor are we surprised that that no one knew about this. Nor are we surprised that HCPS or the Board was not going to share this info with us. Nor are we surprised that the boardmember’s anger (that our councilman referred to) was directed at the messenger, and yet again, not at HCPS for embarrassing the board due to its lack of oversight.
The level of this isn’t to the highest degree, there aren’t many levels in which this falls on. Its mostly all just costs and who will have power.
CPA or not, this is actually far better than the other counties just because we have a control on where money is going. If the State wants us to cut down costs then that isn’t a biggie.
Take for example, last summer a county had a school activity fund problem where money “wasn’t” going where it was suppose to and that in my mind is a big problem. Our system is a lot better than other ones, we just need to shape it up more.
Lew Jr. says
Let me get this straight….an extra $3 million spent on bus service (and that could grow by an additional $6 million if status quo continues), $200,000 “overage” on an energy SAVINGS program, and HCPS credit cards being used for peronal travel!!! Previous commentaries indicate that this is “nothing new” and “the level isn’t to the highest degree”. While I am glad to hear that HCPS is doing many things well, I find these defencencies very disturbing. And that is putting it mildly.
I am a taxpayer in Harford County. That is our money going out the window here. I may not be a CPA, but I can think of a lot of things HCPS could do with an additional $9.2 million over the next several years.
Once again, the accountability issue comes to the forefront. Where is it?? Can you say Elected School Board
Hopefully this audit will prevent the continuance of the mistakes identified. That is the purpose of an audit- to take a look with objective eyes and make suggestions that will make a business more efficient.
Once again, is The Dagger the only public journalistic source that is exploring the true inner workings of HCPS? Thank goodness they are following through and publicizing this information. Too bad we can’t get a true audit of the “high school reform plan.”
I am glad to see that an audit was performed. Unaccountable construction recipients of public funds is alarming to me. Please, County Council, persist on your request for a public review of this entire audit. Thank you Dion for initiating this.
szq…..thats why, when the aegis and record are nothing more than a shelf filler….like the mariner or other weekly mailers…..the dagger will be kicking ass and taking names.
Kathy King says
Well what else is new???? The HCPS has always been a world unto itself and that world is funded with our money!!!! I love the fact that the 10 million dollars is researched while the 474 million is not carefully scrutinized.
ACCOUNTABILITY is the watch word. The only problem is that the HCPS Board and administration lives by the rule “hear no evil” “see no evil” “speak no evil”. Unless, of course, they can destroy a person who dares to question their authority.
Thats true, but the word is “could” increase.. it depends on how the population goes and fuel costs. Reduction isn’t a big deal its just adapting to the economy at the way that its going. And I don’t know about the energy savers but if I read that correctly (or at least sounds like to me) they outpaced energy savings over $200,000 from the cost of the program.. that sounds like a good thing but I might be seeing it wrong. The credit card (P-Card) I don’t know about the travel vacation for a family but that would be an issue related to the use by the person and not HCPS itself. HCPS doesn’t reimburse family vacations by my knowledge and they would have to pay for it themselves. But using it for that is a problem. The P card is suppose to be used for supplies, office equipment, school related events, etc. So if it fell under those categories then I guess it was suppose to be reimbursed but being related to family members sounds more like a vacation.
Parent, taxpayer and businessman says
My favorite is the planted comments from insiders or sympathizers above that seek to defend the disgraceful findings with illogic and misrepresentation. I’m sure the word went out from the admin or board for someone to post a quick innacurate defense. And as we all know, good faith and accuracy is not in their repertoire.