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.