Legislative Joint Auditing-Educational Institutions
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Senator Dan Sullivan
Unverified
0:00
on the minutes. I have a motion to adopt the minutes. Need a motion to adopt the minutes, please. Motion, second. Thank you. Minutes are adopted.
Speaker 2
0:14
Next item is Mr. Fink. Review the reports. Thank you, Mr.
Speaker 3
0:19
Chair, and good afternoon. Today we have 78 educational audit reports for FY23 to review. 13 of the audit reports contained reportable findings, and we will begin with the
two reports which had findings that were referred to the applicable prosecuting attorney and the attorney general. The first is Jacksonville North Pulaski School District. Finding one, our examination of non-payroll expenditures, which included a sample of 31 disbursements and various tests revealed the following seven disbursements totaling forty three thousand dollars did not have any form of approval authorization four disbursements totaling
eight thousand dollars did not have adequate supporting documentation and five disbursements totaling fifty two hundred dollars were not properly classified finding two the districts made payments totaling $61,000 for related party transactions without proper approvals in conflict with Arkansas Code. $51,000 paid to a company in which a board member held a financial interest without approval by the board or the Arkansas Division of Elementary and Secondary Education.
And then there were $7,800, $1,000, and $996 paid to three companies respectively in which three separate board members held a financial interest without approval by the board. Finding three, the district did not obtain bids for two indoor playgrounds in the amount of $58,000 as required by Arkansas code. Finding four, a review of credit card charges and other non-payroll
expenditures revealed disbursements totaling $13,000 that are constitutionally suspect under the Arkansas Constitution as interpreted by the Attorney General, $9,900 for staff gifts, including $1,500 for two-day shipping, $3,000 for meals without a documented business purpose, and in addition, the district incurred $527 in charges for convenience, late, and service fees. Finding five, the district's internal control system did not prevent or detect material errors
in the financial accounting records. The district misclassified $1.1 million of bond principal payments as interest payments. The financial statements were subsequently corrected by an adjusting entry during audit field work. And that concludes the findings for Jacksonville North Pulaski School District. Do we have
Senator Dan Sullivan
Unverified
2:58
anybody from Jacksonville North Pulaski here? I didn't see anyone sign up. Members, I've got some problems with this finding.
These are pretty, first of all, it's being referred to the district attorney. Secondly, if you'll notice, all the responses are just, we'll do better. And that's not, to me, that's not sufficient. I'd like to see some, or at least hear, some detail. I mean, for example, on the first one, the district will ensure all purchase orders are signed. They're supposed to do that anyway. That's nothing new. And I would be open if the committee would like to have someone come in
or willing to see this as reviewed. Any comments from the members? Senator Clark? I'll
Senator Alan Clark
Unverified
3:47
make a motion if necessary. You can word the motion, but I would like to see them in here.
Senator Dan Sullivan
Unverified
3:54
You're making a motion that we have someone come in to speak? Yes. Have a second. Second. All in favor, say aye. Aye. Any opposed? Thank you. We'll ask them to come in. Thank you. Next, Mr. Fink. Yes.
Senator Missy Irvin
Unverified
4:13
Senator Irvin, you had a comment or question? So we'll be holding this report over to the next meeting?
Speaker 3
4:19
Okay, thank you. So what we'll do is we'll call it deferred, and it'll go to the top of the agenda for the next meeting, and then we will send a letter to them. We invited them to, or we did not invite them to this meeting. we notified them since it wasn't a repeat and they're not under fiscal distress, but when we will actually invite them to the next one. Perfect. Thank you, sir. Okay. Mr. Fink, go ahead. Number two. Okay.
The next one is, um, Jesseville school district, uh, finding one, the district used $628 in general activity funds for food, decorations and supplies for a retirement party in conflict with the Arkansas Constitution as interpreted in the applicable attorney general's opinion. And finding two, the district identified four fraudulent checks totaling $22,000 that cleared the district's bank account from August 19 to August 22, 2022. The bank returned the funds to the district
on September 8, 2022. And that concludes the findings for Jesseville School District. members any questions if
Senator Dan Sullivan
Unverified
5:28
not do we have a motion to review motion to review second seconded all in favor say aye
folks this is a participatory thing now somebody's got to say something and we're just going to sit here for a couple of hours. I'm trying to test myself
to see if I can go home eating what I'm saying. Well, you'll have a couple of more chances before your term is up. And we're going to excuse you on this one to at least make a motion to second. But I appreciate the sentiment. As does everyone else, I'm sure. Thank you. So we have a second.
All in favor, say aye. Thank you. Motion
Speaker 3
6:28
is reviewed. Mr. Fink, next. There was one report that contained a repeat finding, and that was Marvell School District. Finding one, there was no documentation of board approval for $12,000 paid to the superintendent for attendance of meetings and training prior to the beginning of her contract. Documentation of the days were available for audit inspection.
Finding two was a repeat. the district's operating bank account was unreconciled during the 2023 fiscal year with unexplained variances ranging from $9,300 to $923,000. As of June 30, 2023, there was an unreconciled variance of $78,000. A similar finding was reported in the previous two audits, and that concludes the findings from Marvell School District. And this is a repeat
Senator Dan Sullivan
Unverified
7:16
finding, and they were invited to attend this meeting? Yes, sir.
Is anyone from Marvell here? Marvel? I had a good friend from Marvel. He'd be upset if I missed it. So there's
no one here from Marvel? Folks, generally when we have a repeat finding, we've asked them to show up, and they don't show up, we hold it over and ask them to come
Senator Linda Chesterfield
Unverified
7:45
in again. Senator? Let me just say this. since this finding took place the district has
been taken over by the state so I guess we would
want the state then to come in and see if these things have been addressed because this this is the first time we've had this whoever it is this new good point has come in
Speaker 30
8:05
and taken over yeah very very good point
Senator Missy Irvin
Unverified
8:08
yeah thank you I'll make a motion to defer this report to next meeting and invite the Department of
Senator Dan Sullivan
Unverified
8:14
Education. Invite the department in as well as a superintendent? Yes. This superintendent is
Speaker 32
8:18
gone and has been gone for some time. So is there a representative
Senator Dan Sullivan
Unverified
8:22
from the school then that would come in or just the state? Probably both.
So what is your motion to have, because the state's here now, they could come up and testify or we can defer it and have both come up later or we can do the state now and have them come in later if we want say what let's have the state come up representatives in the state come up and let's figure out where we are right now i'll withdraw the motion for the time being i appreciate y'all being prepared to come forward thank you and if you would introduce yourself
and you can kind of give us a summary of
Speaker 40
9:05
what's going on here eric saunders assistant deputy commissioner at the department so um which part would you like for me to address is there anything well there are two findings how about both of them yeah so so the first one was yeah they did not have any documentation on that and this was superintendent that's no longer there documentation meaning the board minutes of the action uh actual board minutes uh relative to that uh on the second
one yes it was a repeat finding on the unreconciled bank account we worked um i'm trying to think last year with the district I couldn't tell you how many times multiple times I would say that at a minimum the bookkeeper was here on site 12 to 15 times throughout the year probably focused specifically on just this task it had basically really been neglected and so when you're going through that you have to go back years and track things down it's lengthy process we assisted them with that they're very close to I think getting it cleaned up now I was told just a couple weeks
ago by the uh entity that's working with the district that they should have that cleaned up here within um a month or two is was their goal and so they have since they were placed under state control here in this last spring and there's a transformation contract with outside entity friendship uh that is running the district in that regard so okay i have a question on this finding one the district
Senator Dan Sullivan
Unverified
10:28
will adhere to all contractual agreements they were supposed to be doing that anyway so why weren't they that's it's a great question well I know the thank you
I agree yeah so what's the answer I couldn't
Speaker 45
10:45
tell you why they didn't do that why they
Senator Dan Sullivan
Unverified
10:48
didn't keep the proper minutes all right and just let me summarize and I'll go to you guys so what I'm hearing you say is that you've been working on these that we are have a process in place and we should be working through resolving these in the next couple of months?
Speaker 40
11:04
Yeah, that was specifically with the reconciling of the bank statement. Okay. All right,
Speaker 8
11:08
and Senator Clark, you were first to raise your hand.
Senator Alan Clark
Unverified
11:13
You're recognized. Thank you, Mr. Chair. I realize that all these parties, the way I understand it, takes place, are no longer there. But how does a school district pay $12,000 without documentation that $12,000 is supposed to be paid? You
know, I assume that that would be under the
Speaker 40
11:37
directive of the superintendent at the time directing them to do so. That was kind of my thinking.
Senator Alan Clark
Unverified
11:44
The superintendent directed them to pay her $12,000, but there's nothing in the minutes. Nothing in the board minutes. They
Senator Linda Chesterfield
Unverified
11:59
were under local control at that time. Thank you. Senator Chesterfield, you're recognized. Thank you, Mr. Chair. And while they were under local control for that brief minute, because Marvel has been in and out of state control. Confirmed? Am I correct? Marvel has been in and out of state control.
Speaker 40
12:16
I do know that they were placed under state control April 13th of last year. I don't know the previous history on state control, though. Because I've never seen them before. They've been
Senator Linda Chesterfield
Unverified
12:27
in and out of state control, let me assure you. What is troubling is they continue to do this, and I think one of the previous superintendents had gotten them out of some of this, and then we go back into it. I'm just interested in finding – I'm interested in knowing,
since they were taken over when in this last school year? April 13th
Speaker 58
12:52
of 2023. 2023. And it's still going to take them
Senator Linda Chesterfield
Unverified
12:55
some months to clean it up. That's a question. We're about to go into the next school year. So we're looking
Senator Dan Sullivan
Unverified
13:06
at months to clean up, which would
be after the beginning of the next school year, and we're still under state control. Under state control. Okay. I
Senator Linda Chesterfield
Unverified
13:15
guess that's what's troubling to me is because I've seen when we've been under state control in Pine Bluff for years,
and they still have findings, and we were under state control in Little Rock. When we went under state control in Little Rock, Little Rock was not in fiscal distress, but when it came out of state control, they were. And so I'm just concerned about what the state is doing that is not leading to better results fiscally for the districts over which they have control. And I just want to say that for the
Senator Dan Sullivan
Unverified
13:46
record. Yeah, I think that's the same question I was asking. So what are we doing? What are the details of what's happening? All right. So we're going to have another, just for information,
Speaker 41
13:55
Senator Clark, I'll come back to you. But we're going
Speaker 63
14:05
to have another audit at what point? We'll audit in
Senator Dan Sullivan
Unverified
14:08
this upcoming PEPWA 24 audit cycle. So some point over the next year, we'll be in there. Okay. We'll have a conversation about when the next audit, but we'd like to have some detail when the next audit is done is what are the details of what we've tried and what has and what
Senator Linda Chesterfield
Unverified
14:22
hasn't worked. And I know I'm not going to be back, certainly probably to everyone's joy, but I would like for us to do a study as a subcommittee of audit
as to what happens during the five years under which these school districts are under state control, what results have happened as far as the fiscal integrity of the district because what I've seen has not been good and mine may be a biased opinion or something but I don't know I'm just wondering because Pine Bluff did not come out well it's still having some problems we see that Marvel is having some problems it has been in and out of state control I'm wondering what has
happened in Meade County, what has happened in Pine Bluff, what has happened in these districts that have been under state control fiscally, and that's the only thing we can do. I'd like to see the academics as well, but I think we ought to start taking a look at has this been a good result? Has being under state control for five years been a good result for any of these districts either academically or fiscally? And if not, then we as a legislature need to find another way to deal with this. issue because when you have, uh, citizens don't have any say whatsoever in any of the
decisions that are made and yet their school districts are under or experiencing these difficulties academically and they continue to do it. So I think at some point we need to say, this is not working. Senator, can we
Senator Dan Sullivan
Unverified
15:50
bring this up under new business and you can make a recommendation or motion at that point? I think that's a valid point and would be a good exercise. Thank you. Senator Clark, you
Senator Alan Clark
Unverified
16:02
had a question? Yes, I assumed until Senator Chesterfield asked her question
and probably shouldn't have assumed that when you were talking about reconciling the bank account in the years that you had to go back, that the fact that it's not done yet is not current, but back stuff that they're still trying to reconcile.
Was I wrong or are they not up to date on the current statements when it comes to reconciling?
Speaker 40
16:33
I probably can't answer that accurately. Can I have somebody help me? Yes. Can I call somebody up to assist me with that? Saliyah,
Senator Alan Clark
Unverified
16:44
could you come up? Because you can see that I understand the difficulty of going back years, but usually there's let's start here and make sure everything going forward is correct.
Speaker 76
16:56
Saliyah Kazi, Fiscal Services and Support. So
Speaker 78
16:59
Marvel has been working with us on their bank rec for quite some
Speaker 76
17:05
time. They've had a switch of business managers at least through the two. Is it better? Yes. Let me see. I'm slipping that much here. So Marvel Elaine
Speaker 78
17:17
has been working with us since 2019. They've had two business managers that we've provided professional development to. they've been here to our office and we've helped them reconcile and when they were working with
legislative audit as well we found very helpful when legislative audits shared the spreadsheet for all the outstanding checks from past years we can only you know give them guidance on what to do they have to be the one going in and cleaning it up holding their hands there were times where we gave them guidance, and it was not implemented. Until last year, when we had that transformation contract, we had a professional team who was well-versed in bank recs, and they have cleaned up previous all of the outstanding checks.
I don't know if you're familiar, but eFinance has this one thing where they give you an AFR exception for all of those checks that are prior to outstanding prior to six months. Long story short, all of the previous findings for bank reconciliations have been addressed since two months ago. The new variances are for the existing year, and there are always going to be some variances. It's difficult to say that a school district coming out of fiscal distress is going to always be able to reconcile to a zero.
We've had seen those months. By and Bluff now has a zero variance. But for Marvel, yeah, they're working on it. And the last conversation we had with them with the monthly support zooms that we offer, they said that going forward in fiscal year 25, which started in July, they will have a zero variance. So that's the goal. So it's just the opposite. They've got
Senator Alan Clark
Unverified
19:03
all the back years caught up. Yes, yes, sir. And whatever is not reconciled is, but this is not, the whole thing's not reconciled.
Speaker 78
19:10
It's specific checks. Specific transactions, yes. All
Senator Dan Sullivan
Unverified
19:16
right. Mr. Fink has a comment on
Speaker 3
19:20
that too. Mr. Fink, could you go ahead? Sure. So I went back and looked at what our FY22, what the unreconciled variance was. And at the end of FY22, it was 228,000. And you'll notice in the FY23, we noted that it was 78,000. So it did get better when you look at it comparatively.
I know, you know, might I raise eyebrows that at one point it was out of balance $923,000. That was very early in the FY23 year, around August and September. And then obviously they got it down to the $78,000 that was noted in the findings. So just wanted to provide that information. yeah i think that's pretty much
Senator Dan Sullivan
Unverified
20:02
what you're testifying to both of you that they're coming in and
we're working to get it reconciled and working on it we're making progress we're not
there but the burden is on our our the state's responsibility is guidance did i hear you right yes the actual burden of achieving that accomplishment belongs with the local people Exactly. Yes. Okay. Any other questions on that? Well, folks, we're going to, um, they were asked to be here. They weren't. Is there someone like to make a motion to review this or delay it for next time and had the district come in? We have motion to delay this was a review. Okay. Motion
to review. Again, audit will be back there, and we will have another opportunity if we need. Second to review. I'd like to substitute. I'd like to have them come in. Okay, but substitute motion to come in. Do you have a second on that? Second. All in favor, say aye. Aye. We will then delay this and have them come in. Thank you.
Speaker 3
21:20
All right. Next, Mr. Fink. Okay. The next 10 reports contain findings that were not referred to APA or the Attorney General, and they did not contain repeat findings. Most of these findings are ones that we typically see that are related to federal grant requirements, payroll type issues, and non-payroll disbursement issues. There was one finding specifically after talking to the chair
that I wanted to at least summarize, and it is on page 7 of the report. The finding is for Hope Academy of Northwest Arkansas, and I will not read the whole thing. As you can see, it's a pretty long finding. But they had a material weakness related to their internal controls. And so some of the issues that we noted during our audit were misclassifications in the general fund and the special revenue fund.
while we were there we made corrections during audit field work that we had management sign off on to get the financial statements to be correct for the errors that we noted and then we also noted additional weaknesses during our testing related to bank account reconciliations we noted that they were not properly reconciled at June 30, 2023, with a variance of $46,000.
And our staff identified this variance during audit field work. We also noted that there was no approval of the June 2023 bank account reconciliation, so that we could verify it had been reviewed. You'll notice several issues related to receipts. Then you'll notice issues related to credit cards. Adequate supporting documentation was not maintained for transactions
totaling $6,000. We did not note review or approval on credit card transactions totaling $1,600. dollars. There's also a couple more issues there related to the credit cards. We noted that employee leave records were not maintained by the school in accordance with Arkansas Code. Supporting documentation was not maintained for journal entries. And once again, we had no way of knowing if those had been approved by someone other than the preparer. When we looked at 10
non-payroll expenditures, we found that nine disbursements totaling about $35,000 did not have any indication of approval as required by code. And then there were nine disbursements that were made with only one authorizing signature, which is also in non-compliance with Arkansas code. During our examination of payroll expenditures, we noted that signed contracts were not available. Two employees payroll tested did not agree to the salary schedule.
Review and approval of payroll disbursements was not documented. We also noted that the Charter Board is required to review, adopt, and publish the charter school's budget, and it was not available for audit review. And that is the finding for Hope Academy of Northwest Arkansas. Folks, it's my understanding, this is
Senator Dan Sullivan
Unverified
25:05
their first audit by the state. And although it's quite extensive, there are a lot of things there. They did respond well.
If you'll notice their responses, there is detail there of things they're going to do to get better. Generally, it's not our practice to bring them in on a first audit. A little bit of difference here than there is pretty extensive. of, uh, is there a will of the committee have a motion to ask them to come in and discuss these. You have a second, have a second. All in favor, say aye. Thank you. The motion
passes. We will, um, defer this and ask them to come in.
Senator Missy Irvin
Unverified
25:58
Mr. Fink. Oh, I'm sorry. Senator If I understand the rest of the reports are without significant findings, is that correct? It's
Speaker 91
26:06
items that we would typically see. So could I make a motion to batch
Senator Missy Irvin
Unverified
26:10
those and review? Before you do. Oh, wait, before I do. I would like to ask a question about the Caddo Hills.
Senator Dan Sullivan
Unverified
26:20
I think we only have two more
to batch, Horatio and Hot Springs. and the rest of them there are no findings on, so. I would just like to
Senator Alan Clark
Unverified
26:32
ask a question about CADO before we finish. Okay. You recognize for a question? Yeah, it's a very small finding, it appears. The district paid a flooring company $34,600 to replace old carpet tile
without obtaining a written contract that included the prevailing wage rate clause, which means there was a contract. but what is the
Speaker 3
27:01
prevailing wage rate clause? So this is a specific compliance requirement from the federal government because these are education stabilization funds. They're required to have a clause within the contract that specifically discusses the wage rates that they are using and that they're going to be in compliance with the federal government standards.
And so that's what we look for on these. that's a specific compliance requirement that
Senator Alan Clark
Unverified
27:31
so it's because it was so federal money's not always used and i ask this because i happen to run a flooring company and i don't remember ever having filled that out and work for a school so i was curious yeah
Speaker 91
27:49
and and if I can add, um, we do, we've seen this quite a
Speaker 3
27:54
bit with the ESSER money. Um, and we've seen it
in the past. There were some stabilization funds that went out, um, several years ago that, that had that same requirement. It's called the Davis Bacon Act. And we kind of saw the same things. And so even though we're, you know, issuing a finding, we're also kind of notifying the schools, hey, this is something that you're supposed to be doing, we're going to check it again next year if you entered into a new contract, or we're going to make sure that you have let the contractor know that they need to be including that in that contract.
Senator Dan Sullivan
Unverified
28:27
All right. Thank you. That's very helpful. All right. Senator Irvin, I'll come back to you. You have a motion to batch the last two and all the findings without put all those together? Yes, sir. We have a second? Second. Second. Motion. All in favor, say aye. Aye. Motion passes. Everything is reviewed. Mr.
Senator Linda Chesterfield
Unverified
28:53
Pink, we have any? Oh, new business. Senator, you have a motion? Yes, sir. Mr. Chair, I move that
the audit subcommittee review the school districts
that have been placed under state control to determine the effectiveness of their fiscal standing as a result of that takeover. Does that make any sense? It does to me. Does it make any sense to
Senator Dan Sullivan
Unverified
29:17
anybody else? Do we have a second then? All second. Senator Clark,
a second. All in favor, say aye. Aye. The motion passes. Thank you. Any other new business? Seeing no other business, we are adjourned.
Speaker 110
29:36
Thank you. When will we meet again? Pardon? When is our next meeting?
Speaker 3
29:46
September. September, second week. September. Tiffany, do you know that date for September? I don't have it
Speaker 32
29:51
on me. Okay. We'll find out and get that to you, Senator. Thank you. We are adjourned. Thank you.
Agenda
A. Call to order by Co-Chairman.
B. Adoption of Minutes of the June 13, 2024 meeting.
C. Review of Reports. Refer to the Synopsis
D. New Business.
E. Adjournment.
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - EDUCATIONAL INSTITUTIONS, Jul 11, 2024 | Agenda | 3 | Official source ↗ |
Speakers
Senator Dan Sullivan
Unverified
Speaker 2
Speaker 3
Senator Alan Clark
Unverified
Senator Missy Irvin
Unverified
Senator Linda Chesterfield
Unverified
Speaker 30
Speaker 32
Speaker 40
Speaker 45
Speaker 8
Speaker 58
Speaker 41
Speaker 63
Speaker 76
Speaker 78
Speaker 91
Speaker 110