Legislative Joint Auditing-Educational Institutions
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Senator Mathew Pitsch
Unverified
0:00
He's a quorum. We need at least one of them to come in the room, and I think they will here shortly. Let's do some housekeeping. Let's go ahead and call the meeting to order. Welcome, Senator. Let's start with the adoption of the minutes of the October 10, 2019 meeting. Those should have been emailed to each of you. Did anybody have any corrections in that? And if so, please let me know. Otherwise, we need a motion to accept the minutes.
Motion and do I have a second? Okay. Chair sees a motion and a second of the October 10, 2019 meetings. All in favor of accepting those, please say aye. Aye. Same sign opposed. Okay. The motion would pass. Before we jump into reviewing reports, because we have kind of a short agenda today, I think it's kind of important we meet every morning, if you don't realize the two of us as co-chairs, We meet the morning before we come here to review each of these.
So we kind of have a ready to go type deal. But one of the things that we are privy to that I think would be good for you as board members is I've asked Mr. Newt here to give us kind of a state of the state of legislative audit education, our joint committee, where we're at in the year, where we're in in the cycle because a lot of our members in audit are fairly new to that process. So I've asked him to give us a brief update on that if you'll indulge the chair here. I think that'd be good before we got into all the other things.
Speaker 3
1:30
Thank you, Mr. Chair. Yeah, we're on the education side.
Speaker 5
1:35
We're currently in our 2019 physical year cycle. Today, we're going to review our remaining 2018 audits that's still out there, and there's about 11 reports, I believe, on that. That'll do it for the 2018 cycle, except one. We still have a higher education audit. Hopefully that'll be, my plan is to get that on the December agenda.
So that'll wrap up our 2018 cycle. At the beginning of each audit cycle, we have a prior, we start with three higher education audits, and those are the U of A system, ASU system, and Arkansas Tech University. And we do those three first because they are necessary, because we need to provide audited financial information to the statewide comprehensive annual financial report people over at DF&A
so they can get that report ready. So that provides enough coverage for the column that sits under the higher education column. And those three universities, system universities, gives us enough coverage to provide audited information. So we do those first of all. After that, we prioritize, we go into the school district, charter schools, educational cooperatives.
The first priority is to get physical distress districts out of the way, and also the school districts that require a federal single audit. And the ones that receive, because those are due to the federal audit clearinghouse, by nine months after the fiscal year end. And so that's March 31st, 2020, for this current year. So we have a lot of audits to do that. We have 215 school district charter schools educational cooperatives that we perform.
150 of those are federal. So we have to get that 150 all filed, released, and sent to the federal audit clearinghouse by March 31st. And, of course, to meet that March 31st deadline, your committee doesn't meet most of the times during January through March. So we do what we call an early release. So we'll early release those audits during those months. And then over the remaining period of time, we'll present those to committees.
So that's the reason you see some of these audit reports like we have today. They were actually early released back in the spring before March 31st. And then after those audits are performed, we have the remaining about 65 non-federal school district educational cooperative and charter schools. We work on those mainly through January through August. And also in that, we also look at the remaining higher ed audits as well.
So all of them except those three that I previously
Speaker 7
5:00
mentioned. So that's basically what our cycle is.
Speaker 5
5:04
As just a side note, I just kind of wanted to remind everybody what the standing committee guidelines were. And the guidelines dictates that an audit containing repeat findings, the superintendent
or director and the board president are requested to be present at the committee meeting. And if it's a higher education audit, the VP of finance or chancellor of finance is requested to be at the committee meeting. And then also, if a school district is classified as in being in physical distress at the time the audit report is being presented, then that superintendent and board member is also invited to be at the committee meeting. So the remaining audits, they just receive a letter
saying that the meeting will be held and their audit will be presented. And then it's just up to that entity's officials whether they want to attend that meeting or not. And of course, As you well know, y'all have deferred some audit reports so you can have requests the certain officials to be at the committee meeting. So that's a quick synopsis of that, Mr. Chair. Did
Senator Mathew Pitsch
Unverified
6:20
anybody have any questions for him, Senator Chesterfield?
Senator Linda Chesterfield
Unverified
6:24
Thank you, Mr. Chair. Mr. Newton, would you explain to me about the federal aspect of what you're speaking? Those that have to be at the federal government. Are they all school
Speaker 5
6:41
districts or just particular school districts? They are school districts that expend $750,000 or more in federal funds for the year. And we have approximately 100? 150 of those. It's been between 140 and 150 for the last few years that we have had to submit to them.
Speaker 16
6:59
And we've almost finished with those then? Or we
Speaker 5
7:01
will be by March? Well, we will be by March 31st. We have met that deadline for the last 10 years, so it has taken a concerted effort on our staff's part, and they're very dedicated to meet that deadline. Thank you. Thank you,
Senator Mathew Pitsch
Unverified
7:16
Mr. Chair. Thank you. I appreciate the committee indulging me because we hear
Mike Poor
Unverified
7:20
about what they're doing, where they're going, which schools, what level they're looking at in audits. For instance, we've got the higher ed audits coming at our last meeting this year,
correctly, as you stated? So I want to make sure that you guys feel like you know what's coming next, and that will be our December meeting. When we get into March, it will be into the federal audit reviews, et
Senator Mathew Pitsch
Unverified
7:43
cetera. So I thought it was worth the five minutes to give us an update of how the
Senator Linda Chesterfield
Unverified
7:48
cycle year goes through audit. I have one more question. Senator? We're going to be moving into fiscal session in the spring. I think that's April we're going to do that. we normally make sure that we don't have audit and budget hearings overlapping.
So do you have some idea as to how we're going to proceed so that when the budget hearings
Mike Poor
Unverified
8:10
begin? I can give an update from the executive committee. I assume that will be in the minutes. They proposed a different calendar because of that. Basically, our original schedule, which hasn't been published yet, but intended to have our first audit meeting January 9th, And they're asking to move it the week after ALC in January because of the holidays. And then they're going to do the same thing in February and then not meet in March because that'll be budget review and then fiscal session in April.
There's some concern that we're going March, April, and we don't normally meet in May. But then you'd have a meeting in June for this committee. That's one meeting in four months. so we may have to do something when we're here as a committee to meet during that fiscal to deal with any kind of audit report that needs immediate action, but I think that was the intention, and the executive committee liked the new schedule, so that's what you'll be seeing published here shortly. Thank you very much. I may be stepping out of bounds giving you that because it hasn't been published yet,
but we did approve that, so forgive me if I said too much there, but you asked, so we went there. Okay, any other
Senator Mathew Pitsch
Unverified
9:16
questions? let's jump right into the reports we have guests with us today we will start with the item C review of reports on the agenda and a report that was previously deferred the Little Rock School District of Pulaski County I believe we have guests here with us please come to the end of the table and we'll ask you to introduce yourselves and to begin with the process we'll ask you to identify
yourselves. We'll then read the finding and then we'll ask for some input from you. So please please feel
Speaker 31
9:53
free to introduce yourself. Thank you Senator. My name is Mike Poor and I'm the superintendent of
Speaker 33
10:00
Little Rock Public Schools. Thank you. I'm Kelsey Bailey. I'm the
Mike Poor
Unverified
10:03
chief financial officer for Little Rock Public Schools. Okay. Thank you gentlemen. Let's go ahead. Mr. Newt
Speaker 3
10:11
will you read the findings? Yes, sir. Finding one, excuse me. In March 2018, the district discovered and we
verified $5,091 in unauthorized payments to a bookkeeper during the period August 12th, 2017 through December 22nd, 2017. The bookkeeper whose employment was suspended on May 30th, 2018 submitted and received payment for time she did not work in an after-school program. The district recovered all the misappropriated funds from the bookkeeper's paychecks during May and June 2018, and the bookkeeper's employment was terminated on July 19, 2018.
The second finding, the district dispersed $700 of general activity funds for employee Christmas gifts in apparent conflict with Arkansas Constitution as interpreted by Attorney General's opinion. Finding three, at the conclusion of this audit, Arkansas legislative audit and a law enforcement agency are in the process of investigating certain financial transactions of the district. We will issue a report concerning these transactions at the completion of the investigation.
Speaker 37
11:27
Okay, so with the reading of the three findings, opening comments, either person, Mr. Poore? Thank you, Senator.
Speaker 31
11:37
I do want to make several comments. First, I would like to share appreciation for the state audit team that comes into our school district. Coming into Little Rock, this is the first time that I've actually gone through or endured or collaborated with a state audit. Adjectives abound, right? Yes, all those, kind of an E.
And I think that they're very thorough and work, you know, well. They're thorough in the sense of being with a variety of our folks and with me. And I felt it to be actually a very good process. And I probably would, if you'd have told me that five years ago, I would have, you know, shook my head no about that. So I do think it's a good system of trying to create accountability for the finances. Next is that I want to share that to my left is Kelsey Bailey, and Mr. Bailey now has been our CFO for the school district for almost 10 years, a little over 10 years, and I think we have a very talented young man helping lead and navigate through, you know, a large district and to do it exceptionally well.
And, of course, when you think about it's not just one guy, it's his team. But then we really, I think, do a very good job of trying to train both our principals and our bookkeepers. And as you probably all know, usually you end up with problems the farther away you get from kind of the central part of the school district. And you can see, obviously, we have had a few of those issues. But we've done a really good job of training our folks and trying to make sure that we address issues as they come up.
The last thing that I would share, I have two more things to share, is that our own internal controls were the things where we found items number one and number three. And so I'm actually proud of that because I think that shows that we are reviewing and making sure that we take care of our own responsibility in a thorough fashion. I will also share on item three, that is a significant finding, obviously, as you can probably read between the lines, and we bother the agencies that are now trying to investigate
this on a regular basis, because we'd like to be able to have that come to a conclusion, but that's also out of our hands at this point. Mr.
Speaker 33
14:09
Bailey, would you like to make an opening comment? I pretty much ditto everything that Mr. Poore said. On the findings we typically had over the last few years have been because of some theft we've actually discovered through our internal controls. So we have, I think, great internal controls in place, but when you're dealing with 3,600 employees, you're never going to have 100% of everybody doing everything right at the right time.
Finding number two, I don't know if you have any of the notes on there, but pretty much it was for Horace Mann Middle School. They actually utilized their general activity fund, which is usually generated from Pepsi, Coke funds. They actually buy school beanies for the staff there. They put Christmas gifts on their pro card there, which is unallowable at that point, but that was pretty much what the purchase was. it wasn't that they went out and bought anything at Scrabble. I think it was like $7 a piece for beanies or the skull caps with Horace Mann on there.
They had a good football year, and they were trying to do some school spirit, so that was pretty much that. The other pieces, we just, I mean, we grind every day to really go through our financials and internal controls to review it with payroll and different things to make sure that we have the highest accountability possible and are transparent there, and occasionally we do find some of the items like you see on finding number one and finding number three. So I guess I can elaborate a little bit on maybe on finding number three.
It was significant. It was over 50,000, so it was actually recommended to the Secret Service by Little Rock Police Department. So the agent that was originally assigned was assigned to a presidential protection unit, so it transferred to somebody else, and then I think it's transferred one more time. They think they pretty much have a handle on it. It was about 6,000 transactions we went through. We pulled six years of data to go through, actually went through each one of those transactions. And when we got it to final, we sent it over there.
So they've had it for several months, I guess almost a year now. So I think they're coming to a conclusion to actually submit it for, I think it's going to the district judge or district prosecutor at this point. So hopefully, we'll hear something in the next
Mike Poor
Unverified
16:24
several weeks. I would ask both of you gentlemen, do you have any problems with the responses that are in front of you? Because that's what our committee will question, is your action. As you both have alluded to, you've found the error, if you will, or the misuse, and we're proud of you doing that.
But do you have anything to add to the responses on the three findings, or is that going to stand for your answer to the findings? I have no problems with
Speaker 46
16:53
the response, General. Committee, Senator Chesterfield. Thank you, Mr. Chair,
Senator Linda Chesterfield
Unverified
16:57
and thank you, gentlemen, for being here. I appreciate you coming because really, under the rules of the committee, you were not required to be here except someone said, we'd like to talk to Little Rock. So we're glad that Little Rock came, and I'm somewhat familiar with number three, if I think I'm thinking about the same thing.
So we're hopeful that that does get straightened out, and it's a disappointment because of the individual or individuals involved in it, because of the level of trust that they had with the district. But I appreciate you being here, and these are not repeat findings. And normally we are required to be here for repeat findings, but a member of the committee asks that you come, and so I appreciate you being here. Thank you, Mr. Chair. Anybody else with questions?
Senator Mathew Pitsch
Unverified
17:46
You good? THE CHAIR WOULD ENTERTAIN A MOTION TO FILE THE FINDING. GOT A MOTION. DO I HAVE A SECOND? GOT A SECOND. ALL IN FAVOR, PLEASE SAY AYE. AYE. AND WITH THAT, GENTLEMEN, THANK YOU. AS THEY SAY, IT SOUNDS LIKE BIG ROCKS INTO LITTLE ROCKS. NUMBER THREE IS PROBABLY A BIG ROCK, BUT IT SOUNDS LIKE NUMBER ONE AND TWO WERE KIND OF SMALL ROCKS, AND WE APPRECIATE YOUR DILIGENCE IN FINDING THEM. SO KEEP UP THE GOOD WORK. THANK YOU. THANK YOU VERY MUCH.
Speaker 52
18:20
right committee we'll move on down with what we have next is reports referred to the prosecuting attorney we
Senator Mathew Pitsch
Unverified
18:27
have two of those and i don't believe we have anybody from either school is that correct it's one school oh it's one school i'm sorry it splits over so we don't have anybody from marmaduke in green county so mr newt do you want to read the findings, and we'll try and answer questions with you as best we can. Yes, Mr. Chair. They had one
Speaker 3
18:50
finding, and again, it was referred to the prosecuting attorney. On June 11, 2018, the district's board of directors passed a motion approving the payment of 120 days of unused sick leave to the superintendent upon his retirement, effective June 30, 2018. The number of days approved for payment included 30 days of unused sick leave that were lost upon the superintendent's employment in 2007. The superintendent had accumulated 120 days of unused sick leave at
the district where he was previously employed. However, only 90 days were transferred to the district, which is in compliance with Arkansas Code. The payment of these 30 days at the substitute rate of $65 per day resulted in an overpayment of $1,950 to the former superintendent. Okay. So we
Senator Mathew Pitsch
Unverified
19:47
have that finding there, and the response was, since they're not here to speak to it, I'll let the board members each read the response.
It looks to me like they're trying to make amends with the retired superintendent, but as of today, have no luck. Is that
Speaker 5
20:04
correct? That is correct. we inquired of the school district at the earlier part of this week, and they have not received any kind of refund from him, and nothing has been received from the PA on any disposition as of this time either.
Senator Mathew Pitsch
Unverified
20:18
So is it appropriate for us to make a motion to move this forward
to file it? Okay. The chair will accept a motion to file this finding in front of the full audit committee
tomorrow. Do I see a motion? got a motion second got a second all in favor of filing this report please say aye same sign opposed and the report is filed we now enter into a phase those of you who remember been done several audit meetings we typically will take the reports with findings and ask you to take two to three minutes and read each of them and their individual findings but we have so few of them we kind of made the decision we might and none of nobody's here to defend them
like they typically aren't but i thought i might have mr newt put each one red because we do read them and then ask for questions one at a time since there are so few of them so you want to
Speaker 3
21:18
read us the very first report with finding please yes sir on green county tech technical school district of green county the district did not contact applicable private schools in the area of the district for possible participation in the Title I program in a timely manner. Additionally, the district did not submit the affirmation of consultation forms
to the Arkansas Department of Education in a timely manner. And that
Speaker 5
21:42
just, they have a timeline of getting that. They did contact the private schools. They just didn't do it in the timeline
Senator Mathew Pitsch
Unverified
21:47
that was required. Any questions of the committee? Okay, none.
Mike Poor
Unverified
21:57
Rather than take a motion on each one, I think let's go to the second one then with
Speaker 3
22:03
Jacksonville North Pulaski School District, please. Yes, they had one finding. The district's internal control system did not prevent or detect material errors in the financial records.
Such records are utilized in the preparation of the district's financial statements. The district misclassified $750,000 of federal assistance as state assistance in the general fund. As a result, state assistance was overstated by $750,000 in the general fund, and federal assistance was understated by the same amount in the special revenue funds. And the financial statements were subsequently corrected by adjusting entries during audit field work.
Speaker 5
22:42
And that was a federal grant received for the ABC program, preschool ABC program. It's the TANF fund, which is Temporary Assistance for Needy Families. There is a code that's set up in the ABSCAN manual to record that. They just failed to put it in that source of funds. They instead put it in the ABC source
Speaker 59
23:05
of funds and operating fund. Anybody? Question? Senator? Thank you. This is also one
Senator Linda Chesterfield
Unverified
23:12
of the school districts in my district, and it's the newest.
Okay. So if this is all they've got wrong, I'm very proud of them. But they are a very, very new school
district. And since I represent all four in Pulaski County, I just wanted to say that on their behalf. As
Senator Mathew Pitsch
Unverified
23:29
I tried to allude to with our previous speaker, Big Rocks into Little Rocks is what school
districts do. And some of these are Little Rocks, so we'll do that. Play on words there. Does anybody else in the committee have any comments about that? We'll be asking for a motion to file all these here shortly.
Anybody have any comment about the North Pulaski School District, Jacksonville? All right, let's
Speaker 3
23:53
move on to Prescott. They also had one finding. Unallowable cost totaling $1,800 was paid from the Title I program as a result of a Title I employee's contracted salary amount not agreeing with the approved salary schedule for the position. And they responded that they were going to refund the
Speaker 59
24:10
Title I program from operating funds. Does anybody have any questions concerning what was done there?
Senator Mathew Pitsch
Unverified
24:23
Seeing none, let's move on to West Fork School District. West Fork had
Speaker 3
24:29
one finding. All of the 25 free and reduced price meal applications examined were not properly completed by the district's determining official. However, the applications examined were properly classified for the level of benefit eligible. That was just a case where the certifying official didn't fill out the box where he or she was
Senator Mathew Pitsch
Unverified
24:48
supposed to on that. Safe to say it was paperwork?
Yes. Any questions? Seeing none, then I will, as chair, entertain a motion to report the reports with findings as a conglomerate. We have Greene County, we have Jacksonville, North Pulaski, we have Prescott, and we have West Fork. Does the chair see a motion? He does. A second. All in favor, please say aye. Same sign opposed. We will report all findings. That's there. If you would flip your agendas over to the last page, which, well, next to last, yeah, on the last page, reports with no findings.
I wish, this is the one I wish we could bring people here so they could take their bow at the end of the table. but Ashdown School District for the record, Bauxite School District for the record, Bradford School District for the record, and South Pike County School District for the record with reports with no findings. So with that said, the chair would entertain a motion to file that and I see the motion in the second. All in favor say aye. And this might be the shortest audit education joint committee
you've been involved in in a while. So thank you for your time and service, and the chair will take a motion to close, and I've got that. So with that, we will see you tomorrow probably. So take care.
Agenda
A. Call to order by Co-Chairman.
B. Adoption of Minutes of the October 10, 2019 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, Nov 7, 2019 | Agenda | 1 | Official source ↗ |
Speakers
Senator Mathew Pitsch
Unverified
Speaker 3
Speaker 5
Speaker 7
Senator Linda Chesterfield
Unverified
Speaker 16
Mike Poor
Unverified
Speaker 31
Speaker 33
Speaker 37
Speaker 46
Speaker 51
Speaker 52
Speaker 59