Legislative Joint Auditing-Educational Institutions

Thank you miss share and good afternoon today we have forty one educational reports for fiscal year twenty twenty two to review. Of the forty one reports eighteen have reportable findings and we will begin with the two reports that were deferred from the june meeting. The first is arkansas northeastern college i'm not going to read the whole finding but i'd just provide a quick somewhere since it's there in front of you their card is the internal control system did not detect a prevent material miss statements in the financial statements. The financial statements were subsequently corrected by a college personnel during audit field work. Key airs in the comparative statement of net position the comparative statement of revenues expenses and changes in that position the comparative statement of cash flows in the notes of the financial statements had errors in that's detailed in the finding in that concludes the findings for arkansas northeast and college members were talking about this last time they made some good efforts to correct all the issues they had a lot of the f changes and a lot of movement within that department at school so I don't have any questions anyone else have any questions. Is there anyone from northeastern here. And do we have any questions. Would you like the everything you'd like to say. You're welcome to speak if you like if not were we'll move on chair go here yes or go the end and introduce yourself please. By the way we appreciate you being down here thank you. And if you were to introduce yourself. My name is don ray vice president for administration your camera the hole that might pretty close to you please i'm sorry I am down vice president for administration arks on northeastern college I did I have statements and and I won't since I didn't have questions I didn't want to let you know that we understand we had a lot of difficulties to keep personnel resigned all they had for supervision was may and I became very ill had to have a couple medical procedures so the two young employees that we had. Uh. I'm very proud of them and now they have an entire year and eat them and i'm back healthy and I assure you we took this very seriously. Apologized all of you to legilate about it uh. And to the taxpayers and I assure you that we are gonna do a better job and this will be corrected. Thank you I think you'll just got several more million dollars to you for a new program starting up there yes it would be a well thankful for that and a lot of good things happening up there appreciate you being down here okay thank you members i'll ask one more time any questions seeing now thank you thank you. And saying no question to assad ms reviewed will move to the next item. The next audit that was also deferred from our last meeting is crossed at school district and they had for findings uh finding one the district conducted business with a financial institution and which aboard member held a direct financial interest with our eighty approval as required about arkansas code. Finding two the district did not obtain a performance bond for a baseball field lighting project in the amount of seventy three thousand dollars as required by arkansas code. Finding three we noted deficiencies during an analysis of capital assets and expenditures. I will not go through each one but those are listed in the bullets on your synapsis. And then finding for the district made four monthly payments totalling approximately a hundred and seventy five thousand dollars to a vendor's bank account using electronic transfer after receiving a payment request via email that appeared to be from the vendor. After the fourth payment was processed the recipient bank notified the district that the account appeared to be fititious the district immediately contacted the vendor who provided the correct bank account information as of the report at the district had not recovered the funds transferred to the fit texas account and the men has not requested additional payments from the district and that concludes the findings for crosses score district. I think we have some folks from cross that here if you'd like to come forward please end of the table. Members if you remember we discussed this at our last meeting also and I think they're making a good faith effort to get these issues corrected. Uh but if you would like to introduce yourself in. Speak to the points as you see them. He has any boy can superintendent cross at school district deposits president of the cross school board if you have a statement you'd like to make or in that will just go to questions you have a statement you'd like to make our comment just that we we we've taken all these findings very seriously and we have taken multiple steps to insure that these findings do not occur again in the future. And this is your first year as superintendent so welcome here to the capital we're glad to say thanks for every members anymore and have any questions. Yes you recognized thank you I just have a one quick question when these things were taking place these findings were taking place. How. Season is your school board is a young school board is a school did you have a high turnover on it I mean cause some of these things seem to me. Kinda basic that school were members should know and be aware of and should be catching in questioning so can you speak to was there any experience issue because II know turn over happen sometimes on school boards and that does because some problems the same with the admin so. During the time that these foundings actually occurred we did have a pretty seasoned school board in place and we did have a long ten yeared superintendent employees it's just whatever the fiscal year that these article audit findings occurred we did have a large turnover in the board and what i'm i'm talking about that year so may have twenty two may of twenty two we had three new board members joined and then we had a resignation this year and a new board member so as far as the nonus of the board we have a very new board and i'm starting my second year superintendent but during the fiscal year that this actually occurred we did have a pretty tenure board in a an attainered superintendent at time. But I can actually. I can answer each one of these findings are. The if if you have any specific questions as to how these actually occurred. Members any further questions death center you're recognized thank you miss chair II guess man is is more of a statement than it is a a question but uhm uh the fourth finding which is dealing with the fictitious electronic transfer again not making excuses for that they whoever they are out there are getting more and more and more realistic in in their fishing and their scams are particular company we have a software vendor or in our teeth enter that that does checks for us you know they'll they'll they'll send out a fisher a scam but it's in their control and they're they're trying to pop coles in it have if you guys concern consider doing something like that in the future yes sir it's a week so we actually do that so whenever it whenever I became super intended if you'll allow me I can kind of run through what we've done to tighten up our cyber security to ensure that something like this doesn't actually occur the first thing that we did was we purchased something called no before and this was a training that we required all staff in the district to actually go through it's about a thirty minute training you get a certificate our t department has running list and provides me the list of any personnel that we have in the district even down the board members that have not completed this training but basically what it does as it goes through and tells you what to look for in regards to a fish and any other bad actor that we may have in place we also purchase something called crowd strike falcon in point in our price protection. Which is what you're describing there is stop standard breaches and provides in point protection. We've also purchased methods cloud security to further educate staff as well we required every staff member in our district that holds a cross at schools that were email to set up two factor authentication this is something that answers the next year layer of safety there for our staff um and we also upgrade a google from free to go to work place excuse me google work space for education which basically backs up or emails and anything to do with google draft we've also purchased a positive pay through a bank which if we have any fictitious checks for anything like that uh we can track and i've also been in communication believe it or not it's a little bit harder to obtain sovereign security protect insurance and so i've been in contact with a SBA to get some additional information with that and they provided us with a vendor and an application and we're going through that process as well and then of course you know i've of member reading more specifically on house bill seventeen eighty and which is the arkansas cell funded sober response program trust fine which would comply with or we would fall into that because of how this fair she actually occurred it was it was pretty sophisticated if you'll endorse me out there kind of want to explain that because it inside of my office my business office we do have a very season staff and they do they they this is been something that they've that they've really hold down on to ensure never happens again but essentially we we we outsource our custodial staff and to an outside vendor and as force their communication whenever it comes to invoices and things like that they from notoriously being non communicative whenever we try to follow up and ask them question. So and june of twenty two there was a fish email that was seen from their invoice account the person that sends their invoices and it had an invoice and a request for eft at that point or accounts payable as the business manager if the EFT could be astablished they looked at the email it does look very real as a matter of fact there's a software that you can run it through to see if it passes certain thresholds to get through and it did and the eft was set up and the first payment was made and then a july invoice was sent and that was paid and then in august the company reached out and said you know here's august invoice but we've also attached june and you live for you to make payments on well at that point my payroll clerk forwarded the email. That requested the eft with that person's name on it in all of the information and said this is exactly where we've sent this money to per your request will they never said no stop that's wrong they didn't say anything and so the assumption was that yes then this is missus proper and so then another payment was made in september they followed up in september saint hages never never did get the june in july invoices and say anything about august in september forward it again that emails saying hey this is what we're sending it to steel no respite saying though you're wrong this is this is not correct it wasn't until our bank called us in said it appears that the money that you're sending. To the country sending the money to it's actually once it hits that account being diverted overseas and so we think that they've been hacked and so whenever that was brought to me it was an understanding that they had been hacked it wasn't at that point known that it was an actual fish that leaded to all of this wasn't until I had a meeting with the bank president and their fraud department that we discovered there my response to the company has been you know we we've we've notified audit we've notified the f b t prosecuting attorney's been notified if we recovered the funds that the bank recovers the phones will certainly give them to you but if we don't recover on them you know we've we made two good faith efforts trying to tell you where we were sending this money in you didn't tell us that that was wrong er as a matter of fact it took our bank telling us and I was calling your corporate office and sugar land texas and saying hey this is what's going on and they've they've not made any additional inquiry says to that one where the other is just if you recover the money great then what will take it from. So as far as I just want it uh let you all know that the. As superintendent the board and everybody in the district do take sovereign security very seriously we've made great strotes in the district uh strengthened that thank you thank you just to follow up to the committee this this is a a uh growing exponentially financial crime and so we matt consider looking at some some required training in education so we can prevent as much of this as we can but is constantly changing and they're getting ever more sophisticated so I appreciate the steps that you guys have taken and that may be something that we want to commit consider as a committee in the future thank you any other questions senator chafter field. Thank you. We don't need a second on that deal. The. Yeah this added stand for view thank you. The. We're going to the next time. The next report to review is the text arkan arkansas school district report which had to findings the first was referred to the bomboard. District personnel discovered that the employee responsible for donations to the pantry received checks totaling fifteen hundred dollars from three local entities with two checks payable to the employee and one payable to the pantry. The checks were not deposited into the district's bank account nor were receipts provided to document items purchased with the fines. The individual's employment was terminated on october twenty fourth twenty twenty two the second finding the district could not account for three equipment items costing four thousand dollars purchase from the covered nineteen education stabilization fines and that concludes the findings for texarkin arkansas school district. Fender they have questions thank you was our or all of the misdates perform about one person or there's several people involved in this. It appears it was just one person. And so this person. Worded of four thousand seventy nine come from is that the sign person doing that as well. No fifteen hundred or is that coming from no that it that would be a a different issue yes and the responsibility for the equipment issues. And only with the administration but was really bad in particular that it did they assent to deal with this issue the generally they were either be a federal programs director or a capital assets person that the district has the overseas that process thank you thank you mister. Any further questions. Thing man this item will stand in review thank you. The next six reports contain findings that were referred to the applicable prosecuting attorney came in and fairly school district had three findings the first one in may of twenty twenty one the district discovered a gross salary overpayment totally twenty five thousand dollars with a net overpayment of fifteen thousand dollars to an employee for sick leave days of this amount we were able to verify twenty thousand dollars as a gross overpayment they point the employee resigned on april eighth twenty twenty one as of our report and eight two thousand dollars had been reimbursed to the district. Finding two the district discovered and we verified a gross salary overpayment totalling twenty one hundred dollars to an employee for sick leave days. As of the report date fourteen hundred dollars had been reimbursed in addition during testing a payroll disbursements we noted three employees were salary overpayments totalling four hundred and fifty four dollars. Finding three the district discovered and we verified in proper credit card charges of eight hundred dollars an employee who resigned on march eighteenth twenty twenty two stated to district official officials that these charges were for personal expenses the employee agreed to allow the district to withhold the eight hundred dollars from the employee's final paycheck and this concludes the findings for came to fair school district do you have anyone from candidate fair view here. Then members anyone have any questions again this has been referred to the prosecuting attorney. Sure who overpaid them they do not repay themselves so who was being held responsible the person who overpaid them other person who got the money. So it just a little bit of background on it the district had lost an experience payroll prepare which may have been part of the reason these issues came about uhm on that first one which obviously is pretty large overpayment uh they had an employee who went on fml I leave and they did not come back but that did not get processed in the system which is why it caused the issue and so we we just report the matter to the pay exactly how it's written here and in finding one look but. The finding indicates that somebody was overpay. You don't overpay yourself so you just you just refer the whole thing to them and let them try to figure out who the fault lies with the person who overpay them other person who get overpay. Right because they're incompetence it will ever it is is not the fault of the employee so what you're trying to do is recoup the money from the employee over payment how are we doing this the score district is attempting to recoup the funding and because it's an uh an account and for disbursement. For one for saturday we refer that to the prosecutor. So any time anybody has been overpaid whether they pay it back or not the matter is referred to the prosecuting attorney. Michelle you on it you want to address that question. If you could come to the table please. The. Senator testerfield introduce yourself if you don't mind please shell actually legislative audit so you're asking why we referring it to the prosecutor no i'm trying to figure out who is being referred to the prosecuting attorney is that the district being referred is that the individual who received the overpayment because they're not responsible for the paycheck somebody essential office is responsible for their correct and so if an individual is overpay and they pay it back is a matter steel sit to the prosecuting attorneys it's just routine and it was doing stuff for the first united life more different no we are just referring it to them because we are just a reporting agency and sell we just have the reporting yes means I don't remember in the I don't remember as doing quite this much in referral to the prosecuting attorney you've done it has been doing this referring overpayments I mean. I've been here twenty years and I remember we started doing it more and more even though we didn't find fault with individuals who will prefer who you are part of the process so i'm just trying to figure out that that's been part of our process. Thank you. Senator you recognized so in their in at same vain. Uh I think I understand what you're saying but just to be clear so the statute says. You know in in our understand it makes me feel a whole lot better than it was a FMLA and then they didn't come back and they continue to pay him still a mistake and and I get that but uh this better than something else if they if it is every issue like that no matter what automatically referred even if the employee you know for four hundred and fifty four dollars for the three employees for four hundred and fifty four dollars that has to go to the prosecuting attorney as well or is it a certain threshold or or or what i'm what i'm getting at is do we need to change the statue to allow for things that it might be reconciled that are just sheer mistakes because it turnover or whatever are current threshold is anything over five hundred dollars is referred. Any further questions. Representative you recognized. Mr chairman diagram allows their several findings in here of overpayments and I understand that i'm just curious was the same individual is this several different individuals that received over payment or. Was maybe a lot one individual or two that received more than one overpayment i'm just. Concerned about how many people involved in it may be just one or two individuals that was receiving more than one overpayment would send up a red flag to me as well. It was multiple individuals that got overpaid okay. Anyone else have a question thing no more questions will see this item as reviewed. The next report is form in score district which had one finding on march fifteenth twenty twenty two after an employee contacted the district about not receiving her payroll direct deposit desert personnel discovered that employees direct a positive thirteen hundred dollars have been fraudulently diverted to another bank account on february eighth twenty twenty two district personnel updated the employee's bank information based on a fishing email they receive that appeared to be from the employee the district was unable to recover the fines and that concludes the findings perform in school district. Members anyone have any questions. If anyone here from form in the speak. Saying no one there no questions in this one again is is referred to the prosecuting attorney's office. No questions this item is reviewed. Moving on to the next next report is for a city score district which had for findings finding one the district paid three vendors for professional and consulting services before services were rendered these vendors are paid two hundred and sixty nine thousand hundred and eighty six thousand and thirty six thousand eight hundred respectively from total one federal awards. Finding two the district could not document that procedures are followed to select a construction manager for construction on multiple projects around campus as set forth in rules and regulations governing the use of construction management as a project delivery method as promulgated pursuant to arkansas code the construction manager was paid seven hundred and twenty six thousand dollars for non projects during fiscal year twenty twenty two. Finding three during our examination of payroll records we noted the following discrepancies three employees were underpaid various amounts and three employees were overpaid various amounts due to clerical errors. Time sheets provided for two employees torrelling thirty nine hundred dollars and four thousand dollars respectively we're not properly documented. Contract to dinners for four employees or not approved by the board of education eleven thousand for the payroll preparer eighty one hundred for the district treasurer sixty two hundred and four thousand for two certified employees stipends paid the four employees serving in additional roles were not included in the employees contracts twenty five hundred dollars to the assistant principle twenty five that twenty five hundred dollars to another assistant principle one thousand five hundred and fifty five to the district treasurer and one thousand five hundred and fifty five to one classified employee. Finding for the district did not solicit bids for multiple construction projects as required about arkansas code and those are listed in the bullets. And that concludes the findings for four city school district is anyone here from four city to speak on every hair. The. Um. Yeah. Did you sign up to speak how would you like to sign up to speak and you understand your residential for city. The. Did you speak on your behalf as a resident okay you're welcome if you have a seat at the end place. And if you would please introduce yourself. The. And there's a pretty nice group so don't be relaxed and but you're going to need to speak to the points here so if you have issues that are not contained in the agenda before us. That's which you'll need to speak to yes okay go here okay this is my first time in your name is i'm sorry my name is tracy hey against a number resident of four city arkansas okay go here m um this is my first time ever attending a meeting here and I just briefly scan through these documents and as yes a general citizen i'm not really understanding it for an example with the construction company. Um there is not like rules regulation policies procedures where what somebody find it information from so move in for room we won't have those mistakes again and as a citizen how do we find out who these individuals are that are getting this because i'm not really sure om really what to speak on because I don't really have any documentations that front of me to but. These are some pretty big numbers and looking at other school districts they only have a few findings but when i'm from having some real massive things going on look like it. And that's why I decided to come today I appreciate the again there's no one here from four city to speak to this. Senator thank you and and thank you for coming I can assure you these are not that there have been worse okay. Uh so that's why we're here but is it not true that unless it is a repeat finding the districts don't have to come. True they don't have to come here unless we have it we have specifically asked them to come they're not being here is nothing untoward correspond unless they had a repeat my experience where it is order nearly they're not required to come in less we ask and sometimes things are not as these are also alright we'll visit yes may I think thank you members any other questions of the speaker. Thank you. Signature. Thank you mister chair as a new member have not only the senate but also this committee uh their response dealt with the tips taps uh contracted which is cooperative purchasing could you just for just an executive summary one minute explain that process and when it would apply I mean eleven half twelve million dollars is a lot of money and I understand that but just just for my own sake when that would be asking that question of the chair of the chair or the legislative but who whoever okay we can let us so specifically concerning the construction projects in using arkansas code. The. Are cause of code and initiated twenty two nine two or one and following is where those construction construction projects would fall under and so we did not find an acception to arkansas code twenty two nine two of three. That would allow for cooperate purchasing to be done based on a public proof improvement alteration major repair or all the things that are talked about within twenty two nine two oh three thank you a members you know they're not required to show up however we as we did last time we can deferred this for our next meeting if you have questions for the district we can hold this and request that they be present if someone would like to make that motion I think senator did you want to speak your welcome to speak if you like before I accept the motion. Keep membership of a second to defer this to the next meeting and asset different circuit we will all in favor say I motion our oppose motion passes we will defer this to the next meeting and senator you have a comment or my only question as it relates to if you look at the responses the responses clearly and they get you have time to look at that now it in minimum bring about points about you in the law yeah all of these things and i'm very for me with this couple of these findings for sure all of these things were done in the light uh the department was a part of the pre approvals as it went to the process partnership fires etc so all of these things were done and their responses. Indicate that if if you take time to study the responses and nothing was done in the just list procedures that I know is a procedural thing but what I think we need to be careful because what will happen is there is a lot of districts that i'm aware of. That. Have done this and are using this as it as it was used in four city. And that means you've got a lot of people going to have to come here for this and I think is unnecessary because I think. It allows for it. In it and it was when it was present it was not ever disputed. Until your audit obviously get it in and it was back and forth there so I do you know I mean I think the information is here to deal with and has been referred so coming back to the committee and I mean well if the members have questions that that again that the centers correct there's a lot of explanation there in our went through those explanations be sure before they come back that you read their response they have some ballot responses in those to those issues read through those and we will ask and again it will be their choice who they want to send they can bring a lot of people they can bring one person is up to them but with the committee would like for someone to come and respond to these so that would stand review then thank you. Move on the next the next report is that the gravity school district which had three findings. Uh finding wine the districts internal control system did not prevent or detect significant errors in the financial accounting records sognificant errors in the special new special revenue fine included and recorded the country receivable of two hundred and thirty five thousand and recorded accounts payable of eighteen thousand. Special revenue fine revenues and expenditures of seventy four thousand nine twenty three and seventy four thousand seven thirty three respectively recorded in the general fine the financial statements were subsequently corrected by entries during audit field work. Finding two the district paid ninety one hundred dollars to an employee for various painting projects without obtaining a board resolution as required by arkansas code and finding three during our examination of payroll records we noted the district underpaid to employees fifty one hundred dollars due to clerical errors and we also know an employee that was paid for forty two days worked without an employee contract or board approval. In that concludes the findings for gravity school district. Is anyone here from grab a school district speak. Saying no one members think more and have any questions. Filling out this item will be reviewed. The next report is hope school district which had far fundings on january twenty four twenty twenty two a vendor contacted the district about a payment of eighty nine hundred dollars that had not been received the district discovered that the cheque was issued in december twenty twenty one. And it cleared its bank account and have it was endorsed by an unknown individual who are so forged the district treasure's name as the second endorsement the bank was contacted and a police report was filed with the city of hope police department are phones were recovered from the bank finding too on march ninth twenty twenty two the district initiated and ach transaction totalling ninety eight hundred dollars after receiving a fictitious payment request from an email address that appeared to be on to a vendor the district utilizes. Does your personnel discover the error upon review of the legitimate invoices and effective bank account. The district reported the incident to the city of hope police department as of report date the district had not recovered the funds. Finding three and administrative review for the district was completed by desi child nutrition unit in november twenty twenty one that review which was a september twenty twenty one claim for reimbulse embarrassment resulted in a calculated overclaim in the amount of eighteen hundred dollars due to clear coarse and calculating mills served in addition twenty nine hundred dollars of the claim was disallowed due to mill pattern requirements not being met. Finding four the district paid three hundred and thirty five thousand dollars for installation of an each back system from education stabilization find without obtaining a written contract that included the pervelling wage rate class additionally weekly certified payrolls were not submitted to the district. Also needed the hack system now were a facilitility improvement project totalling three hundred and ninety seven thousand dollars were recorded in the district district's capital asset subsidiary records. And the final funding the district could not account for two of twenty eight education stabilization find equipment items purchased in previous years costing forty three hundred dollars in that concludes the findings for hope school district in one from hope here to speak to those issues no I need one have any questions thing now if adam will stand review. The. The. The next report is marion school district which had one finding a review of activity fun revenue revealed a total of twenty nine hundred dollars in student fees was collected but not deposited of these under positive fines sixteen hundred dollars was used for cast purchases of meals and beverages due to revenue not being properly receipted we were unable to determine if all revenue collect it was accounted for. And that concludes the findings from mary and score district anyone from mary and here to. The. Nan members have questions. Saying now this animal stand review. Uh the next nan reports contained findings that were not referred to APA and they were not repeat findings staff recommends that the committee take a moment to read over these findings and file in mass as reviewed after taking any questions committee may have members if you look through the left. The. The. Anyone have any questions. Seeing no questions we'll see all these has reviewed. The remaining twenty three reports which are listening on the last page I believe that's paid seventeen consists of artists with no reportable findings and staff recommends that these reports be filed in mass both look through the safe your districts on there that's a big deal they go through audit no findings we really appreciate those folks so if you've got those districts in your district give a shout out and tell them thanks. Seeing any questions saying that these will stand as reviewed. We will meet again. In september we'll let you know members if you have any questions that we have things coming back and you have a question about it please reach out and ask those questions these districts are do have responses and they spend quite a bit at time putting over responses together so before we meet again if you have questions on this please look to them thank you and we are journed.