Legislative Joint Auditing-Educational Institutions
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We're so thankful for you to be here today. Thank you for serving on this committee. Before we get started, let's open in prayer and welcome everybody to this meeting. If you'll join me as we start. Thank you, Lord, for this day. Thank you for this beautiful day. Thank you for the chance to represent the people that are in our community, in our backyard. Hopefully we represent you above all with everything we say, we do, we think is pleasing and honoring to you. Thank you for the ability for our staff to work hard also alongside of us to serve the great people of Arkansas.
We appreciate everything we get to do, and may we honor all you do. In Jesus' name I pray. Amen. Members, with that in mind, that's our heart. That's our goal here. Thank you for serving on Audit Committee. And with Co-Chair Duke, it's just such a joy to serve in this way. We were reminded this week, speaking to different schools across, I'm sorry, a few weeks ago, speaking to schools as they were wrapping up in graduation, the start of our preamble and our Constitution, we the people of Arkansas, grateful to God Almighty for the rights and privileges
to choose our own form of government, do ordain this Constitution. That's what we get to do 151 years later. So we don't take this lightly. So thank you again for giving your time to do this today. So with that, co-chair, would you like to say anything? Okay. All right, let's roll. Moving to the agenda. First one is to call the order. Second is to adoption of minutes. So we take a motion to adopt minutes. I see a first and a second. All in favor to adopt minutes, say aye. and opposed like sign motion is moving forward okay second on the agenda and under c is review
of reports we'll pass that to
Speaker 10
1:53
mr fink and our staff thank you mr chair and good afternoon today there are 161 educational audit reports to review of the 161 reports 28 have reportable findings. The current Standing Committee guidelines is to invite entity officials for deferred audit reports, reports with repeat findings, and reports of school districts currently classified as fiscal distress. There were no deferred audit reports from the December 2024 meeting, and there are
currently no school districts classified as fiscal distress. There were seven reports with repeat findings, and I will identify those when we get to them. The first three reports for the committee to review were certified to the governmental bonding board and referred to the applicable prosecuting attorney and attorney general. We will begin with the University of Arkansas system report. There were six findings noted in the report that were all a result of the UA system's
Internal Audit Division that were required to be reported to the PA AG. Instead of reading each finding, I will provide a summary of the issues noted. At UAMS, Internal Audit noted a loss of $67,000 due to a prepayment of services to a supplier that went out of business before services were rendered. Additionally, there were issues noted related to a travel reimbursement of $673 that was a duplicate payment. There were two findings noted at UAPB. Internal audit identified
a potential loss totaling $138,000 related to multiple salary overpayments due to inadequate internal controls and untimely business processes. As of October 17, 2024, UAPB had recouped $45,000 of the $138,000 in overpayments. The second finding was related to check fraud in UAPB's Student Academic Services Program. Checks for invoices were originally made out to students
in the SAAS program, but were altered and cleared the bank in the name of the program director. The program director was terminated in April 2024, and $7,000 in accrued leave time was withheld from his final paycheck. Subsequently, in August 2024, UAPB received a cashier's check for the remaining amount due. At the University of Arkansas Pulaski Technical College, internal audit identified a loss totaling a little less than $17,000 related to multiple salary overpayments due to inadequate internal controls and untimely business processes.
As of October 2024, the university had recouped $8,100 of the $16,869 in overpayments. There were two findings noted at the University of Arkansas Fayetteville. The first internal audit finding was related to automated clearinghouse payments. Internal audit was notified by the university management of a potential loss of $193,000 due to unauthorized charges, changes to a supplier's ACH information.
The review conducted by internal audit was for the period January through April of 2024. Management filed a report with the university police department and worked with the financial institution to recoup the funds. The university was able to recruit $98,000 from the financial institution and the supplier issued a letter stating that the university was not responsible for the remaining amount of the loss. And the second finding was related to a fraudulent check that was inadvertently
approved through the positive pay exception process, resulting in a loss of $11,000. This concludes the findings for UA system. Management has provided a response to each finding, as noted in the synopsis. Although system officials were not required to be here because they did not have a repeat finding, they are present to answer any questions the committee may have. Thank you, Mr. Fink.
Members, you've heard the description from the UA system. As you heard, they are here and available if there are any questions. So do we have any questions, members?
Okay, we'd like U of A to
come up, please. All right, members, who has questions? All right, I see Representative Beatty.
Representative Howard M. Beaty, Jr.
Unverified
6:34
You're recognized. Thank you, Mr. Chair. I guess my questions just go to the salary overpayments and the issues that led to the overpayments. And my question is, I see that you recouped some of the money, but are these individuals, let's just go through each one of them,
at the UAPB, is there a payment plan for these employees? Are they, are they, are they continue to be employed and are they repaying out of, out of payroll and what's the estimate for recouping all those funds? Sure. My name is Tara Smith.
Tara Smith
Unverified
7:03
I'm with the UA system office and serve as the CFO there. I do have campus specific representatives so they can answer
Speaker 21
7:09
to the specifics of your question. And if it's okay, Carla, if you want to join me from, she is the CFO from UAPB and she'll be able to answer those questions. And then UAPTC is the other one with that similar finding.
If you have a similar question for them, then they can
come up. Thank you. Please identify yourself for the record.
Senator Jamie Scott
Unverified
7:32
You'll be recognized. Carla Martin, University of Arkansas at Pine Bluff. Thank you very much for your question. Some of the individuals do have payment plans that are set up. Some of them have been turned over to the collections agency that we work with on our campus for contact and making sure that they set up either a payment arrangement with them or a payment arrangement with the institution directly. So we are working very closely with those to get the monies recouped and back to the campus.
Representative Howard M. Beaty, Jr.
Unverified
7:57
Just to follow up, I know at legislative council we've heard some issues related maybe with other accounting problems there at UAPB. Are these a carryover from some of the changes that you've implemented that will prevent this from happening in the future? So
Speaker 30
8:16
I think the way we have addressed this particular issue is we've
Senator Jamie Scott
Unverified
8:21
strengthened our training with our departments. So when an individual is terminated, it's not necessarily terminated directly through HR,
but the department in which the employee originated. And so working to make sure that these individuals are terminated in a timely fashion so that there isn't a possibility of overpayment has
Representative Julie Mayberry
Unverified
8:48
particular situation. Thank you. Thank you. Representative Mayberry, you're recognized. Thank you. Several different
questions, but I'll stick to one for right now. So you're UAPB, correct? Okay, just making sure. The checks that were fraudulently made to this person, so it was in the student's name.
So I'm curious if the students have been notified that their name was involved in this, would they have been, Were these checks ever expected to go to them, or do they know at all that their name was a part
Senator Jamie Scott
Unverified
9:25
of any of this? Yes, to several of those questions. Okay. So first, the students would do work as a part of a program, and the individual who was documenting their time would then initiate a payment request for them.
The individual would alter the checks once the checks had been received, So the students were anticipating a payment, but not receiving them. Those students have received all payments in which they were due, and the individual responsible was immediately terminated. Is that kind of how it came up? Is that the students were saying, we're not
Representative Julie Mayberry
Unverified
9:55
getting our check, we're working and we're not getting our check, and that's how it was discovered then? Yes, and then when we would go back and say, well,
Senator Jamie Scott
Unverified
10:05
check X was issued to you on Y day and so forth and so on,
and then when we cross-referenced that check number with what was actually cleared in the bank, we noticed that the check had been altered from what we produced to what was actually transacted at the bank. How many students? I
Speaker 42
10:24
don't remember. Okay. I'll let someone else, and then I'll get
back in the queue. Members, any other questions? Yes. Representative Long,
Representative Wayne Long
Unverified
10:33
you're recognized. Thank you, Mr. Chairman. A moment ago, you mentioned some of the people who have been turned over to collections.
I'm assuming they're no longer with the university.
Speaker 49
10:44
The ones that were turned over to collections,
Representative Wayne Long
Unverified
10:46
correct. Okay, just wanted to make sure that
wasn't really clear. Thank you. Sorry. All right, seeing no further questions, thank you for
your time today. Thank you. Without objection, we did have a question of the total, and we're getting the total. There was a question of the total amount in question on today's reports.
for UAPB, but we'll get back on that for the committee. But without seeing any other questions, this will be considered without objection reviewed.
Just the U of A system. Oh, we've
Representative Hope Duke
Unverified
11:25
got more questions here. Thank you. So my question is on UAMS. Did you, on the 67,500, has that been recovered?
Any of it? Please identify yourself. You'll be recognized. Amanda. Okay. Amanda George.
Speaker 59
11:45
I'm the CFO for UAMS. Um, we have turned that over to our legal counsel and are pursuing a legal action against the company and it has not been recovered so far. Thank you. All right, Members, any other further questions for any of
the U of A system? I see Representative Beatty. Well, I just think
Representative Howard M. Beaty, Jr.
Unverified
12:06
maybe we need an answer from Arkansas Pulaski Tech. Okay. Since we had UAPB at the table, maybe they should come to the table as well. All right. Thank you, Ms. George.
You're invited to the table. Please identify
Speaker 68
12:28
yourself for the record. Rita Fleming, CFO for UA
Representative Howard M. Beaty, Jr.
Unverified
12:33
Pulaski Tech. All right, you're recognized. My question's the same that I ask of UAPB. The status of the remaining payments with these folks on a payment plan, the collectability of the remaining balance, do you anticipate collecting all of those funds back?
Are they on payment plans to pay those out, or what's the status? This
Speaker 68
12:56
particular person is on a payment plan, but she's not making payments. So we had filed with the state income tax debt set-off program, and so if she's due a tax refund, that will come to us to abate that. We did reset up a payment plan with her for lower payments in hopes that she would make those payments on a consistent basis,
but she's made one payment, which was recently on that, and we met with her back in, I believe it was February, to set that up. So she's not making consistent payments, and due to the size of the debt, I do not believe it's going to be entirely collectible, but we will continue to pursue it and collect as much as possible. We do contact her. I send her information, emails, and calls every so often just to remind her that she had set this agreement up with UAPTC, and she needs to honor it.
Representative Howard M. Beaty, Jr.
Unverified
14:01
Is she no longer an employee of the institution? No,
sir. Okay. Thank you. Members, any other questions for any of the U of A system?
All right. Thank you for being here today. Without objection, those will be reviewed and
Speaker 10
14:21
filed. we'll pass it back to staff to continue on okay the next report which was certified to the governmental bonding board is atkins school district a district employee solicited funds on behalf of the district to sponsor awards for student athletes district officials discovered
that the employee had collected donations of eighteen hundred dollars however the funds were not deposited into a district account and the student athletes did not receive any awards Law enforcement was notified on March 8, 2024, and the employee resigned on March 13, 2024 and pled guilty to theft of property on April 24, 2024. As of March 4,
Speaker 82
15:00
2025, the district had recovered $1,400, and this concludes the findings for Atkins School District.
All right, members, you've heard the report. Do we have anyone from Atkins School District here today? okay members
any questions on this report this is this is not a repeat finding that's that's important to note all
right you've seen and heard the report you've you've seen their response without objection this will be filed moving forward okay the
Speaker 10
15:35
next report which was certified to the governmental bonding board is mountain pine school district one of the findings noted
is a repeat finding. Finding one, analysis of credit card charges made by the superintendent revealed improper questionable charges totaling $838 as follows. $280 for a toaster oven and ice maker not located at the district. $274 for candy and snacks. $206 for ammunition not compatible with firearms used by resource officers. $77 for personal shopping club membership upgrade and room service fees. In addition, the following questionable charges
made by the superintendent, totaling a little over $2,100, were paid for utilizing United Way activity funds, $1,000 for hygiene products, $572 for kitchen utensils, $189 for a tabletop ice maker, $166 for towels, $88 for snacks and breakfast bars, and $82 for cleaning supplies. According to district officials, some of the items could be accounted for. However, the majority could not be located. Finding two, we were made aware that district officials believed fuel located at the bus shop had been placed in personal vehicles.
An examination of fuel purchases, fuel logs, and other documentation revealed the following. District personnel periodically review the fuel levels in the underground fuel tanks. When reviewing district records, we noted 10 instances in which the actual level was less than the amount that should have been in the tanks according to the fuel logs. The total amount of unaccounted for fuel was 612 gallons. Therefore, it appears that fuel was obtained from district pumps without being recorded in the fuel logs.
We compared fuel usage during our audit year with fuel usage in the first five months of the following school year. The average amount of diesel used each month remain consistent. However, the average amount of unleaded gasoline used decreased significantly from 525 gallons to 284 gallons per month, which could indicate that district fuel was placed in non-district vehicles prior to June 30, 2024. And the last finding was a repeat finding. A review of activity funds maintained by the high school media specialists revealed that all funds
collected were not properly receded at the time of collection. As a result, we were unable to determine if all funds collected were deposited. A similar finding was noted in the prior audit. This concludes the findings from Mountain Pine School District. District officials are present to answer any questions the committee may have. Thank you, Mr. Fink. Can
we please have the district please come to the table you can introduce yourself for the record
Speaker 92
18:31
Tish Knowles superintendent Mountain Pine I'm sorry what was
your last name Knowles Knowles thank you Thomas Gould school president thank you Thomas all right um you've heard the report and
these are repeat findings uh I I believe Ms. Knowles that you are a new superintendent to the district
post these findings that is correct okay what would you care
to just kind of recap maybe some of your responses that you have on and feel free to go in
Speaker 99
19:19
order on the first first finding Yes, sir. First of all, I would like to say that this has also been turned over as an ethics violation to the ethics committee. All of this has to do with three employees who are no longer employed at the district. And the credit card charges, we have tightened internal controls.
There were not sufficient processes in place, so we have put protocols in place for district personnel to use credit cards in the future. And so we started that, actually, I came on board, actually, in May of last year, and we began that in July. Then there are only three, as far as the diesel and gas, there are only three district employees who are authorized to use the pumps. It also takes three keys to use the diesel and gas pumps.
We believe that from these findings, we believe that this was actually put in those other vehicles by school personnel not authorized to use them. And then no personal vehicles are fueled at the district and not allowed. and those only three people have the keys to the pumps to be able to fill vehicles. And then as far as receding money, that employee is also no longer here,
and that's a carryover finding because the year before she was collecting money for sales for one fund, and then she was also overseeing another fund, and that same finding ended in the next year. And so that is what we have done to correct the findings. As far as the firearms, we have a police department at Mountain Pine, and we have a chief of police, and we do not purchase any ammo through school funds.
The school does not have the 9mm guns that the officers carry are their own personal guns and they qualify paying for their own ammunition we do not purchase firearms so the mo had to do with firearms that we don't have and we only have particular firearms anyway at the school so these were for hunting rifles and things like that that the the ammo was purchased for so none of those were we
Speaker 102
21:49
don't have any guns that those would be used for
thank you for that and just looking at the first finding um the toaster ovens
Speaker 99
22:04
and the ice makers some of these things have not been recovered um they have not um we believe that um well the personal shopping club membership upgrades these were for conferences that one of the three members we know one of these three employees or past employees attended and then the hygiene products and kitchen utensils and all of that.
Those are items that are, or that is money that is provided to the school districts in Garland County from United Way, and that money is to be used for local students in our district, and we believe that this was sent to another state for, I don't know for what, personal
Speaker 107
22:48
use, I suppose. Okay. Representative Beatty, you recognize?
Representative Howard M. Beaty, Jr.
Unverified
22:55
Thank you, Mr. Chair. Just clarification. You said, you know, on finding one that the
three employees were no longer involved. Are these the same employees that you mentioned with the fuel cart and the keys that those three employees are
all the same three employees. Thank you. Representative
Chair
Unverified
23:19
Mayberry, you're recognized. Thank you.
Representative Julie Mayberry
Unverified
23:21
I guess I'm just looking for a little more clarification. So because it says the response on finding number two about the gas before when this took place,
possibly were there still only three employees who
had keys or is that what you've done in response to it? That is what I've
Speaker 99
23:43
done in response to it. So there were several keys out. So the first thing I did was change the keys or change the locks on the pumps and then provided the three keys to the transportation director, the maintenance person, and then the assistant transportation director
because those two are the ones that fill our vehicles with fuel, one for lawnmowers or buses or whatever it will be. And so we have one extra key in district office in case somebody would lose a key. But just three
Representative Julie Mayberry
Unverified
24:19
people have keys, and several people had keys in prior years. And then it says it takes three keys in order
to access the pumps. And I guess I'm just curious, does it take all three of those people with their own
key? Like I'm thinking high sci-fi.
We all have to get together and put our key in, and it's the
Speaker 99
24:38
magic code, and it opens. No. Each one of those people has three keys, but it does take all three keys to open the pumps. Okay. So I guess I should say there were nine keys total. Gotcha. Okay. I didn't know if they all had to be together
Representative Julie Mayberry
Unverified
24:51
to witness the fact that we're using the gas right now. No, ma'am. Thank you. Just clarifying some of the words there. Thank you. Representative Painter, you're recognized. Thank you, Mr. Chair.
Representative Stetson Painter
Unverified
25:05
Two questions. One is this is repeat findings. So how long has this been
going on that you are aware of? Representative Painter, I think just the third finding
Speaker 98
25:16
was a repeat. A third? Yes, sir. Yes, the one that was the repeat was the candy sales. That
Speaker 99
25:22
individual was the same individual. So she was over candy sales for one club one year, and the next year she was over prom. So she had a similar situation that she didn't receive money properly and do that. And so we have tightened protocols in that area as well of how funds are received,
and then we do an annual Tier 2 training with any employee who handles money or collects funds for fundraisers or any other use. Thank you for that.
Speaker 119
25:50
And my last question is, I understand in some of these findings
Representative Stetson Painter
Unverified
25:54
the superintendent has been labeled, but who are the other two employees, like a bus barn
Speaker 99
26:02
superintendent? The superintendent, his wife, the special ed supervisor, and the media specialist. Got you. Thank you. Thank you, Mr. Chair.
Representative Wayne Long
Unverified
26:11
Any other questions, members? Yes, Representative Long, you're recognized. Thank you, Mr. Chairman. I was wondering, has this been
Speaker 92
26:23
turned over to the prosecutor? Yes, sir. It has been turned over to the prosecuting attorney, And also, there was
Speaker 99
26:29
$49,000 in prior year that was taken care of. And so the ethics violations have all been taken care of. This has been turned over to the prosecuting attorney. And I believe when we got a letter, we knew that when we got our audit packet.
Is that correct, Mr. Fink? Appreciate it. That's correct. All
Senator Fredrick J. Love
Unverified
26:54
right, members, Representative, Senator Love, recognized. Thank you, Mr. Chair. I just need something, just clarification for this committee. When we say we certify the bond board, certify to the bond board, what does that specifically mean? Does that mean return the number to the prosecuting attorney?
Speaker 9
27:11
If something is certified to the bond board, so yes, it is referred to the PA and the AG still,
Speaker 10
27:18
but there's also another piece to this. So if it's certified to the bond board, they provide coverage for actual losses sustained by its members through fraudulent or dishonest acts committed by an entity official or employee. Okay, so are we saying that the
Senator Fredrick J. Love
Unverified
27:37
bond board then, I guess, for the funds that the district is missing right here, this listed,
Speaker 134
27:45
the district was reimbursed for those funds?
Speaker 10
27:49
It'll have to be reviewed by the bond board, and then their board will make a determination. Okay. All right. Thank you. Thank you,
Speaker 136
27:58
Mr. Chair. And Co-Chair Duke, you recognized? Thank you, Mr. Chair.
Representative Hope Duke
Unverified
28:03
Thank you both for being here. I do have a couple of questions for both of you. I understand, is it Knowles? Yes, ma'am. Okay, thank you.
You came on board in May, correct, if it was last year? Yes. So could you just speak a little bit about your experience before?
Were you in the district? Did you come from
Speaker 92
28:23
a different district? I came from Earl School District, which was a school district in fiscal distress, and I was there
Representative Hope Duke
Unverified
28:30
for five years. Thank you. So I'm just kind of curious to see where you were. Obviously, you're taking over. Were there some problems that were here in place? Can you also tell me if all the employees that maybe have been identified in part of these problems, are any of them remaining with
the district? No, ma'am. Okay, thank you. And I'm sorry, I didn't catch your last name. Gold?
Gould. Okay, thank you. Can you tell me how long you have served on the board? Because I'm assuming you were there during these things?
Speaker 140
28:58
Yes, ma'am. This is my 15th year on the school board
Representative Hope Duke
Unverified
29:01
right now. Okay. And so in that time period, what do you think as far as the board being able to help give that accountability for her as she moves forward in this role on some of these areas? Particularly, I think we see oftentimes a lot of problems with the activity funds in school districts. We're small numbers, but sometimes it gets bigger numbers because there can be a lot of money in those activity funds.
But in your role as a school board member, what have you seen or been able to do to try and help
Speaker 143
29:32
prevent this from happening in the future? Any of these items? Well, we've always get a monthly statement of our funds and everything, and we've always – can you hear me? Is it on? Yes, it's on. Okay. It's something that we've always looked at our budget every year, every month. And at the time, we didn't see credit card statements, but we didn't see what everything was purchased on the credit cards.
So now we've asked that every time we see a credit card, we
Speaker 99
30:01
want to know what's been on that credit card. May I, if
Speaker 92
30:06
I can, I believe the board was a little bit in the dark because the superintendent was,
Speaker 99
30:11
it was an Amazon account, And in an Amazon account, you can either have paid by invoice or paid by credit card. And so the individual, the superintendent, had the invoices only directly coming to him, and only the board would see the credit card receipts.
And the items that were paid for by invoice would go directly to him on his personal email account. And so they had no knowledge of that because they only thought everything was being paid for by credit card. We have remedied that. We have since taken care of that. And that has been a tough process. Sure, thank you. So do you feel, as
Representative Hope Duke
Unverified
30:54
the board president, as a long member on that, so thank you for your service.
That's a big-time commitment. Do you feel like that you are more empowered and better able to, any of these pieces, be able to to catch some of those pieces in the future i mean i know it's hard but do you feel like that you've got adequate training that you have better resources at your disposal to be able to help your superintendent and trust but
Speaker 143
31:19
verify what's going on with our new superintendent we've had some work sessions and so we've been getting more involved with with our new superintendent previous one we never really did any work sessions so this is something for us new to us so it's
helped us realize what we should have seen before and catch it now. So with this new superintendent we've got now, we've stepped forward with what we needed to be
Speaker 149
31:43
doing. Great. Thank you. Senator Love, your request. Thank you,
Senator Fredrick J. Love
Unverified
31:47
Mr. Chair. And just a question. Now, since you've been a school board member, do you all undergo any type of training? Is there a school board training? Yes, sir, there is. Okay. We have so many
Speaker 143
32:02
hours that we have to serve every year.
I don't know how much the new board members, they have so many nine hours. Okay,
Senator Fredrick J. Love
Unverified
32:12
so in the nine hours, did that training cover any of this kind of to prevent? No, not that I've
seen. Okay, all right. That's what I needed to know. So I think, Mr. Chair, we need to possibly review what we're asking school board members to be trained on because this fiscal piece is probably one of the more important pieces
in that they need to be able to oversee and have some insight to this. So I thank you for that answer, Mr. Gould, and I think that's something that we need to look into so that our school board members can be more aware of what's going on fiscally between the superintendents. Thank you, Senator. love we were just discussing that with staff
and we've made note of that okay thank you any other members
questions all right seeing none thank you for being here today we do challenge y'all to rise above in the new phase of mountain uh excuse me mountain pine school district but thank you for
being here today uh without objection this will be reviewed and filed
Speaker 10
33:22
thank you thank you All right. Uh, Mr. Fink back to you. Okay. Thank you, Mr. Chair. The next three reports were referred to the, uh, prosecuting attorney and attorney general. Um, the first one was Falk school district. Uh, they did not have a repeat finding, and this is not a deferred report. So no one is here from the district. Uh, a review of reimbursements to the superintendent
revealed disbursements totaling $3,600 that appear constitutionally suspect under Arkansas Constitution and violate district policy. Additionally, we were unable to verify a legitimate school business purpose for these expenses, $2,800 in mileage reimbursements for non-school trips and $800 for airfare and travel insurance toward the superintendent and four students on a summer college tour. And finding two, unallowable costs paid from the child nutrition program totaling $843 were detected for the audit year. These costs were comprised of $843 in salary
payments that should have been recorded in the district's general fund. And that concludes the findings
for Falk School District. Thank you, Mr. Fink. Without objection, Falk School District, because of not repeatable offense, will be
Speaker 93
34:31
reviewed and filed moving forward. I'm sorry, did we
Representative Julie Mayberry
Unverified
34:39
have questions on that? Representative Mayberry. So I'm trying to, I read the response, and I'm just trying
to understand, is the superintendent claiming that the expenditures for mileage
were to go visit a sick student? Yes. Multiple times, one time, over and over again? Were they ever, and there's no way that they
could be considered school-related? So it ends
Speaker 10
35:02
up adding up to over $2,800. So they went multiple times, yeah, a lot of times. So it was just one student?
Representative Julie Mayberry
Unverified
35:10
It wasn't multiple students? It was one student. Okay. Okay.
Any time that they were ever bringing schoolwork up to them? Do we know what
Speaker 10
35:33
they were in the hospital for? So, yeah, the student had a pretty serious injury due to, I think, a vehicle accident. And what we would have preferred to see in a situation like this to try to, because we're questioning this is what we're doing, is if he would have had school board approval beforehand in doing this, that would have helped us make a determination that, hey,
the school board, as those charged with governance, made a decision that this was something that does serve a school business purpose. For us, due to just the number of times, and we're not used to seeing this at all the other audits that we do on schools, it stuck out to us as a bit unusual, and so we thought it should be questioned. Okay. So the
Representative Julie Mayberry
Unverified
36:19
number of times, maybe if it had just been one or two times? I don't know. I'm just trying to find the line. I'm just
sitting here thinking of a superintendent who, you know,
there's someone who obviously was in a car accident. I don't know if it was school-related on school campus or if it was just whatever, wanting to check on the student. And, you know, to me, kudos to a superintendent who wants to check on a student, but how do we make sure that we're following the law, I
Speaker 10
36:53
guess, is the question. I'm not sure if you wanted a response to that question or not. But if it's over, so there's certain,
If it's over $500, if we have an issue that ends up being over $500 and we question it and we think it's something that is constitutionally suspect due to legal research that we've done, reliance on AG's opinions, just our experience on school district expenditures, if it's over $500, then we will refer it to the PA and the AG. Anyone else from the school
Representative Julie Mayberry
Unverified
37:24
visit the student? Do you know? Not that
Speaker 163
37:28
I'm aware of on the student, on the school's dime.
Representative Julie Mayberry
Unverified
37:33
Okay. Okay. Just like I said, just, you know, to me, just way on the outside and the information I have here, I don't know anything about the super, I don't
even know who the superintendent is. I don't know the student. I just kind of think, you know, where is the line there? Because I would like to know that a superintendent cares enough about students to visit them in the hospital. Like that, to me, is a really sweet quality. But where is the line when it crosses over?
And maybe getting approval from the school board, making it more apparent would help, and maybe cutting down the numbers. And sometimes when you visit, it's on your own dime. Is that kind of the, maybe? It sounds like, Ripson and Mayberry,
maybe this is another note for the training section as well, with the school board approval, because that would
alleviate a lot of the concern that I think staff is describing. Do you agree, Mr. Fink? Just thinking out loud. Never
Speaker 37
38:29
really thought about it before, but thank you. Representative Duke, you're recognized.
Representative Hope Duke
Unverified
38:35
Thank you, Mr. Chair. So Representative Mayberry, kind of along the lines of what you're talking here, in my opinion, just looking at that, I would think that I agree
it's noble, and we've had those circumstances, and being as far away as I am, if someone's down here at Children's, that's a significant trip. But with that kind of number, I would expect that you should be getting permission from your school board. If you're doing it on a school board and particularly just so the school knows where you are, right? Because if you're making that kind of trip, that kind of mileage, you're doing a whole lot of times.
If you're gone from the district that much, that should be something. So I think if to their point of having that kind of, I think that accountability is for the taxpayers of the dime. I love the intent as well and the heart, but your board needs
to know where you are and your staff needs to know where you are. And I think that that would help with that communication there on that piece. I do have a question on the airfare piece of this as well, on that travel insurance. So that's the superintendent as well, is that correct?
Yes, that's correct. And so they took a trip of a college tours of universities that required them to fly, is that correct? That's correct. Do you know where they went? Is that part of the? University of Tennessee in Knoxville. And these were the students that were flying, and the superintendent was traveling with them? That's my understanding. And this school's not here, though, because this is just a...
That's correct. So the superintendent was traveling with them. They went to Tennessee. The school paid for the travel insurance on that. Was he related to any of the members that were going on the trip? Not to my knowledge. Okay. Is that, do you know if that's the norm in a district or that district to? I would say no, it's not the norm. It seems highly unusual to me too. And maybe was the school board, was there approval on this one?
Speaker 163
40:33
I don't believe so, no. Not that we could find.
Representative Hope Duke
Unverified
40:36
Okay. And is that superintendent still with that district? Yes. Okay. Representative
Representative Stetson Painter
Unverified
40:46
Painter, you're recognized. Thank you. So I guess I have a question
for staff. When reports are referred to the prosecuting attorney or attorney general, is there a
Speaker 10
40:58
time frame? So we follow up with them. We have a contact within our office that we provide to them in our letter that we send to make sure that they follow up.
But we also, every single year, we do a PA disposition report for the whole committee on a Friday. I think that's coming up maybe next month, possibly. And so at that time, every audit that we've referred, we will have some sort of follow-up related to it. And if we haven't received a follow-up, it'll stay on that list until we hear something
Speaker 82
41:33
back from the prosecutor. Also, too, is I would be
Representative Stetson Painter
Unverified
41:38
curious, too, to see if there was other adults on that airfare trip as well.
I would be a little bit probably shocked if the superintendent is the only adult with those four students flying and traveling there, as much stuff that goes on. So if we could find out that, that would be great.
Senator Fredrick J. Love
Unverified
42:03
Thank you. Senator Love. Mr. Chair, as just a practice of this committee, when you have an initial finding, does that mean that you all do not ask for superintendents to be in front of you? Is that the practice?
That's correct, especially related to initial findings versus repeat findings. I'll let Mr. Vick describe
Senator Fredrick J. Love
Unverified
42:22
that as well. Okay, when they're repeat findings, that's when you request somebody. Absolutely. Because I'm listening to the questions, and I'm having the same questions, because I think we have questions for the fiscal piece, but we also have questions on, like, what is actually going on. So could we not have the superintendent come next month to actually clear up this?
Because I'm concerned. I think I hear the committee saying that they're concerned that we're trying to protect children. I'm curious why a superintendent is traveling now. I don't know the makeup of the school. I don't know. You know, I'm just curious. I mean, I'm thinking about Little Rock School District, but Little Rock School District is much bigger than 1,000 kids, so I don't know if the superintendent is the butcher, the baker, and the undertaker, you know.
I think that's a great point. Yes, we can request them to be here next month's meeting. Also, I think
it's important to note that this has been referred to the prosecuting attorney. And so just because it's an initial finding doesn't mean that it hasn't been. It has been referred to the prosecuting attorney for further
Representative Stetson Painter
Unverified
43:40
review as well. Okay. All right. Thank you. Representative Painter. Real quick, is there definitions, I guess, for what is classified as a school trip and then what is a non-school trip?
Speaker 10
43:52
I don't know that there's a specific definition for that. I'd have to go back and look in their school policy to see if there's something within their policy that designates. Because $2,800 for a non-school trip just
Representative Stetson Painter
Unverified
44:07
seems, and I just didn't know if that's a definition that they use or what that may
Speaker 10
44:15
be. That was something that we were questioning when we looked at the expenditure as a non-school purpose under the Constitution,
as well as looking through AG's opinions, our legal staff looking over it. That's why we questioned that as a non-school trip. But there
Representative Stetson Painter
Unverified
44:33
is a definition or some kind of language that specifies what a school trip is?
Speaker 10
44:39
Not to my knowledge, like a specific definition. Okay. I'm just trying
Representative Stetson Painter
Unverified
44:44
to understand the criteria that you guys were looking at and justifying, you know, hey, there's questions about this that doesn't seem adding up.
Senator Fredrick J. Love
Unverified
44:54
Senator Love. So I guess on the same line
as Representative Painter, so why did you all classify it as a non-school trip? Did you classify it as a non-school trip because, like, what did you all see? Because what I heard was that the superintendent was traveling back and forth and there was a student attached to that. I would think that even though, I mean, I would think that was a non, that was a school trip.
I mean, it was related to a student if they were actually in a hospital and he was getting schoolwork or whatever. I mean, I'm just trying to – I'm curious. You all classified it as a non-school trip, correct? We are
Speaker 193
45:37
questioning it as a non-business trip. Got you. Okay. I got you. All right. Okay. Thank you. All
right. Thank you. And I'm going to confirm with our staff the motion from center. Is that an official motion
that we need to vote on to bring them to next month's meeting?
How does that work rule-wise? Yeah.
Speaker 10
46:00
Any committee member can choose to defer. If it's the will of the committee to defer, then we can do that. Defer the whole finding or just? Defer the whole report to
Senator Fredrick J. Love
Unverified
46:13
the next meeting so that we can invite entity officials. Senator Love, are you good with that motion? Yes, I'll make a motion to defer the report
to the next meeting as well as bring the superintendent, request that the superintendent attend.
Okay, you've heard the motion. We've got a second from Representative Painter. Any discussion? All right. All in favor
of the motion signal by saying aye. Aye. Opposed like sign. All right. Motion carries. All right. We'll move forward to the
Speaker 10
46:40
next school district. Mr. Fink. Okay. The next report, which was referred to the prosecuting attorney and attorney general, is OCL, the school district. They also had three repeat findings. Finding one was a repeat. The district did not have adequate internal controls relating to use of credit cards. Our examination
of three credit card accounts for one month revealed the following questionable transactions, $37,000 without any form of approval or authorization indicated, $10,000 without adequate supporting documentation, therefore the validity of these transactions could not be determined, and $2,800 for hotels and amounts over the IRS per diem rate. In addition, the majority of payments were made via auto draft and not recorded in a timely manner. A similar finding was reported in the previous audit. Finding 2 was also a repeat finding. During our
examination of the March bank statement, we noted five payments totaling $42,000 were made electronically without board approval or an approved resolution in non-compliance with ADE Commissioner's Memo and Arkansas Code. Upon review, many bills were paid via auto draft and were not recorded in the general ledger until year-end closing. Similar finding was reported in the previous audit. Finding three was a repeat finding. The district's bank accounts were unreconciled by $256,000 at June 30 of 2024.
ALA staff identified $82,000 of the unreconciled variance, leaving an unexplained variance of $174,000. A similar finding was reported in the previous audit. Finding four, the district failed to accurately record deposit with paying agent account balances and transactions in the general fund and other aggregate funds. I won't read each bullet, but you can see those there of what that entailed. And then finding five, which was the last finding, the district could not provide
documentation that bids were obtained for the purchase of the superintendent's vehicle as required by Arkansas code. District officials are present to answer any questions the committee may have. Thank you, Mr. Fink. We
invite the district to the table, please. Thank you for
being here. If you'll identify yourself
Speaker 203
49:16
for the records. My name is Charles Webster.
Speaker 204
49:21
I'm the NM superintendent. Hi, I'm Rebecca Worsham.
I'm the attorney for the school district. Thank you for being here today. Just like we've done with the others, you've heard the five
repeat findings. If you'd care to, in order, maybe give some commentary on the responses, please. Yes, sir. I'm
Speaker 205
49:40
responding to number one. The district will take a extremely careful
about the... If you wouldn't mind pulling the microphone a little closer so we can hear. Thank you. Thank you, Mr. Wachter.
Speaker 206
49:52
I think that's positive to go. There you go. All
Speaker 208
50:05
right. Thank you. Again, I am the inner superintendent. I came in July 1 of 24. My contract ends June the
Speaker 209
50:13
30th. The district stopped all the auto draft.
We make sure that we ask all our cardholders to return their cards to the administrative office, and they have to check those out and then get a board approval if it owes a certain amount of money. So we're taking care of that action. as well. The other one is the credit card we've gotten taken care of. The fund number
five, which is a district bank account unreconciled for
Speaker 208
50:51
$256,000. The district has reconciled a bank statement through June the 30th. We identified those variants. And at this point, We are waiting in the direction of the state on how to proceed in making those adjustments. Thank you, Mr. Webster. And I
think I want to highlight, I think it's finding three. This may be what
you're referencing, but just for clarity.
So it's, we had 256,000 of unreconciled. You found 82,000 of it. There's still 174,000. Is this the figure you're referencing there? Yes, sir. Okay, so you did find the 174, and you're waiting for the state to – what was
the finding? Where was it? We had an outside consultant, Ms.
Speaker 209
51:37
Suzanne Marshall. She's not here today. But we did find the documentation we needed to present to the state. Okay. I'm not sure
Speaker 208
51:46
what those variants were, but we did present it.
But what specifically – where were the dollars? Was it spent on equipment, on – She didn't give
Speaker 202
51:57
me any detail. Oh, you don't have the specifics on
it. Right. Okay. All right. Members, any questions? Representative Beatty? A question for staff. It
Representative Howard M. Beaty, Jr.
Unverified
52:06
said that documentation was presented. Has your office reviewed that, and have you received that information and reviewed
Speaker 10
52:13
it? So I know our staff has followed up with the district, and then when we do the next audit, we will follow up again on this finding
to see where the bank reconciliation is at June 30 of 2025. And so we should obtain that information at that time. I mean, the
Representative Howard M. Beaty, Jr.
Unverified
52:32
reason I'm asking is if the districts had issues and they're providing some information, maybe they're also looking for a little reassurance back from audit that, hey, you've kind of got your act together now and you're following the process. So maybe a more timely response from audit back to the district would maybe make the process easier next time for the school district
as well as for audit team. Thank you, Representative Beatty.
Representative Howard M. Beaty, Jr.
Unverified
53:01
Senator Wallace, you're recognized. Thank you, Mr. Chair and members. Mr. Webster took over a rough situation less than a year ago and has worked hard, and his staff has worked hard to get everything right again, and they're doing a good job right now.
Thank you, Senator. Members, any other questions? Representative Duke. Thank you,
Representative Hope Duke
Unverified
53:20
Mr. Chair. Do you all have any members of your board here with you today?
Speaker 204
53:27
members today. The board president contacted me this morning. He was not able to get off work, so that's why he is
Representative Hope Duke
Unverified
53:36
not here. And I understand that since they are basically volunteers, right? So I do understand that dilemma. So has the board structure changed any over this time period? Has there been any additional maybe support or training so that they are better informed and able to help guide the superintendent and such along the way?
Speaker 209
53:58
Absolutely. They have went to pretty much every training that have been
Speaker 208
54:02
provided for them during the summer, during the fall. So they have went through extensive training. We're in the process. Hopefully this year we can do training within-house. Do you think, and I know it's kind of hard to maybe put words
Representative Hope Duke
Unverified
54:16
in other people's mouth, but do you feel like that they are better equipped than they were when you took over a year ago? Absolutely. they are. Do they ask you lots of questions?
Absolutely. Good. I'm glad to hear that. Thank
you. Mr. Webster, would you mind sharing, were you at a different school district before your time at Osceola?
Speaker 208
54:39
No, I was in Osceola as the school director of student services. Great. Thank you for being there,
providing leadership for this next step forward. Members, any other questions? All right. Seeing none, thank you for being
here today, and this report will be filed without objection, Mr. Chair. Thank you. All right, Mr. Fink, moving
Speaker 10
55:01
forward. The final report that was referred to the prosecuting attorney and attorney general
is Western Yale County School District. They had two findings. Finding one, a review of payroll records revealed the district failed to record an employee's resignation timely, resulting in an overpayment of $900. And finding two, the district did not have adequate internal controls relating to the use of credit cards. Our examination of one credit card account for three months revealed the following questionable transactions, $27,000 without any form of approval or authorization indicated, and $4,600 without adequate supporting documentation. Therefore, we could not determine the validity of
Speaker 82
55:39
the transactions. And that concludes the findings for Western Yale County School District.
Members, any questions or comments with this report? Seeing none, this will be reviewed
and filed. All right, Mr. Fink, moving forward.
Speaker 10
55:55
The next five reports contain repeat findings. The first is Northwest Arkansas Community College. Instead of reading the finding in full, I will provide a brief summary. We noted key errors related to financial reporting due to lack of management oversight and turnover of key accounting personnel. The errors that we noted were corrected
by college personnel during audit field work. Key errors were noted on the statement of net position, the statement of revenues, expenses, and changes in net position, the statement of cash flows, and the notes to the financial statements. A similar finding was noted in the previous three audits. Officials from the college are present to answer any questions the committee may have. Thank you, Mr. Pink. We'll go ahead and invite officials
from the university here, from the community college. If you will, identify yourself for the record.
Speaker 233
56:45
Thank you. Hello. Thank you for inviting us. I'm Anya Peterson Fry, Vice President of Finance Administration, and I joined the college in June of 2024.
Speaker 235
57:10
Thank you, Ms. Fry. I'm Catherine Doner. I am the executive director of accounting slash controller. I took that position on as interim in August of 23 and was made permanent in November of 23.
Speaker 238
57:24
Thank you, Ms. Donner. Alex Vasquez here as executive director for government relations for the college and just here to support
Speaker 239
57:33
our great finance team. Thank you, Mr. Vasquez. Thank you
for being here today. uh, just like
we've done with previous reports, if you care to, um, any opening remarks or responses to some of these findings. I'll, I'll, uh,
Speaker 238
57:45
thank you. Thank you, uh, chair. I'll, uh, make just a couple of opening remarks. Um, I've been in my role just six months with the college, have a long history though with the college previously served on the board of trust board of trustees, as well
as the, um, foundation board over the last 20 years, uh, but have been honored to be able to joined the college here recently, including my first legislative session this past spring. So I appreciate the opportunity to be here and represent the college. A couple of things that are noted in, I think, the responses. First of all, we appreciate the work, the opportunity to work closely with the auditors. We've got a good working relationship with them, so we really appreciate that. Mentioning just two things, you'll see kind of thematically, I think, in the
responses. One is Workday. There was a rough start, frankly, with implementing Workday itself back beginning in 2020, and then Student Workday beginning in 2022. And as part of the learning process here, I learned that those two systems don't necessarily very seamlessly interact with one another, so there were some real challenges there. But we do have a lot more experience now with Workday and Student Workday and that implementation, the integration of those two.
you know, under our new leadership, we think we really have turned the corner and we'll have a better path forward. So that's a positive. Also, obviously we have a new CFO and Ms. Donner, new in her role as controller, but with some experience at the college as well. And we think, you know, under their new leadership, we have better management and controls in place that will hopefully just continue to help us move forward in a more positive way. So just in the six months I've been there, I know that all these issues have been discussed and
worked on very aggressively, and so we are looking for a broader day ahead.
Thank you, Mr. Vasquez. I think just my opening question, just my eyes just naturally go to the accounts payable overstated by $8 million. Can we just highlight that real fast, and
Speaker 244
1:00:00
what was the situation there. Sorry, how's that? Okay. We had some misclassifications predominantly due to, um,
Speaker 245
1:00:07
timing issues on, um, you said accounts payable, um, accounts payable, uh, was related to, uh, misclassification of grant payments or grant receivables and payables, um, not being applied properly. Therefore, it was showing as, um, a payable, uh, the underplayed payments were showing as a payable, rather than reducing the receivables, um, so that, um, it made the, um, it made
the, um, payables over, overstated. Because of a timing error? I'm sorry, no, the timing error was related to the revenues. The payables was related to application or lack of application of grant payments. All
Speaker 235
1:01:07
right, I'm not feeling a lot of confidence in
the answer, to be frank. I'm sorry. It's fine. I'm sorry, I'm very nervous.
It's fine, and if we need to come back to it as we think through it, we can. but um that that just
kind of sticks out compared to all the other line items um and so let's come back let's come back to
it Ms. Donner that's fine members any other
Representative Hope Duke
Unverified
1:01:41
questions Representative Duke uh thank you Mr. Chair um so my understanding these are repeat findings and so just kind of a
more of an overall question since this has obviously been a problem
in some capacity the last couple of audits what are y'all doing differently now than what you were doing
in the previous audit when you had this finding and has it
Representative Julie Mayberry
Unverified
1:02:06
been more than one repeat finding or is this so these are repeat
Speaker 245
1:02:11
findings however they are not the same causes in many cases The prior audit in FY21, the audit stated that the cash reconciliations were not done.
This was due to the implementation of Workday. The staff at that time did not use the ERP of Workday to perform reconciliations, and they basically had not been done. And so when I came on in October of 22 as general ledger manager, I was tasked with catching up the cash reconciliations, which I did. So in FY22, the fact that many of these reconciliations had not been done,
there was a 200% turnover in staff and the accounting department. Things were very far behind. That cleanup was still being performed for this FY23 period and during the audit period and the implementation of Student Workday and the misclassification of some of the clearing accounts set up by the implementation team for Student Workday caused many of the liability and asset accounts
to be ran through the wrong type. The implementation team was not accounting knowledgeable, and they sort of worked in a silo. So we have since pulled in and are much more involved in any setup, any accounts that are added. And we have also in the implementation of student workday, it does not allow for deferring revenue for future periods. That was part of the overstatement of accounts payable, the vast majority of it was because I booked fall of 24 registrations that were going into workday.
I booked to them as an unearned revenue, which is a liability, and the auditor had us reclassify that
Representative Hope Duke
Unverified
1:04:34
to accounts receivable. okay thank you so do you it sounds from what a little bit i'm gleaning here there's some maybe issues in understanding your systems with workday so what have you all done to make sure that people are trained and more confident in what they're doing with workday and steps that you're taking to alleviate this problem so you won't have another repeat finding so you know nobody wants
to come down here right so um what are y'all doing to make sure that you know that's going to get
Speaker 144
1:05:03
cleaned up better. And I'm sure legislative audits given some guidance on
Speaker 233
1:05:09
that as well. Yes, thank you for the question. In the year that I have been with NWAC, we have very actively worked at revisiting the reconfigurations that we had in NWAC. None of the people who were involved at the installation or implementation of Workday are still at the college. So it was difficult to know what their thought process or questions were at the time. But we have gone back and had an
in-depth review of financial configurations. We're looking at our reporting structure and have created new reports that allow us to more closely follow our data throughout the year. We have implemented additional security measures as well as new training as employees come on board and are really working closely with Workday. We're meeting actually with our new Workday consultants. These are not the ones who helped us with the implementation on a weekly basis to ensure that we can adjust configurations as we find problems.
I think one of the things that comes up, and again we thank our auditors for that, is sometimes we don't know there's a problem until something happens. And then it's like, oh, we didn't realize in this case that our new ERP system was putting the dollars over here. And then we manually shift it, and then we can make our configuration corrections. So I think we've spent a lot of the last two years working on that. I feel very confident in our current team and the direction that we're heading. We also have now a Workday implementer, so to speak, within our IT team internally.
And that is what he does 100% of the time, working with student services on Student Workday because of, of course, how our funds come in. And as noted in the response, one of the initial problems was we used Banner and we switched to Student Workday, and the revenues were being counted twice in the Workday system, once in Banner and then again. So I think we have a very good process in place. We have a good IT personnel in place. The IT team also changed over during this time. And so we now have a new CIO. We have folks who are focused just on Workday,
and we have a very good consulting team who is helping us rectify these problems. And we've worked closely with the auditors for 24, where our goal is to not have these repeat findings happen again. Members, any other
questions? Well, thank you for being here today. And I would say that it does sound like you have a lot
of change over and new team members. And, you know, one acceptable answer might have been that my good friend, Mr. Grant Hodges, was to blame for some of this issues. A former employee
of NWAC. I'm kidding. He's a good man. But thank you for being here. We look forward to a brighter future. And with that, without objection, this report will be filed. Thank you. All
Speaker 10
1:07:54
right, Mr. Fink, moving forward. The next report with a repeat finding was Southern Arkansas University. The repeat was finding one. The university's internal control system did not detach or prevent material misstatements in the statement of cash flows, specifically cash flows
from operating activities and cash flows from non-capital financing activities were understated and overstated by $4.6 million. The financial statements were subsequently corrected by university personnel during the audit field work. A similar finding was noted in the prior report. Finding two, as presented on the statement of net position, the university reported a negative current cash balance of $2.1 million at June 30, 2023, due in part to a delay in
federal student aid reporting and drawdowns, the university is required to comply with statutes and federal regulations as they pertain to the university's administration of the student financial aid programs. Due to lack of management oversight and adequate personnel, the university failed to accurately and timely report Pell and direct loan information to the U.S. Department of Education, thus not allowing federal student aid funds to be drawn down. Failure to submit disbursement records within the required timeframe may result in rejection of all or part of the
reported disbursement. The university reported accounts receivable of $11.1 million related to Pell and direct loans at June 30, 2023. As of June 30, 2024, $8.9 million of the accounts receivable balance at June 30, 2023, remained outstanding. And kind of the breakdown by award year is there on your synopsis. The U.S. Department of Education conducted a program review at the university in
February of 2022, and as of our report date, the final determination letter had not been issued. University officials are present to answer any questions the committee may have. Thank you, Mr. Fink. Southern
Arkansas University, you're recognized or called to the table. If you'll identify yourself for the record.
Speaker 253
1:10:09
Thank you. Shawana Reed, Vice President for Finance. Thank
you, Ms. Reed. If you care to respond to some of these findings,
and I think the main thing that we'd like to hear
is just like with other reports, kind of best practices and things that
Speaker 254
1:10:26
we're doing moving forward. Okay, on both. The first funding with the misstatement of cash flow statement. So
Speaker 253
1:10:34
we have hired an additional accountant. During that time period, we, for the year 22, the prior year audit, we sent the response letter in in November, and the audit began in March.
So that was a little short timeline. We usually can make that work. But in that short timeline, we had a data breach, which took about a month of processing out of our hands. And we also were down one accountant who was out with cancer. So we have not had a data breach since, and we've also hired an additional accountant. So those things are being addressed. The second finding was with the financial aid and accounts receivable.
I'm happy to say that currently that amount is down to less than $500,000. And so those things have been addressed as well.
Thank you, Ms. Reeds. Member, any
questions? All right. Seeing none, this will be filed without objection. Thank you. Thank you.
Speaker 10
1:11:44
All right, Mr. Fink. The next report with a repeat finding is Hope Academy of Northwest Arkansas.
I will provide a summary of the finding. We noted material errors in the financial statements related to cash, receivables, payables, revenues, and expenditures. The financial statements were subsequently corrected during audit fieldwork. Additionally, we noted issues related to bank reconciliations, receding, credit card purchases, employee leave records, journal entries, and non-payroll disbursements. A similar finding was reported in the previous year. Charter school officials are present to answer any questions the committee may have.
Speaker 257
1:12:23
All right, we'll invite Hope Academy. Please identify yourself for record. Doug Hess, superintendent of Hope Academy of Northwest
Arkansas. Thank you. It was Hazz? Am I saying that right? Hazz, I'm sorry, Hazz. Hazz, excuse me. Okay, thank you, Mr. Hazz. You are identified, if you'll care, to opening statements about some of these findings
and any response. Sure. I thank you for the work that you do as part of the committee.
Speaker 257
1:12:53
I had the honor of being here last year with these findings, and that was because the 22-23 school year audit was towards the end of the 23-24 school year audit. And so most of these findings are repeated because we hadn't really had time to change them because of that year. I can report, however, that since the initial 22-23 visit here, we have corrected some of our practices.
We now have dual signatures for our checks. We have further employed APSRC as a school finance person to act as an FTE handling our school finance side. We have implemented paper receipt systems. We have created or done through our banking system a new method of credit card documentation, and we feel like we've answered most, if not all, of the employee leave records that we have for this school year as well.
So we feel like we've addressed all of them, and we'll be happy to have no findings in the next audit, hopefully. Thank you, Mr. S.
Senator Sullivan, you're recognized. So you indicated
Senator Dan Sullivan
Unverified
1:14:24
that you had two audits kind of back-to-back. What was the time lapse between them?
Speaker 259
1:14:28
Yes, sir. The 22-23 audit, I believe, I came here about this time last year, I believe. So I'm
Senator Dan Sullivan
Unverified
1:14:35
asking, what was the time lapse between the first one and the second one that you didn't have time to correct everything?
Oh, this audit was a year. So during that year you didn't have time to
Speaker 259
1:14:49
correct the errors? No, sir. We did correct the errors, but the audit information is from
Speaker 257
1:14:54
the 23-24 school year, not the 24-25 school year. Does that make sense? I
Senator Dan Sullivan
Unverified
1:14:59
thought I heard you say that we had an audit. Yes, sir. We had a second audit close to that. So in the second audit, we hadn't had time to correct all the problems in the first audit. Yes, sir. What was that gap?
Speaker 259
1:15:13
The gap between the 22-23 audit that was about this time and
Speaker 257
1:15:18
the ending of the 23-24 year was about a month. Okay. And then we had the audit here recently for the 23-24. Okay, that's reasonable. Yes,
Speaker 259
1:15:27
sir. Yes, sir. I apologize. Thank you for the clarification on that.
Members, any other questions? Representative Duke? Thank you, Mr.
Representative Hope Duke
Unverified
1:15:37
Chair. Thank you for being here. So were you the superintendent through all of these years of the audits?
Speaker 258
1:15:44
No, ma'am. I was just the superintendent of spring of 23, 24, and then this
Speaker 257
1:15:50
current year. Okay. And so this may have
Representative Hope Duke
Unverified
1:15:53
just caught me with the word. It may not be in your intent to say that. But you just said when you first opened that you think you've gotten some of these corrected. So was that just a word you didn't kind of mean to use, or do you feel like you've got these all corrected to the best of your knowledge, but not just some?
Speaker 265
1:16:17
Let's go with all. I probably shouldn't have said some. Okay, because
Representative Hope Duke
Unverified
1:16:21
this is the second time, and you have had the year, and a lot of these seem to me should have been able to be corrected a lot more quickly. I think it should be with urgency so that we don't see you again the next time. Yes, ma'am. Right? So you do feel confident that it's? Yes, ma'am, I do. Okay, great. Thank you. Yes, ma'am.
Members, any other questions? Seeing none, thank you for being here, Mr. Hess. Thank you. This, without objection, will be filed. Moving forward, Mr.
Speaker 10
1:16:56
Fink. The next report with repeat findings is KIPP Delta Public Schools. And I'll just try to give a brief overview.
Mr. Fink, real fast. Sorry, members, we have two more districts that have findings, repeat findings, that will be called to the table total. Then we'll try to move faster on the back end. So stick with me. We've got two more districts. Go ahead. Mr. Fink, sorry.
Speaker 10
1:17:19
KIPP Delta had eight repeat findings related to maintaining adequate supporting documentation to support cash receipts and disbursements, preparation of bank reconciliations, lack of review or approval of disbursements in the education stabilization fund program, lack of proper supporting documentation for payroll expenditures in the Title I and education stabilization fund programs, and inadequate property records related to the education stabilization fund program. Additionally,
the audit noted findings related to the lack of adequate documentation for contributions received, issues related to policies and procedures and allocation of Title I funds. Charged school officials are present to answer any questions the committee may have. Thank you, Mr. Fink. Kip Delta, you're
called to the table. Thank you. Please identify yourself for the record.
Speaker 275
1:18:25
Good afternoon. George Cotton, the chairman of the KIPP Delta School Board. Martha Madden, the finance director
Speaker 277
1:18:40
at KIPP Delta. And Kevin Smith, executive director of
Kevin Smith
Unverified
1:18:43
KIPP Delta. Thank you for being here today. And Ms. Madden,
what did you say your role was? I'm sorry. Finance director. Finance director. Thank
you. Thank you for being here. And this is for my education.
I know just a little bit about KIPP Delta. Used to be a private school, is that correct? And now is a public school. Will you
Kevin Smith
Unverified
1:19:08
help me understand that timing and change? Yes, sir, Mr. Chairman. It's always been a public school. Public charter is one of the first public charter
schools established in Arkansas. Okay, thank you for that. Okay, just like we've done, you've heard the findings and reports. Feel
Kevin Smith
Unverified
1:19:24
free to add your commentary. Thank you. Thank you, Mr. Chairman, Madam Chairman, Chairwoman, and members of the committee.
Again, my name is Kevin Smith, and I'm Executive Director of KIPP Delta. Much like your former school, we had a 2023 audit that was worse than this one, and we were here in December because it took a long time to get – They were delayed in getting the audit to you, probably broke a lot of records. And then this audit that you're looking at ended in June of 24.
The leadership team you're looking at got here in the fall of 24, October, November. A major leadership change was made, including Chairman Cotton, who has been on the board, became our chairman, and Representative Duke was the board member who asked a lot of questions and was right and became chairman. And then so this ends then, but to your other question of what have you done since then,
I'll try to be brief and say that most of the recommendations on here have been addressed and are in place with the exception of two. And one of those would be asset inventory. And we are due to be completed on that by July, the end of July, for two years of inventory that we were not in compliance on in 23 or 24. So that's been a heavy lift, and we're almost there, but we're not quite.
The other one is what's called the variance, which is the amount of unaccounted for money or funds. In the 23 audit, I believe it was $4.2 million. Now, and in this audit, it's down to just over $1 million. As of today, it's down to $350,000. And what that means is not necessarily missing money, but non-documented, not accurately documented money. So there hasn't been any indication that we've seen, which I think is one reason the auditors didn't recommend this to the prosecutor of any criminal wrongdoing,
but a lack of documentation or completed documentation is probably a better way to say it. And so what has Ms. Madden here, and we have a new finance team, some of whom aren't here but are part of the team, And Arkansas Public School Resource Center is also somebody we've contracted with as well. A big part of this has been going back, clawing back, and trying to rebuild that documentation to remove that variance which shows up on eFinance.
So we've made a lot of progress, but $350,000 is still a lot. We're pretty confident that we'll get there also by the end of this fiscal year. June the 30th is our deadline on that, and the end of July for, we hope, for the inventory. And we've made a lot of progress already. But we've also asked the audit, the legislative audit, to do our audit for fiscal year 25. And I hope you all, I don't know if you proved that. Did you prove that earlier today, maybe?
I hope. And we've taken an awful lot of other measures in addition to that. and we're working closely with the Department of Education. And our mission is really to restore confidence in the Department of Education, the legislature, and locally in our ability to manage the finances as well as the school in general. Thank you, Mr. Smith. Any questions? I appreciate that. And we
are well aware of your requests and is being viewed favorably,
so I'll say that. Good. Members, any questions? Oh, I'm sorry. Sorry, Mr. Cotton did? Okay. No, just not. Members, any questions? All right. Seeing none, Mr. Cotton, did you
Speaker 275
1:23:34
have something you will? No, I don't. Thank you for the opportunity. And I, on behalf of the board and going back to Senator Duke's point earlier about commitment, uh, I'm here quite frankly, because I want you to know that the board takes very seriously. I said that the last time I was here, the last time I was here was, I was interim chair. I'm chair of the board now. Uh, this board is excited about
the new team that's in place I've been chair for gosh four months five months I lose track but we're having regular meetings we get regular updates and I told you the last time we were here that I felt we had been sleep at the switch that is not the case now this board is paying very close attention we have a finance team and a superintendent executive director in place that's not only keeping us informed but I guarantee you the next time you we come before you not only will you not see the findings, but I think you'll see the improvement and the confidence in KIPP
schools that we were known for. So thank you for the
Representative Hope Duke
Unverified
1:24:29
opportunity. And Co-Chair Duke? Thank you, Mr. Chair. I just wanted to say that I appreciate y'all being here. I remember from last time, and I also want to just thank you because I have my questions sometimes, and it's really nice whenever you answer my questions before I ask them, and so I really do appreciate that and just you're being
forthcoming with the information as well without us having to ask the information. So I do really appreciate that. Thank you.
Thank you for being here, members. Without further questions, I will say, Mr. Smith,
if you'll see our staff after the meeting, he'll give you an update on your request after the meeting. But without further questions, without objection, this report will be filed.
Speaker 10
1:25:08
Pink. Madam Chair. The final report with a repeat finding is Stronghutig School District. Finding one was a repeat. During our examination of payroll records, we noted the following. Documentation cannot be provided showing board approval of an amended salary schedule utilized for five employees' contracts and pay rates for substitute bus routes.
Two employees received a $5,000 stipend that was not included on the salary schedule. Subsequent to audit testing, an amended additional duty schedule was provided. However, there was no evidence that the board approved the schedule. Three employees received overpayments due to errors in calculating overtime hours, pay rates, and employee lead balances. and we identified compensation for personal services to individuals without an employee contract or a contract addendum in noncompliance with Arkansas Code.
A similar finding was noted in the previous report. Finding two, the minutes of the school board did not indicate the review of the previous year audit report nor the accompanying comments and recommendations and action taken as required by Arkansas Code. School district officials are present to answer any questions the committee may have. All right, we'll invite the school district to the table, please.
Chair
Unverified
1:26:17
If you identify yourself for the record.
Speaker 288
1:26:32
I'm Amy Sanchez, the superintendent. I'm Cindy Smith, school board president.
Thank you for being here. Appreciate that. Just like we've
done, any opening comments and maybe some things that you've worked on in the past to help
Speaker 288
1:26:49
with these findings? This is my second full year as a
Speaker 290
1:26:52
superintendent, and so I am learning along the way. And I appreciate any questions that need to be asked. We've provided corrective actions. I can elaborate as far as, number one, the minutes of the school board did not indicate review of the year audit report.
As a new superintendent last year, I did do it in closed session, but we did not get that into the minutes and vote on corrective actions. We have plans June 10th, open session, to discuss all of the formal findings from this audit. Number two, examination of payroll records. A lot of this had to do with the fact that we decided later in the year, I believe it was in October to provide raises for classified and we provided the budget three
different budgets and one of them included that classified raises would be given and the salaries were approved at that time not individually noted on the minutes and so we know better to go in, and any time that we give or provide a raise to anyone, we have each individual spelled out and in the minutes. That goes to the $5,000.
We had school improvement specialists that handled a lot of the HR and federal program coordinators. Last year, as they were training for those positions for this year, We offer them a $5,000 raise to take over that responsibility. So our HR person had a $5,000 raise to take over that, and then the federal program coordinator. We have noted the substitute bus routes on our 25-26 calendar
and are working to amend the 24, 25 salary scale to allow them to allow it to show what our practices were. The bus drivers got a raise as well, and so the substitute bus drivers received that by day amount. The three employees receiving overpayment, the 1651, the payroll clerk entered it twice, which is why it came out that much.
The 158 was due to the raise that was given from beginning of year and then that change in October. And then the $30 was when we did not have an absentee slip on a person, and they were indeed absent, and they were paid an extra $30. Compensation, that last bullet, we had our child nutrition director to be hired in June and needed that training. Before that, she was a cafeteria manager, and so we did not go in and put a contract in.
And then the 623 was for a custodian who went in and was changed to a 240 contract. So we have made all those changes. We have learned from the contract issue. I wanted to give an example. Our previous transportation maintenance director retired, and his last day was May 16th. and the one that we hired his contract was to start July 1 we went in and did an additional
contract to cover the time in between so those are the things that we have done and I feel like moving forward there is a new superintendent coming in she has more experience and is well acquainted with how to manage these issues better so I foresee the district moving in a in a better direction. And then Ms. Cindy Smith is here. She's working very closely with both of us to make sure that everything is done decently and in order. Thank you, Ms. Sanchez. Representative
Representative Howard M. Beaty, Jr.
Unverified
1:31:10
Beatty, recognized. Thank you, Mr. Chair. Just a point of clarification, where you said that the audit was discussed in closed session, and staff can correct me, but there are very limited things that you can discuss in a closed session. And the audit findings, I don't believe that they fall under the scope of what you can discuss in a closed session. I think those should be open to the public and discussed in an open meeting. So just a word of caution there and going forward, I think I would make certain that was done in an open
session, not in a closed session. And staff can correct me if I'm wrong on that. Yes,
sir. That is the plan. Thank you, Mr. Beatty. Any other
Representative Hope Duke
Unverified
1:31:59
questions, members? Representative Duke? Thank you, Mr. Chair. Representative Beatty kind of got the same issue that I was concerned. I was concerned about, one, it not being discussed, and then finding out that it was discussed
in executive session, and I do want to make sure that the clarity for you and the board on what your rules are, because it's very limited on what you can do in executive session.
Are you the board president, or are you a board member? Board president. Okay. Do you feel like that you have adequate training and understanding of what, as far as executive session and FOIA and stuff there goes, but also for just the issues that you guys faced? Yes, ma'am. We
Speaker 292
1:32:40
do get adequate training from ASBA, and we get training from the co-op. We get training from all over the state. So we are well aware of the issues that we need to fix.
Representative Hope Duke
Unverified
1:32:54
And do you think, as far as the importance of legislative audits reports for the public, do you feel like that you were informed or well-informed, whether it's by the School Board Association or previous superintendents, about the importance of going over that? Obviously, there was a misunderstanding as far as where it needs to be taking place, but the importance of their reports for you all as board members, but also for the people that you represent. Do you feel
Speaker 292
1:33:24
like before this happened, did you understand the importance of that? Yes, we have training, like, from the state once a year as it relates to our audits,
and that was a slip through, but we are well trained as it comes to, you know, being trained for the purpose of audits. I don't like audits, but we have to do them, and they have to be in place, And they help the district run more smoothly when everything in that audit is being accounted for. Absolutely. And, of course, it's best for the taxpayers, too,
Representative Hope Duke
Unverified
1:34:03
for them to be confident of it.
And you all have been here all afternoon, so you've seen the importance of making sure all those I's are dotted and
the T's are crossed and stuff, too. Yes, absolutely. So thank you very much. Yes. Any other questions, members? All right, seeing none, thank you for being
Speaker 10
1:34:26
here today. We will, without objection, consider this report filed. All right, Mr. Fink. The next 17 reports contain findings. These were not referred to the PA or the AG, and they did not contain repeat findings. The entity provided the response for every finding noted.
Staff recommends that the committee take a moment to look over these and
file en masse as reviewed. All right, thank you, Mr. Fink. Members, take
a quick look at those. That does not require a motion, but I do want to make sure people take a look at those. I'm examining as well. Members, any objection or any questions on these reports? One more time to look.
All right. Members, without objection, these will be filed. all right no objection
these will be filed all right moving forward
Speaker 10
1:35:24
Mr. Fink the remaining 133 reports which are listed on the last few pages of the synopsis consist of audits with no findings staff recommends that these reports be filed in mass as reviewed thank you Mr. Fink all right
members as you see those 133 school districts I do want to
take a point of personal privilege right here to list a few of mine, called them out. These had no findings, right? These are good
actors. I want to give a call out to Decatur School District, Farmington School District, Fayetteville School District, and Prairie Grove School District. We're doing a great job with no findings. Those happen to be in my district, and very proud of them. But seriously, it is important to note, I know all of you all members also have school districts that had no findings. Make sure that they are celebrated and that they're so thankful they don't have to come to the table because of the hard work and the good diligence that they're doing. And really, we do. We've got
great school districts that are working across the state in good manner.
So with that, those will be filed without objection. And let's see here. There's no new business on our agenda. Any other thing? Anything else? Representative Long? Yes, Mr. Chairman. I
Representative Wayne Long
Unverified
1:36:38
was wondering, I'm new on the committee, so not to forgive my ignorance, but I understand if they don't have repeat findings, they're not required to come. Is there any other thing in place, like some sort of threshold where
you're talking really big bucks, that they would automatically
have to come? No, not necessarily. Now, there is different thresholds for consideration on what is sent to the prosecuting attorney, and that's based on the legislative audit staff. but not necessarily for coming to the table for the findings reports. And is there any
Representative Wayne Long
Unverified
1:37:16
kind of literature available for the schools to use kind of as a guideline for best practices
so they don't just make things up from
Speaker 10
1:37:28
scratch? Yes, the Arkansas Department of Education, AAEA, ASBA, and then the school board's policies, there's a lot of stuff that they are required to do, stuff that they're required to put on their website concerning their fiscal processes so yes there is stuff that they can follow okay thanks sir
Yeah, so one other item that we were discussing up here is the fact that, like, if anything that's referred to the PA and the AG, those are all put on a list, and we follow, our staff follows up on every single one of them to find out what action or no action that was taken. And then that's presented to the full committee meeting on Friday, and I
Speaker 82
1:38:36
believe that's going to happen next month.
All right. Members, seeing no other business today, we are adjourned. Thank you. This
Speaker 300
1:38:49
may be the highest agenda meeting. Yeah, easily. By members. Oh, really? That's not the only crowd. Crowd.
Agenda
A. Call to order by Co-Chairman.
B. Adoption of Minutes of the December 5, 2024 meeting.
C. Review of Reports. Refer to the Synopsis
D. New Business.
E. Adjournment.
LEGISLATIVE JOINT AUDITING COMMITTEE ARKANSAS LEGISLATIVE AUDIT JUNE 5, 2025 STANDING COMMITTEE ON EDUCATIONAL INSTITUTIONS
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - EDUCATIONAL INSTITUTIONS, Jun 5, 2025 | Agenda | 5 | Official source ↗ |
Speakers
Senator Tyler Dees Chair
Unverified
Speaker 10
Representative Howard M. Beaty, Jr.
Unverified
Tara Smith
Unverified
Speaker 21
Senator Jamie Scott
Unverified
Speaker 30
Chair
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Representative Julie Mayberry
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Speaker 42
Representative Wayne Long
Unverified
Speaker 49
Representative Hope Duke
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Speaker 59
Speaker 68
Speaker 82
Speaker 92
Speaker 99
Speaker 102
Speaker 107
Representative Stetson Painter
Unverified
Speaker 98
Speaker 119
Senator Fredrick J. Love
Unverified
Speaker 9
Speaker 134
Speaker 136
Speaker 140
Speaker 143
Speaker 149
Speaker 93
Speaker 163
Speaker 37
Speaker 193
Speaker 203
Speaker 204
Speaker 205
Speaker 206
Speaker 208
Speaker 209
Speaker 202
Speaker 219
Speaker 233
Speaker 235
Speaker 238
Speaker 239
Speaker 244
Speaker 245
Speaker 144
Speaker 253
Speaker 254
Speaker 257
Senator Dan Sullivan
Unverified
Speaker 259
Speaker 258
Speaker 265
Speaker 275
Speaker 277
Kevin Smith
Unverified
Speaker 7
Speaker 288
Speaker 290
Speaker 292
Speaker 300