Kentucky Auditor of Public Accounts Libby Carlin, Assistant State Auditor (502)

 Background about the APA  Summary of most significant findings noted during recent audits and special examinations of school districts  Tips for improving accountability to avoid these mistakes

 Constitutional office – Auditor Edelen is current state auditor in his first term  Just over 140 employees, approximately 120 professional audit staff  Perform or oversee more than 600 audits and examinations a year. ◦ Local governments – fiscal courts, county clerks, sheriffs ◦ State agencies – KDE, CHFS, etc as part of state CAFR and single audit ◦ Examinations on special districts, school districts, and others

APA’s work related to school districts: ◦ Annual review of all school district audits for compliance with applicable reporting standards and single audit requirements. ◦ Special examinations of school districts. ◦ APA chairs the Committee on School District Audits, which establishes audit requirements and reviews/approves CPA contracts with school districts.

 Improper use of credit cards ◦ Purchases not in compliance with board policy  Personal items  Purchases for other individuals  Items specifically disallowed by policy ◦ Purchases for items reimbursed to the employee through other means (fuel, meals, etc) ◦ Credit card purchases not reviewed in detail by supervisors/board (for superintendent) ◦ Credit card purchases not requiring adequate supporting detail (receipts, etc)

 Erroneous travel reimbursements ◦ May pertain to employees, superintendent or board members ◦ Travel policy should be clearly communicated in board policies ◦ Meal reimbursements for non-overnight travel or for in-district meals (when not specifically permitted by board policy) ◦ Excessive and unnecessary travel  Travel includes individuals with no business purpose  Travel reimbursement for spouses  Excessive Sweet 16 Tournament expenses

 Meal and food purchases ◦ May pertain to employees, superintendent or board members ◦ Food/lunch for staff meetings ◦ In district meal reimbursement ◦ Purchases of meals for others (spouses, nonemployees) ◦ Unallowed purchases (alcoholic beverages) ◦ Excessive purchases (high end restaurants) ◦ Reimbursement without appropriate documentation ◦ Watch for reimbursements of meals paid for with the school district credit card (double paying)

 Employee salaries, raises, fringe benefits, contracts ◦ Salaries and salary adjustments should be approved by the board prior to effective date ◦ Fringe benefits for employees should be consistent for all employees and in district policy ◦ All elements of superintendent contracts (salary, all other payments and fringe benefits, and any other element that differs from the district policy for all other employees) should be expressly spelled out in the superintendent’s contract and approved prior to effective date

 School Level Expenditures ◦ Misuse of activity funds for unallowed purposes (not following Red Book requirements) ◦ Bypassing proper purchase requirements (advanced approval for purchase orders, etc) ◦ Maintaining too much cash from activities prior to deposit ◦ Failing to properly monitor related clubs/activities (booster clubs, etc)

 School Calendar – Instructional Days ◦ Measures should be taken to ensure the school calendar includes appropriate number of instructional days, and any changes to the calendar continues to meet this requirement ◦ Payment of salaries based on instructional days need to be modified if calendar changes ◦ Granting additional time off, extra paid days, contract extensions, salary advances, etc, are not permitted without board approval

 School Board Oversight ◦ Board not provided sufficient detail for decisions ◦ Overuse of consent calendar for key decisions ◦ Inadequate review of superintendent travel, charges, etc. ◦ School board members benefiting from excessive or unnecessary expenditures (travel, meal reimbursement, etc) ◦ Failure by administrative personnel to check for school board approval prior to authorizing payments ◦ Poor mechanism for reporting/addressing spending abuses

 All administrative personnel should be familiar with: ◦ Board and district policies (travel, employee benefits, etc) ◦ Board approvals  Recommend business officers should review of minutes and attached documents for every meeting ◦ Red Book requirements

 Always obtain proper supporting documentation for payments: ◦ Receipts should contain business name, detail of purchases, date, and total (including tips) ◦ If receipts are for more than one employee (obvious more than one meal, ticket, room, etc), ensure all charges are for employees only and documentation identifies all individuals. ◦ Mark through unallowed items on receipts and do not pay (including items related to nonemployees) ◦ Review all credit card detail and match to receipts to avoid duplicate payments, payment of personal items, or payment for items reimbursed through other means (travel or meal reimbursements, etc) or items already reimbursed to other individuals

 Ensure all personnel costs and fringe benefits comply with the employee’s contract and have board approval ◦ Review contract/board minutes to ensure all salary levels, days paid, and raises agree to the approved amounts ◦ Ensure fringe benefits agree to those approved. Additional fringe benefits may include:  Fuel reimbursement  Vehicle lease/allowance (be sure to know if fuel/maintenance is included in the allowance so as not to double pay)  Additional health care payments  Meal reimbursement different than board policy for others

 Ensure all required reports from booster clubs and other organizations are obtained and reviewed ◦ It is ok to request additional documentation or review records when questions arise – clubs and schools should have positive working relationship  Ensure proper controls for all points of cash collections (tickets, events) ◦ Secured in safe until deposit (not in desks) ◦ Deposit within 24 hours of collection when possible ◦ Maintain all proper documentation (receipt detail, deposit ticket, etc) ◦ Ensure duties are properly segregated – do not permit one person to collect, record receipt, deposit funds, and reconcile statements.

 Get comfortable questioning purchase orders and expenditures. ◦ Employers pay you for your judgment and skills, so it’s important to use it to protect them and yourself.  Encourage your superintendent and board to have a policy for reporting waste, fraud, and abuse, and how to address those reports.