School board refutes audit findings

Published 1:52 pm Saturday, April 30, 2016

The Franklin School Board says it is disputing the findings of a city audit that found problems with internal controls with the school board’s finances.

School board Chair Edna King sent a letter to the Virginia Department of Education this week rather than sending a corrective action plan that had been requested, stating the plan was unnecessary.

“Upon recommendations from our board attorney, Reed Smith LLP, these are our division’s response to your letter,” King wrote. “Nothing in the MOU [Memorandum of Understanding], however, requires the school board to submit a Corrective Action Plan with regard to any audit findings. Moreover, there is no allegation in the audit findings or in your letter of March 3, 2016, that the school board has not complied with the above referenced aspect of the MOU.”

A couple of months ago, Davis & Associates, the City of Franklin’s financial auditor for Fiscal Year 2015, released the audit report that included indicated problems regarding internal controls with the school board. When they gave the audit report at a city council meeting at the end of February, they said they had found five issues with the school board all relating to weaknesses or deficiencies in internal controls, and all of which were considered moderate-to-high risk.

“The findings we saw were related to the school board,” Davis & Associates’ Audrey Davis said during that presentation. “There needs to be a real focus on internal controls. We had not noted any of these kinds of issues in the prior audit, so this year it seems to be an issue with internal controls.”

The five findings included problems in the areas of segregation of duties, oversight over financial transactions, significant deficiency in internal controls, budget activity and procurement of services.

Davis recommended updated and revised policies, as well as improved planning, training and management techniques, to resolve the problems.

“I really do hope they decide to follow the recommendations,” Davis said when discussing the findings with the VDOE. “The year-over-year degradation in their controls was very surprising.”

Davis also noted to the VDOE that neither the city nor the schools responded to her request for a management response to be included in the audit report. This was one of the several factors that led to the request for a corrective action plan.

VDOE Superintendent of Public Instruction Steven Staples sent a letter to Superintendent Dr. Willie Bell and King on March 3 requesting the corrective action plan.

The plan was to include the audit finding, details of the proposed corrective action and any specific deliverables planned or developed in resolving the finding, anticipation date for the completion of the correction action plan and name, position and contact information of the individual responsible for implementing the corrective action.

The letter then goes onto explain each finding and the reasons that the “school board disputes the audit finding and does not believe that any corrective action is necessary.”

For example, King responded to the auditor’s charge that the superintendent’s office approves its own transactions by noting that the school board has approved both charges that were relevant to the audit. One charge was approved by the director of human resources and the finance department.

“However, the school board will review its practices and policies in this regard to ensure that personnel are aware of the requirements for the approval of charges,” King wrote.

With the second finding, the auditor referenced an instance in which Bell charged travel expenses to the school board’s credit card for a personal use and then immediately reimbursed the school board for the charges.

Bell charged the school board credit card in the amount of $3,426.50 for a conference located in Honolulu, Hawaii, where he took his family with him. Several staff members went to a similar conference around the same time frame in Orlando, Fla. According to the audit, the charge was made the school board account on March 6, 2015; Bell wrote a check to reimburse that charge on March 19, 2015.

“I received a copy of the credit card bills today … and determined that there were approximately $3,426.50 in personal charges that were paid on the school board’s credit card,” Davis wrote. “This is a material weakness in internal control for the school board in that Mr. Bell actually approved the purchase requisition that was used to incur these costs. The Purchase Requisition should have been signed by someone about Mr. Bell in the school board.”

Contrary to the audit’s finding, King said, “This transaction was done with the knowledge and consent of the school board. However, the school board will review its practices and policies in this regard to ensure that personnel are aware of the requirements for use of a school board credit card.”

Although school board member Bob Holt was not on the board at the time this occurred, he commented on the matter.

“At the monthly board meetings there is a section for approval of bills for payment. I recently learned the bills we see have already been paid for,” Holt said. “Before, I had assumed the checks went out the day after the meeting.”

In the third finding, the auditor said that there were instances in which school board expenditures were not accompanied by proper supporting documentation.

“We subsequently learned from the auditor that this finding related to twenty-six transactions. Each of the twenty-six transactions are supported by the adequate documentation,” King said. “The school board has verified the supporting documentation related to each of the twenty-six transactions in question. Accordingly, the school board disputes the audit finding.”

The fourth finding is regarding the school board’s request for additional funding during fiscal year 2015. The report said that the request for budget increases during the fiscal year is an indicator of lack of planning and management skills.

“The school board vehemently denies that this is accurate or the proper basis for an audit finding,” King responded in regard to the finding. “The school division’s FY15 budget was prepared before the current superintendent was appointed. It is entirely appropriate for any superintendent, particularly one who was not employed by the school board at the time the budget was prepared, to request additional funding based on the changing needs of the school division. Accordingly, the school board disputes the audit finding.”

The last finding relates to the failure of engaging in competitive negotiation before contracting with two consultants. The two consultants at issue are Urban Policy Development and Hairston Consulting.

King said that the school board entered into the contract with Urban Policy Development after receiving a grant approved by the VDOE and that they were under the impression that the VDOE had approved Urban Policy Development through a procurement process, but have now been made aware that is not the case.

“The contract with Hairston Consulting was entered into as an emergency procurement. Upon taking office, Dr. Bell learned that certain steps required by the school division’s Corrective Action Plan needed to be taken immediately and he was so advised by VDOE staff. Certain actions were contingent upon securing a consultant,” King continued. “Accordingly, Dr. Bell determined, with the school board’s approval, that it was necessary to enter into the contract with Hairston Consulting — a consultant the school board understood to be approved by the VDOE — on an emergency basis.

“Accordingly, the school board does not believe that Finding No. 5 is accurate. However, the school board will review its procurement policies and practices in order to ensure compliance with the Virginia Public Procurement Act,” she added.

King refers often to the school board and its members’ beliefs throughout the letter. However, the school board did not approve the letter before it was sent to Staples.

A member of the board also noted that they never had any kind of meeting where they decided to refute the audit findings.

“I have received a copy of the letter and do not recall the board discussing and approving the items listed,” Holt said. “I had just assumed that the board would meet and study the findings and come up with a response. I was disappointed that the letter was not discussed with the board before it was sent.

“The letter implies that it was a board decision,” he continued, “but the school board never met to discuss the audit and never had a meeting with the auditor.”

Holt also added that fellow board member Will Council and himself had both requested to have a board meeting regarding the audit findings, but they never received any reply from King.

Aside from the audit findings, the VDOE had contacted the Franklin City school board on March 23, regarding certain actions Bell has taken that are in violation of the Memorandum of Understanding they signed on April 21, 2014.

Three new courses were added to the 2015-2016 Franklin High School Course Offering Guide without Bell informing or consulting with Chief Academic Officer Dr. J. Roy Geiger.

The courses were Mathematics Proficiency Enhancement, Tutoring Practicum and AVID I and II.

Students were enrolled and began participating in these courses on Feb. 2, 2016, and the school board didn’t approve these course additions until Feb. 18, 2016.

The memorandum of understanding states, “The Franklin City school board will direct the Division Superintendent to consult with the Superintendent of Public Instruction or designee on all recommendations regarding instructional programs or instructional personnel prior to being submitted to the local board for approval. Recommendations regarding instructional programs must be submitted to the Superintendent of Public Instruction by the Division Superintendent no less than 10 business days prior to the local board meeting.”

Dr. Billy K. Cannaday Jr, president of the state Board of Education, sent King a letter highlighting this violation saying, “It has come to my attention that Dr. Bell has taken actions again that are in violation of this responsibility under the MOU.

“I encourage you to take immediate action to ensure his [Bell] compliance with the requirement that he consult with the CAO on all recommendations regarding instructional programs or instructional personnel prior to their being submitted to the local board for approval,” Cannaday said.

The Franklin City school board discussed this matter in a closed meeting on April 13. On April 21, King responded to Cannaday’s letter, ensuring him that Bell has agreed to comply with the conditions in the MOU.

“After discussion regarding our concerns, it was decided that we would accept your recommendations, with minimal changes and one addition, in order to enhance communication and avoid further violation of the Memorandum of Understanding between the Virginia Board of Education and the Franklin City school board,” King said.

The letter King wrote Cannaday was on her own personal letterhead, not the school board’s, and no other member of the school board was copied on it.

When asked if he was aware that King had sent the April 21 letter to Dr. Cannaday, Holt said, “The letter was not shared with the board.”

“I think it is a major concern,” Holt said of Bell’s actions. “I am concerned that there are so many things that are done, and the board finds out after.”

King said she had no comment for this story.

Attempts were also made to reach Davis, Bell and other school board members, however, all were unsuccessful.

Charles Pyle, director of communications for the VDOE, said additional expectations will be communicated directly to the school division.