HR and Financial Disarray – Report From State Audit

The Georgia Department of Audits and Accounts recently completed their audit of DeKalb Schools financial statements for the school year ending June 30, 2017. On Monday the board will be discussing the audit. While the audit itself is disappointing, the letter to management is nothing short of alarming.

The state audit reviews the required Annual Financial Statement for the school district. Additionally, the audit includes a review of controls over financial reporting, determines the ability of the system to detect or prevent fraud, and tests various processes and documentation for accuracy.

The first disturbing fact is that the school district did not meet the statutory deadline for submitting all documents to the state for audit. The deadline was December 31, 2017. The school district did not submit all the required documents until September 29, 2018.

Other facts gleaned from the audit include: (1) material weakness and significant deficiencies were identified with the review of the school district’s financial statements; (2) controls provide very low assurances that fraud can be detected or prevented; (2) the district had to make a number of adjustments and reclassifications because of mistakes or inaccuracies in the preparations of the annual statements; (3) sample testing of physical assets discovered these assets to be missing or nonexistent; and (4) sample testing of Human Resource files found missing and inaccurate employee files that included incorrect compensation.

Is this normal? I’m proud to say that Commissioner Nancy Jester has been chair of the Finance, Audit and Budget (FAB) committee at DeKalb County (not the school district) for the last couple years. For the first time in six years, DeKalb County’s Comprehensive Annual Financial Report was delivered on time and without material weaknesses. Additionally, the county also eliminated five areas of deficiency from findings documented in the fiscal year 2016 audit.

SUPPORTING DOCUMENTS
 Letter To DeKalb Schools Management
 DeKalb Schools ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017

LETTER TO MANAGEMENT

In the normal course of the audit process, the auditor is required to obtain an understanding of DeKalb Schools and its environment. In addition to the Auditor’s Financial Report with control deficiencies and material weaknesses, the auditor met with management and discussed additional observances listed in the  Letter To Management.

Side Note: Given the magnitude of these observations, I’m disappointed that the state auditor noted in this letter

“This communication is intended solely for the information and use of management, those charged with governance, others within the organization and Georgia Department of Education and is not intended to be and should not be used by anyone other than these specified parties.”

Observation – Employee Compensation
• The salary paid to some employees did not match their contract.
• Some employees received retroactive salary payment that was not reported on the salary and travel
data reported to the Department of Audits and Accounts.
• No salary scale or documentation for the salary rate paid could be provided for some employees.
• No documentation of extra pay could be provided for some employees.
• A variance existed in the auditor’s salary recalculation for some employees and no documentation
of explanation could be provided.
• An I-9, driver’s license, or Social Security Number card could not be provided for some employees.

Observation – Bank Reconciliation – Cash Maintenance
• The School District has a lack of controls surrounding the bank reconciliation process over the central office bank accounts. Specifically, the controls and procedures surrounding preparing reconciliations timely and ensuring the preparer and approver date and sign off on each reconciliation.
• Reconciling items dating back to 2010 remain on the School District’s books.
• Reconciliations were not completed for all central office bank accounts. The accounts where reconciliations were not completed have minimal activity and are insignificant.

Observation – Bank Reconciliation – School Activity Accounts
• The School District did not establish adequate separation of duties for the key accounting functions of cash receipting, deposit preparation, record keeping, reconciling and cash custody.
• Multiple school activity account reconciliations were not prepared timely.
• Several school activity account reconciliations lacked evidence of who prepared and/or reviewed the reconciliation and when it was prepared or reviewed.

Observation – Untimely Submission of Financial Statements
The State Board of Education required all school districts to submit a complete set of financial statements, ready for audit, by December 31, 2017. DeKalb Schools did not submit their financial statements, disclosures, and supplementary information by this deadline. The financial statements were submitted on September 29, 2018.

ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2017

The state auditor conducted an audit in accordance with auditing standards and GASB accounting standards (General Accounting Standards Board). On a side note, the CFO for SACS was the lead financial interviewer for the SACS review we had a few years ago. I wanted to go over these state audits with her, but she had never heard of GASB, so I was not able to have a financial conversation with her about any material issues.

The policies and procedures of the School District did not provide adequate internal controls over
procurement
• A review of 25 expenditures for compliance with procurement requirements revealed that DeKalb Schools could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for four small purchase expenditures reviewed.

The School District did not have adequate controls in place over the financial statement reporting
process to ensure all required activity was correctly included in the financial statement information
presented for audit.
• School activity agency account balances for cash and funds held for others were overstated by $196,599 due to the financial statements not being properly adjusted for the current year activity.
• Charges for services revenues were understated by $14,050,108 and $14,028,324, respectively, due to the financial statements not being properly adjusted for the current year activity.
• Cash was overstated and investments were understated by $34,552,492 due to incorrectly classifying cash accounts

The School District did not maintain an adequate and complete equipment listing for the Child Nutrition Cluster.
• Three out of the 15 equipment items selected from property records for testing could not be physically located.
• Two out of the 15 equipment items selected from the property records for testing did not reflect the appropriate use and condition
• Five equipment items being utilized within the lunchrooms selected for physical inspection did not appear to be reported on the School District’s equipment listings.

31 responses to “HR and Financial Disarray – Report From State Audit

  1. Thanks for this thorough reporting.

  2. Arthur Itis

    So, it’s SNAFU. Well, color me surprised…

  3. concerned citizen

    You have done a magnificent job, Stan. I’ll say it again: Stan Jester for Superintendent! Can you imagine any of our recent superintendents’ being able to analyze and being able to explain his analysis to the public? Once again, thank you, Stan.

  4. Another example of a poorly run finance division under Mr. Bell. How many do we need before we take action.

  5. Frustrated DeKalb Parent

    Unbelievable. Beyond words. If this happened in the private sector, there would be terminations, no questions asked. Will we hear from any other board members besides Stan?

  6. Dear Concerned Citizen – Are you kidding? Stan “The Court” Jester for Superintendent? What a fiasco that would be – but, at least potentially not as bad as Stephen Greene. Just another reason my kids are in private school – the whole Dekalb County School Board and the school administration are a Ship of Fools.

  7. Stan Jester

    Thanks for reaching out with the constructive feedback, but at this juncture, I’m confident my candidacy for Superintendent is a moot point.

  8. Despina Lamas

    Wow. Thank you for this comprehensive update. Very alarming to say the least.

  9. And this is why neighbors are so opposed to the property tax increase. Our schools are underfunded, but can’t really argue that the DISTRICT is underfunded

  10. Someone should be going to jail thank u Stan

  11. Good afternoon Stan,
    I am an educator of 14 years, where the last 7 years, I have served as an Assistant Principal with Dekalb County School District (DCSD). I wanted to wait until I had honed my craft before applying for a principal position. However, DCSD’s practices (note I did not write “best” practices), have been one where “friends and family” prevail. I speak two languages; the other being Spanish. I attempted to apply for the principal position at John Lewis Elementary School. However, before I was able to do so, the position was “taken down.” Come to find out, the “incumbent” is a close friend of Ms. Sherry Johnson. Over and over, friends helping friends. My question; why post administrative positions over and over in DCSD when it has already been pre-determined who is slated for the position, while unbeknownst to other candidates, they are only there to “fill a quota.” I am disgusted with the shenanigans of DCSD and have decided to leave a school district where more and more, it’s not about what you know but WHO you know that gets one a promotion.

  12. Stan Jester

    I’ve received a number of complaints about the way the school district has filled the Principal position at John Lewis ES. I have not been told much by the administration. You seem to know more than me.

    How long was the job posted? Why didn’t you apply when it was posted? Why do you say it’s a friends and family hire? Who was hired? Are they qualified? Any idea if they followed the proper hiring process?

  13. We Deserve Better

    Stan,
    The removal of the principal and transfer of the assistant principals at Cedar Grove HS has been a mess as well. The regional superintendent came to a faculty meeting at the end of the year and told the teachers to basically mind their own business about the moves she was making at the school, made a few veiled threats (your job is to teach children, etc), then told the faculty that none of the assistant principals wanted to be the Principal anyway.

    Lots of conniving and backstabbing (from one assistant principal and the regional office) to get the first-year principal removed. It is a damn shame how they’re railroading a man with an exemplary 29-year service record in Dekalb.

    How does the regional superintendent still have a job after wildly inappropriate comments in an administrative meeting a while back? … Oh yeah, because Dr. Green said she was sorry. Wonder what the Cedar Grove principal would have go do to get that kind of forgiveness.

  14. 1. I was in the process of updating my resume. I promise you the job was not listed for more than 5 days. By the way; what is the protocol for the posting and removing of a position? Many times, the Regional Superintendent has already told the HR Rep (who is actual seated in the interview), exactly who they want to serve as principal. You may not believe me, but it is all rigged. From start to finish. It’s all a “formality.”
    2. Ms. McMillan (or Dr. McMillan), the new principal, is coming from another elementary school that I hear was thriving (don’t recall the name). I am taking nothing away from her. It was just the manner in which things are repeatedly done; The friend (Ms. Johnson’s friend – Ms. McMillan) leaves her school as principal, and then the AP at that particular school “suddenly” becomes the new principal of Ms. McMillan’s old school. When did the principal position at Ms. McMillans old school post?
    3. She is a “close friend” of the Regional Superintendent who by the way has never been an administrator in ANY school on a P-12 level, so they changed the requirements to accommodate her lack-luster credentials

    When will the Board begin to believe us.

  15. DSW2Contributor

    ^ ^^Wasn’t the John Lewis Principal vacancy filled by reassigning a current DCSD Principal? Much can go wrong when a new building is opening with 500 more new seats and redistricted boundaries — it’s not something a first-year Principal should be doing.

    ^^^^ If you want to be a Principal, you need to be applying and interviewing with all the local school districts. You can’t just pick one school and decide you’re going to be a Principal at it.

  16. DSW2Contributor

    ^^^Fox 5 report “Hundreds rally to save DeKalb County school principal’s job”:
    http://www.fox5atlanta.com/news/hundreds-rally-to-save-dekalb-county-school-principal-s-job

  17. Stan, is the budget being voted on at the June 10 meeting? It doesn’t appear to be on the agenda

  18. Stan Jester

    There is usually a special called meeting at the end of June to pass the budget.

  19. concerned citizen

    These area supts have gotten way out of control. And of course we know HR does anything they want. There are another handful of upper level people who are not qualified for their jobs but somehow got their jobs. And who again is the mystery woman Green is hiding and protecting? Student Council? We need to get rid of all of them and the Board needs to appoint Stan Jester to Supt.

  20. @Stan:
    Under the budget that has been shared, the page regarding appropriations, it says:
    Superintendent’s Office 2,337,912 (current year) 2,161,946 (proposed)
    School Board 289,951 (current year) 1,044,840 (proposed)

    Does this mean that the super’s office will have a little less money and the BOE is doubling theirs? What raise is the BOE giving themselves? You all are one of the top 2-3 in the state and only meet one day a month for $23,400 plus travel, right?

  21. Dear DSW2 Contributor,
    Clearly you missed the mark; it’s the “principle” of the topic of conversation which should be the focus. Who’s to say this is my only application. Thank you for your input.

  22. Thirty Years Devoted

    Here’s what’s amazing to me…everybody knows DCSD needs to do something about HR, but the board continues to rubber-stamp this tom-foolery–allowing displaced principals and people who paid their dues get a good retirement salary. DCSD must hire a competent corporate, degreed HR executive like other school districts, who doesn’t allow these associate superintendents with criminal records to push through who they want illegally. APS uses HIREVIEW; Fulton County has a competent HR executive with screening steps that are documented so they at least have a record of screening all potential candidates and treating people fairly. DCSD thinks it’s above the law. Not so. Pay attention.

  23. AG,
    Both the AP and former Principal at Ashford Park are exemplary and well deserving of their respective positions.

  24. AG,
    It happens EVERYWHERE to be honest but at least they put qualified individuals in these positions instead of doing a “favor” for a friend.

  25. Stan

    Is anything going to be done to address the concerns mentioned in the state audit? Tax payers are being asked to pay higher taxes to provide more money for the schools. We aren’t sure how the money is currently being used, but we expected to provide additional money.

  26. Joy,

    Just wait until the July BOE meeting when the administration is going to say that in order to complete SPLOST V they need more than $240 million in additional revenue and they want to float bonds to get it.

    No just NO! Heck NO!

  27. momwithquestions

    I find it odd that Brockett Elementary’s prinicipal was head of the HR Dept. at Dekalb County before becoming the principal. How exactly does that qualify one to be a principal?

  28. DSW2Contributor

    ^ If I am remembering correctly, the Principal at Brockett was an Assistant Principal at Kingsley before becoming an HR manager for Region 2. An ES Principal supervises about 75 employees, so a background in HR can be very helpful!

    Many of our good APs never apply to become Principals. Instead, these APs go on to become coordinators and managers at the Palace — those positions have much less stress, work far fewer hours, are never thrown under the bus and, being at the Palace, they are in the one DCSD building guaranteed to have working air conditioning.

  29. Frustrated DeKalb Parent

    Is there an update on this? Last I thought, it had been bumped from a board meeting agenda.

  30. Green and Bell have been meeting with board members to discuss it. I met with them today about the state financial audit. Bell blamed most of it on the old financial systems and the HR stuff on the HR department.

  31. Stan

    Does this order cover the finances at the school level? If money is missing at the school level, what happens? Will the results of the audits be made public?

Leave a Reply

Your email address will not be published. Required fields are marked *