Schools audit cites budget violations

Published 8:52 am Thursday, December 9, 2010

WINDSOR – The news was expected, but it still wasn’t good.

The Bertie County Board of Education received its annual financial audit Monday night as the accounting firm of Anderson, Smith and Wike presented its review of the financial statements for the 2009-10 school year.

The assessment showed the school district with only $57,375 in its fund balance as of June 30 and also revealed the system was in violation of state law on two instances last year.

While the information was not unexpected since the board has been studying its financial condition for the past six months following the resignation of then Superintendent Dr. Chip Zullinger, it was still not welcomed by the board members.

Following the presentation, the board agreed to have a special session at a later time to go through the audit with a member of the auditing firm. Members said they wanted to review the document before asking questions.

Auditor Mike White pointed out the low fund balance, but said he thought the board was moving in the right direction.

“I think the board is aware of the situation and has taken steps to correct it,” he said.

Earlier this year, the board adopted a budget that would add approximately $500,000 to the fund balance should there be no expenditures from that money during the 2010-11 academic year.

The fund balance dipped to just over $57,000 from last year’s total of $790,295.

In addition, the school board was out of compliance with state statues in two areas which were noted as material weaknesses in the audit document.

The first was budget violations in which the school district had more than $1 million in expenditures in the General Fund and State Public School Fund that were not budgeted.

“During the year, the Board incurred expenditures within the State Public School Fund and the General Fund that exceeded appropriations,” the audit concluded. “The violations…are based on amended budget totals. However, prior to amendments being approved by the Board, the Public School Fund and General Fund had expenditures in excess of appropriations totaling $1,707,418 and $1,351,121 respectively.”

The cause of the violation was that budget amendments were not prepared when needed due to lack of timely record keeping and oversight of the budgetary process, according to auditors.

The effect, according to the report, “The Board was in violation of state law.”

The second material weakness found was associated with the appropriation of the fund balance.

According to the report, the Board appropriated $692,000 of fund balance in the General Fund which violated state law because there was only $614,933 available for appropriation.

The cause, according to the report, was “all available fund balance was exceeded without Board approval. Once the Board was made aware of these expenditures, the only available revenue source to budget from to cover the expenditures was fund balance.”

As part of its findings, the audit firm also makes recommendations. The audit simply suggested closer monitoring.

“We recommend that management and the Board monitor expenditures more closely to ensure that budget violations do not occur in the future and to ensure that funds are available to pay for all expenditures incurred by the school system.”

In addition to the two material weaknesses, the auditors also found significant deficiencies in the retirement system remittances and separation of duties.

Though not as significant as material weaknesses, the deficiencies must be reported by the auditor.

The retirement system remittances were simply withheld each month, but not remitted as quickly to the retirement system as they should have been.

The other deficiency was due to the lack of segregation of duties within the cash disbursement cycle for general payments and payroll disbursements.

“There are several items we were required to report, but most had no significant impact on the cost of the board doing business except the overspending of the budget, which you were already aware of,” White told board members.

Board member Pamela Chamblee said she had some questions, but wanted time to review the entire document before asking them. Other board members echoed those thoughts.

Board Chair Gloria Lee said she would work with board members to schedule a special session to review the audit and ask questions.