Auditor report on Hazelwood Schools questions accounting practices, spending, attendance records

Hazelwood School District parent Monique Norfolk criticized the school board’s decision to make cuts to music programs and physical education at a board meeting on February 16, 2016. Parents’ anger at the budget cuts led them to petition Missouri State Auditor Nicole Galloway to audit the district. Her audit report was released on May 2.

Photo by Lawrence Bryant

Missouri State Auditor Nicole Galloway reported a host of questionable operating practices in how the Hazelwood School District spends and handles taxpayer dollars and resources after an audit initiated by a parent-led citizen petition.

"Taxpayers initiated this audit to get clear answers on the school district's spending practices after the district proposed cuts to services for their children," Galloway said. "We found a need for greater accountability in spending and a lack of checks and balances that must be addressed to ensure student needs are the top priority."

In the audit report, released on Wednesday, May 2, Galloway ranks the district’s performance next to the bottom as “Fair.” The overall ranking of “Fair” indicates the district needs to improve operations in several areas, with some requiring immediate attention.

The report details missing money, lack of accountability in cash handling and accounting, major purchases without proper bidding, missing school property without proper documentation, improper calculation of attendance, and violations of the state Sunshine Law for some board meetings.

The scope of Galloway’s audit ended June 30, 2017. The report found the school district collected more than $1.3 million in cash for the 2016-2017 school year. Galloway said in a release that the lack of cash controls means there is a greater risk of loss, theft or misuse of funds. She called on the district to scrutinize spending decisions and address poor cash handling.

Questionable expenses and accounting

In over $487,000 in disbursements by the Board of Education and the superintendent’s office for the two school years reviewed, the audit pointed to spending of money that did not seem reasonable or providing a benefit to the school district. For example, purchasing tickets to a charity dinner at a parochial high school; use of a district credit card for a retirement party at a casino restaurant; travel reimbursements without supervisor approval; and paying state sales taxes for hotel rooms and car rentals.

“We noted disbursements for sympathy flowers, sympathy cards, meals, gifts, additional airline fees, T-shirts, sales taxes, excessive tipping, valet parking, bellhop and room tips, and various travel expenditures that, while possibly appropriate, should be reviewed to ensure they are the best use of district resources,” the audit stated. “Public funds should be spent only on items necessary and beneficial to the district and enhance the education process.”

The district responded, in part, that the audit report did not indicate that the board expenditures were inappropriate, but “rather the audit report outlined recommendations to review and evaluate expenditures, which the district already does and will continue to do.”

In 2015 and in 2016, the district went into two lease purchase agreements to provide Chromebooks (16,000 total) for middle and high school students. The two purchase agreements cost the district $4.75 million, a project the audit found was entered into without a comprehensive cost study, nor did it solicit bids for the purchase. Additionally, the audit found “a significant number of Chromebook computers are not used as intended.” It stated a review of all high and middle schools determined approximately 1,150 students opted out of receiving the Chromebook computer.

“As a result, the district has spent approximately $340,000 ... for Chromebook computers that are not in use as intended,” the audit stated. In response, the district stated that “the Chromebooks are being used for their intended purpose, which is student learning and instruction.”

The audit also noted HSD did not solicit bids or proposals for several purchases of goods and services in the 2016-2017 school year, including more than $1 million for legal services during the 2016-2017 school year. The district responded by stating it will initiate a proposal for legal services for the next fiscal year.

Discrepancies were highlighted in how the district, collects, stores and deposits money collected from student activity fees, athletic fees, event admissions and concession sales.  At Hazelwood Central, the report discusses the use of cash boxes that do not lock to store monies collected during concession sales, and no sales records maintained to track receipts. The amount of money turned in for popcorn and summer snack sales for 2016-2017 came up short compared to inventory purchased, and the report said school personnel responsible could not account for the discrepancies. In response, HSD stated it will purchase locking cash boxes and require their use, as well as sales records and cash receipts to reconcile sales and inventory that will be tracked.

Funds also went missing between August 2015 and October 2016 at Hazelwood Central, and the report states a principal admitted to taking an unspecified amount of money and repaid $3,080 to the district. However, an additional $5,095 is missing and the district did not seek repayment for the additional amount and did not involve law enforcement (as per district policy), allowing the principal to resign without penalty and remain potentially eligible for retirement. It its response, the district stated it followed board policy, consulted with legal counsel, and pursued and received restitution for the amounts it could confirm.

In the Transportation Department, the audit shows the district does not reconcile its fuel logs to fuel billing. The district purchased over a million dollars in fuel for its buses and vehicles during the two school years examined (2015-2016 and 2016-2017).

The district, in its response said it “will review and update procedures to ensure that fuel logs are completed for all fuel use, that there is a documented periodic reconciliation of fuel purchased to fuel used, and that any significant differences are investigated by an administrator.”

The audit said “significant weaknesses exist in receipting, transmitting, and depositing of monies received at some schools.” It said receipts were not issued at Garrett Elementary, receipts were not always issued at West and Northwest Middle, and some of the receipt slips from Northwest Middle were not accurate or complete. At Central High School, the audit stated school personnel do not issue receipt slips for transcript fees received.

“As a result, deposits could not be reconciled to supporting documentation,” the audit reads.

The audit found that receipts at the Finance Department, as well as at the three high schools and Garrett Elementary, were sometimes handled by several employees before deposit “and there is not always adequate documentation provided (receipt slips or receipt log) to support the transmittal of monies from one employee to another.”

Cash drawers and change funds were not counted daily at Hazelwood West high and middle schools, Garrett Elementary and the Central Early Childhood Center, the audit stated. In the Finance office, the audit said personnel do not provide adequate physical security over monies on hand. Also the district does not maintain a listing of employees at district facilities with access to locked areas where safes are located and who also know safe combinations.

The district, in response, said it plans to “restructure the Finance Department and specifically assign duties to an employee who is involved in the daily review of operations and activities including accounting guidelines, procedures and safeguards to reduce the risk of loss or theft.”

The audit said the district lacks an internal audit function that could help uncover and resolve some of its weaknesses. HSD responded that “it is the responsibility of management and administration to provide an internal audit function as resolve any accounting and procedural control weaknesses as well as policy and compliance issues.”

Property not properly accounted for

District property is not always properly accounted for, the audit found. In one case, the report said a tabletop-sized, DIY electronic cutting machine and accessories purchased for Northwest Middle School had been taken home by the school principal. “The school principal stated she had the machine at her residence due to the library floors being cleaned and waxed, but no approval to remove the item was produced,” the audit said. “The device has since been returned to the school.”

During visits to various schools, the audit said assets were not tagged as district property or could not be located. Of the six metal detectors purchased in 2008 for $44,000 for the three high schools, the pair of metal detectors at Central and West were not tagged as district property.  They had not been installed or used, and there are no records to indicate what happened to them.

In its response, the district stated it “will review and update policies and procedures to ensure that complete and detailed asset records are maintained, that appropriate assets are properly tagged for identification, and that annual physical inventories are performed and compared to detailed records.”

Improper attendance reporting

After reviewing 2016-2017 school attendance records for Hazelwood West, Hazelwood Central and Hazelwood East high schools and Northwest Middle school, the audit estimated that improper recording student attendance resulted in HSD receiving an overpayment of about $95,000 in state funding. Hazelwood West High School was the biggest offender, according to the audit, with 8,420 hours counted when students were not in attendance, according to the audit, followed by Central (4,669 hours), Hazelwood East High School (1,512 hours) and Northwest Middle (386 hours).

The $95,000 discrepancy in state funding will get adjusted in future monthly payments, a DESE spokesperson told The American.

Additionally, the audit said the district’s attendance system is not programmed to deduct time when appropriate, resulting in attendance reporting that conflicts with DESE guidelines. In its response, the district stated it will review and update policies and procedures, correct issues and review further options with its software vendor for timely and accurate student attendance reports. 

The audit also found Sunshine Law violations for some of its closed and retreat meetings. “The district did not always comply with the Sunshine Law and was not always consistent or transparent when notifying the public of board meetings,” the audit stated.

Hazelwood is the fourth largest school district in the St. Louis area. A link to State Auditor Nicole Galloway’s audit of the Hazelwood School District and response from the district can be found at https://tinyurl.com/HSD-Audit.

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