Audit finds deficiencies, but not fraud, in school system’s use of money

Officials already tighten some controls

The audit also identified a number of cases where the school system could not provide documentation to verify that money had been used appropriately.

The audit, which lasted almost one year and was made public on June 13, was completed by Maryland General Assembly’s Department of Legislative Services. Under a 2005 law, the agency has been charged with auditing all 24 school systems in Maryland.

Frederick County was the 11th school system to go through the audit. In Prince George’s County, the same audit found that the school system had overpaid $1 million in wages to employees who were no longer employed by the system. In Carroll County, it found that staff had used employee credit cards to pay for satellite television bills and services at gyms, nail salons and even a racetrack.

In Frederick County Public Schools, the biggest concerns were related to the lack of tight controls and proper documentation of staff spending, said State Legislative Auditor Bruce Myers.

“We had a lot of internal control issues,“ he said. “The opportunities are there for fraud.“

For instance, the audit found that coordinators at the Community Agency School Services Program — a program providing support for families of at-risk children — made “numerous“ payments for items and services that were not included in the spending guidelines for the program.

That included veterinary services, toys, athletic equipment, clothes and payments to the state Motor Vehicle Administration. Because there were no signed client statements, the system could not prove who received these items and services.

The audit also found deficiencies in the controls of the 385 employee credit cards in the school system. For instance, the report identified 25 transactions on seven cards totaling $10,448 that “appeared to be intentionally split in order to avoid exceeding the employee’s [daily] credit limit.“

Hal Keller, the school system’s director for fiscal services, said officials have followed up on those 25 cases, and found the purchases valid, though handled incorrectly. Officials have changed the procedure so employees who try to circumvent spending limits can lose their credit card.

Auditors tested 118 credit card transactions and discovered 23 instances when employees had spent $4,500 on gift cards and high-dollar incentives, such as portable DVD players.

According to Keller, the items were intended as rewards for students for good behavior and academic performance. The problem was that officials could not provide documentation to verify that the items went to students.

While the audit did not detect any fraudulent activity, it highlighted instances where fraud could happen and go unnoticed, Myers said.

“Most of the things we talk about aim to enhance their systems and controls,“ he said.

The report encourages the school system to re-examine the operations of its food services department, which has been losing money since 2000.

The audit also highlights questionable purchases in different departments, such as $446,000 to buy 21 new vans and trucks for the system, when it already had 86 similar vehicles incurring a yearly mileage of 5,000 miles or less.

Altogether, the audit examined 12 separate areas of school system operations, including transportation, facilities, food services, grants and even school board policies.

In some areas it found the system was using best practices, such as completing continuous assessments of facility needs or staggering school start times to make the most efficient use of school buses.

In the final report on the examination, auditors issued 18 recommendations advising Frederick County schools how to make their operations more effective.

Keller said the school system has already started to put in place some of the recommendations.

The CASS program, for instance, changed its practices, and last spring created specific guidelines for appropriate purchases and started requiring signatures from recipients of gift cards and payments.

The system will take similar steps to tighten credit card controls, Keller said. The system’s transportation department may also look at way to better use support vehicles, he said.