Auditors raise red flags over School District practices

By Paul Takahashi (contact)

Wednesday, Jan. 23, 2013 | 5:55 p.m.

An independent audit of the Clark County School District's financial practices found several errors, including incorrectly reporting a federal solar grant and not following district policy when issuing large checks.

The issue: Each year, the School District has an independent auditor look over the district's financial reporting practices and its compliance with local, state and federal grant requirements. Accounting firm Kafoury, Armstrong & Co. found the School District conformed with most of its regulations.

However, the firm found several red flags, which were presented to the district's audit advisory committee on Wednesday.

Errors:

• The U.S. Energy Department awarded the School District $2.4 million to place solar panels and more efficient chillers at Clark High School. The grant requires the district to submit quarterly cash financial reports.

However, the district incorrectly reported total grant cash disbursements and total unexpended funds to the federal government. This happened because the district's facilities department applied for the grant and didn't properly inform the district's grants department about it, said Jim McIntosh, the district's deputy chief financial officer.

"We're strengthening our procedures over reporting to ensure this doesn't happen again," he said.

Last year, auditors found two errors in the district's reporting of federal stimulus money it received to help low-income students. The independent audit this year found no errors in similar financial reports and said "corrective action appears to have been successfully implemented."

• District policy requires two signatures on checks written for more than $10,000 on the district’s accounts. Auditors reviewed 35 checks with amounts of more than $10,000 during the audit and found three of those checks did not have the required two signatures.

The absence of a second reviewer of large checks could be a widespread problem in the School District, McIntosh said. The district issues hundreds of checks each year, many of them to fight and settle lawsuits, he added.

"This seems to be an ongoing problem," he said. "We seem to be having some control issues."

Per the auditors' recommendations, the School District plans to centralize the check writing internally and conduct checks on the check approval process to ensure that district policy is followed, McIntosh said. There is a risk of not being able to issue checks in a timely manner, he added.

What's next: The School District's financial department is currently working on the fiscal year 2013 budget, which is around $2 billion.

Gov. Brian Sandoval announced $135 million in new education spending last week, but district officials were wary any state increase in education funding may be offset by continued declines in property tax revenue.

The School Board must approve a tentative budget by April 15 and a final budget by the end of May, before final approval by the state. The next fiscal year begins July 1, 2013.