Decatur Schools Audit Shows Sloppy Bookkeeping

The State Board of Accounts audit of MSD Decatur Township's books, covering the two year period from July 1, 2007, through June 30, 2009, has now been completed and published on the SBOA website.

Thankfully for all Decatur taxpayers, the District did not buy any more property during this audit period, dramatically reducing the length of the audit findings.

The audit finds that the bookkeeping was sloppy enough that at no time during that two year period did the District's books match the bank statements. The audit mentions this in two places and they are quoted here:

The following deficiencies relating to the recordkeeping were noted. A similar comment appeared in prior Report B32087.

Bank Reconcilements were attempted monthly, but the bank balance did not equal the record balance for any month during the audit period. Differences varied from $27,208.35 long to $33,699.74 short (cash necessary to balance).

Numerous corrections and adjustments were made in the records by use of negative entries.

and

The monthly depository reconciliations of the fund balances to the bank account balances were incorrect during most of the audit period. The monthly reconcilements are showing significant cash necessary to balance from September 2008 until the present. Each month's reconcilement is off by a different amount.

Controls over the reconcilement were insufficient. The reconcilements are performed by the deputy treasurer and are not regularly reviewed in detail by management. The deputy treasurer makes most of the posting entries so there is also a lack of segregation of duties.

The School Corporation should devote more resources to resolving the short and performing the monthly bank reconcilements. We recommended that another employer or member of management aside from the deputy treasurer be involved with the reconcilements on a monthly basis. The monthly bank reconcilements should be reviewed by management.

Governmental units should have internal controls in effect which provide reasonable assurance regarding the reliability of financial information and records, effectiveness and efficiency of operations, proper execution of management's objectives, and compliance with laws and regulations. Among other things, segregation of duties, safeguarding controls over cash and all other assets and all forms of information processing are necessary for proper internal control.

Controls over the receipting, disbursing, recording, and accounting for the financial activities are necessary to avoid substantial risk of invalid transactions, inaccurate records and financial statements and incorrect decision making. (Accounting and Uniform Compliance Guidelines Manual for Indiana Public School Corporations, Chapter 9)

IC 5-13-6-1(e) states: "All local investment officers shall reconcile at least monthly the balance of public funds, as disclosed by the records of the local officers, with the balance statements provided by the respective depositories."

The schools response, which is always included in these audits but never reviewed by anyone for sense or nonsense, states the following:

Since the monthly depository reconciliations of the fund balances to the bank account balances were incorrect during most of the audit period, we are going to implement the following controls;

1. We will research all records to bring account balances up to date and reconciled.

2. We will devote more resources to resolving the shortage and performing the monthly bank reconcilements. We will have another employee or member of management, aside from the deputy treasurer, be involved with the monthly reconcilements. Each month, the Chief Financial Officer will approve the reconciliation.

We feel that these improvements will help control the accuracy of receipting, disbursing, recording, and accounting procedures.

No name is shown as signing this response.

Two questions arise - how good a job could Jeff Baer have been doing that the books never matched the bank statements during the two year audit period - and they 'fixed' it by just changing the books to match without finding the source of the errors ("Numerous corrections and adjustments were made in the records by use of negative entries")? And, why did it take the SBOA audit to get such a basic flaw recognized and a plan created to actually fix it?

Unbelievable !