The Audit Committee of the Lake County School District just had their meeting and the external auditor, RSM McGladrey, presented a new audit showing that "someone" manipulated the computerized payroll system to overpay some staff by $600,000.
Either the situation was caused by mismanagement or purposely as part of fraud. It indicates a lack of professional accounting controls - there should be a running total of approved salary levels that is compared to check payments and reconciled to ensure non-approved changes are made to the payroll system.
This is a criminal situation and should be investigated by the Sherrif's department. This is actual theft from taxpayer funds and needs to be investigated by criminal investigators. The article below doesn't say there was any such recommendation, but I will make it at next Monday's Board meeting.
Note: As a former member of the audit committee, I can say that RSM tends to avoid conflict or specifics in their reports - they tend to never make recommendations related to individuals in writing. In former cases where I was auditing potential fraud, we had criminal investigators and the attorney involved before writing any report.
vj
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Who altered salaries at Lake's schools?
Tanya Caldwell | Orlando Sentinel Staff Writer
July 25, 2008
TAVARES - More than $600,000 was used to pay school-district employees higher salaries than they should earn and to create jobs without Lake County School Board approval, according to auditors investigating district finances.
The internal audit, conducted by RSM McGladrey, cited several high-risk practices in Lake County Schools, saying that several employees have maintained high salaries even after being transferred to lower-level positions.
When an employee is demoted, his or her salary is automatically changed to reflect the new salary. But someone has been going into the district's salary system and manually changing some employees' pay so that staffers keep the higher wages for a year or more, auditors reported.
"There's a salary code, and that's what they would change," said Carina Silva, with the auditing company.
"This is something of a cultural policy," Jennifer Murtha, of RSM McGladrey, told district audit committee members this week.
The practice, however, is against School Board policy. Board member Cindy Barrow, who serves on the audit committee, said she wants to make sure next school year's employees are paid appropriately, especially after dozens of assistant principals recently were transferred to different roles.
"We're going to have to monitor very closely that people are getting the right salary," Barrow said. "You don't get to keep your salary from last year."
Other audit committee members also blasted the practice.
"To bounce salaries all over the place to me just doesn't make sense," said Jay Kosner, an audit-committee member.
Carol MacLeod, the district's chief financial officer, said that she has gone through everyone's salary and that all employees now are paid appropriately.
Auditors were especially critical of Superintendent Anna Cowin's practice of hiring more employees than the School Board allowed.
"This resulted in the use of over $600,000 of operating dollars without appropriate Board approval," according to the auditors' executive summary.
The extra employees included workers for a controversial and now-defunct merit-pay plan called the Teacher Advancement Program, which has been reviewed twice by the district's own auditor.
Board members have criticized Cowin for mishandling the multimillion-dollar program known as TAP and have considered writing the governor to have her removed from office. Cowin is expected to deliver a written response to the board Monday to explain her role in the program.
Auditors said the superintendent added TAP employees and hired others without proper board approval.
"They were approved in the overall budget, which was approved by the board," Murtha said, "but it did not go through the correct process."
Auditors also reviewed a hiring freeze Cowin imposed in 2007, reportedly because she feared losing $2.1 million from the state to pay teacher bonuses largely based on test scores. Teachers rejected the bonuses in November for the 2007-08 and 2008-09 school years.
Auditors found that Cowin's hiring freeze -- which was never approved by the board -- didn't net much savings. In fact, 27 employees were hired during the hiring freeze, they reported.
Cowin, in an e-mailed response to questions about the audit, said she "did not have the courtesy of receiving a copy of the audit."
To fix the problems, auditors recommended that the district implement standard operating procedures to keep officials from manually overriding someone's salary and to make sure that extra people aren't hired without board approval.
They also urged the district to start a code-of-ethics program -- complete with a whistle-blowing hotline to report bad practices -- to keep managers from disobeying board policy.
The audit was discussed this week at a district audit-committee meeting. The final report is scheduled to go to the School Board later for approval.
Tanya Caldwell can be reached at [email protected] or 352-742-5928.
