A state audit blames personnel turnover for lax financial oversight in the Steilacoom School District, including one mistake that means the 3,000-student district will have to pay back nearly $80,000 in federal special education funding.
The report from state auditors, released Monday, covers the 2010-11 school year.
Auditors say that Steilacoom:
• Lacked procedures to ensure its financial reporting reconciled with key documents.
• Did not have an independent review process to ensure complete and accurate financial reporting.
• Faced turnover in key positions responsible for overall accounting and finance, federal grants and special education programs.
Auditors claim lack of oversight and sloppy record-keeping resulted in a series of accounting errors. They estimate that $2.1 million in school district assets and nearly $1.8 million in liabilities were not properly documented. The district reported general fund expenditures of just over $34 million for the year.
The special education funding that must be repaid includes more than $28,000 for costs charged to grants that lack documentation and more than $50,000 in salaries and benefits for which the district failed to maintain federally required records of employee time.
The audit report also noted that a $1.3 million liability from a previous year’s audit had not been accounted for in Steilacoom’s records.
That liability stemmed from a special state audit issued in 2008 for the 2006-07 school year. The 2008 report criticized Steilacoom and other Washington school districts with extensive online learning programs. It said the programs had failed to report program enrollment accurately, and it asked school districts to give back money to the state to cover the overpayments.
Steilacoom agreed to pay back the money, and K-12, the Virginia-based for-profit company that ran the online Washington Virtual Academy (WAVA) for Steilacoom, agreed to reimburse Steilacoom for the payback. Reimbursement is ongoing. But auditors said the long-term financial liability had not been reported in Steilacoom’s financial statements.
Steilacoom ended its partnership with K12 and WAVA at the end of the 2011-12 school year.
The current audit also mentions an investigation by the U.S. Office of the Inspector General on Steilacoom’s improper spending of federal stimulus funds. In December 2011, the report said, the district overpaid an estimated $20,000 in salaries and benefits with the federal dollars. Superintendent Bill Fritz said when the error – essentially an accidental double payment – was discovered, the district asked employees for the money back. He said the district will repay the federal government for the mistake.
The current audit covers the year that Fritz arrived in the district. He said he became aware of some mistakes in that first year, but others were discovered by auditors.
He said at the time he started, he was the third superintendent in as many years. He said the district also had four directors of student services over a five-year period.
The district now has two new people in key positions, and Fritz said he’s confident they will resolve problems.
“I feel we are moving in the right direction,” Fritz said.
He said it’s not uncommon for school districts to fail to meet some federal rules governing the hiring of outside vendors – one aspect of the state’s criticism of his district’s accounting.
But he said it’s important to follow the rules to ensure that federal funds are spent appropriately.
Fritz said the school board has been informed of the audit results, and he said he has board support for resolving the issues. The News Tribune could not reach any board members Monday.
Auditors recommended the district implement new procedures, add staff training and hire an outside expert to review financial statements.
LeeRae Ball, Steilacoom’s director of finance and operations since last November, said all those measures are under way. She said the district has asked for help from both a private consultant and from the Puget Sound Educational Service District, a regional entity that provides support for school districts.
debbie.cafazzo@thenewstribune.com
253-597-8635
@DebbieCafazzo
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