Legislative Audit: Educational Institutions
June 2, 2022

S Berry [00:00:00] Meeting. Motion to approve. And second. All those in favor of the motion say aye. Opposed. Motion carried. Okay. Item C, review of reports. And Mr. Fink, we’ll turn it over to you.

Fink [00:00:18] Thank you, Mr. Chair. Good afternoon. Today we have 20 educational reports for the fiscal year 2021 to review. Of the 20 reports– no, that’s okay. Of the 20 reports, there are five reports with findings, two of which were referred to a prosecuting attorney. And one of those was also referred to the bonding board, which I’ll make note of. The first is Spring Hill School District. In July of 2020, the district hired the sister of a board member’s spouse as a part time paraprofessional with compensation totaling $10,000 for the period of July 2020 through June 30, 2021. The district subsequently changed the individual’s employment status to a full-time paraprofessional in April of 2021 and to elementary secretary in January of 2022, resulting in increases of $5,800 and $5,200 dollars, respectively. Although meeting minutes indicate the board approved these transactions, approval was not obtained from the Arkansas Division of Elementary and Secondary Education, which is required by Arkansas Code. Additionally, the April 2021 and January 2022 board meeting minutes disclosed that the aforementioned board member was present and participated in the discussion and vote in noncompliance with Arkansas Code. And that concludes the finding for Spring Hill School District.

S Berry [00:01:48] Any questions from the committee? Motion to file. And second. All those in favor of the motion, say aye. Opposed. Motion carried. Mr. Fink.

Fink [00:02:04] The next report, which was referred to a prosecuting attorney, and it was also referred to the bond board, is Springdale School District. I won’t read the entire finding– or the first finding, but I’ll just provide a brief summary. Basically, the district had a former employee that was the lead technician over HVAC systems, and he also had a personal business where he did HVAC systems. And he ended up taking about $100,000 of HVAC inventory to use in his personal business. The district did find that he was doing this. They brought him in and they questioned him, and he admitted to a portion of the inventory that was missing. He was arrested. And he also has a trial date set at the end of this month. So that’s the first finding, and that was referred to the bond board. The second finding is eligibility determination performed by district management for the TANF program was performed incorrectly. For the TANF program, a sample of 60 children was selected to test eligibility, controls and compliance, and the audit found seven discrepancies related to the controls for eligibility. And that resulted in three instances of noncompliance totaling $4,700 dollars. And that concludes the finding for Springdale School District.

S Berry [00:03:42] Are there any questions of the committee. Motion to file. And second. All those in favor say aye. Opposed? Motion carried. Mr Fink.

Fink [00:03:58] The next three reports contain findings that were, that were not referred to APA. The first was England School District. The district overstated accounts receivable by $520,000 in other aggregate funds. The financial statements were subsequently corrected by an adjusting entry during audit fieldwork. That concludes the findings for England School District.

S Berry [00:04:26] Senator, you’re recognized.

Bledsoe [00:04:30] The district overstated accounts receivable receivable by $520,296? That seems like an awful lot. And what, what happened?

Fink [00:04:42] Yeah, so they were– they had a building project that was funded through facilities partnership funding. And at the end of the year, they had invoices built up that were due that they went ahead and booked a receivable for. The problem was is they booked the receivable in excess of the actual amount of funding that was available. So really what they need to do for that $520,000 is move that from a different fund within the school district.

S Berry [00:05:19] Entertain a motion to file. Motion made and second. All those in favor of say aye. Opposed. Motion carries. Mr. Fink.

Fink [00:05:30] Foreman school district had one finding. We identified an unallowable cost of $1,800 that was paid from ESSER funds. These costs were the result of the district reclassifying food service supplies that were already expensed in another federal program. That concludes the findings for Foreman School District.

S Berry [00:05:52] Any questions. Entertain a motion to file. A motion to file and second. All those in favor of the motion say aye. Opposed. Motion carried.

Fink [00:06:04] Okay, the final report with findings was Mineral Springs School District. The first finding they had five unauthorized withdrawals totaling $3,500 that were made from district bank accounts between July of 2020 and November of 2020. Entity personnel discovered the unauthorized withdrawals upon review of the affected bank accounts and the funds were recovered by the bank. Finding two, the district could not document that procedures were followed to select a construction manager for construction of a pre-K pavilion and fieldhouse addition as set forth in rules and regulations governing the use of construction management as a project delivery method pursuant to Arkansas Code. Additionally, the district did not have documentation of a construction manager contract. And the final finding, the district did not comply with bid requirements for self construction renovations on two buildings as outlined in Arkansas code. Additionally, the district was unable to provide documentation that the contractor provided a performance bond at the time of the project for electrical work totaling $42,000 as required by code. The district obtained a bond after the project was completed. And that concludes the findings for Middle Spring School District.

S Berry [00:07:28] Rep. Meeks.

Meeks [00:07:29] Thank you, Mr. Chair. Question on that first finding about the $3,500 dollars in withdrawals. Can you expound on that a little bit because I’m concerned. Was somebody withdrawing that nefariously or was that theft or what was going on with that $3,500?

Fink [00:07:48] So those unauthorized withdrawals– according to the police report, it was not an employee. One was a forged check. One was a check that was cashed through Arvest Bank. And three debits were from– three of them were debits that were actually from a casino. And so it was just bad actors in each case. I will say that the district, they were doing bank reconciliations, they were performing those reconciliations timely. And that’s why they were able to report the issue so quickly to the bank.

Meeks [00:08:26] So in other words, it wasn’t a school employee. It was like an identity theft situation. Would that be a good characterization?

Fink [00:08:31] Yes.

Meeks [00:08:32] Okay. All right. Thank you.

S Berry [00:08:43] Motion to file and second. All those in favor say aye. Oppose. Motion carried. Okay, I think on the back– are we ready for the back?

Fink [00:08:55] Yes, sir.

S Berry [00:08:57] On your last page, I think you’ll see a list of, a list of school districts with no findings. There’s the University of Central Arkansas– and, but anyway review those if you would, and then we’ll entertain a motion to, motion to approve these. And second. All those in favor say aye. Opposed? Motion carried. Thank you all. That concludes all of our items. Thank you all for coming. I really appreciate being here and cooperating. But anyway, thank you for coming. And this meeting is adjourned.