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Audit shows problems with LPSS handling of records, salaries, federal funds

Posted at 4:19 PM, Feb 14, 2023
and last updated 2023-02-14 17:19:54-05

A recent audit of the Lafayette Parish School System found problems with the handling of employee pay, HR records and federal funds.

Among the problems cited were improper handling of student fees and fundraising money; improperly calculated raises; failure to perform background checks and maintain records of them; failure to document experience used to calculate salaries; failure to properly document receipt of goods and services prior to payment and improper handling of federal COVID funds.

The auditors also opined that the system violated two state laws by failing to properly bond the people who sign LPSS checks.

LPSS issued a press release stating that most of the problems had been addressed when auditors raised them, leaving only a few that are still in the process of correction. To read LPSS's full release, scroll down.

Governments in Louisiana are required to hire an independent accounting firm to audit the books annually, and those audits must be published. They're also required to send copies to the Louisiana Legislative Auditor; if you want to look up any government's audit you can do so at the LLA website here.

If you want to read the current LPSS audit for yourself, you'll find it at the end of this story.

These government audits include any findings by the auditor, in other words, problems with the way things are being done, mistakes, etc. The audits also include a response from the government, which usually includes the way government officials plan to fix the problems the auditor found. If a problem was found in previous years, and never resolved, it's included in the current audit, with a notation regarding the year it was first identified.

This year's LPSS audit includes a list of problems found, along with the auditor's recommendation and LPSS's plan:

There were inadequate controls over funds collected for various fundraisers and activities at the individual schools. (Originally cited in 2006).

Auditors found that policies and procedures regarding collection of monies for various fundraisers and activities in school activity funds at the individual schools are not being enforced by the principals, the result being that some funds may have been improperly accounted for by the School Board.

For instance, on February 17, 2022, the School Accounting Auditor was notified by the Principal and Account Clerk at Carencro High that the Bookkeeper had been maintaining a bag in her desk with cash. The cash was from prior year fees that were collected and not deposited into the school bank account. It was determined that for several years prior year student fees were being collected and deleted from a fees management system but were not being deposited into the school bank account. These fees were instead placed into a bag in the bookkeeper’s desk.

After further investigation of the fees management software utilized it was determined that deleted fees could not be retrieved and, therefore, the amount of collections that were not deposited could not be determined.

On June 20, 2022, the School Board notified the District Attorney and Legislative Auditor’s office of this matter. Due to the ongoing investigation, restitution or an insurance claim has not been filed.

The auditor recommends that the School Board should closely monitor these activities in order to ascertain that the policies and procedures are being adhered to and to take action regarding those not being properly followed.

The School Board agrees with the finding and is continually updating the policies and procedures so that this issue can be resolved. Audits performed by the school accounting department along with external audits provide each school a review each year. In addition to audits several other steps have been implemented over the years, including detailed policies, training videos and the hiring of additional staff to make sure policies are followed and funds are handled properly.

Schools are being encouraged to use online collection for fees to cut down on the use of cash, the old training videos will be updated and more training will be offered, the system promised.

There were inadequate internal control policies and procedures over various Employee Service functions (Originally cited in 2021)

Auditors recommend that the School Board should adhere to its policies and procedures to ensure that errors in
Employee Services functions are detected and corrected timely.

Auditors found that internal control policies and procedures related to Employee Services were not being performed or not being performed timely. The result was that salaries were being inaccurately calculated and paid, and background checks weren't being performed on new hires or maintained properly.

LPSS officials promised that Employee Services will develop and implement a process to ensure these things are done properly and that documentation and salary calculations are checked multiple times.

LPSS says that background checks are performed on every employee who is hired with the Lafayette Parish School System, and they've appointed an employee to audit all files to be sure the required information is them.

There were inadequate controls over documentation in personnel files. (Originally cited in 2021)

The auditors found that the School Board did not adhere to its policies and procedures regarding personnel file documentation; meaning that supporting documentation relating to education necessary to meet minimum job
requirements and experience are not being properly maintained in the personnel files. Background checks are required by state law, and auditors found that LPSS "did not adhere to the statute or its policies and procedures regarding performing and maintaining background checks in the personnel file documentation."

The auditors recommend that the School Board should adhere to their policies and procedures, as well as state law, and ensure that all background checks are performed and all required documentation is maintained.

LPSS officials promised to develop two checklists for new hire folders. One will be general requirements for personnel files and the other will be previous audit tests. Also, moving forward, one employee will audit personnel files to ensure the correct experience and education information is in the files.

The school system did not properly apply Generally Accepted Accounting Principles (GAAP) in recording financial transactions. (Originally cited in 2022)

Auditors found that school system personnel did not properly apply GAAP when recording an isolated set of financial transactions. One of the things an auditor does is pull random transactions to see if they are being done properly.

In one case, an entry made during the bank reconciliation process "improperly affected our cash balance," LPSS officials said, and it had to be reversed during the audit. Their promised response is a yearly review of the process to ensure all the journal entries are correct and the reconciliations are accurate.

In another case, an "adjustment" had to be made to a grant that affected both the current fiscal year and the prior fiscal year. LPSS officials promise that their accountants will be trained to ensure that revenue is properly calculated and distributed.

In a third case, certain pay raises were slightly overstated due to the way they were pro-rated. Going forward, LPSS officials say that all mid-year pay raises will be prorated by the number of remaining working days on an individual’s contract within the fiscal year instead of by the month. The Employee Services department will setup and review all salaries after they are setup in our ERP system prior to the processing of payroll.

Salary increases approved by the Board were incorrectly calculated and paid. (Originally cited in 2022)

The Board approved a $750 teacher pay increase effective November 1, 2021, and a $750 instructional employee pay increase effective February 1, 2022. Auditors found that the pay increases became effective during the fiscal year and the calculation to prorate the increase was incorrectly performed. That means that the salary increase wasn't paid to employees correctly, auditors said.

LPSS officials say they will have the Employee Services Department review all salaries after they are set up in the accounting system. All 2022-2023 hires have been audited and corrected, officials say. Employee Services also will check with the business department to be sure that all past raises have been properly paid.

Indemnity bond required for the superintendent and the surety bonds required for all persons authorized to sign checks were not obtained by the School Board. (Originally cited in 2022)

State law requires that an indemnity bond be purchased and made in favor of the governor or his successors in office, auditors say, and also requires that all persons authorized to sign checks obtain a surety bond for the faithful performance of their duties.

The school system did not purchase the required bonds, auditors found, meaning LPSS did not comply with two different Louisiana laws.

LPSS officials say they applied to a broker for a surety in December 2022, and was to be in place prior to the end of 2022.

More 2022 findings:

Documentation in personnel files wasn't properly maintained; meaning some employees did not have proper documentation to support the years of experience used to calculate their salaries. More than $31,000 in questioned costs was found for just eight food service employees among those sampled by the auditor.

LPSS officials say this will be addressed as part of the personnel file audit.

Also in the food service area, auditors found inadequate controls over payments for goods and services. Auditors pulled 40 disbursements, and found one didn't have the proper documentation to support the payment of more than $42,000 to a vendor.

LPSS officials promise that an inventory and documentation procedure was put in place on July 1, 2022 to ensure verification of all received goods and services.

Auditors found problems with the system's reporting connected to emergency COVID funds. The system did not report more than $1.4 million in expenditures in federal/state grant funds in the fiscal year that ended June 2021, auditors found.

Federal grant rules require that recipients of grants prepare financial statements, including a schedule of expenditures, for the money received.

LPSS "did not have internal control policies and procedures in place to properly track reimbursable expenditures in order to recognize them as federal expenditures in the year in which they were incurred," auditors found.

In response, LPSS officials promise that their accountants will be trained to make sure these expenditures are properly reported in the proper year.

Auditors also found problems with the way LPSS wanted to spend the federal COVID funds. For instance, LPSS requested grant reimbursement for the money it cost to hospitalize people diagnosed with COVID who were covered by the board's health insurance.

The federal COVID money was meant to implement public health protocols like testing and vaccination which were aimed at decreasing the spread of the virus. But payment for hospitalizations to treat people who had the virus "does not appear to be allowable within the grant guidelines of implementing public health protocols," auditors found. That means the system spent COVID grant money - more than $750,000 - on things that don't appear to be allowable, auditors said.

LPSS officials say that they spent that money based on information they received from the Louisiana Department of Education (LDOE) representatives concerning the allowability of Covid Testing, Vaccinations and Covid Hospitalizations. They say they got that in writing from state officials. After the audit finding, LPSS officials say they will ask for a ruling on the issue from state and federal officials.

Here's the LPSS release on the audit. To see the actual audit, scroll down.

Here's the full audit. The findings section starts on page 171 of the document.