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State Auditors in California Discover 'Serious' Flaws In Troubled District's Financial-Management

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California state auditors have found "serious" flaws in the way the Richmond Unified School District routinely handled money during the superintendency of Walter L. Marks, a spokesman for State Controller Gray Davis said last week.

The district's accounting system has been structured to permit overspending to occur unchecked and expenditures or budget adjustments to be made without approval by the school board, a team of seven state investigators concluded after a preliminary audit.

Jay Ziegler, a spokesman for Mr. Davis, noted that the preliminary audit was intended only to find sys4temic problems in the way district finances continue to operate even after Mr. Marks' tenure.

Expenditures by individuals, especially Mr. Marks, will be examined during the course of a full district audit to be completed in November, the spokesman said.

"Because of the financial difficulties of the district and numerous reports that we have received of misappropriations of funds, we have to take those reports seriously," Mr. Ziegler said.

Mr. Ziegler said the auditors also would be investigating allegations that district officials issued contracts without authorization.

Controller Gray's audits of the district were undertaken as a result of the state being called on to lend Richmond Unified $19 million. Although yearly audits of California school districts are routine, most districts are allowed to contract for audits by private companies and are not examined nearly as intensively, Mr. Ziegler said.

Previous audits and reviews of the Richmond schools have found that the district claimed $1.2 million in desegregation costs that had already been paid for by federal programs, as well as $700,000 in desegregation costs for new teachers who were not actually hired.

The probes also revealed that the district had claimed attendance by students incarcerated in juvenile hall and erroneously transferred a portion of a school property to a buyer without being paid for it.

Mark Steinwert, manager of the controller's special project for school districts, said in a memo to the chief of the office's audit division that the new preliminary inquiry showed that, "The district does not know how much it received, how much it spent, or how much is left for each of its special state and federal programs."

Other Audit Findings

The memo said the preliminary audit also found that:

  • Richmond's accounting system is structured so that the administrator who authorizes the payments of checks does so without seeing either the checks or the bills being paid.
  • The district has made no provisions for keeping track of which vendors it owes money and how many of its debts it has deferred. As its in4voices pile up, the risk of duplicate payments greatly increases.
  • Of the 12 budget-and-accounting-department employees, 7 are new to their jobs and are working in either an "acting" or "substitute" capacity, with no specific training or operations manuals to refer to.

As a result of these accounting flaws, the memo said, the district has committed oversights such as paying at least one employee twice for the same day's work and allowing $250,000 in computer equipment purchased last year to remain boxed and stored in a district warehouse without a decision being reached as to its use.

"Richmond is a worst-case example of what happens when a school board does not meet its fiscal responsibility," Mr. Ziegler said.

"There is no remedy for deficit financing in a district of finite means than to go broke eventually," the spokesman added.

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