Report Finds Deficiencies in Business Office

Newport School Committee Chairman Patrick K. Kelley said on Tuesday that  the findings of a recent report prepared by Providence-based accounting firm LGC&D, were "extremely disappointing," casting a shadow over the internal operations of the school's business management offices. 

At their monthly meeting on June 12, School Committee members heard firsthand details of the report from Susan Johnson, a partner at the firm, who reviewed the report’s analysis at the evening’s meeting. She stated that her firm was engaged in the process to examine a system of “check and balances” within the business offices to ensure employees would have the proper tools to continue in operations down the road.

Upon conducting the investigation, Johnson said it “became clear there were some enhancements that needed to be made.”

In terms of budget maintenance, the LGC&D report found that the Fiscal Year 2012 budget had not been fully uploaded into the department’s accounting system, but was instead maintained and tracked through an Excel spreadsheet. According to the findings, that type of reporting mechanism does not provide the information needed by department heads, the business manager, or the superintendent to effectively monitor expenditures.

As a recommendation, they said the business office must upload the budget into the general ledger, providing the ability to prevent overspending.

The next observation in the report dealt with the Uniform Chart of Accounts (UCOA). Mandated by the Rhode Island Department of Education in 2010, UCOA is a system of reporting that allows financial data from across school districts to be compared in a reliable consistent manner.

According to the report, as of May, the school department had yet to convert its FY2011 or FY2012 chart of accounts to the UCOA system. The report stated, “Instability in the business office and lack of attention to this requirement and of training has caused two fiscal years to pass with without appropriate implementation and use.”

LGC&D recommended that the business office focus its efforts on getting the correct UCOA information into the ledger for the FY2013 year, which starts on July 1. After the current information is uploaded, the department could work backward to fix the previous year’s numbers.

The next section of the report focused on Accounts Payable, namely, ineffective Purchasing Order system. Johnson said the system is not being used to the fullest extent possible, and labeled the review process of ordering by the business manager is “insufficient.”

The recommendation was that the business department use the purchasing order system for most, if not all, of its purchases.

In terms of payroll, the report found that the payroll clerk had the ability to add new employees and adjust an employee’s rate of pay. The recommendation stated that the access to new employee and pay rate changes be limited to Human Resources.

Finally, the report reviewed the revenue and cash receipts of the school department and found that the school department does not perform a reconciliation of expected revenue to actual amounts recorded by the City in terms of payments for vocational tuition, retiree health insurance, and other miscellaneous payments.

After Johnson reported the findings, Kelley said, “We’ve asked several times about the need to have audits done, and when we do, we find there are no internal controls in place. We’re just very fortunate that we didn’t have a financial disaster.”

School committee member Robert J. Leary, who had previously called the report’s findings “scathing,” asked Johnson why she believed this happened to the school’s business department.

She responded, “I could think of various situations, but as to a specific reason why – I’m not sure. It could be a lack of understanding as to what employee’s responsibilities are or a lack of training.”

When the school department received the report last week, Business Manager John Miley promptly resigned, leaving the position vacant effective June 30.

Quickly filling that position, the school department unanimously approved a contract for Joan Tracey, the City of Newport’s Deputy Finance Director from the utilities department.

According to Supt. John H. Ambrogi, Tracey will be working to correct the past errors of the school’s business management office. School committee member Jo Eva Gaines spoke on the hiring of Tracey, saying, “I’m very happy that a person of this magnitude is willing to help us out.”