School District audit questions purchase of vehicle

By Greg Bird
birdman@tmcvoice.com

The McCreary County Board of Education received their annual financial audit from the firm of White and Company Monday night. While the audit found no material weaknesses in the overall financial statement of the District, it did find two “significant” deficiencies that reportedly occurred under former Superintendent Michael Cash’s administration.
The audit does not delve into the financial strength or weakness of the District, but looks at the operation of the financial system overall and accounting practices of the District over the past fiscal year. The audit showed the District’s financial performance was up to standards, and all funds were managed accordingly and appropriately.
Auditors noted two instances that raised concerns.
The first involved the purchase of a vehicle without Board approval.
According to the report a contracted employee, not an actual District employee, was directed by then-Superintendent Michael Cash to purchase a 2019 Chevrolet Tahoe, at a cost of $36,929. The audit noted the purchase was not approved by the Board, and the District’s Director of Finance “refused to initiate the transaction due to lack of Board approval.”
The auditor discovered that the person who prepared and approved the purchase, at the direction of the Superintendent, had no authorization to make such a purchase.
To prevent future instances like this happening, the auditors recommended all major purchases should be approved by the Board, and all such purchases should only be initiated by authorized personnel.
Joe Montgomery, the auditor, told the Board that the purchase was the result of a “manager exceeding his authority.”
The District’s response to the finding stated the contractor no longer has purchasing power, and has been re-appointed as a part-time employee. All future purchases will only be made with Board approval and if a similar case should occur again, the goods would be refused and returned.
The second finding noted that three contract employees were paid through the District’s payroll system, as opposed to the accounts payable system, as should have been the case.
Upon investigation the auditors found the three employees were entered into the system by a “non-employee contract consultant” in the finance department, causing the District to pay $7,311 in payroll taxes that should have been the responsibility of the contractors.
The District’s response noted access to the District’s payroll systems has been taken away from all contract employees, and since the resignation of Mr. Cash, the system has been updated to allow only certain authorized employees to access the system. The employees have since been offered new part-time contracts.
A few minor instances of purchases or charges being made at various schools without a purchase order being issued in advance, or incomplete receipt forms being filed. The District response stated the importance of obtaining purchase orders and completing receipts properly has been reinforced with staff.
The audit noted the District saw an ending cash balance for the 2018-19 year increase by $3.1 million, due in part to an increase in the Construction fund from bond sales for the roof projects at Pine Knot Elementary and McCreary Central.
It also stated the Food Service Fund ended the year with decrease in cash by $35,000, due to the implementation of the summer feeding program. It noted the financial feasibility of the program would be monitored closely.
A full copy of the audit report is available to view on the District’s web site: www.mccreary.k12.us.
In other actions Monday night the Board heard from Judge Cathy Prewitt, who presented a brief update on the Drug Court Program the Board had previously voted to re-fund. The Judge stated the program is working “wonderfully,” and has already seen 16 referrals since October.
The next regular-scheduled meeting of the McCreary County Board of Education is scheduled for Monday, January 27 at 6:30 p.m. at the Central Office.