1. Presented by: David Baird KSBA Interim Executive Director REVIEW OF THE AUDITOR EDELEN REPORT

2.  Most legal citations were added by KSBA legal staff.  The board is responsible for reasonable oversight regarding proper use of district funds.  The concern of lack of proper board oversight is repeatedly mentioned in some audits.  Some audits reference more district finance office controls with little mention of the board responsibility.  Statutes and regulations should be evaluated to ensure boards have the legal tools to engage in the level of oversight recommended by the state auditor. GENERAL CONCERNS

3. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS FindingsLaw Basis Recommendations from APA Related Policies Employees were paid for extra days and wages without Board approval. KRS 160.291 – Board approves salary schedules. KRS 160.390 requires all personnel actions by the superintendent to be reported to the board and recorded in the next meeting after action is taken. All arrangements extending employee contracts beyond original contract should be authorized by the board before the first day of extension begins. 03.121/03.221 - Salaries Employees were also paid in advance. KRS 160.291 – Board determines when salaries are paid. Employees should not be paid in advance for days worked beyond the original contract. 03.121/03.221 – Salaries Adjustments to the extra co-curricular salary schedule should be approved by school board. Amounts paid to coaches did not match approved co-curricular salary schedule. KRS 160.291 – Board approves extra duty pay. Coaches should be paid in accordance with approved schedule; any adjustments should be approved by the Board. 03.121/03.221 – Salaries

4. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS FindingsLaw BasisRecommendations from APARelated Policies Excessive spending on Boy’s Sweet Sixteen basketball tournament. The district used high school activity funds and bought tickets for general public members. Board members and district staff. KRS 160.340 – Requires board policy on expenditure of district funds. Redbook Review and revise travel policy to address who may attend the events at district expense. The policy should detail the expenses paid and the source of funds that will be used to pay the expenses. 03.125/03.225 - Expense Reimbursement 04.312 - School Activity Funds Excessive spending on Boy’s Sweet Sixteen basketball tournament. Determine what is necessary and appropriate expense for travel reimbursement. KRS 160.160; 160.340; 160.290; & 160.410. The board should approve only necessary and reasonable travel expenses. 03.125/03.225 - Expense Reimbursement Board should pay only necessary travel expenses. The school board paid in advance for travel to out of state NSBA conference, and paid expenses of guests for travel on these trips. KRS 160.340 & OAG 80-395 – Reimburse documented expenses – no advances. The board should review travel policy and only allow reimbursement of expenses and not pay for guests to attend conferences. 01.821 - Board Member Expense Reimbursement 03.125/03.225 - Expense Reimbursement

5. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Employees reimbursed for out-of-district travel expenses without proper pre- authorizations. Travel policies not followed by employees. KRS 160.410. Board approves only necessary expenses. All district employees follow policies for travel and expenditures. 03.125/03.225 - Expense Reimbursement BOE meetings were not effective for proper oversight. Expenses not properly reviewed. KRS 160.290 – Board has control & management of all district funds. Analyze APA recommendations. Where appropriate make policy changes. 03.125/03.225 - Expense Reimbursement 04.31 - Authority to Encumber and Expend Funds Ensure SBDM policy consistent with board policy on expenditure of activity funds. High school activity funds spent by SBDM without approval or guidelines. KRS 160.340 Board policy on expenditures of district funds. Board ensure SBDM spending policy consistent with board policy. 04.312 - School Activity Funds

6. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Board and employees participated in excessive meals during travel. KRS 160.410. Board approves only necessary expenses. Board policy should only allow for meal reimbursement on a per diem. 01.821 - Board Member Expense Reimbursement 03.125/03.225 - Expense Reimbursement

7. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Board and employees participated in excessive meals during travel. Credit transactions without proper documentation. KRS 160.410 – Board approves only necessary expenses. Policies and procedures should be put in place to review all credit card transactions. The board should review all credit card transactions of superintendent and the superintendent’s request for reimbursement for expenses. They should be reviewed to ensure they are reasonable, necessary and properly documented. Credit card and reimbursement of expenses for superintendent should be reviewed and discussed in open board meetings. 01.821 - Board Member Expense Reimbursement 03.125/03.225 - Expense Reimbursement 04.31 - Authority to Encumber and Expend Funds

8. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Credit card transaction and reimbursements Superintendent used district gas card to purchase fuel without board approval Documentation Appropriateness KRS 160.410 – Board approves only necessary expenses Tax Implications Policies should be updated to state that employees will not receive reimbursement or will be required to pay district back if there is not proper documentation. Update reimbursement form to include more details. Update fuel purchase policies 04.31 - Authority to Encumber and Expend Funds Policies did not specify which expenses are reimbursable. Policies should clearly state the expenses reimbursed by the board for travel. 01.821 – Board Member Expense Reimbursement

9. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies In-district travel Documentation and forms were not required for in- district travel Forms should be updated to document in-district travel. 03.125/03.225 - Expense Reimbursement In-district meal purchases Lack of clear documentation for business purpose. Board members should work with district staff to strengthen policies related to food purchases to ensure meals not associated with out of district travel are not reimbursed by district funds. 03.125/03.225 – Expense Reimbursement 01.821 – Board Member Expense Reimbursement

10. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Superintendent expenses Lack of proper oversight on superintendent expenses. KRS 160.410 – Board approves only necessary expenses. Itemized reimbursement requests should be submitted to the full board, or designated board member. 03.125/03.225 - Expense Reimbursement Superintendent received payment for retirement benefits, sick days and personal leave time not authorized by board The auditor found the superintendent received these without the board updating the superintendent contract. KRS 160.350 & 160.291. Recommend policy change that no salary, benefits, or other payments to the superintendent can be made without written permission of the board in an open meeting. These items should be congruent with the superintendent contract. 02.131 – Contract of the Superintendent

11. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Superintendent paid for days not included in contract The auditor is concerned with no clear reporting of non-contracted work days vs. personal leave days. No good procedure for keeping track of this information. KRS 160.340 –Board approves work schedules. KRS 160.291 – Board approves salary schedules. Recommend the board establish an annual work calendar to make it more clear which days are contract vs. non-contract days. Recommend the superintendent must notify the designated representative of the board when any changes are made to the agreed upon schedule. 02.131 – Contract of the Superintendent

12. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Booster organizations should submit budget worksheets and annual financial reports. Booster organization did not submit required reports to principal. Redbook All booster organizations should be informed of the Redbook requirements and the board should ensure those requirements are being met. 04.312 - School Activity Funds Coal severance expenditures should be properly documented. District received a coal severance grant. No documentation that the grant funding was spent for approved purpose. KRS 160.580 – Board approves gift & use thereof & grant conditions. Provide proper documentation to the Department for Local Government (DLG). 01.11 – General Powers and Duties of the Board

13. ANALYSIS OF STATE AUDITOR OF PUBLIC ACCOUNTS (APA) RECOMMENDATIONS CONTINUED FindingsLaw BasisRecommendations from APARelated Policies Misuse of district owned vehicles In two audits employees cited as using district owned vehicles for personal use without IRS reporting as fringe benefit. Tax & Withholding Implications District should have written policy on use of district vehicles for personal use. 03.1321/03.2321 - Use of School Property Staff did not properly report stolen property. KRS 158.155 requires employees to report all such felony offenses to police – but no law regarding reporting such offenses to the superintendent or boards. District should create a written policy requiring employees to report stolen property. 09.2211 – Employee Reports of Criminal Activity

14.  Should be addressed through training  Finally, there is a clear need for training on reporting to IRS taxable benefits, including take home vehicles, health insurance benefits, retirement benefits and others. CONCLUSIONS