Langdon Area School District’s Business Manager, Kensi Breyer, has made some costly accounting errors. District taxpayers are on the hook for nearly $10,000 in fines and penalties during the third quarter of 2017 and the first quarter of 2018.
By Lisa Nowatzki
Shauna Schneider discovered the errors and fines during the performance of her duties as assistant business manager. Breyer, who has worked as the business manager for the school board since July 2016, was out on maternity leave. During the August 9, 2018, school board meeting Schneider revealed the errors and asked the board members to approve a repayment for a check for $25,137.88.
The money was taken out of an LASD saving account at FM Bank in Langdon in the form of a cashier’s check to pay the IRS taxes, penalties, and fines. According to Board President, Cindy Stremick, using a cashier’s check from the school’s savings account to pay for employees income taxes is not a standard practice that is used by the school board.
The check included $3,700 for late payment, a $3,400 fee for failure to pay, and $445.91 in interest for the 2017 third quarter. Not included in the check was another failure to pay a fine of $2,326.44 and interest of $21.63 for the 2018 first quarter.
The latest fines and penalties are the result of months of budgetary inaccuracies including account balances not reconciled, erroneous financial reports, and end of the year errors with payroll accounts including payroll liabilities such as TFFR (Teachers Fund For Retirement), Social Security, and employee benefits like health insurance.
During the March 12, 2018, school board meeting Emil Schoenfish from Britsch & Associates Certified Public Accounting firm gave the board members an overview of his findings in the 2016 and 2017 school audit reports. According to Schoenfish, the most concerning item was that account balances were not reconciled. “That is particularly the case in the 2016 audit report,” he said.
Shoenfish continued to tell the board that he could not say for certain that some balances in the audit were accurate because he may not have been given the correct numbers. As a result, the financial report was not completely accurate because of the erroneous account balances.
“If the balances aren’t accurate then the reports are not accurate,” he said. “I can’t say for certain that the financials are fairly presented for each of the years (2016 and 2017), especially the income statement.”
One of the largest errors shows a nearly $160,000 difference in the end balance of the 2016 general fund balance and the beginning of the 2017 general fund balance.
It wasn’t until the July 16 School Board meeting that Schoenfish gave his completed audit reports for the 2016 and 2017 school years. The reports contained the errors and mistakes Schoenfish had addressed in the March 12 school board meeting.
Consistent for both the 2016 and 2017 school years, the deficiencies and questioned costs within the auditor’s report were considered to be significant deficiencies. However, compared with the 2016 and 2017 audits, the 2015 school year audit was uneventful and even boring.
The first problem area listed and described on all three audits-2015, 2016, 2017- are identical and identify the same problem and recognize that the solution may not be feasible due to the small size of the school administration personnel.
The documents state, “The Langdon Area Public School District No 23, Langdon, North Dakota has one business manager responsible for most accounting functions. The business manager collects monies, issues receipts, deposits monies, issues checks, sends checks to vendors, records receipts, and disbursements in journals, maintains the general ledger, and prepares financial statements. The degree of internal control is limited.”
Under recommendations, the auditors responded, “Due to the size of the School District it is not feasible to obtain proper separation of duties, and no action is practical.” The school board concurred with the recommendation.
The other four findings by the auditing firm are consistent and identical for the 2016 and 2017 school year. The second finding states, “In lieu of the school board president signing checks manually, the school district has a signature plate. This signature plate is under the control of the superintendent and business manager, who are also signatories. This situation circumvents the dual signature control and should be reviewed.”
The auditor recommends, “The school board president’s signature is often needed during the daily operation of the school district when the board president is not readily available. We suggest that the board review and approve all checks signed in this manner at the next board meeting. ”The school board’s response, “We concur with the recommendation.”
The third finding by the auditing company, “Account balances are not reconciled to actual at year end.” The solution, “We recommend a monthly proof of balances procedure be implemented for the District General Fund. ” The school board responded that they concurred with the recommendation.
The fourth problem identified in the 2016 and 2017 school year audits included, “The North Dakota School District Financial Report and statements of School District Annual Financial Report for Publication are not completely accurate.” The solution proposed was “We recommend that procedures such as those recommended in 16-3/17-3 be implemented to ensure accurate financial reports.” Again, the school board concurred with the recommendation.
The final error identified, “The school district improperly cutoff payroll contracts at last year end.” The recommendation, “We recommend a procedure to ensure that payroll contracts are recorded in the correct fiscal year be implemented to ensure accurate school district reports.” The school board agreed with the recommendation.
According to LASD Superintendent Daren Christianson, Breyer was given two areas to work on in her annual evaluation after the IRS fines and penalties were identified. Christianson said, at the August 9 school board meeting, “The evaluation of the business manager reflects that there are some things not being done the way we want them done, and reconciliation is one of them. Double checking to make sure things are done on schedule is another part that is in the evaluation, so it has been addressed. I think she [Breyer] has the capabilities to do the job. I agree she was probably overwhelmed and without a system of checks and balances. Things got messy.”
During the meeting, board member Tiffany Hetletved said that she would have gotten more help for Breyer if Breyer had said that she needed help. Christianson also said that he did not receive any requests for additional help from Breyer. However, Stremick noted that Breyer did say she needed help several times during conversations with Breyer.
Going forward, Superintendent Christianson said that the plan is to make sure that all accounts must be reconciled monthly. The two-person business manager format will be used including Assistant Business Manager Shauna Schneider. As an added measure of oversight, Superintendent Christianson has been given supervisory control over the business manager position whereas before the business manager only reported to the school board.
For anyone who has questions, all the information contained in the 2015-2017 school audit reports can be found at the Office of the ND State Auditor’s website at www.nd.gov/auditor/langdon-area-public-school-district. For anyone interested in attending, the LASD will hold a public meeting on the budget on Monday, September 17, at 6:30 p.m.