GloucesterTimes.com, Gloucester, MA

June 11, 2013

Report shows deficits in ME activity funds

By James Niedzinski
Staff Writer

---- — MANCHESTER —Manchester Essex Regional School officials are taking a look and adjusting policies after a report by an accounting firm found the district’s student activity accounts thousands of dollars in the red — and some funds unaccounted for.

The report by Powers and Sullivan LLC, based in Wakefield, was sought to check the district’s compliance with a state law regarding how student activity accounts are handled, spent and accounted for, according to the accounting consultants..

Student activity accounts are funded by user fees from sports, fundraising and other means not included as revenues within the school budget.

The firm tested transactions to see if receipts were being processed in line with district procedures, recorded accurately and handled in accordance with state law.

Yet the Manchester Memorial School has three student activity accounts with a total deficit of $5,049, while the middle-high school has student activity accounts with a deficit of $1,472.

In its review of 28 transactions, the firm could not tell where two Manchester Essex Regional High School student activity expenditures totaling $2,951 came from. Scholarships are also considered a student activity, which help offset the costs associated with the participation of at-need students, according to the report.

In the 28 transaction sample, two merit based scholarships were paid from Essex Elementary School and the Manchester Essex Middle High School to student activity funds.

But the accounting firm indicated that scholarships would be considered as gifts for educational purposes under state law. Powers and Sullivan recommended the district record educational scholarships in a separate account, as state law requires for gifts and grants.

Powers and Sullivan also noted that the amounts spent and the actual money leaving the accounts from both elementary schools are not turned over to the director of finance and operations or the district’s treasurer in a timely or consistent manner.

The firm recommends reconciliations are completed and reviewed on a monthly basis for review and approval.

The accounting firm noted in the report the district also does not have a consistent practice of maintaining documentation for receipts; there are also no procedures in place at either elementary school to ensure receipts are being deposited in a timely manner.

According to the report, the middle high school deposits are done at least on a weekly basis; the accounting firm recommended the elementary school receipts be deposited at least once a week as well.

“We recommend that the district discontinue reimbursing the student activity checking accounts until adequate supporting documentation has been provided to the director of finance and operations,” the report reads.

That finance and operations director, Avi Urbas, said Monday that some policies have already changed while other chanegs are in the works.

The district recently updated their standard operating procedures, and it will be updated again to include recommendations by Powers and Sullivan, Urbas wrote in an email to the Times. The district has not yet identified the reason for the account deficits.

Officials can review each schools accounting remotely with recently installed software, and there have been some instances were accounting practices need to be improved.

“I will be looking into the reasons for these deficits to determine the cause,” Urbas wrote. “This could simply be an example of costs being charged to the wrong account, but I will not know for certain until I look into the matter further.”

Urbas attributed the unaccounted funds to a likely miscommunication between the accounting firm and the district. Student planners cost $1,775 and the district was reimbursed; it was unaccounted for, he said, because the expense came from a different account and the high school did not have the documentation handy.

The remaining $1,175, for Green Team purchases, was paid back in September, Urbas said, but the purchases came at a time where the district changed its policy by making invoices being reviewed the the School Committee. The transaction occurred before the new procedure was in place.

“It sounds like this may have been a one-time exception,” Urbas wrote, adding the inclusion in the report was helpful.

Urbas also noted $257 in interest was used from interest earnings was spent on non administrative costs. He wrote the costs were for approved student activities, but the charges should have been expended from a different account.

The district also plans to move scholarship fundraising from the student activities account to a different account.

The fiscal report covered the period from July 1, 2012 — the start of the current fiscal year — through March 31 of this year.

From the School Committee’s perspective, the report was a step in the right direction after the district made some student activity account changes last year.

Committee chairman Linda Crosby said the district was eager to do the financial review after some policies were changed last year, adding the district reached out to have the report completed.

She said the committee never perceived any unaccounted funds or deficits as stolen or fraudulent.

“We thought the report was a positive step,” she said Monday. “It was an area we wanted to improve upon, and we have some new goals.”

James Niedzinski can be reached at 978-283-7000, x 3455 or at jniedzinski@gloucestertimes.com.