SPECIAL MEETING OF THE GARRETT COUNTY BOARD OF EDUCATION
Oakland, Maryland 21550
Tuesday, September 22, 2009
Part I - Call to Order
Mr. Rodney L. Durst, President, called the special meeting of the Board of Education to order at 6:02 p.m. Also in attendance were Dr. Donald Forrester, Vice President; Mr. James Raley; Mrs. Charlotte Sebold; and Mr. Thomas Carr, associate members and Dr. Wendell Teets, Superintendent of Schools.
Part II – New Business
Mr. James Murray, CPA, of Rodeheaver & Associates, P.C., presented the draft financial report for the period ending June 30, 2009. He was assisted by Mr. Daniel Porter, CPA, manager of the Board of Education audit, and Tracy Teets, CPA, who assisted with the audit. Also in attendance were Mr. Ervin Fink, Executive Director of Administration and Ms. Judy Travis, Finance Coordinator. Mr. Murray reviewed the required correspondence that explains the responsibilities of all parties involved in the audit and reports certain audit findings. He reviewed the Other Post Employment Benefits (OPEB). OPEB was adopted by the Board of Education this past year. OPEB requires the Board of Education to accrue the annual required contribution for Other Post Employee Benefits to be paid in the future. As part of this adoption, the Board of Education along with the County and Garrett College, as part of the Garrett County Employees Health Care Plan, elected to pre fund certain of those OPEB cost creating an OPEB Trust. This trust is being funded through the County Commissioners.
Mr. Murray also informed the Board about a change in accounting principle for recording Medical Assistance Funds. Up through this past fiscal year, the Medical Assistance funds were recorded in the current expense unrestricted fund and any revenue that was billed and received for student health services were deferred on the balance sheet and had no effect on the revenue and expenses. This past year, the state has mandated that those funds be recorded in the restricted fund and with doing that, those funds represent a fee for service and shouldn’t be deferred. They should be recognized as revenue when billed. This Board made this change for FY2009. There is a prior period adjustment required in the amount of approximately $435,000 received in prior years and not yet spent that needed to be moved from the unrestricted side to the restricted side and have become part of the fund balance.
Mr. Murray gave an overview of the report which was completed in compliance with standards applicable to financial audits contained in Government Auditing Standards and generally accepted accounting principles. Mr. Murray stated the report expressed an unqualified opinion on financial statements.
Mr. Murray referenced the Management’s Discussion and Analysis (MDA) – June 30, 2009. He also gave a brief overview of the basic financial statements, notes to these statements, the food service fund, supplementary program information, and school construction fund.
Most of the school system’s total revenue of $72,321,843 was provided through State of Maryland taxpayers and county funding. The Statement of Net Assets shows Total Assets of $63,718.978 and Total Liabilities of $9,490,778, reflecting a Total Net Assets of $54,228,200. This is an increase of approximately $11,752,000 from the prior year. The majority of this amount less about $500,000 is attributable to capital assets. This includes the renovation of Northern Middle School and Grantsville Elementary School, the Northern High School roof project, press boxes, and several Open Space projects. The Statement of Fund Balances Sheet shows a total fund balance of $1,307,957. This consists of $500,000 in accordance with a policy by the Board of County Commissioners that the Board of Education maintains this amount as the undesignated/unreserved fund balance at the end of each year, $693,628 in carry-over funds to support the health care increase in the 2009-2010 budget, $89,692 in carry-over funds from estate funds, and $24,637 in carry-over funds for Northern Middle revocation expenses. The required amount by the Board of Garrett County Commissioners that the Board of Education maintains in undesignated/unreserved fund balance at the end of each year of $800,000 was amended during the year to $500,000. The Food Service Fund showed an end of year balance of $173,393. The fund balance for Food Service consists strictly of the food inventory and supplies. If the Food Service funds fall into the red, it will look to the current expense fund to subsidize Food Service. For FY09, the Board of Education subsidized $3,349.00 to the Food Service program.
Mr. Porter reviewed the Internal Control Report and the Single Audit Report.
The only deficiency in internal control that is reported is that the Board has inadequate design of internal control over the preparation of its financial statements. Board personnel lack the qualification and training necessary to prepare financial statements in accordance with GAAP. The Board does not have controls in place over the selection and application of accounting principles that in conformity with GAAP including sufficient expertise in selecting and applying accounting principles as an aspect of such controls. In order to remove this as a material weakness of internal control, the Board would have to put internal controls over the production of financial statements in place so that a financial report could be generated to include notes that satisfy the requirements of GAAP. The Board of Education is not in a fiscal position to staff this order. This deficiency is common to many organizations. Mr. Porter reported that there are not any instances of non-compliance or other matters that auditors would be required to report under Government Auditing Standards.
Dr. Teets thanked Mr. Murray and his staff for their professional job and also thanked Mr. Fink, Judy Travis, staff, and all other administrators for a clean audit.
Mr. Murray thanked the staff, Judy Travis, and Scott Germain for their assistance during the audit.
Dr. Forrester also personally thanked Mr. Murray and his staff along with the Board of Education secretarial staff for their help.
Mr. Porter explained the fraud triangle to the Board. There are three factors: pressure, opportunity, and incentives. In these tough economic times, the increase of fraud is dramatically increasing. In looking at the Board of Education, the biggest fraud risk lies with the school activities fund. It is an area where centralized controls are not in place. Because of this, Mr. Fink introduced the Board to the draft of a new policy and procedure, School Activity Funds. Most of the guidelines in the policy and procedures are already being followed by the school. There are two areas that are being specially addressed. One area is tickets sales and the other is school fundraisers. Once the policy and procedures are in place, this will be one of the areas that the auditors will hold the Board accountable for. Mr. Fink has discussed this policy with school administrators and will take the draft to them again before being formally submitted to the Board for review and approval.
Part III –Adjournment
There being no further business, the meeting was adjourned at 7:47 p.m.
|James M. Raley||Wendell D. Teets|
|Approved: October 13, 2009|