0313 Auditor

0313 Auditor

Auditor’s office shares lessons learned the hard way

Auditor’s office shares lessons learned the hard way

By Madelynn Coldiron
Staff Writer

The man who has led a series of special investigations of public agencies for the state auditor’s office gave Kentucky school board members some recommendations designed to keep them – and their school districts – out of hot water.

Brian Lykins, a 30-year veteran of the auditor’s office and his current boss, Auditor of Public Accounts Adam Edelen, discussed best practices for oversight, financial controls and policies at a packed clinic during KSBA’s annual conference, Feb. 22-24. Edelen’s office recently has produced devastating examinations of several Kentucky school districts.

Proper oversight, controls and procedures are not complex, Lykins said. “But we have found over and over again that some of the most sophisticated organizations with hundreds of millions of dollars in an annual budget did not have some of these fundamental processes in place.”

Edelen said he has observed a pattern in the cases his office has investigated involving entities like school boards.

“When you have the appropriate balance between the executive – in this case the superintendent – and the school board, you almost never find any instance of abuse,” he said. “The big problem is when boards become rubber stamps for the administrator or the administration becomes a lap dog of the school board. That’s when you get in serious trouble.”

He added, “Almost every instance of abuse we’ve determined so far is the result of an executive who isn’t properly being watched.”

Policies and procedures
Lykins reviewed some policies and procedures for school board members based on the common themes the auditor’s office found in its special examinations. While boards are not supposed to be involved in day-to-day operations, he said, they “should establish the parameters, the policies and procedures” within which employees work.

The board also is responsible for making sure those policies are being followed and consistently applied, he said, “and you do that by asking for information, asking for reports, having individuals come into the meetings and address issues with you.”

The mission statement also can be a vehicle for keeping the organization within those parameters the board sets, he said. “It helps because it keeps people focused on what they need to be trying to achieve.”

Maintain enough flexibility during board meetings to hear from different managers within an organization, Lykins said. “Make sure you get information from multiple sources. Ask pertinent questions. Ask about benefits, ask about salary increases, ask about those things that can have some impact in areas where there is an opportunity for things to occur without board knowledge,” he advised.

Boards may get conflicting advice on how to maintain their minutes, he said, ranging from keeping the minutes to a bare minimum to making them extremely detailed. “We encourage people to document and to document more fully rather than less fully,” he said. At the least, all action must be documented in the board minutes so there is no question about what happened.

Lykins reminded board members to follow the provisions of the state Open Meetings Act for going into closed session and to take final action only in open session.

The board and its CEO
Boards should approve the compensation package for their primary executive and be aware of the compensation structure of the organization, Lykins said. Make sure there is a physical contract, easily located, for the superintendent, he said. And make sure it spells out the specific terms, benefits and work days.

“Any change you make to the contract, do so in the contract; don’t do it outside it,” he said.

Ask for periodic reports on the benefits and be sure that someone like the board chairman is designated to monitor the financial activities of the superintendent, Lykins recommended. Employees should not be expected to do this because it places them in an awkward position.

Other recommendations
One important step the board should take is to establish an independent process for receiving, analyzing, investigating and resolving concerns –even anonymous concerns – about the organization and its management. This can be done through a dedicated email address, phone number or even post office box, Lykins said.
He also touched on a hot topic in finance, recommending that boards ensure districts have detailed supporting documents for financial transactions, particularly involving credit cards. “Only accept a detailed reimbursement and make it consistent,” he said.

No witch hunts
Edelen reiterated to the clinic crowd that his office is not in the business of witch hunts or fishing expeditions:  “If you are doing it the right way, if you are cleaning up a mess and trying to do it the right way, then you ought to lose no sleep at all by my presence in your area.” If waste, fraud and abuse are happening, he said, “you ought to be losing a lot of sleep.”

Edelen said districts may get requests for information from his office, but that will not necessarily mean an investigation is under way. He said he wants to share best practices and “get a picture of what Kentucky looks like.”

“What we’ve got to do is make sure school districts don’t get in trouble,” he said.

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