McHenry County Blog

Huntley’s Aileen Seedorf scored a big victory for taxpayers when Huntley School District 158’s new, non-temporary Superintendent of Schools John Burkey granted Seidorf’s request for a copy of the scathing management letter from outside auditor William F. Gurrie & Co.

What a way to try to build credibility during his first week on the job.

Seedorf's Freedom of Information request was turned down by the former school superintendent.

She delivered her appeal to School Board President Mike Skala at the meeting when the Majority 6 board coalition hired fellow member Glen Stewart for a $101,000 school administrative job.

As a result of her FOI letter and appeal, there were three letters released. I shall cite the "draft" dated April 18, 2006. It identifies “reportable conditions,” which it says

Involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control that, in our judgment, could adversely affect the organization’s ability to initiate, record, process, and report financial data consistent with the assertions of management in the financial statements.

In short, you guys are in big trouble.

There are so many examples!

1) For instance, "Reconciliation of bank accounts:"

reconciliations…were not performed on a timely basis. As a result, significant differences existed in the District’s general ledger at year end that had not been detected by a responsible employee in the normal course of his/her duties.

So much for what the outside auditor calls

a significant control over the timely and accurate recognition of transactions in the accounting records.

2) With the rather boring tile of “Period-end accounting close,” the auditor observes,

We noted the District had significant transactions recorded in the wrong accounting period (month/quarter/year). There does not appear to be an effective period-end closing procedure to ensure that transactions are posted to the correct period.

In other words, District 158 accountants—using the job title “accountant” very loosely—cannot even figure out what year some expenditures were made. With such incompetence, no wonder the check books can’t be balanced. And, what does this mean?

Significant revenue and expenditure accounts should also be analyzed for errors or omissions on a regular basis, as well.

The auditor must have found something that is only hinted at here.

3) “Duplicate check numbers,” reads the next heading.

Certain check numbers, apparently used for recurring items such as payroll withholding remittances, are reused on a regular basis….This practice provides the opportunity for an individual to issue an unauthorized check that would not necessarily be detected on a timely basis.

So, as the auditor said to the Board, people could be stealing money right now. Further, the auditor mentions the need for better “control over blank check stock and controls requiring that checks be issued sequentially and accounted for."

That’s as loosey-goosey a system as I can imagine in a multi-million apparently very quasi-business operation.

4) “Internal financial reporting” is such a mind-numbing title, too, but it’s next.

During our field work, we became aware that the District has not generated internal financial reports for most of fiscal year 2006. The reports were not generated because of the lack of accurate opening balance information…Internal accounting reports are necessary for the management of the District, for communications with the Board and public…

Remember, this audit is for the 12 months from July 2004 through June 2005.

How devastating will the next audit be?

Anyone want to bet that the incumbents running for re-election will not want it released before their re-election campaign next April?

5) “Accounting department” is the next dry heading. I guess this will be about the unit that the District 158 Board just hired a woman whose most recent job was as a secretary to head.

The District’s accounting records were insufficient to allow for the production of external financial records for nearly ten months after its fiscal year end of June 30, 2005. The accounting records had to be adjusted by significant amounts prior to the issuance of the audited financial statements.

This probably refers to the $524,000 adjustment to make the check book balance. I guess those in control figure the taxpayers won’t wonder where the money went.

The letter of advice suggests evaluating

the adequacy of the accounting department.

Boy, is that an understatement! Here are the specific recommendations for consideration:

· The competency of the accounting staff,
· The adequacy of the accounting software system,
· The ability of the District to attract and retain qualified accounting staff,
· The adequacy of ongoing staff development programs,
· The sufficiency of staffing levels,
· The department’s organizational structure, and
· The presence of effective policies and practices (written or oral).

6) “Other matters” is the last subheading.

a) “Cash accounts” - “…the accounting entries (should) reflect the actual movement of cash.”

b)“Construction accounting” – apparently, there is a danger that bond covenants will not be met, because these recommendations appear:

· Establish separate sub-funds in the accounting records for each project,
· Establish separate bank accounts and investments for each project, and
· Maintain an ongoing record for each project of the original estimate, the contracts issued, change orders to date, progress to date, retainage and amounts paid and payable. This subsidiary record should be reconciled to the general ledger on a monthly basis.

In other words, you don’t have a clue what you are doing.

c) “Posting transactions” – “…the District’s transactions are not always grouped in a consistent, logical manner when posted to the general ledger.
And, then, this monumental understatement:

This practice complicates the bank reconciliation process and makes it difficult to analyze the accounts.

The outside auditor recommends batching all transactions “in logical groups (for instance, by payroll or by accounts payable run) and posted to the general ledger on a timely basis.”

What a concept.

d) “Journal entries” – “The district staff made numerous journal entries to the general ledger in an attempt to fix the accounting problems. Many of these entries had to be reversed.”

How devastating. I wonder if even one CPA is in charge of anything.

And, then this warning to protect the guilty:

This report is intended solely for the information and use of the board of education, management, and others within the organization and is not intended to be and should not be used by anyone other than those specified parties.

That reinforces the

DRAFT COPY
NOT TO BE REPRODUCED
WITHOUT THE PERMISSION
OF WILLIAM F. GURRIE & CO.

Talk about trying to protect the guilty!

How refreshing that the new superintendent should begin his term of office by coming clean with the public about the severe shortcomings of his predecessors. Now, what about that forensic audit that board member Larry Snow suggested?

Good riddance to his obviously incompentent predecessors, but it sounds as if more house cleaning is needed, plus an infusion of compentent accountants.

= = = = =
Some may think my judgments are too harsh. Just for background, a majority of my time in the General Assembly in the 1970's was spent as a member of the Legislative Audit Commssion, so I have read a lot of agency audits. I also managed the biggest part of the Illinois Department of Central Management Services--Benefits--during the mid-1980's, so I know what it is to be audited. This is one horrible audit for which people ought to be held responsible.

If this audit were of an Illinois department or agency and I was in the Illinois House, I would file an impeachment resolution to remove the agency head, something I actually did for one of Governor Dan Walker's directors who refused to follow the real estate equalization laws two years in a row.

Labels: Aileen Seedorf, Freedom of Information Act, Gurrie, Huntley School District 158, John Burkey, Legislative Audit Commission, Management Letter