02/13/11 — School audit focused on procedures, not misuse

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School audit focused on procedures, not misuse

By Phyllis Moore
Published in News on February 13, 2011 1:50 AM

Wayne County Public Schools did nothing fraudulent, is not expected to have to pay back federal stimulus funds, and earlier reports by a Raleigh media outlet to that effect were erroneous, state and local officials said.

Earlier in the week, a media source reported districts in Wayne, Wake and Sampson counties were being investigated after an audit was done on use of the funds. Wayne's portion was $1.4 million.

Sarah Clark, with the communications office at N.C. Department of Public Instruction, said the audit in question was done locally and not through that office.

"We're trying to figure out where all this is coming from because there's some things that are a little bit off in that (TV) news story," she said.

Officials at WCPS said at the time that the funding dollars had been used for Title I students as stipulated, and that the school system likely came under question because the money had been distributed for materials rather than filling positions, knowing that the funding would run out in two years.

"There's no misappropriation, no misuse (of funds)," said Nan Barwick, assistant superintendent for finance. "I think the whole reason we were picked up in the first place is we were one of the few school systems that chose to purchase equipment to go in those Title I classrooms. We didn't just arbitrarily buy things."

Some of the confusion might be attributed to the format used for distributing those funds, she said.

"Part of the process, they wanted us to use the IPS -- interactive purchasing system -- to solicit bids," she said. "We did not use that system. That's why the auditors wrote us up.

"We did do bids, we followed our normal process. We just did not use this system. The instructions initially told us we had to use another different system and halfway through, the whole process changed again."

Failure to follow the guidelines to the letter resulted in the auditor finding certain sections were not in compliance, Mrs. Barwick said.

According to a copy of the audit report, released by Pittard Perry and Crone, which conducted audits for several school system, "Certain disbursements of American Recovery and Reinvestment Act funds did not have the necessary documentation and certain guidelines were not followed."

In a statement released late in the week by the local CPA firm, "This report states that the Wayne County Board of Education did not comply with the guidelines set by the Office of Economic Recovery and Investment (within the American Recovery and Reinvestment Act) regarding Management Directive 3 and 3a, which addresses the process of purchasing equipment from monies granted to the Wayne County Board of Education."

Philip Price, chief financial officer at DPI, explained that the problem discovered through the audit was more about "purchasing procedures" than how the money was actually spent.

"As long as Wayne County implements the procedures as they should for procurement (under the federal guidelines) there would not be an exception that would require payback," he said. "If we find that they are not following those procedures, either through a future audit or through a monitoring visit, then that could lead to some money payback.

"But as far as the results or implications that were outlined in that report, I do not expect any kind of financial payback."

Price said that the rules attached to the federal monies are much different than those the typical school system usually follows.

"We spent a great deal of effort trying to make sure that local school districts understood," he said, adding that GAO, Governmental Accounting Office, a federal agency, monitored implementation and made sure districts were in compliance.

"What happened is, if they notice a school district is not following this, they take exception to any that's non-compliant."

Price said he appreciates the system that has been put in place and is confident Wayne County will not have to reimburse any of the funds. Nor is the school system suspected of any wrongdoing for the way the money was allocated.

"(They) just didn't follow the procurement," he said. "Wake County, for example, was another one that was cited. They did not feel they got clarity on the procedure they were to follow in October, or the end of September. They did have the proper procedures from that point on.

"We waived that exception because they implemented the corrective actions that it would not happen again."