Responding to a recent recommendation from the state auditor’s office, new Letcher Schools Supt. Tony Sergent says tightened policies and procedures pertaining to reimbursing top administrators of the county school system for travel expenses will be enforced.
During a special meeting of the Letcher County Board of Education held August 5, the board authorized Sergent to submit a response to the office of Kentucky State Auditor Adam Edelen explaining that the board is in the process of adopting revised measures for reimbursing the superintendent, assistant superintendent and all other district employees required to attend outof town meetings and events.
The board approved the second reading of the revisions Monday after giving its OK to the first reading in July.
“We were actually one step ahead of the auditor’s office,” said Board Chairman Robert Kiser.
Sergent, who began his four-year term July 1, said the new policy and procedures included in the second reading would comply with all of the auditor’s recommendations.
“Before reimbursement occurs we follow policy,” said Sergent. “We just have to, at the district level, follow these. We’ve instructed our people not to reimburse anyone unless we have the proper documentation.”
Sergent said he has taken one trip since he was hired as superintendent and that he followed protocol while doing so.
“It’s a matter of enforcing it,” said Sergent.
In a report prepared July 8 by Sandra Rudic of the state auditor’s office, Rudic recommended that the board implement procedures to require that the board review all expense reimbursement forms submitted by the superintendent and assistant superintendents. Rudic also suggested that the board establish a more defined limit to the amount of travel expenses the superintendent can incur without preauthorization from the board as well as implementing procedures to ensure budgetary constraints are observed.
“Ineffective internal controls and lax enforcement of policies and procedures related to travel, lodging and meals resulted in insufficient documentation and questionable expenditures,” Rudic’s report says. “Poor enforcement of policies related to outside business travel has been permitted, resulting in unnecessary spending which may limit available funding for necessary projects and other services for the school district.”
Acting on an anonymous tip to a hotline, the state auditor’s office examined 24 travel and expense reimbursement forms submitted by former Supt. Anna Craft and 25 forms submitted by Asst. Supt. Twyla Messer.
According to the superintendent’s contract, travel related expenses are to be reimbursed upon board approval. Rudic verified that two of the reimbursements were included with travel warrants approved by the board, but said she found no evidence that the board ever reviewed actual reimbursement requests. Craft’s requests for reimbursement were signed by an employee of the district finance department. Messer received prior approval for trips from a supervisor and submitted signed requests. Payments made to Messer were included in the travel warrants approved by the board.
Rudic said it doesn’t appear that anyone ensured that expenses incurred by Craft and Messer kept within a travel budget. The board approved a travel budget of $8,046 for the superintendent’s office for fiscal years 2012 and 2013. Expenditures totaled $12,663 in 2012. With six weeks left in the 2013 fiscal period, the budgeted amount was exceeded by $3,267.
“The district did not follow the board policies or the superintendent contract requirements in reimbursing travel payments to the superintendent, and did not monitor expenditures to ensure travel stayed within the limitations established in the board approved budget,” the report says. “Failure to follow appropriate approval and monitoring policies increases the risk that individuals could be paid for amounts in excess of those due to them.”
According to the board’s revised policies and procedures, the superintendent and the superintendent designee must be given prior approval for “necessary and appropriate” expenses to receive reimbursement for school-related travel. Travel expenses for guests of employees will not be reimbursed and the expense reimbursement process now requires documentation of the funding source for all approved trips.
Revisions to board policy also require that travel vouchers be submitted within one week of the trip. Travel expenses will only be reimbursed if the requests are filed on the proper forms and include itemized receipts. If incomplete or improper documentation is presented and it is discovered after travel expenses are paid, the individual may be required to reimburse the district.
The new policy says that before the board can approve payment it must review itemized reimbursement requests for the superintendent’s travel expenses during an open board meeting.
Rudic said improved oversight and control is needed in certain areas. Reimbursement requests reviewed by Rudic lacked adequate documentation to support the purpose of travel and how it related to operating the school system.
“The only documentation provided was a brief, often incomplete summary of the purpose of the travel (ex. KASA, middle school initiative, etc.),” says the report. “We did not find sufficient documentation in any of the 49 travel reimbursement forms reviewed. In some instances the city traveled to or conference/meeting attended was not included in the details. There were no conference or meeting itineraries provided, or other detailed information regarding meetings or conferences/trainings attended and their relevance to the district. Without this information it is not possible to determine that the related expenditures were necessary or proper expenditures of the district.”
Rudic said 20 items totaling more than $2,800 were reimbursed to individuals without sufficient supporting documentation including no receipts or receipts that were not itemized to support reimbursement of items purchased.
“Without adequate documentation to support the purpose of the travel related charges, it is not possible to verify that the travel was related to the duties and responsibilities of the superintendent or deputy superintendent, or verify that the expenditures complied with board policies, contractual agreements, or state/ federal laws and regulations,” the report says.
Rudic’s report says that under current requirements, district employees can spend $7 for breakfast, $8 for lunch and $15 for dinner. Employees may bank meal allocations during the day to allow for increased expenses at particular meals later. Rudic suggested that the board revise the policy to include requiring actual receipts for all meals.
The auditor said that some travel expenditures, including hospitality room items, a “thank you” gift basket and pies purchased for meetings, did not appear to be “reasonable” or the documentation supporting the expenditure was not adequate. Rudic said some meal costs appeared excessive or included payment of meals for persons other than the claimant. The auditor considers a single meal exceeding $30 to be excessive.
The audit mentions Craft’s trip to Washington, D.C., for the Letcher County Central High School Band’s participation in the Presidential Inauguration on Jan. 17 and her return on Jan. 20. The board approved the trip for the band and members of the Junior ROTC for the dates of Jan. 19 through Jan. 23. The report said Craft incurred $1,294 in air travel, car rental and meal expenditures, while her hotel bill was covered by points accumulated from previous travel.
Craft said she and the band went a few days earlier than originally planned after they were invited to attend the Bluegrass Ball and to allow JROTC members to place a ceremonial wreath on the Tomb of the Unknown Soldier at Arlington National Cemetery. The group was also required to clear security in advance. Craft returned to Letcher County without staying for the parade because she suffers heart disease and was unable to walk the long parade route.
“Prior approval for trips should include all expenditures related to each employee’s travel: hotel, meals, incidentals, mileage or airline ticket,” Rudic’s report says. “Even when these expenditures will be paid collectively for a group of employees, this identifies the expected travel costs per person and then would be a rational basis for reimbursement of approved expenses. Significant changes to cost estimates should be documented and explained when reimbursed and the approval document should never be altered to agree to actual expenditures.”
The auditor recommends that the board end its practice of one employee paying for multiple meals during travel or require sufficient documentation of those meals provided in those instances. Rudic also suggests that approval of travel reimbursement should never occur before or until the employee has actually signed the reimbursement form and provided documentation and explanations as needed.
Rudic said that even though the board had received financial reports and accounts payable information before meetings, it was lenient in its responsibilities to authorize expenditures.
“As documented in the meeting minutes, these items were routinely approved without any detailed discussion or questions presented regarding the items to be paid,” she said. “There was no indication that supporting documentation for payment of expenditures was reviewed by any board member, or that expenditures were questioned by board members.”
The auditor recommends that supporting documentation for expenditures are reviewed by the board and questions and explanations of expenditures reviewed at board meetings should be documented in meeting minutes.
The board’s revised policies and procedures requires the board is to designate at least one board member to review bills before a meeting for items that may need clarification before the board votes to approves reimbursement requests from the superintendent.
During her 12 years as superintendent, Craft raised millions of dollars to help fund the construction of Letcher County Central High School and it various sporting complexes and to fund construction of the more recently completed Letcher County Area Technology Center. Craft also traveled to meet with donors to raise money for instruments for the LCCHS band, a concert piano for the LCCHS auditorium, and funds needed to support academic related programs such as the LCCHS drama department. Craft retired as superintendent June 30.
“When the audit requests were made we were unable to find (receipts) during a tenure of a finance officer who is deceased,” said Craft. “I’ve never done anything to hurt the board. Anywhere I went or had meals was to raise money for this district. I never went anywhere or did anything if it wasn’t to benefit the board or the students.”
The audit was initiated through information about the superintendent and assistant superintendent’s travel expenses received from an anonymous call in April to the state auditor’s office tip hotline, 1-800-KY-ALERT. The board will be billed for the audit. A total cost will not be calculated until the report is finalized.
Members of the school board past and present accompanied Craft on some of the trips as well as members from the Kentucky Department of Education.
Craft was reimbursed for meals at Windy Corner Market in Lexington totaling $49.03 on Nov. 30, 2012. The auditor’s report described the expense as “not reasonable” and “excessive.” That bill included meals for newly-elected board member Mendy Boggs and her two daughters. Craft said she forgot to mark the two daughters’ meals off of the receipt before requesting reimbursement.