Friday, May 1, 2009

School Activity Fund Frauds: An Accident Waiting to Happen

From auditnet.blogspot.com:

The following article appeared in the Washington Post on November 9, 2007 (Student Money Vanishes, but Few Are Punished Activity Funds Are Often Plundered and Mismanaged by Adults):

I have maintained for a long time that management of these funds was an accident waiting to happen. As an internal auditor for Fairfax County Public Schools I observed firsthand the types of abuses that occur regularly in school activity funds. Despite reporting mechanisms such as independent audits that show control weaknesses many of the abuses are repeated year after year. This is in large part due to who controls the funds, lack of effective policies and procedures, and an overall position that these are not material to the financial statements and therefore do not warrant attention.

Across the United States millions of dollars are collected each year for student activity funds. These funds are under the direct control of the principal of the school. While the funds may seem immaterial (from several hundred dollars up to hundreds of thousands of dollars) when you consider the amounts collected by school district the number easily reach millions of dollars a year.

Student activity money is collected from vending machines, sporting events, bake sales and other activities approved by the school principal.

The funds are supposed to be used to promote the general welfare, education and morale of students through activities such as field trips, school publications etc.

The funds are the responsibility of the school principal.School districts are supposed to have policies and procedures covering the collection, safeguarding, and expenditure of school activity funds.

The funds should be audited each year by an independent accounting firm.

However the reality is that procedures for collection, safeguarding and dissemination are not always followed. Not all the money collected is recorded in the school's accounting system. Funds are not promptly deposited and are kept in insecure locations (unlocked desks) or safes with access by multiple personnel. Funds are spent for purposes other than the benefit of students.

School principals routinely give the responsibility for oversight of the funds to individuals not properly trained. Due to lack of internal resources (such as internal auditors) funds are not audited on a regular basis. Additionally the school districts external auditors may not even be aware of the funds available and therefore do not look at whether appropriate internal controls are in place.

Read more here...

5 comments:

Sharon Crews said...

Great article! This Davis vs McArdle case is not about two people; it is about a system that isn't working and hasn't for a long time--didn't start with this administration. So much money comes into the schools--espcially, the high schools--and it goes relatively unaccounted for--or spent unwisely. Just look at the Exhibits on C.J.'s blog that record $469.00 to One World for food for someone--do you think it was for kids (maybe so and maybe some donor paid for it, but the records aren't clear). Shouldn't someone look at these accounts and ask "Who was eating?" Banquets for teachers, etc., should not come out of activity funds or Title I funds, but I was under the impression that I was served luncheons, etc., that came from funds that should have been used for education, etc.

EMERGE said...

I found the article informative. I wonder if the program presented by the Budget Committee has a component on it for student activity funds.

It appears to be well known amongst the Principle set how convoluted managing these funds can be.

Sharon Crews said...

Emerge, I just asked the same question on C.J.'s blog--from where does the student activity money come--I certainly hope not from the Education Fund? Also, at the high school level I believe there is a fund called the General Fund. I have always wondered what that money was spent on--and if all the spending is at the principal's descretion. The point I've made is the principals can buy items that seem to be school-related, but they can very much be for personal use by the principal in the building. For instance, we had a smart board at Manual--I think it was very much considered to be for the principal's use--or, at least, I don't recall seeing it used in anyone's classroom, etc. I think it was offered for our use. However,since there was only one smartboard, having a smartboard "for a day," probably isn't worth the effort.

EMERGE said...

I agree, it sounds like the principal has broad discretion as to what may be required to "promote the general welfare" of their student body.

Sharon Crews said...

I am getting careless--or I miss the spell check!