Staff members involved in student activities were concerned that centralizing the student activities accounts, and moving them from the individual school buildings to the district business office, would interfere with a system that’s worked well for decades. “We’ve basically been carrying that internal control risk for 30 years, and it’s been working as far as I know,” said school board member Mitch Mork,”but this is the first that anybody’s heard that it’s not working.” (KCAW photo)

For the first time in recent memory, the Sitka School District in January failed to get a clean audit.

Although the faults were procedural – rather than financial – the issue weighed heavily on the minds of some school staff and school board members as they considered whether or not to formally adopt the findings at their February 1 regular meeting.

It should be noted from the get-go that the Fiscal Year 2022 Audit of the Sitka School District completed by the Anchorage accounting firm of Altman, Rogers & Co. is a 138-page report that finds the financial practices of the Sitka School District to be in good shape, and even praiseworthy.

That said, a couple of deficiencies were noted, that – given the overall competency of the district’s business office – might be the equivalent of grammatical errors on an A-student’s otherwise solid term paper.

The first was a failure to track expenses from the Student Activities accounts to the district’s general ledger on a monthly basis – which the auditors consider a “lack of internal controls,” and the second was a failure to file some quarterly reports to the US Department of Education on time, which the auditors also attributed to a lack of internal control.

The district office was informed about both of these problems before the auditors officially delivered the report in January, and its response was to promptly agree with the findings, and to begin corrective action.

Keeping on top of federal grant compliance did not generate much attention at the meeting, as it’s probably a matter of bringing recent hires in the district business office up to speed on the requirements of the government bureaucracy. But centralizing the Student Activities accounts raised alarm bells for some.

Mike Vieira is the president of the teacher’s union (Sitka Education Association) and a former activities director at Sitka High School. He was worried that changing accounting practices, while impressing auditors, might interfere with the function of activities.

“I was concerned to see that kind of buried on page 132 of the audit is a pretty big change in the standard operating procedure of our district regarding the way that activity funds are distributed and controlled, and executed,” Vieira said. “Forever, those activity funds — at least at the high school — have remained with the high school accountant. And it’s a very local approach to our building. And it’s allowed our building to function as a team with our administration, our accounting team, and the coaches inevitably that need access to those funds.”

Vieira recounted an incident where the Sitka basketball teams were en route to games in Wrangell, and ended up overheading and going all the way to Seattle for the night, where they had to be housed in hotels – all of which transpired long after the district’s business office had closed.

Rich Krupa is the athletic coordinator at Sitka High. He said that the episodes Vieira described were not unusual.

“Things happen all the time,” Krupa testified. “I need access to stuff immediately. And with stuff that’s proposed, that’s not going to happen. And my feeling is Sitka athletics and activities are going to be held captive, if it’s changed dramatically. I have no idea what (the District Office) they’re planning to do.”

The corrective plan is written right into the auditor’s report: Business manager Leslie Young stated that “the district is currently in the process of transitioning all school activity accounting to the district’s accounting system to provide a uniform system for operating and training school staff within one centralized system.”

What that will look like in practice is still a bit uncertain. Felix Myers, student representative on the school board, was caught in one of those thorny travel situations last year on a Mock Trial trip to Anchorage. He urged the administration to make sure that remedying the audit did not leave his fellow students in the lurch. 

“We have to make sure that when this does happen, there is a constant line of support for student activities,” Myers said. “So because of that, speaking on behalf of students and student activities, that has to be a priority, making sure that we still have access to the ability to communicate and make sure we can get home.”

Board member Mitch Mork took a different tack: Maybe the auditor was incorrect. There’s nothing illegal about maintaining separate activities accounts in the schools, so why fix what isn’t broken?

“This has been going for, I don’t know, a long time, 30 years,” he said. “We’ve basically been carrying that internal control risk for 30 years, and it’s been working as far as I know, but this is the first that anybody’s heard that it’s not working. So again, communication…. We don’t have to do anything special. It’s just a conversation.”

Mork suggested that the board postpone voting on approval of the audit until all affected parties had been brought together and assured that the corrective action required by the auditors was fully understood.

Board member Tristan Guevin, however, thought it was irresponsible to play chicken with General Accepted Accounting Principles (“GAAP”), and urged the board to approve the audit, and the corrective plan.

“When you look at this audit finding, these bank statements weren’t being reconciled with the general ledger,” said Guevin. “And so I think that’s something we need to ensure happens. We need to support the the superintendent and the business office in ensuring that happens, and I think the only way that that does happen is through some kind of level of centralized control.”

Board president Blossom Teal-Olsen concurred, saying it was the board’s fiduciary responsibility to citizens to comply with the audit. Superintendent Frank Hauser carefully avoided trying to sway board opinion on the corrective plan, but emphasized several times that the district was required by law to have a board-approved audit. “We’re approving the audit,” Hauser said, “we’re not necessarily approving business office functions.”

Ultimately, all board members were reassured that approving the audit – including the two “internal control” deficiencies, and their corrective plans – didn’t rule out further dialog about how to best handle the student activities accounts, and the measure passed unanimously.