Magazine article The CPA Journal

School Boards Don't Need State Oversight

Magazine article The CPA Journal

School Boards Don't Need State Oversight

Article excerpt

Corporate management scandals and ethical failures occur when boards of directors fail to oversee the work of senior executives. The board is ultimately responsible for the integrity of the business and should not delegate control of checks and balances to subordinates. Imprudent delegation of authority to subordinates is especially problematic for school boards, where the average tenure of board members is less than five years.

New York State Comptroller Alan Hevesi has stated that school districts should be audited more frequently by state and external auditors. In his book Out of Crisis, Edwards Deming explained how inspection will not improve a faulty system. To change the weak and ineffective systems of board oversight of financial practices in school districts, school boards need a clear method of audit control. Most school boards lack the financial reporting skills to establish clear and appropriate procedures for an audit committee.

Improving Board Practices

In a study of school board financial practices in New York State conducted by Carol Eisenberg of Dowling College, less than 40% of trustees agreed that their boards matched planned expenditures against revenues on a monthly basis or asked questions about the monthly district treasurer's report. Only 42% of board members agreed that they examined fund balances at least twice each year, and only 46% reported that they asked for justifications of a transfer of appropriations. H.S. Grace, in The CPA Journal (March 2002), stated: "The board with and through its audit committee must accept the ultimate responsibility for the quality and integrity of the risk and control environment." Most boards report that they do not consistently practice the financial procedures that fiduciary experts would require.

How can school boards ensure the financial integrity of the school district? First, each school board should have a policy that establishes a board audit committee composed of two board members, an internal auditor appointed by the board, the district treasurer, and the business official. Their duties should be to verify annually that the checks and balances within the financial system are operating as described in the board's policy. Board policy should provide answers to the following questions:

* Is the person who approves a purchase order different from the one who pays it? …

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