NASHVILLE - It's in charge of turning around Tennessee's failing schools, but the state's Achievement School District now has its own flunking grade from state Comptroller watchdogs.
The just-released audit by the Division of State Audit provides a blistering critique into what auditors say the agency's lack of internal financial controls over basic functions.
So just how bad are things at the agency that directly manages five public schools and contracts with private charter groups to operate 24 other schools falling into the bottom five percent of schools statewide in terms of student performance?
Even as Division of State Audit accountants' examination was still underway this spring, the state Department of Education, which had allowed the ASD to operate independently, informed the Comptroller's office in April that it had staged an intervention and seized control over the ASD's "fiscal and federal processes."
As a result, the functions were transferred from Memphis to Nashville with a turnover of the ASD's financial staff. Education Commissioner Candice McQueen's staff told auditors they were hiring a fiscal director, fiscal manager, accountant, account tech, federal programs director and federal programs manager.
Problem areas cited by the Division of State Audit ranged from loose controls over spending, travel and credit cards to insufficient monitoring of the actual schools that ASD runs or contracts out.
Specific findings include:
1) The Achievement School District's management did not establish adequate controls over several key human resources and payroll processes
State law directs that it "shall develop written procedures, subject to the approval of the commissioner, for employment and management of personnel as well as the development of compensation and benefit plans."
"During our audit," watchdogs wrote, "we found seven key areas where ASD did not establish processes over key human resources and payroll functions, including segregating duties; maintaining personnel files; verifying education credentials; documenting time and attendance; completing performance reviews; documenting approvals of bonuses and pay raises; and exiting employees.
2) The Achievement School District's management "failed to implement adequate internal controls over its expenditures, travel claims, and purchasing card purchases
"Based on our testwork," auditors wrote, "we found several deficiencies that indicate that ASD management did not establish adequate internal controls over expenditures and purchasing card purchases. Specifically, we noted that management did not properly approve expenditures, travel claims, and purchasing card purchases, nor did they provide adequate support for some transactions.
3) The Achievement School District's fiscal management "did not perform sufficient fiscal monitoring of its direct-run schools and charter management organizations
"Considering the problems identified in previous Tennessee Single Audits," auditors noted, "we inquired with management to determine if ASD management conducted fiscal monitoring of ASD's Achievement Schools and charter management organizations; we found that ASD's main office staff do not conduct such monitoring.
In one instance, auditors discovered there were payments of $5,895 to employees who no longer even worked for ASD.
Among other things, auditors also couldn't find six expenditure transactions for a dental insurance premium, donation, coffee supplies, and accrual calculations, totaling $131,637, and for three travel claims for a flight and expenses involving charter school operators. That totalled $4,734 and, the audit says, "management could not provide supporting documentation."
Auditors wouldn't even publicly cite specifics in one of their findings on "internal controls." Instead, they found refuge in an exclusion to the Tennessee Open Records Act. It deals, among other things, at ensuring sensitive information about security problems with information systems doesn't get out.
But according to the new audit, that's on top of a lot of other problems that both the state and federal government, which in addition to Tennessee provides funding, have found in previous audits.
On March 30, 2016, the U.S. Department of Education, Office of Inspector General, released an audit of Tennessee's Race to the Top grant, which included funds spent by the ASD.
"This federal audit identified similar internal control deficiencies and areas of
federal noncompliance with the Race to the Top grant at ASD," the latest Comptroller notes. "During our current audit, we continued to find similar issues relating to fiscal deficiencies and noncompliance, but we have also identified new areas of deficiencies related to human resources and purchasing cards."
It notes that ASD "did not have sufficient processes, procedures, and specific
critical controls in place to ensure compliance with federal and state requirements, including proper administration of federal and state funds. In some instances, we found that ASD had actually created or adopted procedures but had failed to follow them."
The audit said that the Comptroller's office has previously "reported deficiencies in ASD's internal controls and noncompliance with federal program requirements, resulting in approximately $721,000 of federal questioned cost."