Is 'financial autopsy' enough for Kent schools? Expert touts benefits of internal auditing
Washington state is funneling billions of dollars into K-12 public education over the next few years to satisfy a state Supreme court order in the McCleary school-funding lawsuit. But that influx of money raises questions about accountability for school district finances. Washington, unlike other states, does not require districts to employ internal auditors to monitor spending of public funds.
Such oversight would be welcome in the Kent School District, where financial turmoil has many people reeling, even within the organization. Ashley Gross, KNKX’s youth and education reporter, sat down with Morning Edition host Kirsten Kendrick to discuss her reporting on internal auditing in school districts, and the experts who champion the benefits of the additional accountability measure.
Editor’s note: This Q&A has been edited for clarity and brevity.
Kirsten Kendrick: How did your reporting on financial issues in the Kent School District lead you to the topic of internal auditing?
Ashley Gross: Kent schools have been struggling financially for a couple of years. The district says the problem stems from several issues. Among them, hiring a lot of teachers to reduce class sizes — before the state followed through with funding — and overprojecting enrollment. When student enrollment came in lower than expected, the district received less money from the state, leading to a budget crunch.
There also has been some distrust by parents regarding how money is spent. Examples include a software purchase without a competitive bidding process and questions that have swirled around millions of dollars in transfers from the district's capital fund to its general fund. The district has defended itself and said it's taking steps to control costs. The school board recently called for a financial autopsy; an independent accountant will look at spending and operations dating back six school years. Maya Vengadasalam, school board president, said the board will finalize a request for proposals for that work at a Dec. 5 work session.
Ken Smith, an accounting professor at Central Washington University, has reviewed public records for Kent schools. He says in addition to the financial autopsy, the district should hire two internal auditors to report directly to the school board to monitor future spending. District officials didn't respond to questions about whether Kent employs an internal auditor. Vengadasalam says the district had an internal control person until recently, but added the role should be bigger than just cash control. She says she's been urging the district to hire an internal auditor since 2015.
Smith says the lack of a state requirement compelling districts to hire these independent positions exhibits weakness in school district accountability.
"The state of Washington is flawed in its school district governance because there is virtually no culture of this common best practice to having internal auditors," Smith said.
KK: Are there any school districts in Washington that have internal auditors?
AG: Seattle Public Schools has an Office of Internal Audit, which reports to the school board’s Audit and Finance Committee. That office also oversees the district’s ethics and whistleblower program. Seattle took steps to improve oversight and accountability after a scandal in 2011, when state auditors uncovered a scheme in which the manager of the district's small-business program accepted kickbacks and gave out contracts for which there was no work done.
"That setup was to ensure that the Office of Internal Audit can be independent and objective so that we're free to report on whatever we find without having any sort of fear of retribution," said Andrew Medina, director of internal audit for Seattle Public Schools.
Tacoma has a similar office, and the Northshore School District just hired someone on a part-time basis. The work of these internal offices complements the work of state auditors — focusing more on solutions rather than just identifying problems.
Paul Walker, director of internal audit for Tacoma Public Schools, says he reports to the superintendent in addition to a citizens' finance and audit committee. He says he has the freedom to hold executive sessions with committee members, excluding the superintendent, if the need arises.
KK: What sort of work does Tacoma’s auditor do?
AG: Lately, Walker has been reviewing capital projects. He also looks at contracting, a regular practice that has helped the district discover cost savings. For example, his team found that the district was overcharged by a contractor for sign language and interpreting services. He says the work sends a message to current and future contractors that the district is paying attention to how it spends its money.
KK: If Washington state doesn’t require internal auditors, which states do require them?
AG: New York state has stringent requirements. School districts with more than eight teachers must employ an internal auditor. The law was created after a Long Island financial scandal, in which district officials stole millions of dollars. They spent it on everything from flights to England to luxury cars.