The Evans County School Superintendent placed blame on changed state policies and ‘longstanding practices,’ among other things in his 45-minute rebuttal to the recent state audit that found financial deficiencies.
His soliloquy followed the release of an annual audit conducted by the Georgia Department of Audits & Accounts (DOAA) that revealed deficiencies in internal controls and processes, particularly in the areas of travel, procurement, and employee compensation. You can read more about that here.
Waters prefaced his presentation Thursday night during the work session with a prepared statement he read to Board members in a jam-packed room.
“Several of the concerns identified were tied to long standing practices that have not been yet aligned to our state’s policies and the absence of some procedural expectations. While the intentions are kind and the actions were all rather than employee support and operational efficiency, we do recognize the need to ensure that our processes match current guidance and expectations for accountability and transparency. With any external review, we look to see how we can improve our practices, and we appreciate the feedback from our audit team and view this as an opportunity to refine and strengthen our operations. We have also received correspondence from the Georgia Department of Education indicating that the findings and the audit reports are officially closed. This means we’re now on to the next step of aligning our practices with current standards, ensuring efficiency.”
Waters then asked for the opportunity to explain the ‘root cause’ of each audit finding.
FINDING # 1 – the override internal controls for travel and meal expenditures.
“The background of these, this finding was for the audit time period, the audited time period, four separate conferences – I requested POs for administrative meals as a time of team building for the conference attendees as a way of expressing our appreciation for our district and school leaders. The funding source was ‘clearwire funding’ and is appropriated the budget as employee appreciation funds and was approved in our 06/10/2024 budget. These funds are non tax revenue. Receipts were submitted and the purchase was processed through finance. The amount spent represents approximately 35 collective meals for the attendees.
According to the auditors, the process should have included an agenda and sign in sheet as documentation for the meals or a better practice was for us to simply follow through with state procurement. So the cause there was a lack of alignment with our employee, policies and the state travel, which was updated in 2022.“
Waters said he and Chief Financial Officer (CFO) Ryan Nease will be responsible for drafting a new policy to present to the Board.
Waters also said they set up a calendar reminder to remind the local board office that the state department of education is updated annually. Training for personnel will also be provided and, going forward, documentation and agendas and sign in sheets will be required.
Upon questioning from the Board, Waters was asked if the employees were held to ‘per diem’ caps, to which Water said that did not apply for employee appreciation matters – only for things like conferences.
BOE Member Dorcas Moore asked if some of the training and conferences could be conducted virtually so a trip would not have to be made. Waters said they do try to do that, depending on the distance.
FINDING #2 – Improper Lodging Expenditures
Waters suggested that he saved the school system money by booking an AirBnB for a conference for two employees, instead of using the conference hotel. The issue, however, is that Air BnBs are not permitted under state rules.
“We located an Airbnb that was $500 less than the conference cost and I therefore processed the P. A. For the lodge and reservations. Receipts were collected. The purchase was processed through finance. Again, our policies at one time did not say there was an exclusionary factor for the non commercial properties. We now know that.”
Waters did not say the location of the conference, nor did he indicate the dates or offer any additional information on this matter before going into a deficiency pertaining to an employee. Upon a question from a Board member, Waters stated that conference attendances included him and Dr. Costlow.
“A second finding regarding lodging involved a management member who requested to attend the facilities conference. I gave that approval. He attended the conference and submitted documents for travel reimbursement, including the conference registration and agenda. The lodging was paid for with a district credit card, and he submitted the receipt for that lodging. However, when that was submitted, it was determined he did not obtain a PO for lodging. The call lodging was, able to be verified as part of the conference. It was the actual conference hotel. I authorized some payments and followed up with a conversation with the employee about the importance of following the PO process. I’ll note that the employee is no longer with the district and to my knowledge, I don’t know if I have heard of any other, situations that was isolated occurrence as far as not having a PO for lodging.”
Waters said the root cause was that the employee handbook did not specify that non-commercial properties were prohibited for travel. He said he went to the state website and the plan is to take the language from the state site and ‘drop that’ into the Evans BOE’s travel policy.
“There was nothing communicated to us that we should not do that,” Water said, after acknowledging that the prohibition is on the state website.
FINDING #3 – Undocumented Golf Outing
“I requested POs for an administrative round of golf to show appreciation to our staff and have an informal time to discuss the upcoming school year. The funding source was ‘clearwire funding,’ as appropriated through the budget for employee appreciation funds. Receipts were submitted and purchase was processed through finance.
According to auditors, any event, whether it’s golf or any other type activity, needs to have a clear business purpose at which we would have an agenda and a sign in sheet. We did not have documentation of those for business purposes, therefore, the finding. As far as corrective action, any such request will require pre-approval by a higher level authority, including for myself, that would be the board. If approved, written, justification for the business related activities must be submitted, and any administrative retreats that we hold must include agendas and sign-in sheets.”
Upon being asked who attended the golf outing, Waters said the outing included himself, Human Resource Officer Robert Costlow, Claxton High School Principal Dr. Paul Mizzell, and Second Chance Academy Principal Mark Stroud.
“I’ll also say this, to, uh, make sure there’s no appearance of any issue, I will not be asking you to do any of those type activities in the future,” Waters said. He said he wanted to look at appropriate ways to recognize employees, to which BOE Member Dorcas Moore said the employee appreciation should include all employees, not just a select few.
FINDING #4 – Manual purchase orders used outside the financial system
“The background – prior to a phase in conversion to the fully-automated system we have now, that began in 2023, all POs were paper and transmitted through an email process, and those went through the finance department. Paper POs for the superintendent were part of that process and that process, and that was seven or eight years ago. We simply have not processed over those purchase orders. Superintendent’s purchase orders, I would tell you, probably the least number that are initiated. Most were maintenance and probably school nutrition.
The auditors brought this to our attention back in March through the audit and asked us. We told them it was a legacy process and we immediately stopped it. So this has already been rectified. We are not using manual POs anymore. All purchase orders are flowing through the financial management system. Again, that’s been going on since March, and we will train any staff on electronic processes if needed for that new model, if necessary.“
BOE Member Larry Davis Jr. inquired about the annual training participated in by the Superintendent. Waters said he has not previously attended the financial training, to which Davis said the lack of knowledge shows a problem on the school system’s side. Waters did not reply.
FINDING #5 – Exchange time payouts without board approval and liabilities which could exceed $90,000.
“The exchange time process and procedure is something that I’ve heard from a previous administration. At that time, it was kept in the notebook. There were individual sheets where employees, if they requested exchange time, it was put on that sheet, put in the notebook if they wished to use that exchange time, it was documented and passed on to payroll. We have since transitioned to a new electronic platform. An audit was completed, I believe, around October of 2023. And we realized we had a, an unregulated issue with exchange not being awarded.
We saw the need to create an internal regulation. We did so. Our supervisors were, uh, trained on that and how and when to exchange time could be awarded. It was our understanding because there was no board policy that it was an administrative procedure that we were to handle internally. During that audit, it was noted that several nonexempt employees, and basically that means they’re hourly employees, they’re not contracted, had been awarded exchange time, which is not in line with the Federal Labor Standards Act.
If you are a non-exempt employee based on FLSA, you must be paid at a rate of one and a half times your hourly rate for any overtime. You cannot be awarded comp time or exchange time. We identified 16 employees at that time that were classified employees with exchange time. I authorized overtime payments to make sure we were in compliance with FLSA. No contract employee was paid for exchange time. Only the classified, again, in line with FLSA. I have those lists for the board if you wish to see those.
Again, it was an unregulated practice that we inherited.“
Auditors told Waters they need a formalized exchange time policy
BOE Member Barbara Murphy shared with Waters that when she worked with DFCS, she was told certain things were done a certain way. “But I wasn’t going in nobody’s courtroom based on what I was told, I found out for myself. So nobody went to find out?”
Waters replied, “It was an inherited practice and we’ve gone through eight audits since I’ve been here. It’s never been brought to our attention. I came in and didn’t question that. Perhaps I should have.”
It was noted that the audit only examines a snapshot of the school system’s finances and that previous audits did not highlight issues, prompting concerns from the public about whether or not there are issues that have not yet been identified.
“We do not have a liability of $90,000. That figure was determined based on the contract employees, the amount of leave time they have on the books. If the board adopted to pay out exchange time, we would then have to recognize in our books a liability for that time. We do not have to recognize that liability if the Board adopts a policy that says you cannot be paid for exchange time.”
FINDING #6 – Vacation Payouts was in violation of the policy
For contract management team members, their job description actually indicates that their vacation time is redeemable. What we found out is when we set the budget, we set the budget allowing them to redeem that time only to find out that it was in violation or in conflict with our board policy. So in order to correct that, we immediately stopped the payouts. We followed board policy, unless the board elects to change it, we are not recommending a change with the exception of this: we need a statement in the handbook that says in the event of any conflicting guidance documents, board-approved policy shall take precedence.
FINDING #7 – Incomplete Procurement Records & a Lack of Competitive Bidding
“There are two parts here. The first, an RFP was posted for construction manager at risk for CES, for the pre-K renovations. A bid will be due on October 30 at 9AM. We had two bids that were submitted for review.
That was Pope Construction and Lynn Construction. The bid summary sheet was completed and shared with me by Dr. Jordan on October 31. The bids were presented on November 2nd and approved on November 6th. The auditors pulled that particular RFP and we were unable to find the formal bid documents. We had the bid sheet. We were able to go back and have those individuals send that information to us after the fact, but we could not find them. We searched the Record Room, we went through cabinets, those documents could not be found…
The second was in regards to a decision on 03/11/2024. We approved Lynn Construction’s guaranteed maximum price for the renovation for the Pre K Wing, but the board elected to exclude 13 HVAC units. Instead, the board elected to separate those HVAC services from the contract. I spoke with our legal counsel on how to proceed because it was no longer under that construction contract.
It was, individual items were not over the $100,000 nor was the service. I was advised for us to follow our BOE policy.
So we did advertise the bids locally. We did not put those on the state procurement site, but we did put out an RFQ. We obtained three bids: Dyess, Ogeechee Heating and Air, and Signature Heating and Air, and we submitted a recommendation for signature on April 22, 2024 for approval. According to auditors, the total value needed to was over $100,000 and it should have been placed on the state procurement site.
So they have helped us to clear up that language. What we’re asking or what we’re proposing is we’ve already started the process. We talked about this back in January and February. I gave to you all a packet of how RFPs, RFPs will be presented to you as far as those that information will all be in a packet of how it was advertised. We have started that process.“
CLOSING
“I will mention that with the findings, the district has been designated as ‘moderate risk,’ what that simply means is when they return, they will spend more time with us and look at more documentation, including all of the items that have been mentioned to make sure that we have actually rectified those situations.”
Waters said he is also required to attend the financial conferences in the future due to the audit findings.
Though Waters, who was hired in 2016, is the individual who will be responsible for ensuring most of the changes are implemented, along with other staff, he did not mention why he failed to previously implement them over at least the last three years since state regulation changes.
Waters did note that the audit only examines a snapshot of the school system’s finances and that previous audits did not highlight issues, prompting concerns from the public about whether or not there are issues that have not yet been identified.
After the meeting, the Board met in closed executive session for nearly an hour. The session was heated with yelling coming from inside the building and at least two board members leaving crying.
