Auditors hired by the Hempstead school board to investigate the district’s finances have raised more than a dozen red flags about payroll practices and vendor payments, according to a preliminary report.
Plante Moran LLC, a Michigan-based certified public accounting and consulting firm, sent its first findings to district officials in mid-January after reviewing records for the school years 2014-15, 2015-16 and 2016-17.
The findings included payments to former employees, instances where employees’ net pay exceeded their gross pay, and 25 employees who didn’t have a birth date in the master file. Some employees were more than 80 years old and others had birth dates listed as Aug. 31, 2017, the report said.
The 24-page report also identified what auditors called “unusual trends” in vendor payments, such as duplicate amounts paid to the same vendor; payments made on weekends, when the business office should have been closed; and rounded dollar amounts that “could be a red flag of fictitious or inflated invoices,” according to the document, which was obtained by Newsday.
Plante Moran pointed out that the district paid some employees as “vendors,” which acting Superintendent Regina Armstrong said is the term that the district uses to describe employees who are reimbursed for legally approved, work-related expenditures.
Specific examples of payments included dollar amounts and the name of the employee. The names had been redacted in the copy obtained by Newsday.
Plante Moran did not respond to requests for comment Monday.
Armstrong wouldn’t address the findings further, saying they had yet to be investigated fully by Plante Moran.
“A preliminary report is just that,” she said. “The auditing firm has not dug deep into what their initial findings were.”
Board President Maribel Touré said the report should be taken “seriously.”
“Of course everybody has to be very, very concerned, not only me, but the whole community,” she said, stressing the results are preliminary and need to be investigated further.
Among the red flags raised by Plante Moran:
Paychecks to former employees: An example is an employee who was listed in the master file as having a termination date in June 2016, yet received payments as late as May 2017. “It is unclear why individuals would still be receiving pay after their termination dates,” according to the report.
Expense reimbursements: Some employees received more than $20,000 each annually, which auditors said “seems high for expense reimbursements for a school district.” One example was an employee who received reimbursements totaling $33,486.20 in 2013 and $37,700 in 2014. The employee also received $20,150 in 2013 and $72,778.88 in 2014 in paychecks.
Overtime pay: Several employees received what the report called “significant amounts” of overtime pay in one month. The highest monthly amounts in the years examined were $8,156.04, $6,5156.45, $4,527.68, $4,375.65, $4,354.73, $4,318.78 and $4,218.64. Many other employees received more than $3,000 in one month.
Tutors with duplicative billings: Auditors identified more than 200 billings where the time for a tutor working with one student overlapped with the time billed for the same tutor working with another student. The report noted that “it is not known at this time if it is acceptable to provide such services to multiple students at the same time.”
The report noted several times that auditors weren’t familiar with all of the district’s accounting practices. That unfamiliarity could explain why Plante Moran raised some of the concerns, Armstrong said, citing the district’s practice of listing employee reimbursements as vendor payments.
Other districts also record employees who are reimbursed for legally approved expenses as vendors, longtime Jericho schools Superintendent Hank Grishman said when asked about that practice.
Other discrepancies, such as incorrect birth dates, could be clerical errors, Armstrong said.
The 8,000-plus student system has had chronic troubles with its fiscal operations — stemming from “mismanagement” and a high rate of turnover in its business office, according to a report to the board in January by Jack Bierwirth, a state-designated special adviser to the district. Bierwirth, a veteran former school superintendent, was appointed by state Education Commissioner MaryEllen Elia in September to review the district and report back to the state on its operations, finances, curriculum and personnel.
The state Education Department, on Bierwirth’s behalf, declined to comment on the findings.
In mid-June, the board approved a $85,000 contract with Plante Moran to conduct an audit. The company put its investigation on hold in February, asking for more money to continue its work, Touré has said. The board last week unanimously approved a $100,000 contract extension.
Plante Moran has until June 30 to complete its investigation and will likely issue its final report in the summer, Armstrong said.
“They need time,” she said. “They have to get payroll records and things in order to make a final decision as to whether or not what was reported is even relevant.”
Board member LaMont Johnson supports Plante Moran conducting a complete review.
“I encourage a report that will clear everybody’s name,” Johnson said, referring to the names that had been redacted in the copy obtained by Newsday. “People’s names that need to be cleared will be cleared and people’s names who shouldn’t be cleared because they’re guilty of something, that needs to come out also.”
Board members Randy Stith, Gwendolyn Jackson and David Gates did not return calls for comment.