Dover, Del. – State Auditor, R. Thomas Wagner, Jr., regrettably reports on another charter school’s major fiscal mismanagement which went undetected for several years.

As part of this inspection, we looked at the State’s operation and oversight of charter schools that would allow such practices to continue. Several factors combined to create a perfect storm of poor internal controls, which allowed the former school principal to (1) purchase personal items worth $127,866 using AOD funds, (2) pay legal fees for lawsuits alleging sexual harassment, (3) reimburse employees for purchases in violation of State policy (e.g. alcohol purchases), and (4) reward teachers with stipends and bonuses without adequate justification, board approval or equitable distribution. There is also an additional $129,458 that could not be validated as either a school or personal purchase. It is likely that these practices go back further than our investigation; however, the older the occurrence the more time it takes to investigate and the more unlikely we are to get answers about exactly what was purchased.

A major concern is the hands-off approach taken by oversight parties including the board of directors, DOE, the independent auditors, Innovative Schools, the Charter School Accountability Committee (CSAC), and Division of Accounting (DOA). This report outlines questionable activity and an operating environment that allowed widespread mismanagement. Until August 2014, nothing in the Statewide process or the ongoing financial audit drew attention to the mismanagement at AOD. In fact, the CPA firm auditors, contracted by AOD, reported clean opinions (Unqualified Opinions) with no findings on internal controls during Fiscal Years 2012 and 2013 for both the financial statement and single audits. Also of concern is that the financial statement auditors cited compliance with Generally Accepted Government Auditing Standards (GAGAS), which require more stringent procedures due to the public accountability of entities receiving government funding (GAGAS Section 4.47).

In addition, the Board was not adequately trained or adequately involved in day-to-day operations.  During this time, neither AOD personnel or the Board had knowledge of its complete failure to evaluate risk and develop an internal controls environment that would help protect the School against fraud, waste, and abuse. This left a culture that put one person in almost complete control of all aspects of the School’s operations and a culture where no one dare report such matters including the firm contracted to do the financial audit.

In general terms, all Charter Schools should utilize the Committee of Sponsoring Organizations (COSO) internal Control Framework as a guide to developing strong internal controls that support good fiscal operations that helps to deter fraud, waste, and abuse.  Further, the process used to establish and train Charter School Boards should be reviewed and revised to ensure appropriate oversight.

An additional concern impacting charter schools and school districts throughout the State is that many in the State take the position that “local funds” may be used as the school deems appropriate. The report includes instruction in which the Department of Education, Division of Accounting, and Office of Management and Budget reflect this view. The term “local funds” describes how the funds are collected yet local funds are still a part of state operations, particularly when School Districts are a part of primary government. There is no reason these funds should be exempt from the same rigors that are applied to other funds in the State.

A copy of the complete report can be found at: Academy of Dover Inspection.

For more information, please contact Kathleen A. Davies, CPA-PA, CISA, CGFM, CGAP, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.

Dover, Del. – On June 16, 2015, State Auditor R. Thomas Wagner, Jr. hosted the American Legion Boys State Auditor and Budget Director for the day.

Upcoming high school seniors, Thomas Gilmore, from Polytech High School, and Derek Golembrosky, from Delaware Military Academy, were selected as the 2015 American Legion Boys State Auditor and Budget Director, respectively. American Legion Boys State is an annual program that teaches high school students about government structure and operations.

After the selection process, both Mr. Gilmore and Mr. Golembrosky spent a day shadowing the Delaware State Auditor, where they learned about the duties and office of the Auditor of Accounts.

State Auditor Wagner stated, “I’ve participated in the Boys State program for 27 years as Delaware State Auditor. I look forward to it every year because I think it’s a great way to get young people involved in public service.”

Mr. Gilmore adds, “Shadowing Auditor Wagner to learn about a typical day in his position gifted me immense knowledge of government processes in a short period of time. The cordiality, sociability, and knowledge Auditor Wagner exhibits allowed me to gain insight into the political world and to meet several important figures in the state government that is impossible from simply researching.”

Mr. Golembrosky also stated, “Experiencing what Auditor Wagner goes through on a day-to-day basis gave me a lot of insight into how our state truly runs. You can do research and go online, but shadowing him was a completely different and valuable experience. Also, Auditor Wagner was extremely informative in not only his position, but other positions and committees, such as the Office of Management and Budget, which will help me a lot as Boys State goes on.”

For more information, please contact Kathleen Davies, CPA-PA, CISA, CGFM, CGAP, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.

Dover, Del. – State Auditor, R. Thomas Wagner, Jr., released the Paramedic Reimbursements Agreed-Upon Procedures report for State Fiscal Years Ended June 30, 2013 and 2014. Overall, the outcome was very favorable and only minor findings were identified. As in previous years, findings included late budget submission documents from the counties that did not contain all of the required information. In addition, one reimbursement package out of six tested was missing a Line Item Summary of Expenditures, and another reimbursement package was missing a statement certifying the expenditures submitted were for direct operating expenses. Also, out of 120 expenditures tested, two expenditures which were reimbursed for $5,962 were not adequately supported. For complete details, see the report at: Paramedics AUP

Although Paramedic units in Delaware are a part of county government, each county receives 30% of total operational costs for paramedic services on a reimbursement basis from the State of Delaware. These funds are provided through the annual Grant-In-Aid Bill and are distributed by the Department of Health and Social Services, Division of Public Health, Office of Emergency Medical Services (OEMS). OEMS is responsible for the coordination of training, certification, financing, and oversight of the State’s paramedic system.

The State of Delaware contributed $9,569,945 and $7,845,357 in fiscal years 2013 and 2014, respectively, toward the operational costs of the Paramedic units. Paramedic units provide Advanced Life Support services for ill and trauma patients, medical support at large events, community outreach and educational programs, emergency disaster preparedness, and medical support to law enforcement activities. Auditor Wagner extends his sincere appreciation to the men and women providing these services to their communities.

For more information, please contact Kathleen Davies, CPA-PA, CISA, CGFM, CGAP, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.

Dover, Del. – State Auditor R. Thomas Wagner, Jr. reaffirmed his Oath of Office for his seventh term as Delaware’s Auditor of Accounts. Supreme Court Justice Henry duPont Ridgely administered the Oath of Office in a small ceremony held in the State Auditor’s office on Tuesday.

It is my honor and privilege to serve and represent Delawareans in the fight against fraud, waste, and abuse across the First State. I am very proud of my Office’s record; but, I am also firmly dedicated to looking to the future. I am fortunate to have the most credentialed and qualified staff in the Office’s history. I will continue to rebuild my office to a more appropriate staffing level with well qualified professional staff. My Office will do its part to face the ever changing challenges in Delaware.

For more information, please contact Kathleen Davies, CPA-PA, CISA, CGFM, CGAP, Chief Administrative Auditor, at 302-857-3919 or kathleen.davies@delaware.gov.