On November 3rd, the district’s auditor Kathi Mantell, CPA reported an encumbered balance as of 6/30/2010. Simply put, encumbrance preserves cash to cover goods and services ordered in the waning days of one fiscal period but paid in the next (usually within ninety days). For less scrupulous, “creative” accountants however, encumbrances are used to preserve cash that would otherwise be removed, which for school districts means a return of tax levy or transfer to a restrictive reserves.
There are very specific Department of Education rules governing encumbered funds designed to hinder dishonest creativity (Click here to view the rules) but School Superintendent Vitta and Business Administrator James Verbist knowingly broke them.
Through OPRA requests 2010-27 & 2010-28 I discovered purchase order 100001E for $212,055.47, which was written on either 2/24/2010 or 4/22/10 – click here to view the two “official” records. At any rate, on 12/31/2010 the encumbrance was canceled, rendering the cash useable for any purpose.
Initially I believed the RTBOE’S 6/16/2010 resolution to transfer up to $200,000 of excess operating funds was seed money for a solar energy project click here to view 6/16/10 resolution. But since 100% financing was available for solar, the money was improperly transferred for general purposes. My best guess is cash was needed to meet annual payroll increases.
In addition a stale dated purchase order to Verizon for $4,555.10 was encumbered. Since the PO date is 11/20/09 and no activity was recorded, there is no contractual commitment and no funds should have been pushed into the 2010-2011 school year. click here to view details
Finally, two blanket orders totaling $1,850.70 were encumbered. Blanket orders are issued for frequently purchased items and open amounts do not constitute valid orders. Encumbrance for blanket orders are expressly prohibited click here for details
The district auditor, executive county superintendent, Department of Education Division of Finance and RTBOE members have been advised of this accounting control lapse.