HEARNE -- The Hearne school district is in violation of multiple state laws and local policies in its business practices, according to a 55-page report presented to the school board Monday.
At the request of the district, the Texas Association of School Business Officials formed a management team to look at the district's policies and procedures. Among its findings, TASBO noted that the district's business manager had failed to monitor the 2014-15 adopted budget throughout the fiscal year, resulting in overspending, in addition to a lack of written procedures and delegation of duties within the business department.
Rebecca Estrada, executive director of finance at the Lackland school district, worked on the review with TASBO and told the school board that because of financial management issues, the district had exceeded the general fund budget in three areas.
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According to the report, a district financial audit for the period ending Aug. 31, 2015, found $50,000 had been overspent. Exceeding the adopted budget without obtaining prior board approval is in violation of state law and local policy. The district had a similar misstep in the 2013-14 financial audit, when it overspent in two areas by about $10,000 that fiscal year.
Estrada said she couldn't find in the past two years that the district had approved quarterly investment reports or approved investment brokers. Bank reconciliations have also not occurred in a timely manner, she said, make the district vulnerable to fraud.
Additionally, Estrada said there needs to be better delegation of duties regarding financial transactions. The report found the finance department has not implemented adequate internal controls over financial reporting, even though there are four staff members available to handle cash management, general ledger maintenance, bank reconciliations and other business.
A March 7 letter attached to the report says the overall lack of procedures and internal controls in the district's business operations reviewed "may create vulnerability for fraud, theft and/or lack of staff efficiency, all of which would constitute misuse of district funds."
Estrada recommended the district create an action plan to address the findings, with compliance issues such as violations of state law being the primary focus.
School board President Sylvia Montelongo asked if a forensic audit would be recommended. Estrada said she wasn't sure if it would be best because there's still uncertainty about how much has been spent. An audit would be difficult to conduct without a reconciled bank account, she said.
Potentially hiring an outside auditor to conduct a forensic audit was also on the agenda for possible action, in addition to items regarding Superintendent Raul Nuques' contract and the opening of several federally funded positions.
Those items were not discussed in open session. As of press time, the school board remained in executive session. Eleven items were scheduled for discussion and possible action once the board returned to open session.
