MORTON — The Washington State Auditor's Office turned up a total of four violations for the Morton School District in a report covering the district's finances from September of 2002 to August of 2005.
The report, issued July 7, cites four separate findings, one in the financial report and three in district's accountability report.
The financial finding addressed the declining financial condition of the district, with a general fund ending balance of negative $88,757 in 2001-2002 that worsened to negative $242,482 at the end of 2004-05.
The accountability report stated that the district did not adequately monitor its expenditures, needed to improve internal controls over Associated Student Body activities, and did not comply with teacher education and experience reporting requirements.
"THE (FIRST) FINANCIAL CONDITION … is becoming extremely common, especially in small, and some large, districts," said Mindy Chambers, spokesperson for the auditor's office.
"The other three, in the accountability report, we see these in numerous school districts. These are fairly common findings," she said.
Though conducted in May of this year, the audit covered a three-year period that ended in August of 2005. In the financial statements audit report, the district had a chance to respond to the findings.
"From the entire management team (administrators and board members) serving during the time of the audit findings only one administrator and one board member remain with the district. The new management team's primary goal is to eliminate the negative fund balance," the district responded.
The district also pointed out that the failure of the maintenance and operations levy for 2006 cost the district $620,000 in tax revenue, but pointed out the district had still managed to improve the general fund balance by $115,000 over the first seven months of the 2005-06 school year.
"The fact that the new administration of the district has 1) realized marked improvements in reducing the general fund balance deficit; and 2) established a multi-year plan to reach a positive fund balance, demonstrates that the district has established adequate controls over expenditures," read the closing remarks of the district's response.
Morton passed its maintenance and operations levy in the Feb. 7 special election, which ensures $565,000 in tax revenue in both 2007 and 2008.
MORTON'S ADMINISTRATION sought help from Educational Service District 113 in the spring of 2004 to deal with its mounting debt, according to ESD 113 Assistant Financial Officer Chuck Hole.
"They are accomplishing their plan," said Hole, who helped the district develop a four-year plan to bring it into a positive ending balance.
"I believe their budget for the upcoming year gets them out of a negative position, so they're making progress," he added.
"They are working with OSPI (the Office of the Superintendent of Public Instruction) and the ESD to do what they need to do," said Chambers. "That's always a good thing, when they respond in a positive way to out audit report. That's the best thing, I think."
AT MONDAY NIGHT'S meeting of the Morton School Board, Superintendent John Flaherty reported to the panel the audit report. Flaherty was hired in June of 2005 to replace Russ Davis, who resigned as superintendent at the end of the 2004-05 school year.
"A lot of these things we already know," Flaherty stated, referring in particular to the finding regarding the financial condition of the district. "I believe it's water under the bridge."
As Hole stated, the district's projected budget for the 2006-07 school year will end in black ink. The district will close the 2005-06 school year with a deficit of between $120,000 and $160,000, depending on retirement of several instructors, Flaherty said. The projected budget for 2006-07, which the district approved on Monday, shows the district ending the next school year with a balance of $118,501.
FLAHERTY ALSO PRESENTED the board with a plan of action, including 12 recommendations, for correcting the three findings in the auditor's accountability report. The recommendations for the first finding include eliminating the district's credit cards and preparing monthly line-graph reports for the board of directors. Just two recommendations were made for dealing with the third finding: hiring a consultant to work with the business manager to ensure proper staff mix reporting, and submitting the procedures to the superintendent.
The second finding warranted seven separate recommendations, most of which dealt with training teachers and volunteers to properly handle ASB funds. One of the suggestions was to eliminate the district-sponsored senior class trip to Disneyland, which presents a liability issue with the district's insurance company.
"If there's other ways to do that, certainly we'd entertain it," said Flaherty, with the board members agreeing to look at separate options before the second reading of the superintendent's list of recommendations at the August board meeting.
THE AUDITOR'S OFFICE also reported that Morton will now be audited annually, rather than every three years, until internal controls are improved. If the recommendations are accepted, Flaherty said, plans to correct each of the three accountability findings will be in place by the middle of October, well before the auditor's office visit in the spring of 2007.
Don Powell, chairman of the school board, complimented Flaherty on his work in bringing down the district's budget deficit.
"You inherited some difficult situations," Powell said. "You took the bull by the horns and turned this around."
Aaron VanTuyl covers education and religion for The Chronicle. He may be reached at 807-8237 or by e-mail at avantuyl@chronline.com.
