The accuracy and reliability of the Region 4 school district’s accounting practices in fiscal year 2019 was raised as a major issue by a presenting auditor at a joint meeting of the Region 4 Board of Education (BOE) and the Supervision District Committee on May 7.

In presenting the 2019 audits for the Supervision District and R4, Michael VanDeventer, a partner at the accounting firm Mahoney Sabol, said, “The district does not have proper internal controls to ensure the completeness and accuracy of nonstandard manual journal entries and account reconciliations.”

This means cash was not properly reconciled to the general ledger, transfers of cash between the R4 BOE and Supervision District Committee were not properly recorded, and there was an overstatement of cash in the general ledger because prior year accruals for payables and accrued payroll were not adjusted.

In addition, the June 2019 bank reconciliation included invalid reconciling of items and prior year audit entries were not recorded.

These findings had been reported in a 2018 R4 BOE audit. Former superintendent of schools Ruth Levy and former business manager Kimberly Allen were the district’s fiscal leadership team during the time covered by the 2019 and 2018 audits.

“It was the expectation that the 2018 finding could be addressed really prior to commencing the 2019 audit,” said VanDeventer. “Again, we did do a preliminary review of the district’s trial balances, general ledger reports, and bank reconciliations back in November 2019 and that revealed that ultimately the finding was not adequately addressed.”

A $429,729 deficit in the capital sinking fund is the result of a beginning deficit of $199,261 caused by the $350,000 Mislick property land purchase in 2017, and then further subsequent draws for paving and removal of an oil tank in the summer of 2018. The paving and oil tank removal were done prior to the R4 Board’s knowledge of the deficit.

The 2019 audit for the R4 BOE revealed an “unfavorable claims year” leading to a $575,105 deficit in the health insurance reserve fund, according to VanDeventer. A prior year and current year deficit in the cafeteria fund were covered by a $194,165 transfer from the General Fund.

VanDeventer explained the root cause of the problem as a lack of accounting expertise and procedures in the business office.

As a result of these findings, the district will need to submit corrective action plans with the State of Connecticut’s Office of Policy and Management and Department of Education.

VanDeventer reported a $57,404 surplus in the fiscal year 2019 Supervision District Budget, which was unanimously approved at the May 7 meeting to be returned to its member boards.

A decision will be made at a Thursday, May 14 R4 BOE meeting on a $201,280 fund balance in the general fund, to either refund member boards or transfer to the Capital Sinking Fund to cover the deficit.

Superintendent of Schools Brian White, who was hired last July, said he is addressing many of the concerns relating to the finances.

“I’m actually quite proud of the work that we have done with this board to really increase the overall level of transparency to the public,” said White.

White and his team have taken several actions to gain a better understanding of and rectify financial matters. They include the development of a financial task force, with representation from the Boards of Finance and Boards of Selectmen in Chester, Deep River, and Essex.

The district worked closely with several financial consultants relative to the capital and health insurance funds and in examining internal processes for financial reporting, earlier in fiscal year 2020.

White praised Business Manager Richard Huot, who was hired mid-year.

“Dick has really done a tremendous job with really helping to correct some of the internal systems as we better understood where those areas of remediation needed to occur,” said White.

Huot has been working with incoming finance director Kelly Sterner “to facilitate a very smooth and effective transition,” White added.