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Lack of control and monitoring led to Coquitlam school district deficit — audit

A forensic audit by KPMG says a lack of control and monitoring over finances at School District 43 led to an $8 million deficit last year. Board chair Melissa Hyndes and Superintendent Tom Grant are expected to discuss the audit at Tuesday
A forensic audit by KPMG says a lack of control and monitoring over finances at School District 43 led to an $8 million deficit last year. Board chair Melissa Hyndes and Superintendent Tom Grant are expected to discuss the audit at Tuesday's board meeting in Coquitlam,
— image credit: FILE PHOTO

A forensic audit of School District 43's finances is recommending tighter financial controls — including the establishment of a finance committee and training for trustees and staff — to prevent the errors that led to the district to post an $8-million operating deficit last year.

The long-awaited audit also recommends SD43 establish more stringent financial reporting, such as monthly forecasts, and establish a contingency to cover unplanned expenses.

Tuesday evening, the board is expected to approve all 14 recommendations by KPMG, which spent months analyzing the district's financial situation, interviewing staff members and reviewing memos and minutes at the request of CUPE and the Coquitlam Teachers' Association.

Although it found no criminal activity or deliberate misconduct by current or former employees, KPMG suggests the district's leadership team has been lacking in financial prudence, owing in part to a culture where education outcomes are more important than the bottom line.

For example, the budget passed last spring contained significant risks and uncertainties, and district officials weren't in agreement over whether the financial expectations would even be met. Still, there was no contingency set aside, and when problems started to arise, there was no consensus between superintendent Tom Grant, then-secretary treasurer Rick Humphreys and the four assistant superintendents about the seriousness of the problem.

While uncovering the various factors that led to the deficit, KPMG learned that while members of the district leadership team (DLT) knew as early as June 2012 of a deficit problem, the information wasn't relayed to trustees until much later.

REPORTING DELAYED

On Sept. 25, 2012, the projected deficit was $4.4 million but trustees only learned of the situation on Nov. 20, when they were told a $9.1-million deficit was projected, according to the report.

The public wasn't informed of the situation until February 2013, when a $4.9-million savings plan was announced.

"We were told that some DLT members had a lack of confidence in the reliability of the deficit information from Finance and this factor added to the delay in reporting and responding to the developing deficit," the audit states.

Other problems included staff turnover leading to a knowledge gap prior to the 2013 budget, lack of control and monitoring of unbudgeted positions, and historical accounting errors that, when caught, weren't factored into spending.

Consequently, staffing costs exceeded the budget by $3.8 million, $1 million more was spent in substitute teaching costs than was forecasted, revenue projections for international education revenue were overly optimistic, and there were higher than expected benefit costs. As well, enrolment was lower than forecasted.

Today, the district continues to feel the effect of last year's spending problems because that deficit still has to be paid back in future years. As well, the district had to make $12.1 million in cuts to this year's operating budget.

Mark Ferrari, the secretary treasurer who replaced Humphreys, who resigned in 2012, said an update on the district's current financial situation will be made public at the Feb. 11 board meeting.

dstrandberg@tricitynews.com

 

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