By Marcello Iaia
HILLTOWNS — External and internal auditors submitted their state-required annual reports for Berne-Knox-Westerlo this fall, detailing good accounting practices in one, and over contribution to fringe benefits in the other.
Contract language for calculating dental and health insurance payments for BKW employees does not match the method the district uses, which has overstated district contributions for an unknown number of years, according the internal audit report by Management Advisory Group of N.Y. Inc. MAG also found in its audit of the 2011-12 school year that numerous authorizations for coverage were not available.
The district’s new business official, David Hodgkinson, said he could not speak to what would be done in response to the report, which was filed on Sept. 26, because it is still being reviewed.
“The district will be addressing all concerns in that report,” said Hodgkinson.
Districts are required to submit their corrective action plans on how they will address audit findings to the State Education Department and the Office of the State Comptroller within 90 days of receiving the report. The MAG report was accepted at the Oct. 9 board of education meeting.
The external audit, an examination and test of the district’s financial statements conducted by Bonadio & Co. LLP, will not require a corrective action plan because it considered BKW a “low-risk auditee.”
“We got an unqualified opinion, and that is the best opinion you can get,” said Hodgkinson, of the external audit.
The total cost to the district in overpayments described by the internal audit is unknown. Vasilios Lefkaditis, president of the board of education, said no one now working in the district knows when the current calculation method started, and the audit did not test every agreement for district employees.
Salaries and benefits account for about 70 percent of the $21 million BKW district budget.
To show the method in place, the report uses Teacher Support Staff as an example.
“…Contract language clearly states, ‘each unit member hired prior to July 1, 2004 will contribute 3 percent toward the cost of the individual policy,’” says the report. “The contract further states, ‘The Board shall contribute…85 percent of the family premium.’”
The clerk calculating payroll deductions for individual employees and the district’s share of health and dental insurance premiums subtracts the district’s $494.38 premium for an individual policy from the family premium of $1,376.14. The 85 percent is taken from this $881.76 difference, and the individual cost of $494.38 is then added, coming to $1,230.88 for the district’s share of a Teacher Support Staff family premium. Applying 85 percent directly to the family premium, however, produces $1,169.72, a difference of $61.16.
The report includes seven other categories
of employees where such district calculations do not match the wording in their respective contracts and agreements, including the Teachers’ Association, Civil Service Employees Association, and employees under the clerical handbook. The district’s calculations followed wording in the Administrators’ Association contract, according to the report.
All four bargaining units have expired contracts. Their provisions, by law, remain in effect until a new contract is negotiated. The Teachers’ Association, which includes employees like nurses, guidance counselors, and part- and full-time teachers, has about 75 full-time-equivalent members, according to its president, Kelly Smith.
Discrepancies between actual methods and contractual language are sometimes considered “past practices.”
“That benefit has been assumed by that employee for a reasonable period of time, and we can’t just come in and change that,” said Hodgkinson, referring to “past practices.” He added, “It has to be negotiated.”
With the review of the report not final, Hodgkinson said that he could not deem the BKW situation a “past practice.” He started working at BKW in October.
In Understanding the Teacher Union Contract: A Citizen’s Handbook, published in 1999, public education scholar Dr. Myron Lieberman wrote that a “past practice” is binding if it meets three criteria: the practice was known by the party not claiming it, it happened more than once, and it was accepted consistently under the same circumstances.
“All our benefits are spelled out in the contract,” said Smith, on “past practices” associated with fringe benefits for members of the Teachers’ Association. She added, “Whatever the contract states is what we get.”
Negotiations between the Berne-Knox-Westerlo School District and the Teachers’ Association have been at an impasse for over a year, and most of the latest provisions remain from the last full contract covering years 2002 through 2007. The last extension expired in 2009.
Smith, who had not read the MAG audit, said the teachers’ union is waiting for the district to provide numbers of members enrolled in different plans. This will allow for a cost analysis, she said, “to figure out the value of the concessions that we are willing to make.”
Lefkaditis said negotiations have been delayed, in part, because of the 2- to 3-month process of hiring a new, permanent business official.
“We should get in front of the bargaining tables very soon,” said Lefkaditis.
The missing insurance authorizations would have to be obtained from insurance companies, said Hodgkinson, adding that they are necessary for audits, to make sure those who are covered are eligible.
The MAG auditor conducted fieldwork on June 19 and 22.
“We have one person,” said Hodgkinson, referring to the payroll clerk. “It’s not like we have a fleet of people. And the auditors have a certain amount of time.”
The high-priority recommendations to be implemented by next June suggest that the district write procedures for providing fringe benefits for current and retired employees in the Business Office Procedures Manual, determine whether fringe benefit calculations match board intent, keep authorizations available, and consider clarifying relevant wording in district contracts and handbooks.
The moderate-priority recommendations to be implemented by next December include segregating duties by re-assigning responsibilities for payment to the Accounts Payable Clerk and by having someone other than the preparer review and approve entries. Also, employees covered by the teachers’ agreement are to submit receipts for all medical or dental appointments to support use of sick leave as required by the agreement.
The only recommendations from prior years’ audits the report found were not implemented surrounded the inactive Extraclassroom Activity fund and the Athletic Association and Youth Sports clubs.
No action had been taken to evaluate the appropriateness of the Athletic Association and Youth Sports clubs, a recommendation made in March 2011. Another, from April 2010, to ensure “detail of deposits is attached to the deposit,” and that meeting minutes record student decision-making process, it said, were to be addressed in training this fall.