POULSBO — The North Kitsap School District did not have adequate timecard information to justify nearly $1.5 million in federal funding spent on wages and benefits for special-education program employees in 2012 and 2013, the state auditor’s office reported.

In addition, 64 coupon books sold as part of a school fundraiser are unaccounted for, the community pool failed to keep track of passes sold, and a school didn’t receipt sales at its coffee stand.

The state auditor reported the discrepancies May 27, according to documents obtained by the North Kitsap Herald.

The auditor’s office recommends the district improve its monitoring process of all employees whose wages are covered by federal grants, and improve control over Associated Student Body (ASB)-generated funds and cash handling within the district.

Though he hasn’t “dug into it very deeply,” school board President Dan Weedin said the board was made aware of the auditor’s findings. He said the findings have not been much of a topic outside a brief conversation.

“The administration informed us that they are working hard to deal with any of the things that have shown up there,” he said. Weedin said he has “full confidence” in the administration to address the issues.

In the case of the special education program, the district “was unable to provide required time and effort documentation for 11 employees that were fully funded through the program,” according to the auditor’s report.

During fiscal year 2013, the district spent $1,457,099 in federal funding on its special education program, according to the auditor’s office. Of that amount, $1,412,724 was used to pay salaries and benefits.

The auditor’s office reviewed payroll transactions to determine whether salaries and benefits charged to federal grants were supported by proper documentation, such as time sheets. The district was unable to provide proper documentation and “did not follow its normal process to ensure employees submitted semi-annual certification,” according to the auditor’s report. The district requested the information from the employees, “but did not follow up to make sure the documentation was received,” according to the report.

The auditor’s office was ultimately able to verify the work by the employees was done entirely within special education, so the district does not face penalties.

If the auditor’s office had not been able to verify the employees’ information, the district could fall in noncompliance with grant requirements and “jeopardize future federal funding,” and be required to return federal funds to the grantor, according to the report.

District’s control over activities, cash handling is insufficient

A review of the money the district reported receiving during the fiscal year 2012 and fiscal year 2013 fiscal years found five discrepancies; four of the discrepancies occurred at Kingston High School.

The auditor’s office found the district could not account for 855 gift cards out of 1,600 being sold by the Kingston High School football program. The missing gift cards, valued at $17,100, were being sold for a fundraiser. The district reported 745 cards sold for a total of $14,900.

“The cards were not adequately tracked when checked out to the students to sell, making it difficult to determine the quantity of cards sold from the record retained,” the auditor’s report states.

The Kingston High School wrestling team conducted a coupon-book sale fundraiser. The auditor’s office found that of the 200 coupon books, 100 were “lost.” The auditor’s office found that 36 students were fined for missing coupon books. Sixty-four books remain unaccounted for.

The auditor’s office also found a non-district employee signed for two purchases for trophies and T-shirts. The orders were shipped to a personal address, which violates district policy. “The district was not able to provide receiving information or inventory of the products purchased,” according to the auditor’s report. “There was no revenue received by the district for the sale of the T-shirts.”

The Kingston High School student store was found to not receipt sales for its coffee stand, according to the report. The coffee stand did not inventory cups to determine what the expected sales should be. Instead of receipts, the money was counted and receipted as a batch.

Outside of Kingston High School, the auditor’s office found the North Kitsap Community Pool did not keep track of passes sold. Numerical sequencing of sales was off and some numbers were used multiple times, according to the report. “The numbers are handwritten and handed out in no particular order, causing there to be a lack of integrity over passes,” the report states.

All told, the district reported collecting $1,141,743 from ASB activities in 2012 and $995,916 in 2013. The auditor’s office is required to examine the financial affairs of all local governments at least once every three years.

The cause of the discrepancies was due to the district not having “adequate oversight” over cash handling and a lack of training for the district’s cash-handling policies and procedures, according to the auditor.

“Inadequate internal controls over ASB activities and cash handling increases the risk that a loss or misappropriate of public funds may occur and not be detected in a timely matter, if at all,” the report states.

The district is required to have an audit of its financial statements if it receives more than $2 million in annual revenues, or spends more than $500,000 in federal financial assistance, or an audit is specified in financing arrangements, such as bonds, loans, or grant agreements.

Despite the discrepancies, Weedin said the district did well in the audit. Right now, the board is focusing on the end of the school year and preparing for the 2014-15 budget. If the auditor’s findings are not fixed a year from now, “then we’ll have an issue,” Weedin said.