‘Fraud could exist and not detected’

The Public School System is not in compliance with its regulations and there could be misstatements of payroll expenses, according to an independent auditors’ report conducted by Burger & Comer P.C.

In examining PSS’ financial report provided to the Office of the Public Auditor, the auditor found that fraud could exist and not be detected.

The auditor said for 14 or 16 percent of the 90 payrolls selected for pay period Dec. 10, 2017 to Dec. 23, 2017, or 19 percent of the payroll selected for pay period May 27, 2018 to June 9, 2018, 5 or 6 percent of the payroll selected for pay period Sept. 2, 2018 to Sept. 15, 2018, employees did not sign and verify the time card.

The auditor said the cause is that PSS did not adhere to policies and procedures for the maintenance of Human Resources records.

The auditor said PSS held the timekeeper training on Aug. 30, 2018.

The auditor’s recommendation is that on the time card section, all employees must have timecards and the timecards should include the employee’s signature.

The auditor said PSS should strengthen the training on the payroll process and implement and monitor the procedures.

The auditor also found that PSS is not in compliance with its procurement policies and procedures.

The audit also found that PSS’ total expenses for Fiscal Year 2018 amounted to $91.67 million, while aggregate support from federal agencies, CNMI appropriations, and other revenues amounted to $90.42 million.

OPA audited PSS financial statements for the year ended Sept. 30, 2018.

PSS said the increase in FY 2018 expenses is primarily due to increase in general regular and student services related to compensation.

PSS disclosed that at the closing of FY 2018, its net position amounted to $78.55 million, a decrease of $1.24 million or 2 percent from the $79.80 million in FY 2017 net position.

PSS attributed the decrease primarily due to excess expenses over revenues.

According to Burger & Comer P.C., which conducted the independent auditors’ report, PSS financial statements present fairly the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the PSS, as of Sept. 30, 2018, and the respective changes in financial position for the year then ended in accordance with accounting principles generally accepted in the U.S.

Burger & Comer also stated that in its opinion, the combining nonmajor fund financial statements and the schedule of expenditure of federal awards are fairly stated in all material aspects in relation to the basic financial statements as a whole.

Burger & Comer said in its opinion, the PSS complied, in all material aspects, with the types of compliance requirements that could have a direct or material effect on each of its major federal programs for the year ended Sept. 30, 2018.

PSS’ net position includes investment in capital assets, net of accumulated depreciation, of $77.43 million, restricted for special purpose of $2.45 million and deficit of $1.33 million.

PSS said the deficit is due to noncurrent liabilities that are to be funded by appropriations from the CNMI government.

PSS’ enrollment for school year 2017 to 2018 was 10,179 students. PSS said there was a decrease of 41 students from 10,220 students for school year 2016 to 2017.

PSS current assets of $9.59 million as of Sept. 30, 2018 decreased by $1.41 million or 12 percent compared to current assets $11.01 million as of Sept. 30, 2017.

PSS said the increase in capital assets is primarily due to major expenditures attributed to construction projects.

Current liabilities of $5.86 million as of Sept. 30, 2018 increased by $353,864 or 6 percent compared to $5.51 million as of Sept. 30, 2017 primarily due to the purchase of instructional materials and capital projects from various vendors.