Audit on PSS shows deficiencies, noncompliance with regs

An independent audit conducted on the Public School System for last fiscal year revealed significant deficiencies and noncompliance with PSS’ policies and regulations as well as federal standards.

The audit, conducted by J. Scott Magliari, found that bank reconciliations for nine accounts were not timely prepared while two accounts have an unaccounted difference amounting to $26,504.

PSS, in its response, said it experienced a turnover of key employees and lack of qualified personnel in the Fiscal and Budget Division in fiscal year 2010. It said it will hire a general ledger accountant by May this year and promised to reconcile all bank accounts in a timely manner.

Due to the lack of personnel, PSS also failed to recognize significant accounting transactions such as the unrecorded revenues from the CNMI government appropriation amounting to $4.1 million; accrual of receivables from fiscal year 2010 appropriation amounting to $1.085 million as well as accrual of NMI Retirement Fund contributions amounting to $5.1 million, according to the audit.

The audit also found that PSS made unauthorized withdrawals of $1.8 million from the general obligation bond, which is restricted, because of the funding shortfall from the local government. PSS said it will restore the borrowed funds and vowed to adhere to standards.

A change order of $39,000 was also approved for a professional development contract with an original price of $170,000. The change order is 23 percent of the original contract and exceeded the allowable 10-percent variance.

PSS said its procurement officer had aligned the change order regulation for PSS with the CNMI procedure, which allows a 25-percent variance from the original contract.

The unauthorized use of a PSS credit card was also uncovered when the system paid a total of $3,875 for food on three separate occasions, one of which was approved after the transaction.

The auditor noted that because PSS does not have formal credit card policies and procedures in place, unrecorded or unauthorized disbursements could be incurred and not be detected in a timely manner. PSS said it adopted new policies and procedures in February 2011.

Personnel requirements, travel

Eleven of the 40 employee files audited, meanwhile, did not have the physical examination on file-a violation of the system’s human resources policies. PSS said that it adopted in October 2010 procedures to ensure that all required documents are on file.

Because of the personnel turnover at the HR department, this also resulted in findings that some 30 employee files have no application evaluation and assessment form on file, which is important in determining the pay rate of the employee.

PSS was also found noncompliant with its own procurement policies when the audit discovered some products and services that were provided before purchase orders were released.

The report also indicated that there were authorizations for travel outside the CNMI that were not provided for examination while others were not submitted within the prescribed period.

“With the large volume of travel authorizations [TAs] processed, PSS should explore the option of electronic filing and approval of travel authorizations,” the auditor recommended. PSS, for its part, indicated that it will use electronic filing of travel authorizations effective April 2011.

The same audit findings revealed that PSS issued travel advances with unliquidated TAs to 20 travelers amounting to $21,968. Some liquidations did not also occur within the prescribed period amounting to $6,816, while 13 TAs that were not liquidated totaling $13,847 were found. There were also liquidation not on file, amounting to $6,770, and supporting travel documents that were not on file, amounting to $12,994.

The audit also showed that PSS recorded a questioned cost of $393,300 in fiscal year 2010, with supporting documents not on file for entries on salaries and wages from the general fund to specific federal programs.

PSS also failed to address and rectify specific findings in previous years’ audits. In fiscal year 2009, a total of 10 findings, majority of which involved travel of employees, are still marked “unresolved.”