W. Covina School Deficit Was Ignored, Audit Says

Inadequate adjustments to financial changes and incomplete bookkeeping contributed to the multimillion-dollar deficit faced by the West Covina Unified School District, according to a special audit.

“No one in the district really managed the budget,” said Roy J. Blair, a certified public accountant with Vavrinek, Trine, Day & Co., which conducted the audit.

One key problem, the company found, was that essential budget adjustments were not made as the school year progressed.

“This made it impossible for program directors, managers, principals or the accounting department to evaluate the current financial status of individual accounts,” the audit said.

School officials “did not appear to utilize the computerized financial data furnished to them, inasmuch as the reports were not complete,” according to the audit.

‘Did Not Know Limits’

“Principals did not know their (spending) limits and they did not ask for them,” said Donald A. Driftmier, a certified public accountant who also worked on the audit.

“What led to the budget deficit was ignoring or not having a handle on the budget process,” he said.

Comparing the budget process to a checking account, Driftmier said: “You have X amount of dollars to spend and if you don’t pay attention to it, you have a problem.”

The special audit, which was released during a special district Board of Education meeting last week, recommended a number of ways the district can improve its accounting procedures, including daily monitoring of financial conditions.

Kathleen J. Jones, the board president, expressed surprise that such practices were not being followed.

“That’s so basic, it’s hard to believe that (such information) wasn’t in the system,” Jones said in an interview. “That is one of the ways that your management and board can ensure that you are living within your budget. When the information is not in place, then there’s no way you can (stay within a budget).

“To find that there were no controls is just unbelievable,” Jones said.

Emergency Loan Sought

The accounting firm estimated that the district will end the school year with a deficit of between $3.1 million and $3.6 million. School officials are seeking an emergency loan from the state to cover the deficit and have assured parents that the school year will not end before June 18, as scheduled.

Among other findings, the audit also voiced “concern over the collectibility of funds due to the district.” It said the status of some contracts is unclear.

For example, Blair said the district apparently has not collected $105,000 it is owed by the county and has not billed Mid Valley School, a private school for emotionally disturbed and learning-handicapped students in West Covina, for rental of district office and classroom space.

During its meeting last week, the board appointed a committee of 10 community members to suggest where cuts should be made to save money. The committee is scheduled to meet for the first time tonight at 7 in the district office, 1717 W. Merced Ave. The meeting is open to the public.

An employee committee and a management committee have also been formed for the same reason. Suggestions from all three groups will be used by the board to formulate a recovery plan.

News of the financial crisis was made public during a meeting April 28, when administrators told board members that the district was facing a deficit of as much as 10% over its $27 million budget.

Administrators have said that expenses exceeded projections, while revenues fell short of expectations.

Board members have blamed administrators for glossing over financial reports and allaying the board’s concerns with assurances that the district would be receiving more money from the state.

The board removed two of the district’s top administrators at its May 2 meeting. Supt. Donald Todd, who is expected to retire June 30, was placed on administrative leave with pay for unspecified medical reasons. Jimmie L. Duncan, assistant superintendent for administrative services, was placed on an indefinite administrative leave with pay “due to the current financial situation,” according to Jones.

The board also formally sought an emergency loan from the state to meet the deficit, which was originally estimated at $2.7 million. State Sen. William Campbell (R-Hacienda Heights) is spearheading efforts in the Legislature to obtain the money. The first steps in that process were cleared this week when the Assembly Education and Ways and Means committees voted to authorize the emergency loan.

The special audit was needed to confirm the financial status of the district and to obtain the state loan.

It recommended that:

Financial projections be improved and monitored daily.

Up-to-date financial information always be provided to the county.

Work on the 1987-88 budget begin immediately.

An experienced school finance administrator be hired to oversee the district’s budget and accounting functions.

All accounting data submitted to the board be supported by information that includes at which school the money was spent and for what programs.

All contracts be reviewed and collection of unsought bills begin immediately.