Updated: Norman wants to postpone state meeting on schools' audit

Three top Burke County school officials probably won't go to Raleigh on Monday for a meeting concerning the 2007-08 audit that board Chair Tracy Norman describes as "a front-burner" issue in the N.C. state treasurer's office.

A Superior Court session concerning the board of education's lawsuit against Burke County commissioners is expected to begin Monday, so Norman said Thursday she will ask state officials to postpone their meeting.

Norman surprised some fellow board members at Monday's school board meeting when she announced, "I've been asked to come next Monday to Raleigh to meet with the LGC (Local Government Commission) over our audit."

She sought the board's consent for Superintendent Rick Sherrill to accompany her. The board also authorized Finance Officer Keith Lawson to make the trip.

Pressed for details about the commission's concerns, Norman said, "What I was told was, as audits go for a school system, that Burke County Public Schools' audit is on the front burner. There was a request made about us responding to the concerns in the audit and there have been so many comments made from members of the community and others about fiscal irresponsibility, so I don't think it would hurt at all to let the LGC, DPI [the N.C. Department of Public Instruction] or the state auditors just to kind of take a look and if they want to come in to the Burke County schools and go back and look over our records I certainly don't have a problem with it."

The Local Government Commission monitors local governmental units' (including school districts') compliance with fiscal and accounting standards. The commission also has statutory authority "to impound the books and records of any unit of local government and to assume full control of all its financial affairs... when the unit persists, after notice and warning from the commission, in willfully or negligently failing or refusing to comply with the provisions of the Local Government Finance Act."

The Burke County school district's 2007-08 audit was due Oct. 31. The Local Government Commission in Raleigh received it May 5.

"A report received by the governing body 10 months after year-end identifies financial and operational problems after it is too late to take any effective action," wrote Sharon Edmundson, director of the state treasurer's Fiscal Management Section, in a June 12 letter to Norman.

The audit reported one "material weakness" and several "significant deficiencies" identified by the auditing firm, Smith Miller and Buff of Morganton. Edmundson told Norman to "please write to us about your plans to resolve these matters."

Norman told board members at the June 30 meeting she would have a response prepared for review at their next meeting.

Heather Franco, the state treasurer's deputy director of communications, said this week the Local Government Commission has not received a response from Norman.

"As for the meeting that is taking place on Monday in Raleigh," Franco continued, "this was not requested by LGC staff. The request came to our office from the auditor's office and board chairperson."

A spokesman for the state auditor's office, staff attorney Tim Hoegemeyer, said the auditor's office did not request the meeting, nor could he imagine why the state auditor's office would be involved with a local school system's audit. (Update: Hoegemeyer said via e-mail Friday morning that he learned a representative of the state auditor's office was assigned to attend the meeting. Hoegemeyer also said the meeting has been canceled.)

The 2007-08 audit has been a sore point for some school board members for more than a year.
State law obligates the school board — not the superintendent or the finance department — to hire an outside company to audit the schools' books. Lowdermilk, Church & Co. of Morganton audited the Burke County schools' finances for years.

The school board in the spring of 2008 sought bids for conducting the 2007-08 audit. School board member Rob Hairfield said four firms applied, the board's finance subcommittee narrowed its choices to two and on May 5, 2008, Hairfield presented the subcommittee's recommendation. The board unanimously voted to hire Smith, Miller & Buff to do the 2007-08 audit.

The school district has a large, complex financial system that challenged Smith, Miller & Buff's capabilities, according to Lawson. He and accountant Doug Smith discussed the audit at the school board's June 8 meeting. Both said turnover in the schools' top ranks — for example, Randall Brackett retired and Lawson succeeded him as chief finance officer — complicated the audit. Smith also said his firm fell several months behind schedule when the school board didn't respond to a request to renegotiate the contract.

As for the audit's findings, Smith said none of them were "insurmountable obstacles" the school district couldn't overcome. In fact, Smith said, the audit included the schools' corrective plans. He described most deficiencies as an absence of accounting controls. One bank account was not properly recorded, but no funds were missing. The finance office moved some money without proper school board authorization, but nothing was misspent. Also, the schools spent more than authorized for some funds, but total expenditures were within budget, he said.

Vice-Chair Tim Buff closely questioned Lawson and Smith about problems with and in the audit. However, he and other board unanimously voted to accept it.

Later that night, Lawson told the board he would begin advertising for a firm to perform the next audit.
The board on June 30 voted 5-1, with Norman opposed, to hire Lowdermilk and Church for the 2008-09 audit.