(PSS) — The Public School System said it has already responded to a recent independent external audit commissioned by PSS, and has initiated corrective actions.
Ernst & Young (CNMI) Inc. conducted the audit and completed the report on Aug. 17, 2022.
Most of the findings are administrative in nature and have already been addressed, PSS said.
The remaining findings/recommendations will be addressed by Sept. 30 or the end of the current fiscal year, the Office of the Commissioner of Education said.
“The independent audit report was for the fiscal year ending 2020,” the office added. “It was a re-audit that we have requested. Most of the findings are administrative in nature and they have been addressed and are reflected in the same report that was released by the auditors.”
PSS provided copies of the audit report to the Federal Audit Clearinghouse for all of the school system’s grantors
The CNMI Office of the Public Auditor released the audit report to the public on Monday afternoon. The executive branch and both chambers of the Legislature were also provided copies of the report.
“These findings were for fiscal year 2020 that have already been resolved but the report was just released lately,” PSS said.
Responses to findings
The audit report recommended, among other things, that PSS improve its processes to ensure that transactions, including non-cash transactions, are recorded in the proper accounting period.
PSS agrees with the finding, adding that there was a lack of adequate staffing and management personnel. But the finance director and comptroller position was filled already and has implemented corrective actions, PSS said.
As for the Schedule of Expenditures of Federal Awards or SEFA, PSS said its Federal Programs Office has hired a director of internal control and evaluation to oversee and ensure that SEFA is prepared accurately and completely.
“Future preparations of the SEFA will [be on] accrual basis, so activities and receipt of goods that occurred during the fiscal year will be reflected in both SEFA and in the books,” PSS said. “The Federal Programs Office process of recording grant revenues and reporting will be revisited. Future trainings with the Finance Office will be scheduled.”
Questionable costs
The audit report mentioned questioned costs involving federal grants, but said PSS these costs were allowed by the federal grantors.
“These costs were paid for needed education related expenses due to budgetary shortfalls that challenged PSS’ ability to pay all of its salaries, wages, insurance, utilities and taxes,” PSS said. “According to the U.S. Department of Education, use of the [Education Stabilization Funds]…for these purposes is allowable. Correct accounting entries were made and local funds will fully reimburse these charges and then use the ESF reimbursement to offset payroll costs towards the end of the fiscal year.”
The audit report likewise questioned a $1,000 retention incentive PSS provided to an “ineligible party.”
PSS said it has already “adopted a standard operating procedure for the recent retention incentive payout made to employees. Any and all future incentive payouts will be accompanied with Standard Operating Procedures to ensure that employees receiving payment meet the eligibility requirements.”
The audit report likewise stated that PSS “failed to exclude capital expenditures from the modified total direct cost pool and failed to use the negotiated indirect cost rate in computing for indirect costs for reimbursement.”
The amount involved was $84,926.
PSS said this concern has been addressed, adding that it used “the Admin cost rate of 5%…to pay staff for assessing damage to schools caused by Super Typhoon Yutu.”
PSS added that it will “use the negotiated indirect cost rate in computing and will exclude capital expenditures from the modified total direct cost pool.”
Indirect cost is a set percentage — 5% — of a federal grant that allows the grantee, PSS, to cover overhead cost and grant management expenses/cost.
Procurement regulations
According to the audit report, “PSS failed to effectively implement its procurement regulations” involving change orders to one vendor contract.
This vendor contract was for a photocopier change order that amounted $912,072 of which $666,325 was recorded in FY 2020 and had exceeded the $250,000 simplified acquisition threshold, the audit report stated.
This is a single contract for all 20 public elementary, middle and high schools, and all of PSS programs.
PSS in its response said it has “performed a price analysis of the cost of the service on a price per copy basis. A three-year lease was awarded for the provision of copiers for all schools both public and private including toner, paper and service within twenty-four hours. There is written documentation to support the use of competitive sealed proposals upon initial procurement, in accordance with PSS Procurement Regulations § 60-40-225.”
PSS added, “The cause of the price increase was due to the standards-based system that PSS adopted. No textbook publisher has shown interest in developing this standards-based system for a school system with only 10,000 students. Accordingly, PSS teachers developed their own standards-based lessons for presentation, practice and assessments that involved the use of copier printed lessons for practice sheets and weekly assessments.”
“In moving forward,” PSS said, “we are cognizant of the [audit report’s] recommendations and will initiate three improvement plans: 1) cross-training of personnel, 2) building capacity, and 3) improving and strengthening standard operating procedures.”
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