Audit - Baltimore County Public Schools

Financial Management Practices Audit Report

Baltimore County Public Schools

November 2020

OFFICE OF LEGISLATIVE AUDITS DEPARTMENT OF LEGISLATIVE SERVICES

MARYLAND GENERAL ASSEMBLY

Joint Audit and Evaluation Committee

Senator Clarence K. Lam, M.D. (Senate Chair) Delegate Carol L. Krimm (House Chair)

Senator Malcolm L. Augustine

Delegate Steven J. Arentz

Senator Adelaide C. Eckardt

Delegate Mark S. Chang

Senator George C. Edwards

Delegate Andrea Fletcher Harrison

Senator Katie Fry Hester

Delegate Keith E. Haynes

Senator Cheryl C. Kagan

Delegate Michael A. Jackson

Senator Benjamin F. Kramer

Delegate David Moon

Senator Cory V. McCray

Delegate April R. Rose

Senator Justin D. Ready

Delegate Geraldine Valentino-Smith

Senator Craig J. Zucker

Delegate Karen Lewis Young

To Obtain Further Information Office of Legislative Audits

301 West Preston Street, Room 1202 Baltimore, Maryland 21201

Phone: 410-946-5900 301-970-5900 1-877-486-9964 (Toll Free in Maryland) Maryland Relay: 711

TTY: 410-946-5401 301-970-5401 E-mail: OLAWebmaster@ola.state.md.us

Website: ola.state.md.us

To Report Fraud The Office of Legislative Audits operates a Fraud Hotline to report fraud, waste, or abuse involving State of Maryland government resources. Reports of fraud, waste, or abuse may be communicated anonymously by a toll-free call to 1-877-FRAUD-11, by mail to the Fraud Hotline, c/o Office of Legislative Audits, or through the Office's website.

Nondiscrimination Statement The Department of Legislative Services does not discriminate on the basis of age, ancestry, color, creed, marital status, national origin, race, religion, gender, gender identity, sexual orientation, or disability in the admission or access to its programs, services, or activities. The Department's Information Officer has been designated to coordinate compliance with the nondiscrimination requirements contained in Section 35.107 of the United States Department of Justice Regulations. Requests for assistance should be directed to the Information Officer at 410-946-5400 or 410-970-5400.

November 19, 2020

Senator Clarence K. Lam, M.D., Senate Chair, Joint Audit and Evaluation Committee Delegate Carol L. Krimm, House Chair, Joint Audit and Evaluation Committee Members of Joint Audit and Evaluation Committee Annapolis, Maryland

Ladies and Gentlemen:

We conducted an audit of the financial management practices of the Baltimore County Public Schools (BCPS) in accordance with the requirements of the State Government Article, Section 2-1220(e) of the Annotated Code of Maryland. The objectives of this audit were to evaluate whether BCPS' procedures and controls were effective in accounting for and safeguarding its assets and whether its policies provided for the efficient use of financial resources.

Our audit disclosed that BCPS needs to improve internal controls and accountability in certain areas, including procurement and disbursements, payroll processing, and information systems. For example, adequate access controls had not been established over its financial management system, and BCPS did not ensure certain personnel and payroll transactions were subject to independent review and approval.

We also found that BCPS' procurement policies were not sufficiently comprehensive. Specifically, BCPS' policies did not define the criteria for necessary contract modifications and did not require a signed contract modification to support changes to contract terms and conditions. For example, BCPS paid an additional $1.2 million to purchase upgraded anti-theft devices on a $140.0 million contract for laptop computers without executing a written contract modification. Additionally, BCPS did not have a written policy for documentation of receipt of goods and services prior to payment, as well as for prepayment of services.

Furthermore, procurements were not always made in accordance with established policies or applicable State law. Specifically, BCPS did not ensure that contracts were properly executed prior to payment, as required by its policy and did not

publish the award of four contracts totaling $23.7 million on eMaryland Marketplace, as required by State law. We also determined that BCPS used an intergovernmental cooperative purchasing agreement (ICPA) to purchase 197 school buses totaling $19.5 million in a manner that was inconsistent with the intent of the ICPA and limited competition. In addition, BCPS did not maintain sufficient supporting documentation of those purchases to enable us to determine whether BCPS received the best value. Due to the lack of available records from both BCPS and the vendor and variability in the buses, we could not readily determine whether the amounts paid were consistent with the pricing in the ICPA.

Significant risks existed within BCPS' computer network. For example, monitoring of security activities over critical systems was not sufficient and its computer network was not properly secured. In this regard, publicly accessible servers were located in the BCPS internal network rather than being isolated in a separate protected network zone to minimize security risks.

In addition, we identified certain practices which, if implemented, could provide opportunities for achieving cost savings in student transportation. Specifically, BCPS had not performed a system-wide route analysis, and some bus routes were operating at less than 50 percent of the desired capacity. BCPS also needs to ensure the reasonableness of payment for employee healthcare, which totaled $152.2 million during fiscal year 2019.

Finally, based on our current audit assessment of significance and risk to our audit objectives, our audit included a review to determine the status of 11 of the 12 findings contained in our preceding audit report. We determined that BCPS satisfactorily addressed six of these findings. The remaining five findings are repeated in this report.

We conducted our fieldwork from May 2019 to February 2020. On March 16, 2020, due to the COVID-19 pandemic health crisis, the State Superintendent of Schools decided to close school and administrative buildings to employees and the public for a two-week period. This was eventually extended for the remainder of the 2019-2020 school year with limited access by certain employees. All BCPS buildings were open during the entire period of our fieldwork, so the objectives and scope of our audit were not impacted. To the extent that the COVID-19 crisis continues to impact BCPS operations, certain recommendations in this report may need to be adjusted in the future to ensure proper controls under the modified operations.

2

BCPS' response to this audit is included as an appendix to this report. We reviewed the response and noted general agreement to our findings and related recommendations, and while there are other aspects of the response that will require further clarification, we do not anticipate that these will require the Joint Audit and Evaluation Committee's attention to resolve. In accordance with our policy, we have redacted the names of any private companies or products mentioned by BCPS in this document. We wish to acknowledge the cooperation extended to us during our audit by BCPS and its willingness to address the audit issues and to implement appropriate corrective actions.

Respectfully submitted, Gregory A. Hook, CPA Legislative Auditor

3

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download