Scottsdale school board ponders best lens for internal financial scrutiny

Scottsdale Unified School District Governing Board (Photo by Arianna Grainey)

It appears the Scottsdale Unified School District is eying the implementation of an internal auditor for the third time this decade.

Since 2008 the position of internal auditor has been abolished twice, district officials say; however, the turmoil the district has undergone the past several months may point to the need for one.

An April 30 special Scottsdale Unified School District Governing Board meeting agenda included discussion of policy DIE, audits and financial monitoring. SUSD General Counsel Michelle Marshall presented initial information, including the district’s history with internal auditors.

Governing Board Vice President Kim Hartmann says it was her idea to discuss policy DIE, pointing out either the district should hire an auditor or change its policy.

The Governing Board’s implemented policy seems to call for an internal auditor.

Pam Kirby (Photo by Arianna Grainey)

“What I’ve been struggling with and thinking about is do we need an internal auditor or not?” Scottsdale Unified School District Governing Board member Pam Kirby questioned at the April 30 meeting.

“Clearly the events over the past three, four, five, six months suggests that we do.”

Since November 2017, a series of events have unfolded that has left SUSD without a superintendent, chief financial officer or chief business and operations officer. In addition, an Arizona Attorney General’s Office investigation is being conducted.

“When I first got here in 2008 we had an internal auditor whose position was abolished in 2009 or 2010, and did not have one again until ’12-’13,” Ms. Marshall told the Governing Board at the onset of the policy discussion.

“That position was abolished under Dr. Birdwell in the 2015-16 school year for savings out of M&O.”

Ms. Marshall’s main question to the Governing Board was whether or not they wanted to reinstate the auditor position, and if so, what that policy would look like.

“What is the internal auditor’s duties, how does this person get evaluated?” she questioned. “It would be good to have you talk about how that person should report if you want to add that position back.”

Ms. Marshall says previously the post carried an $80,000 annual salary.

Interim Chief Financial Officer Dr. Doug Virgil could only confidently confirm one other district he knows of that has an in-house auditor, Mesa Unified School District.

In part, the audit and financial monitoring policy directs the superintendent to establish the department of internal audit to conduct audits, investigations and special projects requested by the Governing Board or the superintendent. The policy gives full and complete access to any of the district’s records, physical properties and personnel relevant to the performance of an audit.

Ms. Kirby says she can already see the role of a one-man internal auditor being problematic, and she doesn’t recall anyone reporting to the board in the previous iteration of the auditor.

“I was on the board for most of these years and I don’t recall receiving reports from our internal auditor,” she said.

Ms. Marshall confirmed she couldn’t find or recall any reports to the Governing Board from an internal auditor in recent years.

“I’m struggling to figure it out because honestly a one-person internal audit department isn’t setting that person up for success,” Ms. Kirby said.

“They don’t have the authority that they need to go through the entire organization to have access. They will hit walls everywhere they go — I just know this organization well enough to know that to be true.”

Governing Board President Barbara Perleberg concurred with Ms. Kirby, saying she struggles with the reality of that position.

“We know we have a need we’ve identified and have identified going back many, many years. We know we need our systems working a lot better and having stronger checks and balances within them,” Ms. Perleberg said.

“I’m struggling with the reality, or possible false sense of reality. I don’t think an internal auditor would fix that. Even recently, and way in the past, I struggle to see how to make that roll successful.”

Barbara Perleberg (Photo by Arianna Grainey)

A major question during the discussion was who the auditor would report to. Previously the role reported to former Superintendent Dr. David Peterson before he abruptly resigned from SUSD in December 2015. Ms. Marshall says from her understanding, the internal auditor worked closely with former Chief Financial Officer Daniel O’Brien.

“I don’t know whether she technically reported to him at that time, but that was my understanding of the relationship,” Ms. Marshall said.

Ms. Kirby floated the idea of having the internal auditor report to the legal department, but readily admitted that it would be difficult to make that work.

“I’d love to hear some better recommendations,” Ms. Perleberg said, throwing out ideas of re-training staff and scrubbing departments.

“I know who they report to is a dilemma as well,” she said. “Obviously reporting to the board isn’t an option. I think you run into trying to keep it quiet…it’s about solving problems and fixing things, but also, yes, what kind of resources are going to be spent more effectively solving the problems we have.”

Ms. Hartmann joined the “what’s the right answer” chorus, re-iterating SUSD needs more due-diligence around their processes.

“I think there’s a way you can structure it that adds an independent view and value — it is challenging to understand if it’s the highest and best use of resources,” Ms. Hartmann said.

“It’s a significant amount of money within one position, you know, that’s kind of putting all your eggs in one basket. What I’ve heard, from the last two individuals, the positions have been abolished because they’ve been considered non-value added.”

The Governing Board ultimately decided to table the item until more information is gathered. In addition, an external audit review by Heinfeld Meech & Co. is expected on May 15, district officials noted.

Northeast Valley News Services Editor Melissa Fittro can be e-mailed at mfittro@newszap.com or can be followed on Twitter at twitter.com/melissafittro.

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