Audit panel calls for greater controls
Updated 10:47 pm, Sunday, August 30, 2015
The Audit Committee of the Town of New Canaan wants town finance officials to have full access to the Board of Education’s financial books and lock in more checks and balances to ensure money is being spent correctly and prevent fraud.
The issue of open access to the school district finance records re-emerged at a meeting in late July as the committee worked through a trio of whistleblower complaints about Board of Education contracts and a policy offering free tuition to children of out-of-town New Canaan school faculty.
Audit Committee Chairman Bill Parrett told Town Council members the body wants town finance officials to have “unfettered access,” to the school district’s accounting records to ensure the school district is following accounting standards that allow all transactions to be vetted.
Parrett emphasized the three-member panel found nothing amiss in the board’s finances from a “books and records” standpoint.
“I want to be clear that we the (audit) committee believe the town is lucky to have Dr. Bryan Luizzi as our superintendent and believe he is totally committed to excellence in New Canaan education and an effectively managed financial process,” Parrett said.
The committee recommended the town direct its auditing firm O’Connor Davies to come up with a detailed set of possible internal controls to be implemented to ensure town officials can vouch for education and other town spending internally and to lenders. The town’s current auditing procedures don’t include mechanisms to uncover discrepancies that could indicate fraud or embezzlement, Parrett said.
“The town prepares financial statements for the state, bond offerings and residents,” Parrett said. “These statements are represented by the first selectman, chief financial officer, and with the stamp of approval of the Town Council. Based on our experience and knowledge, the Audit Committee would have concerns about signing or approving these statements.”
The whistleblower, Michael Nowacki, a town resident, submitted complaints to the committee about three issues: a new employment contract between the Board of Education and the district’s new director of finance, Dr. Jo Ann Keating; financial issues related to the tuition-free education for out-of-town children of teachers as an employee benefit; and the process of obtaining financial background on the board’s annual budget requests.
Luizzi said this week that the Board of Education has begun meeting with First Selectman Rob Mallozzi and the town’s chief financial officer, Dawn Norton, to hammer out additional ways education officials can offer access to financial statements about district spending.
The dominant concern of access to finance accounting records and other materials cited by the audit committee should be addressed fully in the talks, Luizzi said.
“They have access and are welcome to ask any questions or come over anytime and see what we’re doing,” Luizzi said. “The amount of information exchanged already between the Board of Education and the town is significant.”
The Board of Education checks its spending accounts with the town monthly, confirming any shifts in spending or unexpected costs that come up to ensure the town is up to speed, Luizzi said. Nevertheless, Luizzi said the information should be provided differently if that is desired, he said.
“We regularly reconcile our accounts to the town to make sure our budget is right,” Luizzi said. “It’s all here and a lot of the questions I believe are being cleared up and will go away.”
Parrett said better integration between the town and school board could include progress toward consolidating areas that have been under review for shared services for some time, including purchasing maintenance and information technology equipment, human resources and payroll functions, cooperating on building maintenance projects, and collaborating with police on safety and security.
“We could recite areas of a lack of cooperation that we believe is costing taxpayers real money; both items where the town has not cooperated to meet the needs of the BOE and vice-versa,” Parrett said. “This is at best wrong, or at worst, sets a tone that we in New Canaan will tolerate a waste of taxpayers’ money. It would be much better to save the waste and invest in our town, children and staff.”
Luizzi said sharing services is an ongoing discussion and that the town and school district have already adopted joint purchasing in the areas of fuel, electricity and maintenance of athletic fields. There are other areas in buying equipment that most likely would save money, he said.
“There are already combined efforts to work to save taxpayer money and I think there are more opportunities like that,” Luizzi said.
Despite needing more work to adopt rigorous oversight and controls, the town has made great strides in the last year and a half to increase transparency and address “material weaknesses” identified by town auditor O’Connor Davies, Parrett said. Those weaknesses included money that was mislabeled.
“I do want to note the town’s current finance team has made many important improvements in recent years but in our best judgment still has a ways to go to improve systems,” Parrett said.
Parrett said the committee found that one of the whistleblower items brought forward by Nowacki, an employment contract with Keating, was not drafted clearly and could be interpreted incorrectly.
Part of the contract called for Keating to receive “continuous income,” which is not clearly defined by the contract, Parrett said.
“The Audit Committee believes there must be a clear understanding amongst all parties as to who should provide input to and approval to all employment contracts,” Parrett said.
Luizzi said the term “continuous income,” described in the contract was in reference to a Long Term Disability Benefit, and did not describe income on top of Keating’s regular salary.