Richland 2 placed on fiscal watch because of tardy audit, which raised concerns

·3 min read
The State

The state Department of Education has flagged Richland School District 2 for financial and budgetary concerns after a state-mandated audit report was submitted almost four months late.

While no major issues were found in the audit, State Education Superintendent Ellen Weaver declared Richland 2 on fiscal watch in a March 27 letter to the district because of the report’s tardiness.

The audit was originally due Dec. 1, 2022. It was submitted March 21, 2023.

Districts have a 60-day grace period after the deadline to submit an audit, according to state law. After that, they are saddled with a fiscal watch designation, or worse.

In her letter, Weaver warned that though the district’s fiscal watch status was not related to audit findings, the education department could continue or escalate the declaration in the future if the tardiness is not remedied.

A fiscal watch status is the lowest level of concern, according to state law. Although the report was due months ago, the education department waited to issue an official designation until after the report was submitted. The department wanted to be sure the audit’s findings didn’t warrant a higher level of concern, said Laura Bayne, superintendent of strategic engagement for the education department.

Matthew Hodges, vice president of Burkett Burkett & Burkett, the accounting firm that conducted the audit, said the it was late because materials needed to conduct the audit were received from the district later than usual. It also was delayed by a separate investigation of Richland District 2 by the state inspector general as well as district staff departures.

Last year, the inspector general investigated the district at the behest of Gov. Henry McMaster following complaints from parents.

Among the audit’s findings were that 56 teachers were collectively underpaid $294,000 during the 2022 fiscal year because of overstated expenditures and understated accrued salaries, Hodges said.

These teachers were paid retroactively during the 2022 and 2023 fiscal years from Richland 2’s general fund, Hodges told the board on Tuesday, March 28.

Hodges also said the audit found issues with procurement card spending. Some meal and travel expenses did not receive prior approval, while educational purchases did not take advantage of district contracts. The audit also found that p-cards were used to pay some recurring costs; purchase orders should have been used instead. It is unclear who made these errors.

The inspector general’s report, which was released in November, also flagged some of the problems found in the annual audit. The inspector general’s report flagged Richland 2’s payroll accuracy, and it found that 66 teachers were collectively underpaid by $459,381.

The report also noted that the district does not have an internal auditor. Implementing an internal audit program was one of many recommendations made in the inspector general’s report, which called an internal auditor “vital.”

Richland 2 has 10 days to appeal the education department’s decision and 60 days to send a recovery plan outlining corrections that will be taken to fix issues.

The district will not be submitting an appeal, said Greg Turchetta, the district’s chief communications officer.

“The consequences are what they are,” Turchetta said. “We will not submit a late audit again.”

Richland 2 is now one of two Richland County districts on fiscal watch.

Richland 1 was placed on fiscal watch in December following scrutiny from the SC Department of Education. State auditors found troubling procurement card spending. A letter from former State Education Superintendent Molly Spearman said there were “significant deficiencies and material weaknesses” that affect the district’s financial well-being. An appeal was denied in January.