Let’s take a closer look at these two paragraphs:
• Action: The board voted down a motion to approve a Cypher and Cypher audit, saying that several directors still have questions about funds previously moved from unrestricted to committed purposes.
Miller questioned why the board was prolonging discussion of the audit, pointing out the state Department of Education and the district's solicitor also reviewed the funds at issue and determined the actions taken by the previous board were sufficient.
The movement of this money was discussed in the January 15th post, “A Shell Game?”, http://www.fortcherryinfo.blogspot.com/2012/01/shell-game.html.
Miller states the actions taken by the previous board were sufficient; however, were they legal?
Those actions were taken without board approval.
June 2010 – PDE-2028, 2010-2011 Final General Fund Budget, was submitted to the PDE. Signed by B. Miller, Sroka, and Dinnen, this budget indicated the intent to transfer $707,576.54 from the Capital Reserve Fund into Reserve for Technology in the General Fund. Other than B. Miller, it appears the remainder of the board was unaware of this planned move.
December 2010 – In a last minute item added to the agenda, the board was coerced into voting to transfer the money from the Capital Reserve Fund to Reserve for Technology in the General Fund. This move was reported to the PDE on PDE-2028 as board approved six months earlier. Here is an unofficial transcript of the dialog and subsequent vote from that meeting. As you will see, members of the Board were under the impression that Cypher was to come in to explain the legality of the transfer of the funds.
School Board Meeting 12-06-10 (Fund Transfer)
Brant– Should be item 15. It says 11 on the agenda. That is item 15. - The action to transfer all remaining funds from the Special Revenue for Technology to the General Fund /Technology Special Reserve. Thereby closing the Special Reserve…..thereby closing the Special Reserve for Technology Fund and establishing a Reserve for Technology in the General Fund in accordance with GASB 54.
Sharpnack – “so move”
Brant – Motion by Dr. Sharpnack and second by Mrs. Schwab
Brant – Any questions?
Chris – Yeah … Actually this is an item that we’ve been discussing and the action was to have the auditor in to explain to us in detail about how it’s going to work… we never had that occur. There is still some questions by myself and I think … the treasurer… regarding the action… so I would say that we would want to defer this to a future meeting.
- Secondly I have a document; I’m not sure where it came from. It’s actually accounting bulletin 2010-02. Which is actually the impact of GASB 54 and unfortunately I only have this copy. I can send it to whomever. It says what the impact was on school accounting.
“as a result of the clarification of the use of special funds…reserve fund types, a school Capital Reserve Fund no longer meets the definition of Special Revenue Funds. Schools with Capital Reserve Funds must reclassify these funds as Capital Projects…
Not General Funds.
Chris – I think we’re going against what the accounting bulletin actually calls out. So… But putting it into the General Fund contradicts what the accounting office under GASB 54 requires us to do.
Chris – If you would like to read a copy of that (gesturing to Brant)
Brant – Yeah … Pass it over.
Sharpnack – This is a recommendation from our Auditor?
Sroka – That’s correct… It’s the recommendation of the Auditor
Chris- I’m giving you the recommendation of the accounting office. (Sroka trying to talk over Chris)
Chris – turn to page 2, paragraph 3
Sroka - I have had dialog with the accounting office that I shared with this board before…
(inaudible… Sroka is trying to talk over Chris)
Chris - And from that we actually asked to question the Solicitor to come in… I’m sorry… the Auditor to come in and explain to us.
Because there is still some questions by some of the board members.
Brant – O.K.
Sharpnack – Call the question. (“Calling the question” ends all discussion.)
Brant – We have a motion… A second?
Jamie – Actually
Brant – Another comment
Jamie – No… We have a motion to table.
Brant – Actually he didn’t make a motion (pointing at Chris)
Chris – I would like to make a motion to table until we have some time for the Auditor to explain.
Brant – There is a motion to . . .
Chris – “Table”
Brant – Table by Mr. Lauff
Brant – Is there a second?
Jamie – “Second”
Brant – There is a motion and a second by Mr. White to Table
Discussion – inaudible
Sharpnack – inaudible
Brant- Yeah, We vote on the motion
Brant – Any questions on the motion? Motion to defer…
Elmo- Motion to defer means to table?
Brant – I’m sorry… Motion to Table.
Elmo – Ah… Yes a question… Mr. Lauff is correct. We did ask. I don’t know if the actual invitation was relayed to Mr. Cypher or not…
We did ask Mr. Cypher to come in and present him… present us his reason…….. Inaudible ……. And um…
I know he was here not long ago to discuss…was it….financial statements?....
Sroka – inaudible
Elmo – and excuse me… I thought he might wanted… I thought he might have addressed it at that point in time.
So, I’m just wondering if we should not have him in… allow him in …
Sroka – inaudible
Brant – inaudible
Jamie – Question for Paul…if we delay this a month is there any… inaudible
Paul – I don’t perceive closing the year then. If I can’t transfer the money.
Discussion… Everyone
Paul – inaudible
Jamie – Why can’t you just transfer it in January? Our fiscal year is June to…
Paul trying to talk over Dinnen
Dinnen - July
Dinnen– They are closing the audit right now. The audits going on right now for the last year.
That’s why you need the action right now. The auditor today needs the action…Right Now.
Jamie- to do… effective June 30th?
Dinnen – to close
(Discussion – Everyone)
Sharpnack – This is the recommendation of the Auditor.
Sroka – “Absolutely”
Brant- Well I guess my question would be if we table this until January and we have Cypher come in January…
What would he say in January that would prompt you to take some action that you don’t otherwise take tonight?
Is he going to back track from his own advice?
I guess…
Elmo – No, I don’t believe that he would to answer your question.
(Brant Nodded)
Chris – There is a possibility the funds would go to the Capital Project Fund as opposed to the General Fund as the document says it should.
Brant- And I’m operating. . and It’s an assumption of mine. . that our Auditor who is a professional also… is aware of this (holding up the document)
account bulletin GASB 2010-02 and in spite of this… is still making a recommendation to us. A professional recommendation to take this action. (Keep in mind that Brant signed off on PDE-2028 which indicated the intent to transfer the money. At the time of this meeting (December 2010), it was still not clear who recommended the action. A meeting with Cypher was requested months earlier, but Sroka did not set up the meeting.)
Brant – I’m saying if we wait until January to have him come in to tell us why….
I don’t think he’s going to have a reversal of his position…except that we delayed it a month.
Brant- But that’s my….
Sharpnack – I called the question on the motion to table it.
Brant – Motion to table
Brant – All in favor of tabling… Please signify by saying Aye
(Chris and Jamie said “Aye”)
(Everyone else was opposed…)
(Sroka did roll call)
Brant- We do have a motion and a second on item 16 transferring funds…
Any other questions?
Brant – All in …
Chris – What’s the dollar amount?
Sroka – The dollar amount is $707,576.54
Brant – 707,576.54 “Approximately”
Brant – All in favor please signify by say “Aye”. All opposed?
Roll Call
(Jamie White and Chris Lauff voted “No”)
(Everyone else voted “In Favor”)
Brant – Last one is the motion to adjourn.
December 2010 – After the vote, the Annual Financial Report was submitted to the PDE showing the transfer of the money from Capital Reserve to the General Fund. (At this point, the Board is still not clear on the legality of the transfer of the money. According to the PDE, the money previously held in Capital Reserve was to be reclassified as Capital Projects, not transferred into the General Fund.)
January 2011 –Cypher attends the Board meeting to present the 2010 audit.
Mr. Cypher was asked straight on about the legality of the transfer of the money out of the Capital Reserve Fund.
Cypher’s response, “What does it matter? It isn’t hurting anyone”.
Quite an interesting response coming from the school auditor, especially when you consider that it ranks number 7 on a list of “ethical hazard” warning signs. . .
Essentials of Business Ethics
Collins, Denis
John Wiley & Sons, Inc.
p. 94
Surely the transfer of money from the Capital Reserve to the General Fund, a direct violation of municipal law, would raise a red flag with the PDE . . . So how was the transfer out of Capital Reserve explained in the yearly audit?
To avoid alerting anyone to the transfer of money out of Capital Reserve, it appears that Dinnen and Sroka renamed the “Capital Reserve Fund” to “Equipment Reserve Fund” in the “Management’s Discussion and Analysis” portion of the audit.
Sly . . . anyone looking at the official audit would have no idea that a transfer out of Capital Reserve had occurred.
However, it’s the auditor’s job to keep the District in compliance . . .
Cypher, who has performed the fiscal audit for years, should have recognized the error, questioned the renaming of the fund, and corrected it.
Instead, Cypher just went along with Dinnen and Sroka.
Now take a look at what happened to the fund the next year . . .
June 2011 – PDE-2028, 2011-2012 Final General Fund Budget, was submitted to the PDE. Signed by B. Miller, Sroka , and Dinnen, this budget indicated the intent to transfer the money from Reserve for Technology in the General Fund to a Committed Fund.
October 2011 – The Annual Financial Report was submitted to the PDE showing the transfer of the money from Reserve for Technology in the General Fund to a Committed Fund. This was done without a board vote or board resolution as required by the PDE.
Bottom line – our tax money was moved without board approval. Board approval is required by municipal law.
Now Dinnen and Sroka are trying to “legalize” the move of the money by saying that the vote in December 2010 was actually a vote to move the money into a Committed Fund.
This is the item the board voted on in December 2010, taken directly from page 4 of the December 2010 minutes. The word “Committed” does not appear anywhere in the motion.
“Action to transfer all remaining funds from Special Reserve for Technology to the General Fund Technology Special Reserve, thereby closing the Special Reserve for Technology fund and establish a Reserve for Technology in the General Fund, in accordance with GASB 54”.
http://www.fortcherry.org/17031051991440767/lib/17031051991440767/_files/Dec_2010_Reorganization.pdf
From this public notice, placed just 4 days before the meeting, it seems that Cypher will be presenting an “Audit Report” at 7:00, on Monday, March 19, just before the regular scheduled Board meeting.
It will be interesting to hear how Cypher explains the movement of the money without Board approval.
It is the auditor’s job to keep the District in compliance with municipal code. To do that, the auditor is to review the minutes of the board meetings to ensure all actions have board approval. To date, there are no official documents showing board approval to establish a Committed Fund – no meeting minutes, no board vote, and no resolution. Even the “Account Summaries” that Sroka prepares to list current fund balances do not show an established Committed Fund.
The “Account Summaries” can be found here: (http://www.fortcherry.org/17031051991440767/lib/17031051991440767/_files/January_2012.pdf).
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There appears to be a pattern of the Administration taking action without board approval.
Our elected School Board Directors are to direct Dinnen and Sroka; instead Dinnen and Sroka direct the board.
The solicitor and auditor are to keep the board in compliance with municipal law; instead, it appears they find loopholes to legitimize Dinnen and Sroka’s actions.
This “going behind the Board’s back” has been going on ever since Dinnen came on board in 1998, beginning with this letter, “signed” by then Board Secretary, William McNamee.
This letter evaluates Dinnen’s performance at FC and was critical in enabling Dinnen to obtain his Letter of Eligibility; however, the Board never evaluated Dinnen. The letter itself went out without the Board’s approval or knowledge.
This letter went out without the Board’s approval or knowledge. It’s one of the very first examples of the Administration (Dinnen) taking action without board approval.
The McNamee letter was the beginning . . . it continues to this day.
How many other actions have occurred without the Board’s knowledge or approval since Dinnen came on board at FC in 1998?
Read more about the McNamee letter, shown below, in the August 9th post, “Strange?. . . Questionable?. . Fraudulent?. . The Beginning of the End of Truth, Honor, and Integrity, continued.” http://fortcherryinfo.blogspot.com/2011/08/strange-questionable-fraudulent.html
