This letter was sent to CPA Ron Smith of RHR Smith and Company, the firm that audits the Harwood Unified Union School District.
Hello Mr. Smith,
It has come to my attention that you will be answering questions as the principal representing the RHR Smith as the CPA auditing the Harwood Unified Union School District (HUUSD) on November 13, 2019. I am writing to bring a matter to your attention via this written inquiry to be addressed in the question session at the meeting.
My concern relates to what I believe to be a significant material weakness in the internal controls of HUUSD as clearly evidenced by the district’s response to a public records request. A summary is as follows:
- The school district is using debit/credit/purchase cards underwritten by Synchrony Bank (branded by Amazon) for discretionary purchases.
- The statements from these cards are redacted/blinded by showing an alphanumeric transaction identifier in place of vendor information in the board warrants so that vendor information is not available (unlike all other warrant statements/payments where vendor information is published). You can see the statements here – www.huusd.org/huusd-board – under board warrants.
- I submitted a public records request February 22, 2018, requesting the complete statements from the Synchrony Bank/Amazon accounts.
- I received an editable spreadsheet apparently created by the district in lieu of Synchrony statements, representing that these purchases were a series of book purchases from Amazon. These transactions the district provided do not reconcile or balance with transactions on the blinded statements on the warrants as I pointed out when again requesting the statements. This second public records request for the statements was also denied.
- I escalated this concern to the HUUSD Board and the board voted to supersede the Public Records Act and continue to deny me access to the statements (to which the public is clearly entitled by VT Public Records law). To my knowledge the board never requested or reviewed the actual statements themselves or took any other action to ascertain whether this discretionary spending is appropriate.
- These cards are still in use today with higher spending levels, all Synchrony/Amazon statements still blinded/redacted on board warrants and the spending level is several thousand dollars per month. Notably the spending level dropped significantly when I raised the concern and has since increased to even higher levels.
My questions for you are:
- Does this represent a material weakness in the financial controls of the district?
- Can you clarify the board’s responsibilities and obligations with respect to financial oversight and governance in this matter?
- What is the appropriate response from executives and directors when there appears to be misrepresentation and obfuscation of financial records/receipts?
- Given this example, combined with the fact that the majority of the district’s expenditures (in excess of $100,000 per day) are subject to virtually no third-party reconciliation, review or approval (payroll is not reviewed by the board), is there a broader material weakness in the HUUSD financial controls?
- Can you please clarify, for the benefit of the HUUSD Board and the public it represents, how Auditor Independence works in general with a focus on who RHR Smith is working for?
Thank you in advance for your attention to this matter and your response.
Seth Henry lives in Fayston, Vermont.