After a five-year wait for basic budget information, state auditors have uncovered a host of flaws in Gila Community College’s financial systems.
The community college has no finance director, no procedures to keep track of its equipment, failed to perform a physical inventory, didn’t review billings and failed to put into place fundamental budget safeguards, concluded the state Office of the Auditor General.
The audit brought into sharp focus the problems the GCC board and administrators have had in recent years getting basic financial information from Eastern Arizona College, which manages 95 percent of GCC’s budget under the terms of a contract that gives the GCC board little effective control.
The auditors concluded that “the district’s financial statements were not issued in a timely manner since they were issued five years after fiscal year-end. The district did not have anyone with accounting expertise to oversee the financial statement in accordance with generally accepted accounting principles.”
The auditors concluded “we identified certain deficiencies in internal control over financial reporting that we consider to be significant deficiencies.”
The auditors said they didn’t specifically consider whether the district’s procedures fully complied with state law nor on the effectiveness of the district’s internal control over financial reporting and therefore didn’t come to a conclusion on those issues.
“We didn’t know differences existed until now,” said board president Robert Ashford at the first GCC board meeting in two months on Friday, Oct. 28.
The last GCC meeting happened in August, even though the land transfer discussions had begun with the county. Ashford explained that the meeting in September was canceled due to a lack of a quorum.
The report recommended the district improve monitoring of its contract with EAC, prepare a legally required annual expenditure report in a timely manner and establish policies and procedures for disclosing conflicts of interest.
As it happens, the GCC board, on a split vote in December, repealed all its existing board policies and has not yet adopted any replacement policies. The repeal of the policies in December allowed Ashford to continue serving as chairman.
The audit report said due to the terms of its contract with Eastern Arizona College, all detailed financial information goes to EAC administrators in Safford.
GCC has no control over its own financial statements.
The auditor general’s report indicated that it took five years for Eastern Arizona College to provide the OAG with the financial reports requested by the auditors, which caused the delay in the release of the audit of the 2006 budget.
“The auditor general has no enforcement powers. They said the delay came from Eastern Arizona College (EAC),” said board member Tom Loeffler.
Once OAG received the requested financial statements, the state auditors said EAC reports did not follow accepted accounting procedures and were not complete or accurate.
The auditors concluded the system provided little opportunity for GCC to catch any problems in spending, revenues or billings — including spending on equipment and facilities.
The report says 95 percent of the money GCC spends goes through EAC, but “the district did not assign the responsibilities for monitoring and overseeing its educational services and operating agreements with EAC to a (GCC) district official.
“In addition, while the agreements allow the district to review the records and documentation supporting the amounts billed to the district, it did not perform these reviews to ensure that the amounts billed were correct.”
As a result, the district risks not receiving the services and financial information specified in the agreement’s terms and conditions and could be billed for incorrect amount.”
Several GCC board members have complained repeatedly in the past two years that they cannot obtain basic financial information from EAC, even when setting tuition and deciding on hiring and program changes.
The audit report also said the incomplete and sometimes inaccurate reports from EAC could cause GCC serious problems when it comes to receiving or accounting for various state and federal grants.
“The district’s accounting records were incomplete because the accounting records related to state and federal grants were maintained by Eastern Arizona College; however, the district was not aware that this financial information should have been reported in its financial statements.”
Senior Dean Stephen Cullen informed the board that an auditor had been hired to address the issues brought up by the 2006 audit. Going forward, the auditor will handle the remaining audits for the years 2007 — 2010.
“2008 is being worked on now, the 2007 paperwork has been submitted. My personal goal is to have the 2009 and 2010 done by the end of the year,” said Cullen.
“Is the CPA hired by GCC or EAC? How much did it cost?” asked Loeffler.
Cullen reported that GCC hired the auditor at a cost of $8,400 to fix the 2006 audit and $8,600 to complete the remaining years.
After examining the audit, board member Larry Stephenson observed an omission in the income and revenues.
“There is no mention made of over $1 million in tuition. This should be brought to the auditor general’s attention,” said Stephenson.
In effect, the auditors conceded that in many cases they simply didn’t have enough information to determine whether the district’s books were entirely in order.