Agreed-upon procedures report confirms all District 210 bond funds accounted for
Thursday, April 14, 2016

At its regular meeting on April 14, the Lincoln-Way Community High School District 210 Board of Education took action to accept a report from independent accounting firm Crowe Horwath, which was hired in November to conduct a comprehensive agreed-upon procedures examination (AUP) of the District's May 2006, February 2007 and December 2009 bond issues for the construction of Lincoln-Way North and West high schools, as well as other improvements and equipment for Lincoln-Way Central and East.

The examination affirmed that all proceeds and investment earnings from the bond issues were accounted for and that there was no evidence of any missing money or diversion of these funds for any non-school purposes.

"All bond proceeds and investment earnings issued for non-refunding purposes were deposited into the District's bank account, accounted for in the District's funds and spent for school purposes," stated Crowe Horwath Partner, Christine Torres, in a April 14, 2016 report to District 210. However, the report also noted that, between June 2008 and May 2013, some deposits and expenditures were improperly recorded and/or transferred between District accounts and that some expenditures were made without Board knowledge or approval.

Crowe Horwath, an independent Chicago-based public accounting firm, was hired in November to conduct a comprehensive agreed-upon procedures examination of the District's May 2006, February 2007 and December 2009 bond issues. The AUP was requested by District Superintendent Scott Tingley, pursuant to the Board's direction, to ensure that all funds from these bond issues, which occurred prior to his appointment in July 2013, were accounted for, allocated and expended properly based on legal requirements and accounting best practices.

"The agreed upon procedures examination confirms that there are no missing bond funds, and no evidence that any monies were diverted away from legitimate school purposes," said District Superintendent Scott Tingley. "All interest and other income was accounted for and used for school expenses, but the accounting wasn't handled properly. We're using the findings from Crowe Horwath to rectify those issues and set our financial books in proper order."

Specifically, Crowe Horwath reported that all proceeds from the District's 2006 and 2007 bond issues were properly directed by the Board and deposited into the District's Capital Projects fund (Fund 60). $10 million in bond proceeds from 2009, directed by the Board to be deposited into the Capital Projects fund, was incorrectly deposited into and expended from the District's Life Safety fund (Fund 90). Also, approximately $1.2 million of interest income from the 2006 and 2007 bonds was incorrectly transferred from the District's Capital Projects fund to the Life Safety fund during the 2010-11 fiscal year. Subsequently, approximately $4.6 million of the miscategorized proceeds were incorrectly expended for non-capital purposes through journal entries without Board knowledge or approval.

Crowe Horwath's examination also showed that during fiscal year 2008-2009, District Administration transferred $8 million in interest earnings from the 2006 bond issue to the District's Operations and Maintenance fund (Fund 20) without seeking the express approval of the Board of Education.

To address these discrepancies, the Board has directed action to amend, correct and transfer monies to properly categorize all funds. This includes the transfer of $4.6 million from the District's operating funds back to Capital Projects, as well as $366,985.75 from the Education fund back to Capital Projects for monies spent on legitimate but non-capital related expenditures, such as classroom, library, athletic and music supplies. The transfers will be funded with additional tax anticipation warrants to be issued this year, increasing the District's borrowing by $5 million. The District's new auditors, Wermer, Rogers, Doran & Ruzon, LLC, will be directed to include examination of the District's records of accounts and journal entries.

"The result of these previous accounting discrepancies mitigated the deficit spending that was part of the District's true financial picture from FY08 to FY13," said District 210 Interim Business Manager Steven Langert.

District 210 was placed on the Illinois State Board of Education's financial watch list in March 2015. In August, faced with serious fiscal challenges, the District 210 Board of Education made a difficult and painful decision to close Lincoln-Way North High School. In addition to the closure of Lincoln-Way North, the District has also implemented significant staff reductions and budget cuts.

Since last September, at the Board's direction, the District superintendent and the interim business manager have been working closely to improve the District’s accounting practices to ensure the highest levels of integrity, effectiveness and accountability. That work is ongoing, and includes a thorough review to determine the optimal structure, staffing and administrative oversight of its financial operations moving forward.

"The Board is mindful of and committed to serving as a responsible steward of the District's educational and financial resources in all matters, including its review and response to Crowe Horwath's agreed-upon procedures report," said Dee Molinare, District 210 Board president. "Since the AUP found no evidence of missing funds from bond proceeds, there is no need for a forensic audit of the bond proceeds. Moving forward, District 210 will continue to concentrate our full focus on addressing the issues and challenges facing our District, while fulfilling our mission to provide opportunities to maximize the academic growth of all Lincoln-Way students in the most cost effective manner."

Copies of Crowe Horwath's letter/report to the District and the resolution detailing the Board's actions to accept and address its findings will be posted on the District's website no later than close of business on Friday, April 15.