EDLD 5342 Week 5 Violation Examples of Code of Ethics for School Leaders

While I am not aware of many situations where the ethics of finance have been violated, I am aware of one incident.  A well-respected district employee had access to many pieces of equipment.  This employee had been a member of the district for many years and was often the “go-to” person for construction and maintenance solutions.  Obviously, as equipment becomes old and obsolete, there is still a process to follow to liquate assets. This employee allegedly took some of these old and obsolete pieces of equipment and placed them on their own land, perhaps even to another state.   Somehow, someone found out about it and reported this violation, as is always the case.  My understanding is that the equipment was valued at less than $5000 and was no longer usable by the district. Since the employee did not accurately follow the process for liquidation, there was an employment consequence and legal proceedings ensued.  This is an unfortunate situation that essentially tarnished the fine reputation this employee had established and gave people cause to question the district’s asset liquidation process.  As a result, that district now utilizes a much more tedious process for asset accountability with much tighter guidelines on equipment usage.  The ethical conflicts involved in this situation violated TAC Standard 1.4:  “the educator shall not use institutional or professional privileges for personal or partisan advantage.” I conducted an internet search and learned about another district which discovered a missing escrow account, which violates TAC Standards 1.3 and 1.6.  Standard 1.3 states “The educator shall not submit fraudulent requests for reimbursement, expenses or pay” and Standard 1.6 states “The educator shall not falsify records, or direct or coerce others to do so.”   Apparently, the district’s former Chief Financial Officer informed the board that he established an escrow account to help pay for the district’s Chapter 41 payments.  Not only was the account not established, but also the funds were allocated to other district expenses.  In addition, the district did not follow Texas Education Agency guidelines.  As a result, the CFO was fired and the Superintendent ‘s integrity came into question by the board and community.  (News-journal.com; Longview, Texas; January 16, 2011) Other examples of ethics violation include one district where the employees used district credit cards to purchase personal items.  This violates standard 1.2 (The educator shall not knowingly misappropriate, divert or use monies, personnel, property, or equipment committed to his or her charge for personal gain or advantage.) and 1.1. (The educator shall not intentionally, knowingly, or recklessly engage in deceptive practices regarding official policies of the school district, educational institution, educator preparation program, the Texas Education Agency, or the State Board for Educator Certification (SBEC) and its certification process.) The superintendent’s failure to disclose connections or personal gains from professional affiliations such as consulting fees, etc. violate Standards 1.7 “The educator shall comply with state regulations, written local school board policies, and other state and federal laws.”  A fifth and final example of an ethics violation would be a superintendent who claimed they had the appropriate certifications for which they truly did not.  This would violate standard 1.8 “The educator shall apply for, accept, offer, or assign a position or a responsibility on the basis of professional qualifications.” The short and long-range consequences of any of the violations always include deterioration of trust in the public education system.  For example, in the district where employees inappropriately used the district credit card, the short -term results are that the district needed to pay for the debt.  In addition, the public lost confidence in the fiduciary procedures for the district.  When the superintendent does not appropriately disclose business or personal relationships, there is potential for a conflict of interest.  The short-term consequence is that the Board of Trustees, as well as the community, questions the integrity of the superintendent, which could develop into long-term consequences due to the lack of trust, confidence and belief in the integrity of the superintendent and the system.  In the example involving obsolete district equipment, the short-term consequence was that the public and the board questioned district procedures.  A long-term consequence is that these valued employees of the district lost their jobs, the district lost a valuable employee resource and the employees faced possible legal consequences.  In order to avoid the above-mentioned violations, there are several pro-active plans that can be used.  To avoid a credit card nightmare, a district could either eliminate the use of credit cards or create a monitoring system that prevents unauthorized use of the cards.  This would show that the superintendent is following a quality indicator similar to Superintendent competency that “models and promotes the highest standard or conduct, ethical principles, and integrity in decision making, actions and behaviors” as well as illustrating that he/she “apply laws, policies, and procedures in a fair and reasonable manner.” To prevent a superintendent and district from being embarrassed about a business or personal relationship, full disclosure of any questionable relationship should be expected.  A form allowing for this full disclosure by the superintendent would help alleviate any questions and protect him/her from future allegations.  Again, this illustrates the modeling of highest standards as well as “exhibiting understanding and implementing policies and procedures that promote personnel compliance with The Code of Ethics and Standard Practices for Texas Educators.” Lastly, by implementing procedures that require a paper trail for any asset liquidation and verification by an outside source of the receipt of those assets, the superintendent not only shows that he/she is implementing policies and procedures stated above, but is again modeling and promoting highest standards.

Final Reflection for EDLD 5342 Week Five

In reflecting upon my strengths and competencies, I remain confident in my ability to build relations with the Board of Trustees.  I continue to struggle with management issues.  This does not reflect upon my management of personnel, but rather my management of time and resources.  As a superintendent, I believe I understand the procedures for accurate, effective and ethical purchases and record keeping. I would want to make sure I have a very capable CFO who understands the intricacies of accounting and upon whom I feel has the highest of ethics and standards.  As one superintendent once stated to me, “my job is to hire the best people and make the ones I’ve got better.”  This makes sense to me. The parts of this course that have made the greatest impact on me include a variety of resources.  From week one lecture notes, I am reminded that “operating school districts with fewer resources than needed is not a new concept.”  Given the current budget crisis in education, this gives me hope that we will overcome!  I wholeheartedly agree with Dr. Arterbury’s statement in the video:  “It is not likely that we could maintain a democracy or a world class work force without an educated society.”  His statement reminds me of the importance of taking on this challenge of educating all students.  The Worksheets for Establishing Foundation School Program Aid used in week three from Texas Education Agency was helpful to me in that it solidified the importance of the ADA number for every district.  Without this number, no one could complete the worksheet.  As much as the technology and incomplete information for the week three assignment frustrated me, I felt this was the one class where I learned the most.  Of course, this is the area where my preliminary self-assessment indicated I also had the most to learn!!  I learned the importance of networking with others.  Without the assistance and willingness of my small group to make sure we “got to the bottom” of the assignment, I would have been lost.  We were persistent and professional in researching all options.  In addition, I was reminded of the importance of reaching out to others in time of frustration and crisis for two reasons. First of all, this confirmed that I was not crazy and that the misunderstandings/frustrations were universal.  This was very affirming.  Secondly, the resourcefulness of everyone in the class and the vast amount of experience and knowledge only enhanced my knowledge and ability to reason through the data.  My insight from the interviews with my superintendent and CFO again affirm the importance of finding a very capable and ethic-minded CFO.  The intricacies of school finance continue to challenge me, but I am confident that finding and partnering with the right CFO will help me navigate through the school funding nightmare.  Lastly, I learned that while having a strong opinion is important, it is equally important to remember that patience and kindness pay off.  Instead of getting too frustrated about the assignment, I was reminded that by using the resources of other professionals and continuing to pursue options, a solution is imminent.  I believe this lesson will be most important as superintendents continue to face budget challenges and frustrations of working with the legislators.    I have no doubt  there are times when a superintendent feels the information provided is lacking and that there are no solutions to the challenges he/she faces.  The experiences in this class provided me with a small exposure to those feelings and the processes we pursued as a cohort mirror what a resourceful superintendent should do in these situations.

District Leader Interview Regarding Financial Audits

1. How is the external auditor selected?

In my conversations with Dr. Ryan, GCISD Superintendent, and Ms. Elaine Cogburn, GCISD Chief Financial Officer, both indicate that this is an important decision.  Dr. Ryan stated selecting the district auditor is very similar to selecting a personal financial advisor.  First of all, select an auditor who is familiar with school processes and finance.  By talking with other superintendents, there are auditors with whom districts are familiar and use regularly.  Secondly, a superintendent would want to review their qualifications. Based on the abilities and reputations of the auditor, the superintendent will make recommendations to the board.  Lastly, Dr. Ryan suggested that the district change auditors every few years.  This way, the board and superintendent are getting a fresh look at their procedures to make sure the audit is valid and helpful.

2. How does the auditor conduct the audit?

Ms. Cogburn provided that the process is very tedious.  The auditor spends approximately two weeks on site to look at the various source documents.  They will pull samples of items to test to make sure processes and reports are accurate.  The auditor will select major programs.  They will look at trial balances, compare to previous years and look at variances from previous year balances.  If there is a large variance from previous years, the auditor will pull those reports and do an itemized audit of each piece.  This is the tedious portion.  Ms. Cogburn stated that the point of this is that a district does not want large variances that cannot be explained.  The trial balances pulled include assets, revenue and expenses accounts.  The audit includes a C5 exhibit that provides budget vs. actual to account for any unplanned events such as an expense for a piece of equipment or revenue from a donation or unplanned source. 

3. What does the audit conclude about district financial procedures and actions?

The audit provides information that the district practices sound financial processes. It indicates any material weaknesses and indicates recommendations about separation of duties, control over the finances, policies and procedures recommended to prevent misuse of funds and the financial strength of the district.  Dr. Ryan recommended that a CAFR( Comprehensive Annual Financial Report) is a helpful piece of information that he relies upon as a superintendent, but Ms. Cogburn stated that that report provides much more than financial basics and is extra work for the financial department that an auditor wouldn’t necessarily need such as AEIS information, etc. 

4. How are the results communicated?

The district communicates the results in a public meeting with the board when the audit results are completed.  They must publish a C3 in the paper.  The district also submits the audit to TEA in three different methods, written, electronically, and by mail.  It is also submitted to the department of education, posted on the district website, and provided to any external group  such as grant suppliers, agencies, etc. would who also need a copy. 

In summary, the purpose of the audit is to maintain as much transparency as possible with the taxpayers.  The communication with taxpayers, TEA, the board and other agencies who support the district is imperative in assuring them that the district is sound, following correct procedures and good stewards of the taxpayer’s financial resources.  In addition, it is in the best interest of the district to make sure the procedures are followed in order to avoid a lengthy, tedious, and, possibly costly, audit of certain funds. 

Understanding Personnel Salaries in District Budgets

Personnel salaries in GCISD currently account for 86% of the total budget. This can be a positive indicator to the taxpayers of the community that the district is using as much of the district funds as possible in salaries.  A further breakdown indicates that most of that salary allocation is paying for teachers.  On the other hand, since most of the district budget is heavily invested in payroll, which is a fixed cost, there is not much opportunity for trimming the budget without cutting positions.  Comparing GCISD salaries to those of the surrounding districts, the salaries are in the middle of the comparison charts.  In addition, the percent of administrative salaries in comparison to other districts is also smaller.  In other words, the administration to teacher ratio in GCISD is much smaller than in other districts.  We are not administrative heavy.

The impact associated with a five percent salary increase for all personnel in GCISD could be catastrophic at this point.  GCISD is going to have to allocate some fund balance resources this year to make the budget balance, depending on what the legislature finally decides to allocate to educational funding.   This dip into fund balance will be required without any type of pay raise for this next school year.  Providing a five percent salary increase would require a greater portion of the fund balance, which would have a negative impact on our district bond ratings and FIRST ratings.   In addition, by providing our personnel with a 5% raise, we would then place ourselves out of the market comparability with surrounding districts.  The NE Tarrant county area could not support this type of market increase.