News Story

Persistent Accounting Failures Risk Benton Harbor Schools’ Federal Money

‘Control activities ... inconsistent, ineffective, and in some cases, nonexistent’

In 2015, the auditor for Benton Harbor Area Schools found that the district had not recorded $1.1 million in federal funds it had received. In one instance, the auditor checked on 10 employees paid for with federal dollars and found that four of them were paid a combined $133,000 more than contractually allowed.

The auditor noted a familiar refrain found in the district’s annual budgets: “Benton Harbor Area Schools agrees with the finding and is in the process of implementing the recommendation.”

Except, it hasn’t happened.

The district’s handling of the federal money it receives provides some insight into the accounting dysfunction that has plagued Benton Harbor Area Schools for years.

Benton Harbor receives about $5 million a year in federal funds, which account for roughly 15% of its total budget. The auditor’s warnings that the district’s mishandling of federal money threatens its continued distribution to the district hasn’t had an impact.

Audits released in 2016, 2017, 2018 and 2019 also note that the district is not managing its federal dollars properly. And within each audit, the district admits its mishandling and offers claims to address it.

The auditing firm Hungerford Nichols notes in the most recent audit: “The district does not have a clearly defined, uniform set of written procedures to govern the administration of Federal Awards.”

The auditor also stated: “Control activities performed by the business office staff or other staff involved with the administration of Federal Awards were inconsistent, ineffective, and in some cases, nonexistent, increasing the risk of noncompliance with requirements of Federal programs administered by the district.”

From the 2018 audit: “The district did not consistently follow procedures established for the administering of Federal awards as documented in its Federal Written Procedures. ... Control activities performed by the business office staff were ineffective, or in some cases, nonexistent, increasing the risk of noncompliance with requirements of Federal programs administered by the District.”

And similar notes were made in audits for 2016 and 2017, with the statement, “Benton Harbor Area Schools agrees with the finding and is in the process of implementing the recommendation.”

Scott Johnson, chief financial offer for the school system, pointed to the auditor’s explanation for the accounting mishaps.

“The reason is noted on page 18 of the most recent audit report, and is as follows: ‘Cause: The District's business office experienced significant turnover during the year, and procedures established by the prior administration were not carried forward.’”