By HOLLY WAGNER
Herald-Whig Staff Writer
A local certified public accountant and former School Board member says a forensic audit of the Quincy School District from the 2001-02 school year to the present could cost half a million dollars and take nearly a year to complete.
Quincy School Board President Melvin "Bud" Niekamp has called for a special session of the School Board at 4 p.m. Thursday in the Baldwin Round Room. The agenda includes a proposal to establish an ad hoc committee to consider the need for a forensic audit and to retain a qualified accountant to conduct that audit for that time frame.
Dennis Koch, a self-employed CPA and a School Board member from 1995-2003, has conducted audits of the city and county. He questions whether a forensic audit is needed or cost-effective.
"To me, this is a wild goose chase," Koch said.
Niekamp is calling for the audit based on research done by Daniel Bastean, who has written more than 100 letters to board members and others detailing what he believes to be accounting errors.
Niekamp declined to comment for this story. His wife said Tuesday that "he would be issuing a press release," but she did not say when that would occur or what the release would be about.
Bastean, who operates a rock drill at Central Stone in Quincy, says he taught himself government auditing standards. He says he knows the cost would be prohibitive to do a forensic audit for the eight years that Niekamp has identified. Instead, he suggests conducting a forensic audit of just the 2002-03 and 2003-04 school years. He predicts it would cost the district at least $200,000 to conduct the audits.
"Those two audits right there will tell you if you need to have audits for the rest of the years. The School Board's got the money for it," he said, suggesting several accounts the district could draw it from.
When asked what he thought a forensic audit would find, Bastean replied, "Well, I don't know. That's the thing about it. They don't know where their money's at."
Koch said a forensic audit also is known as a transactional audit or fraud audit. It involves going through every single transaction for every year. A normal audit costs the district about $30,000.
When a regular audit is conducted, auditors are "testing controls and looking at samples of transactions, maybe a few hundred," Koch said. "They have four auditing standards and regulations they have to follow, but an audit is never intended to look at every transaction. Is it possible that an audit would miss something? Yeah, sure it is, but typically, it's piddly stuff.
"A forensic audit is designed to find fraud and illegal acts, and you're looking at every transaction. When the Quincy School District writes 1,000 checks a week, that's 52,000 transactions right there to look through."
Koch said about 600 man hours were involved in an audit of the city of Quincy the last time he was involved five years ago, and he believes that figure would be similar in an audit of the Quincy School District. A forensic audit, he said, would take at least twice that long to complete for one year's worth of transactions.
Koch said he believes it would take four people working 40 hours a week one year to complete the eight-year audit that Niekamp wants done.
"There has been no fraud found, no illegal acts found," Koch said. "What are we going to get for this half million dollars? What are they hoping to find? And who's going to pay for it?"
Bastean said he is not alleging fraud or malfeasance. Rather, he said, it's a matter of knowing how much money the district has.
Many of his concerns date back to the year the self-insurance fund was divided into the district's various funds, rather than existing as a stand-alone fund. Any profits go back into the different funds.
Auditor Tim Custis of Gorenz and Associates of Peoria conducted his first audit for the district on June 30, 2004. He recommended the change to the self-insurance fund, which was carrying a deficit of around $8 million. That was the year that put the Education Fund into a deficit from which it has never recovered.
District Business Manager Richard Royalty officially began July 1 of that year.
Bastean is concerned that problems resulted then that have never been corrected. He alleges as much as $9 million in errors over the years in keeping the budget. Financial projections are being based on false information, he said.
"They don't know where their money's at," Bastean said. "I know where it went. The self-insurance fund borrowed it all ... They didn't reconcile the bank account."
Custis said Bastean's claims are unfounded.
"His most common complaints are over loans and transfers," he said. "The money never left the district."
Bastean has conducted a letter-writing campaign asking for information about the district's finances and complaining about what he considers to be Royalty's bookkeeping mistakes. He spoke in March and plans to speak again before the School Board to register his dissatisfaction with the district's administration.
Board Secretary Phyllis Stewart said she averages at least two or three hours a week responding to Bastean's requests for information. Usually, other people are involved, particularly the district's legal counsel.
"It varies, (but) it's a lot (of hours)," she said.
Bastean was successful in convincing the board to backtrack and correct a transaction from the 2004 budget that had been recorded as a loan but, in fact, was not paid back and should have been labeled a transfer.
Royalty met with Bastean to answer his concerns, but he said Bastean's mind appeared to be made up. Part of his confusion, Royalty said, came from looking at budgets before they were amended. The board approves the amendments to the budget at the end of the year rather than month by month, he said.
--hwagner@whig.com/221-3374
