Southwestern Oregon Community College is working to rectify issues brought up in its recent audit that revealed a number of weaknesses and problems experienced under its prior administration.

The audit, conducted by Wall & Wall Certified Public Accountants, covered the fiscal year ending June 30, 2008, and was completed over the past two months.

CPA Rob Wall said the college did follow generally accepted accounting principles, was determined to be a low-risk auditee and received the top score in auditing standards.

 “The college did comply with GAAP, which resulted in an unqualified clean audit report,” Wall said.

However, the audit uncovered 10 significant deficiencies regarding internal controls, including six material weaknesses relating to its bookkeeping and financial records.

Although he didn’t want to conjecture on how problematic the significant deficiencies and material weaknesses are to an organization, they are something to pay attention to.

“I would think I would have some things to improve on and correct,” he said.

A significant deficiency is one that adversely affects an entity’s ability to initiate, authorize, record, process or report financial data. It can lead to a higher chance that a misstatement of its finances can go undetected, the audit states.

The college also overspent during 2007-08. It didn’t accurately calculate cash projections or provide them on a timely basis. And its staff improperly monitored cash flows, the audit said.

Wall said some of the deficiencies are likely the result of a decision to cut the college’s business manager position in July 2007.

That meant the understaffed business office didn’t have anyone to oversee operations and to enforce policies and procedures. Wall compared it the problem to running a hospital filled with nurses but no physicians.

“It would be like a big corporation not having a CFO,” Wall said.

The lack of a business manager resulted in materially misstated liabilities within the college’s books of record in accordance with GAAP.

“If you eliminate that position, you don’t have someone with the technical ability to either perform those high-level accounting tasks, nor does the existing accounting personnel have someone to go to answer the higher level questions,” Wall said.

This issue appears repeatedly throughout the audit. Wall has recommended the college’s board of directors fill that position and that the college’s accounts payable be thoroughly reviewed by someone other than the preparer.

Linda Kridelbaugh, Southwestern’s interim vice president of administrative services, said the college is already working on its internal controls. It recently sent 10 staff members to an Oregon Budget Law workshop. A response from the college included in the audit also blames the prior administration for overspending.

“I think these were expected findings,” she said. “I don’t necessarily agree with the severity of each of the findings individually. I feel that many of the controls we’ve had in place for years and it’s never come up as a finding.”

The college is implementing an integrated online purchase order system to track encumbered monies so administrators will have a better sense of cash flow at any point. Additionally, only four key staff members now have the authority to approve purchases.

“Prior to this change, every budget manager had a minimum signing authority; below that threshold, no additional approval or oversight was required,” college staff responded in the audit statement.

Kridelbaugh said the business office is short-staffed and its business office director, Ron Olson, is essentially filling two jobs.

Administrators will talk with the business department to determine the work load and what staff members feel is missing before the college takes the next step.

“It’s not clear yet, what if any technical skills or job functions are not being done,” she said.

But that gives way to another issue. Kridelbaugh isn’t sure the college can afford to hire a business manager. Southwestern recently announced it will lay off seven faculty positions and it's proposing an across-the-board 5 percent pay reduction.

“Therein lies another problem,” she said.

Wall said he believes the college is working to rectify the audit issues, but won’t know for sure how effective the changes will be until the following audit.

“I think that they are concerned and they’re doing what they can to correct these deficiencies we reported on,” Wall said.

Another issue that appeared during the audit shows that the college district made a deal to buy property without first seeking full board approval. One was $495,000 for bare land on Newmark Avenue in North Bend on the east side of campus, and the other for $140,000 to acquire a parking lot in Curry County.

Kridelbaugh said this occurred under former college president Judith Hansen.

“That is not what’s going to happen now,” Kridelbaugh said. “These expenditures are part of the internal budget problem that we faced in the fall.”

 Southwestern responded to the item by acknowledged that the prior administration — Hansen and the Vice President for Administrative Services Sheldon Meyer — entered into the agreements or expended funds for purchase that violated Board of Education policy.

“College and Board of Education policies and procedures did not adequately safeguard the college,” the college responded in the audit. “The current college administration is committed to fully complying with College and Board of Education policies; however, there must be additional oversight to monitor compliance.”

It went on to say that the Board of Education established a finance subcommittee — made up of two board members and two budget committee members — to provide additional monitoring of college finances, and oversight of the president and financial management of the college.

“The college is taking this information and we’re using it and we’re going to move on and hoping to find zero to two findings next year,” Kridelbaugh said.  “We’re taking that audit very seriously.”