Public Minnesota School Tech Company Eviscerated by Audit

ties_budget_cut

A K-12 publicly-funded technology organization is experiencing a drastic cut to its budget in addition to considering layoffs as a result of a forensic audit.

In addition to the budget cuts, Technology and Information Education Services (TIES) could see its headquarters move out of the art deco building it is currently housed in, as well as ending its costly practice of hosting data services for schools.

“Everything’s up for review,” TIES interim executive director Mark Wolak said after a meeting of the group’s executive committee Wednesday.

During the meeting, Wolak discussed the crisis, saying that the cost to fix the problem should not become a burden for schools, nor will TIES increase its member fees.

“We’re not sidestepping this financial situation at all,” Wolak told them. “It’s a new day at TIES.”

Formed in 1967, the company is a government entity made entirely of school districts that elect members of its executive committee.  There are currently 49 school districts counting as full members, and almost all of its $31 million in operating revenue comes from schools.

The recent audit shows that TIES has been losing money for at least the past three years.  This finding is consistent with the forensic accountant’s report from October.

The October report noted that TIES was in trouble, as they continued to not collect on accounts receivable and using bank lines of credit to cover shortages each year.  In addition, a lack of basic financial controls was causing a tremendous loss of money.  The company routinely rented out its event center free of charge, while also paying $47,808 to a telephone company it had stopped using.

Executive Director Betty Schwei­zer showed a salary of $183,855 prior to her retirement this year.  In addition, she was given a $61,332 severance package six weeks before the completion of the forensic audit.

The new audit shows a net loss of $1.35 million in 2014 for TIES, meaning they are not generating enough cash to cover their debt.

Total revenue was shown to have fallen by $1 million mostly due to a slow year for the products that TIES resells to school districts through its TIES Depot unit, including Chromebooks, desktop computers and networking gear.

TIES also used $5.3 million in notes, or IOUs, to perform major renovations and upgrades to its headquarters and event center.  The money was backed by a $600,000-a-year levy on its school district members.

The company’s regular outside accountant, Baker Tilly Virchow Krause, audited the year-end financials.

According to Baker Tilly, the company had a “significant deficiency” in internal controls, including a number of undocumented credit card approvals and vendor payments.  It also discovered that for the past few years, workers had not been properly reconciling the books with bank statements.

TIES’ new chief financial officer, Denise Sundstrom has announced that a team has been appointed to sift through the problems and “a lot of them were fixed.”  She does not believe the same issues will appear in next year’s audit.

A new policy has been instated that will make sure that TIES hires completely based on an applicant’s qualifications and skills, in addition to ensuring that employees are not supervising family members.

Schweizer had previously had her son and daughter under her employ, in addition to allowing her niece to use the event center without having to pay for it.