Auditor slams Seattle's school payroll system

Seattle Public Schools might have been able to prevent a teacher's embezzlement of nearly $180,000 by making a simple change to its payroll system, according to the Washington State Auditor.

Last fall, district officials discovered a Nova Alternative High School teacher allegedly adding overtime to her signed time sheets — something she had been doing since 1992, according to the district. Of the $179,000 the district believes she stole, $120,000 was in the past five years.

The state auditor recommended in 2001 that the district cut off employees' access to their signed time sheets, records show. The state made the same recommendation in 2002. And in 2003, 2004 and 2005, audits continued to warn that the district's shoddy payroll system put funds at risk. Auditors pointed out smaller losses: $1,800 in 2003-04, $12,000 in 2004-05.

State Auditor Brian Sonntag said the 2005-06 audit of district operations follows repeated warnings from his office that embezzlement was possible.

"We have identified weaknesses before," he said. "They hadn't been addressed, and now we're reporting a loss of public funds and a misappropriation."

The Nova teacher resigned last year and is now the subject of a Seattle Police Department criminal-fraud investigation.

The audit also found that the district paid a middle-school teacher $8,387 for time the teacher did not work, and paid an employee $6,284 for three months when the employee should have been on unpaid leave. Several other employees were overpaid by a few hundred dollars because of math errors and misreporting.

School district spokeswoman Patti Spencer said the district knows there is a problem with its payroll system and has had "a heightened awareness" of the problem. But, she said, "no specific additional procedures have been put in place." After time sheets are signed by supervisors, they are turned into the payroll department by an administrative assistant. Spencer said she wasn't sure how the Nova teacher had access to her signed sheet. This fall, the district will launch a new computer system that links its payroll and financial systems, and it is hiring an internal auditor, reorganizing its human resources and payroll departments and training managers to better monitor their budgets.

In addition to the payroll problems, the state found the district has been counting some part-time students as full-time. Since the state and federal governments fund districts on a per-student basis, the miscounts allowed the district to collect about $200,000 more than it should have in the 2005-06 school year. The district collects nearly $200 million a year to serve its 46,000 students.

Despite the findings, Spencer said the district is in good financial shape. She pointed to an audit of the district's financial statements over the same time period. For the second year in a row, that report found no problems. Standard & Poor's and Moody's both recently raised the district's bond ratings — another sign of the district's financial stability, Spencer said.

The district agrees with Sonntag's findings, Spencer said, adding, "However, overall we know that the management of our finances ... is very sound and significantly improved from five years ago."

Emily Heffter: 206-464-8246 or eheffter@seattletimes.com