There were concerns about misstatements in the financial records and overpayments to former employees, however an audit of Southeast Arkansas College for the fiscal year ending June 30, 2011, found the school to be in compliance with relevant regulations.

There were concerns about misstatements in the financial records and overpayments to former employees, however an audit of Southeast Arkansas College for the fiscal year ending June 30, 2011, found the school to be in compliance with relevant regulations.

The Legislative Joint Auditing Committee with the Arkansas Division of Legislative Audit released its Independent Auditor’s Report for the 2010-2011 fiscal year Aug. 9, which is required to ensure that the financial statements kept by the educational institutions in the state are free of any untrue information.


The audit found that SEARK’s internal control system did not prevent, or detect and correct misstatements in the financial records that included classification errors totaling $2,304,656 listed in the Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets.

The audit found that the primary causes of the classification errors included: investments totaling $1,029,959 were improperly reflected as cash and cash equivalents; long-term investments of $1,035,334 were stated as short-term investments; purchases totaling $132,072 were not capitalized in accordance with the college’s policy; and journal entry errors resulted in overstating of accounts receivable and deferred revenue balances.

SEARK board of trustees chair Paul Bennett said in a conversation that the misstatements were the result of data being placed in the wrong categories.

“Because of the size of those numbers, it is concerning but the truth of the matter is that those are accurate amounts and we do have that money,” Bennett said. “It was just entered into the wrong field in a computer accounting program. I don’t think this will affect our day to day operations in any way.”

“This was most likely a miscalculation related to a turnover in staff,” Bennett said. “We feel that we have that corrected and that it won’t happen again.”

Bennett said that since the time period referenced in the audit, the college has hired a controller and authorized the hiring of a business manager to ensure that this sort of situation is not repeated again in the future.

SEARK president Steve Hilterbran agreed that the steps being put into place on campus should adequately address the shortcomings found in the audit.

“Besides hiring a new controller we also outsourced our payroll to Paycomm in order to take some of the pressure off of our staff,” Hilterbran said. “We had put off hiring a business manager last year to see whether the hiring of the controller and the use of Paycomm would meet our needs but now we have decided that we need a business manager to perform internal audits to make sure that we find problems and correct them. We want to hire someone as soon as possible.”

“We’ve got to do due diligence to make sure these problems don’t continue,” Hilterbran said.

SEARK submitted a formal management response to the findings which was included in the final audit report.

In its response SEARK noted the hiring of a controller Feb. 20, 2012, and said that the school is documenting workflow processes and training throughout the business office.

“Emphasis is being placed on completion of financial statements in a more timely and accurate manner in order to exercise due diligence in the preparation of the Notes to the Financial Statements,” the management response said.

Annual leave overpayments

The audit uncovered several overpayments made to SEARK employees whose employment with the college had ended.

“Upon termination of employment, the annual leave payout policy allows employees to be paid for unused annual, birthday, and holiday pay not to exceed 240 hours,” the audit letter to management says in part. “The president had accrued and was paid for hours in excess of 240, resulting in a $2,339 overpayment. During the 2012 fiscal year, the controller and director of physical plant received an excess leave payout resulting in overpayments of $503 and $2,067 respectively.”

Bennett said that the hiring of a controller and the creation of the business manager position should help to prevent this type of incident in the future.

“With regard to the excess pay for annual leave the controller who we have brought in is implementing new systems to ensure that this doesn’t happen again,” Bennett said. “The reason for the overpayments was a failure to adequately account for that time. The board authorized the hiring of a business manager to assist in updating all of our systems to make sure these problems don’t happen anymore.”

Bennett said that steps have been taken to recover the excess funds and that he believed they would be successful.

Hilterbran confirmed that steps are being taken to retrieve the money.

“We made a courtesy call to them to tell them that a form letter would be mailed to them asking for the overpayment amounts,” Hilterbran said.

Hilterbran said that the business office has already heard from former SEARK president Phil Shirley who said that he would be sending a check for the total amount that was overpaid to him as soon as he receives the letter from the business office.

Leadership assessments

“Essentially we are healthy with our processes,” Hilterbran said in summing up the takeaway from the audit report. “Essentially things are going well but we have areas that we need to strengthen. Whether it is with new electronic processes to stop human error or with the addition of new staff to relieve the workload so that people don’t miss things that they should catch.”

Bennett had similar sentiments.

“I think that the audit reflects that the college is in a strong financial position,” Bennett said. “We have not had to incur debt to finance the new buildings on campus. We feel like we are in a strong position as we move forward with the new administration building. I appreciate the work of the college in putting us in this financial position.”