Letters from auditors Grant Thornton reveal that the Langley School District did not take immediate steps when it was warned to close gaps in internal controls.

Other information reveals that finance department staff failed to inform superintendent Cheryle Beaumont and former secretary-treasurer Peter Greenwood of the conditions which allowed accounting errors to occur. These led to multi-million dollar overspending by the district, all of which will have to be repaid to the Ministry of Education.

Obtained by The Times, the Grant Thornton correspondence relates to the international chartered accountants and management consultants’ audit, which identified shortcomings that were not corrected.

In the spring of 2009, independent auditors Deloitte advised the board that instead of an anticipated surplus of more than $250,000, the district had overspent its budget by $4.8 million.

A more detailed examination of the books showed overspending of millions more.

The final debt to be repaid is $8.2 million.

Deloitte found that the district’s finance department was aware of several conditions which caused the errors, but did not report them to either Beaumont or Greenwood.

The overspending was the result of accounting errors which began in the 2007-08 school year and continued in the 2008-09 school year, two and three years after inefficiencies were first brought to the district’s attention.

Greenwood announced his retirement in February, three months before the board of education was made aware of the errors.

Deloitte blamed, in part, a computerized accounting system that was outdated and not capable of carrying out the checks and balances necessary. It recommended new software.

In its Sept. 12, 2008 letter, Grant Thornton wrote: “It is management’s responsibility to weigh the costs of implementing controls against the benefits that the controls will achieve.

The purpose of this letter is to provide you with the information related to the identified risks so that you can make the necessary decisions. Observations not addressed from the prior year have been repeated to allow management to challenge past judgments in the current operating environment.”

The letter noted, but did not specify, “some areas where controls could be tightened.”

In June, 2006, Grant Thornton noted that the IT manager, who is involved in the day-to-day management of the school district’s critical systems, has the ability to perform programming functions.

“This constitutes improper segregation of duties and the IT management function should be segregated from the programming function,” the letter stated.

Wayne Braun took over from Greenwood on Aug. 17. On Wednesday, The Times asked Braun if it is possible that, had the district taken Grant Thornton’s advice, the mistakes which led to the overspending could have been avoided.

Braun said: “That’s a good question, if we knew what the advice actually was.

“The letter was prescriptive. They don’t explain what the shortcomings were or what some solutions were to rectify them. They leave that up to the board and management how they are going to do that. They suggest findings, not solutions.”

He continued: “Since Aug. 17, internal controls have been tightened tremendously. My assistant (assistant secretary-treasurer Tally Bains) and I have put in place internal controls to mitigate this ever happening again.”

On Grant Thornton’s observations about updating software, Braun said that accounting software must track budgets versus actual spending “to ensure we are on track. We have modified the software tools and we will look at upgrading software as required. We have not done it yet.”

Asked if the school district had, at any point before the deficit was discovered, taken any of Grant Thornton’s advice to tighten controls, Braun said: “I would say minimally, until August 2009. There were internal controls, but the question is, where they monitored? I can’t speak to them.”

The Times asked Braun about changes in the IT department. He said: “We are in a better place today to make sure that there is proper segregation of duties in the IT area.”

International auditors Deloitte, hired by the district to investigate how and why the massive debt accrued, “has confidence in the staff that is now in place,” Braun said.

The Langley Teachers Association has requested a copy of Grant Thornton’s letter for the 2008-09 year, but Braun said it will not be released because it is for district management only.