Categories
Technology

Payroll system conversion horror story

Converting their payroll system has resulted in some serious errors to the tune of greater than $1.5 million for the Fort Worth (Texas) school district.

The school district overpaid employees and former employees at least $1.54 million, according to the [internal] audit. It also found that the district’s payroll system lacked proper controls, was cumbersome and inconsistent, and included manual paper entries that led to human error.

Aside from the poor conversion, it doesn’t sound like the new system is all that great if it requires manual entries. I’m assuming the entries are needed because the payroll system doesn’t interface with their general ledger system. Additional review controls over the process between systems is required in that case.

Some trustees are seeking an independent audit of the problems to get more assurance that fraud wasn’t a factor and that all the issues have been resolved.

[Trustee Christene] Moss said she wasn’t comfortable with parts of the report in which the [internal] auditors could not determine why various issues happened.

Yeah, I’d be concerned about that too! As well, the auditors aren’t certain that all the overpayments have been identified and fixed. I think these are the main reasons why an independent audit is needed. The situation calls for a specific engagement looking at the system conversion process and subsequent issues.

Board President Ray Dickerson reiterated that he didn’t think there was a need for a costly external audit. He said controls will be put in place.

[…]

Dickerson said the problems that were found are typical in such a transition.

“No matter how well you plan and train, once you flip that switch, you’re going to find things you didn’t know,” he said.

Uh, not really dude! And certainly not $1.5 million worth of “things you didn’t know” (on a monthly average payroll of $41 million)!

As a not inconsequential footnote, the conversion to a new system was required because the old system’s vendor was no longer going to be supporting it. A quick search for “open source payroll software” turns up many options which will prevent vendor lock-in in the future.

Update: Another story, this one in the Fort Worth Weekly, has more details about the internal audit’s findings and the attempts by the district to have some former employees repay the erroneous amounts.

Categories
Accounting

Improving education through vouchers

Government control of education is accepted without a second thought by most citizens of our society today, but there are growing ranks of those who believe government should have a hand only in financing education, and not administering it.

This idea, that a government could fairly finance education based on a voucher system, is often at the heart of any current educational funding discussion. An educational voucher system increases the satisfaction and participation of parents in their children’s education. Competition encouraged by a voucher program spurs improvement in public schools.

Equality of access to institutions improves dramatically with a program targeted at low-income children. Finally, in a democratic society like ours that is the champion of the modern free enterprise system, it simply does not make sense to deprive our children of the benefits a public market in education would provide.

Opponents of a voucher system voice many arguments to defeat the voucher discussion. They claim a voucher system results in schools that are no more effective and no more efficient than public schools. They claim that top students are chosen to attend private schools with voucher aid and it results in “cream-skimming” of the best and brightest out of the public system. They claim that vouchers drain money from the public system as well. Finally, it is argued from a moral high ground that to profit by educating our young people is deplorable. Their arguments are misguided and short-sighted.

Vouchers are, in essence, a government subsidy given to parents to fund the cost of private education. In what is widely regarded as the origin of the voucher movement, economist Milton Friedman argues in his 1955 essay that “a minimum level of education” should be funded by vouchers to be spent by parents on “approved educational services.” The role of government “would be limited to assuring that the schools met certain minimum standards, such as the inclusion of a minimum common content among their programs” and their previous role as providers would be reduced. This was a somewhat revolutionary idea in a system whose basis up to this point had been accepted as unchangeable.

The power of vouchers is not limited to reducing the role of government in education. Vouchers targeted at low-income urban children are currently being used in small-scale programs in Milwaukee, Cleveland, and Florida. Vouchers have long had an “unappreciated intellectual pedigree among reformers who have sought to help poor children and to equalize funding in rich and poor districts.”

The government of Ontario also recently announced a controversial tax credit plan similar to a voucher plan that would reimburse the parents of children currently in private schools. The voucher movement is gaining acceptance and support will continue to grow in the future.

One of the main advantages of a voucher system is the increase in parental satisfaction and participation that results. Parents who are allowed to choose the school their child attends generally feel more engaged in their education and empowered. Communication between schools and parents will increase in a free choice world as “schools will have to market themselves to potential buyers and to maintain enrolment through better communication.”

Choice is paramount to people in our society today. Choice is the backbone of the free enterprise economy we live in. The ability to choose where we buy our gas or groceries is the cornerstone of our social structure. These rather pedestrian choices we take for granted have transformed choice into a value in and of itself. Furthermore, “the instrumental benefits of choice may not always be uppermost in our minds.”

The simple act of choosing seems to be good for us. Having a choice in something like our children’s schooling “affirms our autonomy and our fundamental dignity as human beings.” Parents of children in voucher programs feel better about their child’s education, if only for the simple fact that they had the opportunity to choose.

It has also been shown that voucher programs actually improve public education as well, through competition. This, of course, is one of the aims of the public market, and the “operating mechanics of the voucher system reflect a marketing principle.” Through competition, schools that are not efficient compared to others lose students and thus are forced to improve and increase their enrolment, or cease to exist. It has been shown that “even partial subsidization of private schools had a competitive impact on neighbouring public schools, where students’ marks rose by an average 8%.”

Voucher opponents often decry vouchers on the basis that competition will not improve public schools. Sweden operates the world’s most robust and wide-ranging voucher program and a recent study showed competition from independent schools “improves both the test results and the grades in public schools… The improvement is significant in both statistical and real terms.”

This is a convincing rebuttal. The evidence suggests that vouchers have the ability to not only improve the voucher students’ education by giving them access to better schools, but also the education of students who stay in public schools.

The voucher programs currently in practice in the United States are targeted specifically at low-income students, in an effort to improve equality of access to quality education. In large urban centres, public schools are often under-funded because the system is based on property taxes in the U.S. Suburban parents want to “protect their physical and financial exclusivity against the threat of school choice,” and there is no question the system of public school finance “creates dramatic disparities in the resources available to educate children.” Suburban districts end up having more dollars per pupil in education funding than urban districts, but because of the value of the property being taxed, they have lower tax rates.

Indeed, the goal of most voucher programs implemented today is to remedy this situation. It is not surprising then, that minority parents are “especially concerned about the public schools, with a majority (68%) now in favour of school vouchers.” Low-income families “have expressed great satisfaction with their new schools” , and although performance results are mixed, there is no doubt that targeted voucher programs help poor children get an educational opportunity they would not otherwise have received. Limited voucher programs allow the reconciliation of local autonomy with some measure of racial diversity and educational equality.

Arguments against vouchers in education more often than not come from teachers unions. In the U.S., support for voucher programs is entirely the duty of Republicans, because the teachers unions have the ear of the Democratic Party. A larger voucher program to test its effectiveness has not been implemented mainly because of teachers, and this is an argument they use against vouchers. They claim that “trials have been so isolated that their results are unproved.”

This is, however galling, still true of vouchers. They are largely untested, with only a few small-scale programs scattered around a country as large as the U.S. Performance results from these test programs have so far been mixed. Minority students, such as African-Americans, have “scored significantly higher on standardized tests than comparable students who remained in public schools.

Interestingly, there is no evidence that vouchers have improved the academic performance of other ethnic groups.” From an objective viewpoint, these mixed results are not at all upsetting. There is “little in the way of detectable gains for whites” but urban minorities perform better than their counterparts in public schools. If the only effective advantage of vouchers is a reduction of the divide academically along racial lines, there is merit to the idea.

Opponents of vouchers claim they encourage “cream-skimming”, that is the selective removal of the best and brightest students or the most active parents’ children from the public school system to place them in private institutions, with of course the help of public funds. This is mainly a problem with universal voucher programs, because targeted programs go to low-income students on a more equitable, and sometimes random, basis.

In the Cleveland voucher program, there were more eligible students than spots in schools, so voucher students were chosen in a random lottery. The notion of cream-skimming due to vouchers is still up in the air, since there are not any programs of large enough scale or universality to test this theory. The idea that private schools would reject troubled students is unproven as well, especially since most students of this nature who are forced out of the public system are taken in by the private. In targeted voucher programs cream-skimming is avoided.

Teachers unions have fought the implementation of voucher plans by arguing they are unconstitutional. The U.S. Constitution specifically states that church and state are to be separated. In the Cleveland program, parents overwhelmingly used the vouchers for religious schools. Teachers unions challenged the voucher plan under the constitution and twice won. The third appeal was to the Supreme Court and it ruled that public funds flowed to religious schools “only as a result of the genuine and independent choices of private individuals.”

The ruling made sense. After all, there has been no constitutional challenge for federal student loans when they’re used to attend Notre Dame. If magnet and community schools are taken into account as well, 37% of parents chose nonreligious schools in Cleveland.

However, as many as three dozen states have laws separating church and state in their constitutions that are even stronger than the federal constitution, some “specifically ban states from giving money to religious schools.” The choice is for the parents to make regarding which school their child attends with the aid of vouchers. If that choice happens to be religious, then it should be accepted as the will of the people.

It has been argued that voucher students drain money away from public schools when they leave and their voucher money goes to a private school. The best example of a large voucher program is the Cleveland plan. The $10 million it provides to voucher students is additional funding for education. More than $600 million goes to public education in Cleveland, and that figure did not change with the introduction of vouchers. If and when broader voucher programs are implemented, chances are schools will “receive the resources their enrolment merits.”

The argument that students take money away from the schools when they leave does not hold up under closer inspection. It has also been argued that when bright students leave the public system, the ‘peer effect’ causes the students left behind to perform more poorly. This ‘drain’ on the public system, however, is far from conclusive.

Voucher foes also point to capacity as a sticking point. “Public schools in the U.S. serve 46 million K-12 children, private schools six million.” They argue that there are simply not enough schools to accommodate a lot of students leaving the public system. The law of supply and demand tells us that if the demand is there for additional educational institutions, the supply will catch up, and probably quicker than it would if publicly controlled. Granted, there are not going to be additional schools overnight, but in a couple years the supply would be there to match demand.

According to Milton Friedman, “You can’t think of it in terms of the existing stock of schools. There will be a flood of new schools started.” It is silly to think that there will be no schools available if there are hundreds of students with government money looking to spend.

In the end, we are left with the critics’ most desperate argument. They assert that it is morally wrong to profit from educating our children. This is how they view private schools – as profit vehicles. But education is already big business, for textbook manufacturers, janitorial and food services companies, software companies and building contractors. Business will always profit from education, and this will not change with the adoption of a voucher program. What will change is who controls the flow of the cash, and who decides which businesses get to profit from education. This choice, will be the parents of voucher students’.

Widespread use of vouchers in education is far from becoming a reality. With opponents as rich and vociferous as teachers unions holding sway over the Democrats in the U.S., it can seem almost hopeless. But the voucher movement marches on, amidst naysayer and teacher propaganda. “The simple fact that the voucher experiment has been allowed to continue is an enormous victory in itself.”

Vouchers have a lot going for them. They increase parental participation and satisfaction with their children’s education. They lead to improvement in public schools through competition and market forces. They increase equitable access to education for minorities and poor children. Vouchers represent what has increasingly become a cornerstone of our democratic society: the right to choice. First, however, we must choose vouchers.

Categories
Auditing

What Enron meant to me

Enron burst into flames around January 2002. I was just starting my second semester at Brock University in the esteemed Bachelor of Accounting program when the Houston-based company went down.

What did this mean to a 19-year-old Canadian accounting student with no share holdings and no knowledge of the energy trading giant from Texas? Actually, a lot more than I’d ever have imagined.

From then on, every single accounting or even business class I took touched on Enron in one way or another. I don’t think another class of accounting students got such an in-depth education in various types of off-balance sheet financing.

The business ethics course I took during the balmy summer of 2003 was dominated by Enron. Sure, there were other cases. Eli Lilly and Union Carbide spring to mind. But Enron was dominant. And, as accounting students, Arthur Andersen’s complicity in Enron’s deception was also a focal point in class discussions.

We studied Sarbanes-Oxley, the comprehensive legislation enacted in the wake of Enron and aimed at preventing a repeat, as it occurred. It’s primary focus is on documenting controls. At the time I probably knew more about Sarbanes-Oxley’s requirements than the people it was going to affect the most – management at American companies.

Right around that time the reference in the CICA Handbook to “assuming management’s good faith” was removed, mainly to avoid the legal liability issue that such an assumption may give rise to in the event of another Enron.

Enron changed a lot. Accounting was thrust into the spotlight in terms of further government regulation, the Big Five became the Big Four accounting firms, and nothing will ever be like it was.

Categories
Profession

School of Accountancy through July 4

Posting may be infrequent over the next few weeks as I focus on the School of Accountancy, which started yesterday and doesn’t end until July 4. It’s being held at York University‘s Keele Campus in North York (Toronto).

It consists of classes every day, two practice exams this Friday and the following Friday, and the final exam at the end. I’m not the only blogger who’s there either!

The School of Accountancy curriculum provides for the development and enhancement of required CA competencies through integration and application of technical knowledge. It is also fundamental to the development of pervasive CA qualities (ethical behavior, personal attributes, professional perspective and judgment) and specific CA competencies required for the UFE and the practice of public accounting.

Case studies addressing professional-level competencies and reflecting real business scenarios, likely to be encountered in practice, are used extensively. Students experience a significant amount of work in small groups, including presentations, throughout the three-week period – there are no lectures at the School of Accountancy.

So far there have been minimal presentations. They’ve been limited to just sharing the results of small group discussions, and haven’t required standing up in front of the class. My seminar leaders may be going easy on us though, it may be different in other seminars.

There are around 1,100 CA students here, and we’re broken up into groups of about 30 for seminars, and small groups of 5 within the seminars for group work on the cases.