A cash payment for teacher retention draws auditor’s interest

MARYSVILLE — A $400 payment to every teacher in the Marysville School District has caught the attention of state auditors concerned it could be viewed as a gift of public funds because the school board failed to spell out precisely what the money was for.

They also raised concerns about a program offering employees up to $2,000 as an incentive to give the district early notice of their plans to retire.

Auditors targeted those incentive payments in a May 19 letter to the school board that accompanied the agency’s review of the district’s financial operations and record keeping, including payroll, contracts and purchases, in the 2019-20 school year.

Overall, the district received a clean audit as the agency concluded the operations “complied, in all material respects, with applicable state laws, regulations, and its own policies, and provided adequate controls over the safeguarding of public resources.”

But in the separate management letter, auditors drew a bead on how the district handles memorandums of understanding (MOU) used to amend collective bargaining agreements.

They noted that while the board approves the collective bargaining pacts, it lacked policies or procedures for approving MOUs, which can sometimes contain substantive changes to the larger agreements.

“As a result, the District does not have adequate controls to ensure that MOUs are appropriately approved in accordance with state law and the Board’s expectations,” the letter concluded.

Two situations called out in the letter deal with cash incentives for employees.

One involved a provision in an MOU between the district and the Marysville Education Association in October 2019. It contains a provision for a one-time payment of $400 to each teacher in April 2020. The association represents roughly 720 instructors.

“The payment was made in 2020 and was for the purpose of incentivizing continued work in the Marysville School District at a time when there was a teacher shortage and incentives from regional and national districts to fill open positions,” Jodi Runyon, spokeswoman for the school district, wrote in an email.

The Board of Directors did not discuss or formally approve the retention payment in a public meeting. However, the intent to agree to the changes for those purposes was shared with board members, Runyon said.

The district made $288,000 in payments, according to auditors.

Incentive programs are allowable but must be set up beforehand with guidelines on how employees can qualify to receive them, said Kathleen Cooper, a spokeswoman for the state auditor’s office.

In this instance, to avoid the appearance of a potential gift of public funds prohibited under the state Constitution, the district needed to establish clear criteria for awarding them that would show employees went above and beyond their normal duties, she explained in an email.

The second matter stemmed from an MOU in January 2020 with all labor groups regarding a one-time “retirement incentive” stipend. Employees who submitted a formal letter of retirement by Feb. 14, 2020, could receive up to $2,000, under the deal. Employees working less than full time would receive a pro-rated amount. About $70,000 was paid out last school year, auditors found.

The retirement incentive is an annual offering. It is beneficial to the school district to have early notification for planning and budgeting purposes, Runyon said.

Districts face a May 15 deadline to notify teachers if they could potentially be laid off. Knowing early who is going to retire could reduce or eliminate the need to send out those reduction-in-force notices, Runyon explained.

Auditors want the school board to adopt formal policies as to how the retirement incentive program will be run before offering it, Cooper said. Agency staff first raised a concern verbally at the end of the audit process last year. That put the district on notice it would be looked at this year, Cooper said.

The district is responding.

“We have a policy drafted that is under review by the policy committee prior to going to the Board of Directors,” Runyon said.

The intent of a management letter is to spotlight areas in need of improvement in the eyes of auditors. There are no penalties imposed, and it doesn’t detract from the clean audit issued by the agency, officials said.

The letter concludes with recommendations for the board to adopt policies for entering into and approving memorandums of understanding, and offering incentives.

“These recommendations are intended to bring awareness to the steps the district needs to take before offering the same or similar types of compensation,” Cooper said. “Whether they choose to continue these programs or not, our goal is to ensure they take the appropriate steps to ensure these programs and others are correctly authorized beforehand and in compliance with state law.”

Reporter Jerry Cornfield: jcornfield@heraldnet.com; @dospueblos