Ledyard - The Board of Education has begun drafting a policy to govern the district's student activity funds, for which Policy Committee Chairman Gordon Strickland said guidance has until now been "nonexistent."

The draft of the new policy, titled "School Activity Funds" under the category of Business and Non-Instructional Operations, is a revision of a 10-year-old policy of the same name that will also replace two other policies: Monies in School Buildings and Activity Funds Management.

Student activity funds in each of the district's schools support everything outside of the regular education budget, from school portraits and driver's education to clubs, sports and class fundraisers. Donations can be made to them, and at the high school level, the total pool of money is in the $100,000 to $200,000 range.

Under the current policy, there is no process for reports to be generated and passed along to the Board of Education. There are very few specifics outside of the fund's use for the "educational benefit of students" and its maintenance by a designated treasurer.

Superintendent Cathy Patterson said Wednesday that the current policies are outdated.

The first draft of the revised policy, which board members read for the first time Wednesday night, is about seven times longer - and much more detailed - than the original. It requires detailed records of all transactions, weekly deposits of monies collected, and encourages checks rather than cash deposits.

It also grants new authority to school district Business Manager Bill Merrill, who, with the principals and superintendent, will develop written procedures governing collection, deposit and disbursement of money for each school and establish a record of who, when, and why it was collected or disbursed. The procedures will also specify employees who have the authority to sign checks.

Merrill will also now "periodically and randomly" audit each school's fund to check that it is being "properly administered."

The policy prohibits the use of funds for accommodation, loan or extension of credit to any person and requires that copies of an annual financial statement for each school's fund be provided to the Board of Education in August, as well as the results of an annual, independent audit.

State law mandates auditing of such funds, which Strickland said the district had complied with - but it has been done as part of a larger town budget audit, and then only a "cursory look."

"It just wasn't enough," Strickland said.

The introduction of a revised student activity fund policy comes two months after the Board of Education decided to conduct a forensic audit of Ledyard High School's student activity fund. At its Feb. 19 meeting, board members voted to pay up to $12,000 to public accounting firm BlumShapiro to conduct the audit.

Patterson said in February that she has "some concerns about practices and procedures we use to manage the account," but declined to elaborate further.

The board cited possible legal action "to protect school district's rights" as its reason for going into executive session before this vote, inviting Ledyard High School Principal Amanda Fagan and Human Resources Administrator Donald Steinhoff.

At the time, school board Chairman Julia Cronin declined to comment on whether legal action was involved. Cronin could not be reached for comment this week.

Neither the audit nor the policy revision is the result of the other, Strickland said, adding that the board would not have had to conduct the forensic audit if the new procedures had already been in place. The policy committee had begun working on this policy change about a year ago, he said, putting it on hold for budget season.

Strickland said he expects the audit to be completed within the next month or two, and the results could provide more guidance to the board on how to revise the policy.

Strickland said these steps are part of a larger effort by the board to become more involved in the school district's financial operations and have more oversight.

Strickland said there have not been any issues with the student activity funds "for the most part." The new policy will aim to prevent them.

"Sometimes when you go to look at records, it's not always easy to figure out what's going on from the records because there's not been a standard," he said. "We're setting the standard."

The board will vote on the new policy at its next meeting on May 7.

a.isaacs@theday.com