An independent auditor has flagged nearly two dozen "material weaknesses" in the Prince George's County school system's financial controls, citing wage overpayments, unchecked time sheets, bidding and contract irregularities and more than $900,000 worth of missing school equipment.

Those revelations emerged from a long-overdue fiscal 2004 audit filed this week with the Maryland State Department of Education and obtained yesterday by The Washington Post.

Despite the numerous warnings about lapses in internal controls, county school officials cheered a central finding of the audit: Their books for the fiscal year that ended June 30, 2004, were at last certified by the accounting firm BDO Seidman LLP. The auditors' opinion found that the Prince George's system "fairly, in all material respects," showed $1.36 billion in revenue and $1.27 billion in spending.

That opinion set the stage for the state to release $40 million in aid withheld from Prince George's schools since last fall because of missed auditing deadlines. "It's imminent," said a senior state education official who spoke on condition of anonymity because state schools Superintendent Nancy S. Grasmick had not yet announced a decision.

The audit originally was due Sept. 30, 2004. In November, the state started freezing payments to Prince George's, the only school system of 24 statewide to have funds frozen in the past year under a state law requiring timely audits. Failing to get the money -- a real threat absent an audit -- might have forced significant cuts in the coming school year.

Beatrice P. Tignor (Upper Marlboro), chairman of the county Board of Education, called the auditors' opinion "a blessing." Of the 23 material weaknesses identified in the audit, Tignor said: "Those are problematic. But they are reparable."

Material weaknesses are conditions that expose an agency to heightened risk of error or fraud. There was no indication that auditors found fraud. But portions of the documents, especially a 41-page memorandum on faulty financial controls, painted an unflattering picture of operations in Maryland's second-largest school system during a year of leadership transition.

In June 2003, Andre J. Hornsby replaced Iris T. Metts as Prince George's schools chief. He inherited an operating budget deficit of up to $82 million. Hornsby spent much of his first year plugging that gap and seeking to fix a new, bug-prone computerized payroll system.

The audit showed that Hornsby succeeded in the first task, but problems apparently abounded with payroll and related operations.

Auditors, citing school system reviews and their own work, found that wage overpayments increased with the new payroll system, that some teachers were paid the wrong rate, that some former employees were paid for as long as a year after termination and that salary adjustments often were backdated.

In addition, auditors found many time sheets processed without supervisory or managerial approval.

In school programs, the auditors identified accounting problems with Head Start money for educating disadvantaged youngsters, finding no supporting documents for a $582,246 entry in a cash receipts journal. They also found that funds for campus activities lacked adequate controls, citing checks issued payable to "cash" and $927,929 in missing equipment.

In collections, the auditors found that the school system failed for more than two years to bill the county government for $1.7 million in owed money.

In purchasing, the auditors found a solicitation for a contract worth more than $15,000 that was not properly advertised in a newspaper. They also found it was "common practice" for the system to skip writing formal contracts and rely instead on purchase orders. The auditors recommended ending that practice. They also noted two transactions done outside the system's normal procurement process, pointing to a report issued in June by Huron Consulting Group Inc. that spotlighted ethical controversies under Hornsby.

Hornsby quit as schools chief in May, denying wrongdoing, and Howard A. Burnett was named interim chief of the 136,000-student system.

Burnett attached a statement to the audit that praised the "professional competence" of school system staff who aided the auditors. In an unsigned passage, school system officials also wrote: "We concur with [the auditors'] findings and support their recommendations, with alternative strategies to address the findings possible in some cases." They promised "detailed action plans" by Aug. 31.

The audit's conclusion ends a tortuous chapter for the school board, which fired its first auditor, KPMG LLP, in February amid a dispute over the pace of the work. BDO Seidman, which began in March, frequently had difficulty getting answers to basic questions.

Lost or limited data, the firm wrote, "caused inefficiencies and errors throughout the audit process."