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9486 in the collection
Lots of Missing Money in Dallas: District Ignored Auditors
As long ago as 1992, the state comptroller warned Dallas school officials that they had a problem.
Thousands of dollars in cash earned in part by students who sold candy or washed cars was disappearing, and there weren't sufficient controls in place to stop it.
But a key remedy prescribed in state efficiency audits in 1992 and 2001 still had not been carried out by June, when DISD officials became aware that at least $50,000 and possibly more than $100,000 in students' money was missing from Molina High School. District officials also said money might be missing from Bethune Elementary.
In both audits and in follow-up reports as recently as January, the comptroller's office said the Dallas Independent School District needed a system to centrally manage student activity funds, as well as a network of business managers to track the money.
Superintendent Mike Moses said last week that the new system was put on hold because trustees wanted to see whether principals would improve management of the funds on their own.
"There was just a discussion among all the board members," Dr. Moses said. "They just said, 'Let's wait a year and see if we can get the principals to do this.' And I didn't object to that."
He added that the district this year has begun to phase in a centralized system and tighter controls at middle and high schools, including Molina, and that the process was planned before the recent case.
"I have expressed concern in the last two years about management of those funds," he said.
School board President Hollis Brashear said the board did support a delay. But he said the superintendent has decided that it's time to centralize the funds.
"He [Dr. Moses] held off as long as he could because he wanted to keep the flexibility," Mr. Brashear said.
Larry Groppel, DISD's deputy superintendent for business services, said the situation at Molina probably would have been caught sooner if a centralized system had been in place.
"I think it would definitely have raised a red flag," he said.
Under the previous system, an office manager or designee at the campus would collect the funds and deposit them at the bank. Under the new system, daily deposits will be picked up by armored vehicle and taken to the bank. A weekly log will be submitted to the district treasurer's office and a monthly report sent to the Quality Control Department.
Unanswered questions
The district says officials at Molina noticed their money missing in early June. The case is being investigated by DISD's new police force and the internal audit department. So far, there have been no charges.
Two weeks into the school year, teachers at the west Oak Cliff school are still wondering what happened. So are the students.
Some of the missing funds were to be used for senior class activities such as prom. One teacher has said she's missing $17,000, which includes a $5,000 grant. The money belonged to a school dance team.
Ashley Downs, a 10th-grader at Molina, said students know little about what happened.
"They don't really want to talk about it," Ashley said of teachers and administrators. "Me and my friends have talked about it. We think that somebody might have taken it for themselves.
"Some teachers are trying to raise money to take the place of it."
The district has said it will replace the money after it is determined how much is missing and who is responsible.
On Thursday, Molina principal Linda Kimm was placed on paid administrative leave until the investigation is over. Ms. Kimm, who was a finalist for 2003 principal of the year, has not been accused of wrongdoing. But under district policy, the principal is responsible for overseeing the management of activity funds.
Ms. Kimm has not returned phone calls to the school.
The district hasn't given a definitive answer on whether money was stolen from Molina. However, Dr. Moses has said he thinks the findings will show money was stolen, based on what he knows. He believes the case will be solved soon.
Officials said Friday that a second investigation is taking place at Bethune Elementary. DISD spokesman Donald Claxton said the district won't release further information on the case, and officials at Bethune didn't return calls.
Dr. Moses said anyone implicated in the Molina case can expect to be charged. The district attorney's office will be brought in when the investigation develops suspects, officials said.
It won't be the first time DISD has filed charges for activity fund theft.
A history of problems
According to the comptroller's report released in June 2001, DISD had 26 cases of missing, stolen or unaccounted-for activity funds between February 1997 and May 2000. The cases, some still pending at the time of the report, totaled at least $127,000. Totals were not provided in seven of the cases, and the report lists no school names.
In 1998, five Dallas schools were investigated after more than $89,000 in activity fund money came up missing.
A former athletic director at Skyline High School, under suspicion when $52,445 disappeared, was indicted on charges of abusing his official capacity. A former secretary at Preston Hollow Elementary was indicted on felony charges of stealing about $4,000. The principal of Evening Academy was fired. So was an office manager at Spence Middle School.
Dr. Moses said no one has been fired over activity funds during his tenure, but he said sanctions have been taken against some principals and office managers for discrepancies. Dr. Moses said two other cases last year resulted in personnel action, but he would not elaborate, citing privacy concerns.
He said he warned principals last year that the district would manage activity funds from the central office if the process didn't improve. The warning came after a report for 2001 showed a 31 percent increase in irregularities that ranged from the pre-signing of blank checks to inaccurate financial reports. The number of such mistakes grew from 608 in 2000 to 794 in 2001.
School activity funds aren't small potatoes in DISD. An total of $15.8 million was received in fiscal year 2002, and $14.2 million was received in 2003, according to the district. The current activity fund balance is $6 million.
Two types of funds make up the activity fund. The first is for money generated from such activities as school pictures and vending machine sales. The second is for student activity money, raised by cheerleaders, student councils, bands and dance teams.
Lynn Dehart, principal of North Dallas High School, said that while he will support the district's position to centralize, he likes controlling activity funds at the campus level.
"It's a matter of the freedom to do things that you need to do," he said.
But Mr. Dehart said it's difficult to keep track of all that money, which can funnel through many subaccounts in a middle or high school.
"I've got a young lady that works with me, and I tell her every day, 'My life is in your hands,' " Mr. Dehart said.
Ms. Kimm, the Molina principal on leave, said in an April 2002 interview that maintaining activity funds is "a lot of work, especially at the high school level, where every organization has accounts."
Still, superintendents have been reluctant to take control of the funds away from principals and manage the money at the district level.
Leonard Grant, a vice president of the Dallas Council of PTAs, knows plenty about the district's activity fund system. The retired teacher and coach at South Oak Cliff High School was dubbed "candy man" for his success at fund raising.
Mr. Grant said it's common for principals to be possessive of activity funds.
"They want to use it at their own discretion," he said. "If it goes downtown, it will be tracked."
Comptroller warnings
In 1992, the comptroller's office noted "weak" controls over activity funds in DISD and recommended three steps. First was to establish a centralized system for accounting, banking and investing the money. The report said the district should phase elementary schools into the new system by 1993 and all other schools by 1994.
In a 1993 progress report, the district said it hadn't taken any of the steps.
"School activity funds are the responsibility of local campuses," the district told the comptroller. "DISD feels that central fund control reduces campus access and creates a logistical challenge and additional administrative costs."
The next comptroller audit was released in 2001, and five of 193 recommendations were related to activity funds. Steps the district has implemented include requiring two signatures on checks, a software system for tracking funds and rules holding principals accountable for accurate financial reporting.
But the district waited to carry out the fifth recommendation: Create a centralized accounting system at the middle and high schools and hire five area business managers to oversee it by January 2002.
Comptroller Carole Keeton Strayhorn returned to Dallas this past January for a follow-up and gave DISD high marks for completing 178 of her recommendations. She even commended tightened controls on activity funds.
However, Mrs. Strayhorn once again urged creation of a centralized system.
"This money continues to be managed individually at each school with limited controls," she said in a report.
District officials debated as recently as this year over whether they could afford five business managers to oversee the funds. The salary for each position is estimated at $46,313.
Varying approaches
The state leaves it up to Texas school districts to determine how student activity funds are managed, and Dallas wasn't the only district using a decentralized system before this year.
The El Paso and Fort Worth districts allow all campuses to maintain their activity fund records, while Houston uses a hybrid system in which activity funds for middle and high schools are run through the central office and elementary school principals are allowed to retain local control. San Antonio uses a centralized system for all schools.
Until this year, Molina had been allowed to manage its activity funds, including many subaccounts, at the school. An office manager at Molina, who resigned July 31, had the job of receiving the funds from program directors and making deposits to bank accounts.
The principal was considered "treasurer of the organization," with authority to appoint in writing one or two people to help supervise and maintain activity funds. The designee had authority to sign the school's checks.
As part of the comptroller's recommendations in 2001, activity funds were audited on a staggered schedule, with a goal to audit all activity funds at least once every two years. The audit selection is based on a risk assessment that includes looking at significant problems in prior audits. Molina's last audit was May 31.
This school year, the district has started to phase the middle and high schools into a system that runs through DISD headquarters. About 14 schools will use the system this year, with others to follow in the next couple of years, officials said.
Besides requiring armored vehicles and weekly deposit logs, the district plans this fall to hire three of the five business managers recommended by the comptroller.
DISD officials are confident the new system will provide better accountability. Dr. Moses said the district will decide later whether centralization is needed at the elementary level, which generally generates less cash.
Mr. Brashear, who represents the area that includes Molina, said he foresees further discussions on activity funds, and he imagines the superintendent will bring forward other recommendations. He will ask that the board be briefed on changes to the process.
"Over the years our internal auditor has conducted audits, and he has always brought back lots of deficiencies," Mr. Brashear said.
— Tawnell D. Hobbs
DISD was warned about tracking funds
Dallas News
2003-08-31
http://www.dallasnews.com/localnews/education/stories/083103dnmetactivityfunds.1983f.html
INDEX OF OUTRAGES
Pages: 380
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