THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, December 3, 1995 TAG: 9512030050
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY ALETA PAYNE, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Long : 167 lines
Former school Superintendent Sidney L. Faucette is ``not in the business of pointing fingers,'' he said by phone on Friday.
But in his report on the Beach schools' financial system, Faucette blames the district's $12.1 million budget shortfall on the creation of a board budget review committee, inaccurate information from his finance staff, and city officials and their finance system.
``I never did have faith in the City's financial system and never will trust a control system which pre-empts the superintendent, chief financial officer, or internal auditor from direct budget oversight,'' he writes.
Faucette gave his 64-page report last week to the School Board in Gwinnett County, where he has worked since leaving the Beach this summer. The board in the suburban Atlanta school district has urged Faucette to clear his name.
``I pray that this will provide you with the information needed for informed public discussion in Gwinnett County,'' he writes.
On Monday, a special grand jury will begin scrutinizing the finances of the Virginia Beach schools. Commonwealth's Attorney Robert J. Humphreys called for the grand jury investigation after an external audit showed the district's budget document was essentially useless because of miscalculations of revenue and expenditures and transfers of money between line items. But the audit left many questions unanswered.
Faucette's report provides his most comprehensive analysis of where the finance system in Virginia's second-largest school district went awry.
``Since I was not contacted by either governmental agency or the external auditor and because the work of an investigative grand jury may not become public information, the time seems appropriate to share my thoughts with the people of Gwinnett County on the financial situation in Virginia Beach.''
In comments and in his report, Faucette said the establishment of a board budget review committee prevented him from carrying out a key role in the district's financial system.
In his report, Faucette said the committee was charged with overseeing the financial management of the school system, reviewing all budget transfers and recommending all financial reports. He did not receive the information, he said, until after the committee had already decided whether to recommend its approval.
``I couldn't get into the loop before it went to the Budget Review Committee,'' he said. Faucette also said he sought a seat on the committee for himself, his designee or the division's internal auditor but was unsuccessful.
The budget committee was dissolved after Faucette left, but two board members who sat on the committee, Ulysses Van Spiva and Tim Jackson, have said that Faucette greatly overstates the powers and authority of that committee.
Spiva said the committee had ``no control functions'' over the budget and did not set policy. Jackson said the committee did nothing to cut the superintendent out of the loop.
Faucette said he was not placing blame on the budget committee members, because they used the information provided them by the school's finance department in their recommendations.
``The information they received was identical to the information I would have received,'' he said. ``It's embarrassing to me . . . that I wasn't able to get the good information.
``Whether the board perceived it as my being involved or not . . . what was done cut me out of the control function the superintendent usually has in the budget administration process.''
Faucette credits board member Joseph D. Taylor, who served on the budget review committee, and board members Susan Creamer and Robert Hall for pursuing budget information, but writes that responses to their inquiries were not always accurate or timely.
Faucette does not address in his report why information from a December 1994 report by then-internal auditor Kevin A. Jones, which anticipated many of the issues raised in the external audit, was never brought to the attention of the board as a whole.
The internal audit report, which Faucette saw as a member of the board's audit committee, is ``typical of my concerns throughout my four years as superintendent,'' he wrote.
Faucette said and wrote that he was convinced when he left the school system that it would end the budget year with a surplus because of spending restrictions he'd ordered. Had he gotten sound information, the situation would ``absolutely'' have been different, he said.
``I would have personally led whatever charge it took'' to bring the budget in line, he said.
Faucette declined to name individuals responsible for the inaccurate information, citing only the school system's financial staff.
``I don't think they were trying to provide us with bad information,'' he said. ``I think there are all sorts of flaws in the financial system.''
Faucette first alerted the board in December 1994 that the division faced a potential shortfall, and he put spending measures in place to rectify the situation. In mid-April, when it appeared that the finances could not escape disaster, Faucette implemented rigid budgetary restrictions divisionwide.
At that time, he has said, Faucette gave then-deputy superintendent James L. Pughsley ``oversight'' of the budget, a claim which Pughsley has denied. Pughsley became interim superintendent in July and is one of three finalists for the permanent job.
Faucette said Pughsley was given control over requisitions to make sure the division stayed within strict purchasing guidelines.
``The main thing was to make sure we didn't get any `maverick requests,' '' Faucette said. ``I wasn't asking him to be a budget director or a finance director.''
Faucette went on to praise Pughsley, saying nothing that has transpired would lead him to question Pughsley's leadership.
Pughsley could not be reached Saturday afternoon for comment.
The city receives perhaps the most sustained attention in Faucette's report.
``Whenever City staff felt school revenue estimates were under or over stated, they adjusted them in the budget submitted to City Council.''
City Manager James K. Spore declined to comment until he had seen the report.
``I think it would be more responsible that way,'' he said.
Spore did say that city leaders repeatedly questioned school officials about federal revenue estimates that were much higher than the district traditionally had received. ``We questioned them on their numbers. They went up to D.C. to verify them and came back to say they were correct.''
Faucette goes on to write that the city's computerized financial system was not ``school-funding-friendly,'' and that consultants had told district officials that it was not sound for school use. He writes that efforts to get the system changed were unsuccessful.
``The school system was not in control of this project and still suffers from an unfriendly system,'' he writes.
City Finance Director Patricia A. Phillips agreed that the system is not the best, but it works for the city and it has worked for the schools for 18 years.
``It's true it doesn't have a lot of bells and whistles, but it works,'' Phillips said. ``The integrity of the data is reliable and has always been reliable.
``Any system has got to be built on a solid budget . . . and it's got to be based on setting priorties with the use of your money. And no computer system will give you that.''
Faucette also said that he is concerned about the way in which some information is being ``used against the School Board'' in light of what he considers the city's advance knowledge of it.
``The City staff had 100% access to every financial transaction of the school system from time of commitment to actual payment, and had total access to revenue stream, from budget development and adoption to implementation and final audit,'' he writes.
Phillips agreed that the city has access to the school district's financial figures, but its knowledge does not go beyond the numbers.
``We see numbers, we don't know what they're for,'' she said.
``We were processing checks,'' Spore added. ``They were supposed to be doing the substantive review.''
Under state law, the City Council must appropriate money for the school district but has no control over that money once it is handed over.
City leaders have said they repeatedly asked top school officials, including Faucette, about warning signs of financial troubles and were repeatedly told everything was under control.
``We were reminded of the fact that they're a separate entity and that they would take care of their budget,'' Spore said.
Faucette's report comes at a time when Gwinnett officials are urging him to speak out.
``I can't wait to get this behind us,'' Gwinnett board member Dan Seckinger said last week. But Seckinger emphasized that he remained very confident in Faucette.
``While he might make a good scapegoat, the problem is right there at home,'' Seckinger said.
For his part, Faucette writes at the end of the report to his new board that perhaps he trusted those around him too much.
``I am not trying to deflect attention from my responsibility for the performance of people with budget developement or control responsibilities,'' he writes. ``I pray that we can soon get this issue behind us. I will continue to work hard to deserve your trust and support.'' MEMO: Staff writer Karen Weintraub contributed to this report. ILLUSTRATION: Color photo
Faucette
KEYWORDS: VIRGINIA BEACH SCHOOLS BUDGET by CNB