THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, November 21, 1995 TAG: 9511210003
SECTION: FRONT PAGE: A12 EDITION: FINAL
TYPE: Editorial
LENGTH: Medium: 95 lines
What did they know and when did they know it?
Those questions, famous from the Watergate era, resurface now with regard to the financial fiasco of the Virginia Beach public schools. The Circuit Court's agreement yesterday to convene an investigative grand jury provides a proper forum for answering them.
The school system is $12.1 million in deficit from the '94-'95 school year. It faces a $6.6 million deficit for this school year unless planned budget-tightening trims it. These deficits are the legacy of a budgeting process that outside auditors just characterized as useless. But more than process is at fault here.
As the extent of the mess schools made of finances has become more clear, the public has repeatedly asked for the ``people'' audit that the school system repeatedly fails to provide.
Who made the seemingly deliberate budgeting decisions to so grossly overestimate revenues and underestimate ex-penses?
Who over-saw a budget process so bad that actual expenditures often bore little relation to budgeted amounts, and budgeted amounts little relation to actual expenditures?
How could top school administrators and board members not know? And how could those who did know not raise an unmissable alarm?
More than a few school officials must have known since last winter how poor the budget process was. The then-internal auditor told them. The school superintendent and the two School Board members who served on the board's Audit Committee and several top administrators received copies of a December 1994 report from internal auditor Kevin Jones detailing shortfalls and shortcomings of the '94-'95 budget. The same sort of errors, miscalculations and oversights Mr. Jones warned of pre-deficit, the outside auditor confirmed post-deficit, just last month.
Mr. Jones' report should have rocked the school system to its core. Why didn't it?
Mr. Jones told Virginian-Pilot staff writer Aleta Payne last week that he attended a meeting in March at which the board's Audit Committee received and discussed his alarming report. Committee members at that time were then-Superintendent Sidney Faucette, School Board Chairwoman June Kernutt and board member Susan Crea-mer, a CPA. Dr. Faucette has said he'd be ``happy to help,'' but not apparently regarding this report. Ms. Kernutt and Ms. Creamer have no comment.
Memos and memories both indicate that they and several top school administrators received Mr. Jones' report in March. Yet nobody blew the whistle. Worse, nobody told the full School Board.
Dr. Faucette, who resigned from the system as of July 3; Mrs. Kernutt; Ms. Creamer and other school officials who had seen the Jones audit report in March professed as much surprise at the deficit revealed in August as anybody else.
How can that be? The answer is a central skein of the tangled web of accounting and accountability that if schools won't, only a special grand jury can unweave.
Commonwealth's Attorney Bob Humphreys requested such a panel earlier this month. By law, Circuit Court judges decide whether to empanel such a jury, whom to appoint as special grand jurors and how much, if any, of the jury's report is made public.
Yesterday the Circuit Court of Virginia Beach agreed to empanel a special grand jury. It will convene Dec. 4. Presumably it will consist of jurors with sufficient expertise to separate the wheat of fact from the chaff of finger-pointing now rife in the court of public opinion. Mordecai Smith, the schools' budget-development director and/or chief financial officer since 1989, implicates Sid Faucette and others, who implicate Mort Smith. The School Board, although finally taking ``ultimate responsibility'' for this mess, remains unwilling to accept the consequences.
It steadfastly resists, for example, the efforts of City Council to take even the obvious minimal step: Consolidate city and school record-keeping both to better track expenditures and to save taxpayers the cost of duplicative efforts.
``I wouldn't think most board members would make a decision on a matter this significant in three days,'' Chairwoman Kernutt told the Beach Democratic Club Saturday. But this sort of consolidation has been discussed by city and school staff for months. Board members' complaint is more with their bureaucracy, not the city's; with the board's misplaced faith, not City Council's.
City Council has leverage it should not hesitate to use: the $12.1 million deficit that schools need the city to cover now. Council also has the support of the Beach's General Assembly delegation for a city charter change to require consolidation if schools continue to reject it.
School Board and City Council each meet today, and the school-finance fiasco is on each's agenda. Consolidating financial services, getting square on the repayment of that $12.1 million, promising to cooperate with the special grand jury's investigation and to support the publication of its findings: Lining up squarely behind these measures would be not only a step in the right direction of fiscal discipline, financial accounting and accountability for past, present and future school budgets. It would be a reassuring reiteration of leadership from City Council, and a welcome chink in the School Board's stonewall. by CNB