THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, November 21, 1995 TAG: 9511210271
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY TOM HOLDEN AND KAREN WEINTRAUB, STAFF WRITERS
DATELINE: VIRGINIA BEACH LENGTH: Long : 120 lines
The Circuit Court on Monday granted a request by Commonwealth's Attorney Robert J. Humphreys for a special grand jury to investigate how the school system ran a $12.1 million deficit in 1994-95.
The jury will begin deliberations Dec. 4. Its members, already chosen by the court, are expected to subpoena current and former school system personnel to testify in secret about management of the district's $340.8 million budget for the fiscal year that ended June 30.
``I welcome anything that will bring all of this out in the open,'' School Board member Tim Jackson said. ``I want some answers.''
Vice Mayor W.D. ``Will'' Sessoms Jr. echoed those concerns.
``I think the key thing about the grand jury, if it can serve any purpose at all, it's to allow more facts getting out pertaining to who is responsible for this problem,'' Sessoms said.
Both the City Council and School Board will meet today to consider ways to make sure the financial problems do not occur again.
Humphreys asked the court Nov. 8 to convene a special grand jury after a formal audit from KPMG Peat Marwick revealed the district had overspent its 1994-95 budget by $6.4 million, while underestimating revenue by $5.7 million.
The auditors found a series of miscalculations in a budget they said was prepared without realistic supporting assumptions for many payroll, revenue and non-payroll figures.
The auditors' review found a budget that had spun out of control in the final year Superintendent Sidney L. Faucette was in charge. Faucette resigned in June to become superintendent in Gwinnett County, Ga.
Faucette has come under increasing scrutiny for his handling of the district's finances, particularly in light of a Dec. 29, 1994, report by then Internal Auditor Kevin A. Jones, who told key district personnel that the budget contained millions of dollars in miscalculations, overexpenditures and other mistakes. Faucette could not be reached for comment Monday.
Jones completed his audit one week after Faucette forecast a potential $7.4 million budget shortfall. Faucette then ordered strict spending cuts to avoid a year-end crisis. But Jones' report took three months to reach the School Board's audit committee - Faucette, School Board Chairman June T. Kernutt and board member Susan L. Creamer.
Copies also were sent by Jones to the deputy superintendent, two executive assistants to the superintendent, the chief operating officer, the chief financial officer and the School Board's clerk.
Jones said audit committee members agreed that Faucette would present the report's findings to the full School Board. Interviews and records checks show no evidence that Faucette ever did.
It is illegal in Virginia for a public body to overspend its annual budget as the School Board did last year. There have been no allegations that anyone used taxpayer funds for private purposes.
But Humphreys, in requesting the special grand jury, said he was concerned that other crimes might have occurred in the school administration, because fiscal controls were so lax.
The City Council has agreed to lend the district $12.1 million to cover the deficit.
Several council members said Monday that while they must allocate money to cover the deficit, they want to ensure that anyone responsible for previous problems is no longer managing the district's finances.
``I think that a responsible process has to be put into place to try and make certain that this fiasco does not occur again,'' Mayor Meyera E. Oberndorf said. ``Part of the question that the public has been asking is, `Who knew about it, what was their responsibility, how can we know that they are cognizant of what they have done wrong or right, and how will they either continue their service or serve elsewhere?' ''
Council member W.W. ``Bill'' Harrison Jr. said he is not concerned with indictments, just the truth.
``I think it is important that we establish what happened,'' Harrison said. ``I'm more interested in knowing that than I am in criminal prosecution. I think that's really the most important thing for the public at this point.''
Some School Board members warned, however, that if not handled correctly, the grand jury process could further damage faith in the state's largest school district.
``If I had my choice about how that process would be conducted, I'm not certain that I would go this route,'' board member Elsie M. Barnes said.
``It could help clear the air or it could muddy the waters more, depends on how it's done,'' she said.
The decision to empanel the grand jury comes as the School Board searches for a permanent superintendent. Board members interviewed several applicants Monday at an Oceanfront hotel. Interim Superintendent James L. Pughsley is among the applicants.
The special grand jury will be the first assembled in Virginia Beach since Cox Cable of Tidewater faced questions about airing the Playboy Channel in 1985. The company later withdrew the programming. MEMO: $12.1 MILLION SCHOOL DEFICIT
A special grand jury will be an investigative panel of seven to 11
prominent citizens of Virginia Beach chosen and convened by the Circuit
Court.
It cannot issue an indictment, but it can recommend such action to a
regular grand jury, and it can suggest legislative remedies to any
problems it uncovers.
The jury's investigation is closed to the public, but its final report,
which it has six months to complete, can be made public.
The group will receive testimony under oath, and has the power to
subpoena school district records and current and former district
officials. It cannot extend its legal reach out of state, for instance
to Georgia, where former school Superintendent Sidney L. Faucette heads
a large school district. Faucette could appear voluntarily.
The state pays all costs associated with special grand juries.
KEYWORDS: VIRGINIA BEACH SCHOOL BOARD BUDGET DEFICIT GRAND
JURY by CNB