THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Tuesday, December 5, 1995 TAG: 9512050277
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY DEBBIE MESSINA, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 87 lines
The city's finance director and an independent auditor were the first to testify before a special grand jury that convened Monday to begin investigating the school district's budget crisis.
City Finance Director Patricia A. Phillips and auditor Susan P. Reed of KPMG Peat Marwick appeared before the 10-member panel for four hours. The proceedings are closed to the public.
Peat Marwick conducted an expanded audit of 1994-95 school spending and concluded that the district ended the fiscal year June 30 with a $12.1 million deficit. It is illegal in Virginia for public bodies to overspend their budgets.
Phillips, in her role as chief of the city's finances, provided figures and information to Peat Marwick, which audits city finances annually. The firm was asked this year to perform a more extensive check of school funds.
Neither Phillips nor Reed would comment on their testimony Monday. Neither the witnesses, nor the court officials, would discuss whether Phillips or Reed would return to the court for more testimony.
The audit report, released Nov. 7, in part prompted Commonwealth's Attorney Robert J. Humphreys to request that the Circuit Court empanel a special grand jury to untangle the financial mess. It's the first special jury empaneled in Virginia Beach since 1985.
Since the audit, a lot of fingers have been pointed among School Board and City Council members and staff, but there's no clear understanding of what went wrong or who was responsible.
Former Superintendent Sidney L. Faucette left Virginia Beach in July to head schools in Gwinnett County, Ga., outside Atlanta. Theschools' chief financial officer, Mordecai L. Smith, was placed on administrative leave in September. And an internal auditor was hired by the School Board this fall to replace Kevin Jones, who resigned from that position in April.
The audit showed a financial system without checks and balances, where mathematical errors were frequent and budgets were ignored. However, it did not explain how the school system ended up in such shape.
Jurors have the power to subpoena witnesses during their investigation, which could last up to six months. Although secrecy surrounded Monday's hearing, presiding Circuit Judge John K. Moore released a list of the 10 jurors.
Seven men and three women comprise the panel, most with financial or legal backgrounds. They were appointed by the nine Circuit Court judges. Attorney Richard D. Guy, a former state delegate who also serves as a chancery commissioner for the Circuit Court was selected the jury's foreman by Moore.
The hallway in front of Courtroom No. 8 where the jurors were meeting was sectioned off with velvet ropes and brass poles. Jurors did not use the public hallways to enter or exit the courtroom for lunch or when the day's business concluded, about 4 p.m.
Humphreys, who serves as the jury's legal adviser, would not say when they will meet again, or how often they will meet.
The special panel cannot issue indictments. But if it concludes that someone violated the law, it can recommend that the commonwealth's attorney seek a regular grand jury.
Although the special grand jury's work is secret, Humphreys has said that he hopes the panel will agree to make public its final report. MEMO: THE PANEL TO INVESTIGATE THE SCHOOLS' BUDGET CRISIS (BIOGRAPHICAL
SKETCHES ON PAGE A11)
JOAN PERRY BROCK
assistant secretary and treasurer of Dollar Tree stores
ROBERT H. CALLIS JR.
former Beach City Council member and School Board member
ANNE EVANS GORRY
Certified public accountant; former Beach schools teacher
JAMES K. GREGORY JR.
retired vice president at NationsBank
RICHARD D. GUY
attorney and former state legislator
CHESTER B. LONG JR.
senior vice president of Commerce Bank
ARTHUR G. MCGOWAN
attorney and former Navy master chief petty officer
MARTHA KELLAM STONE
daughter of semi-retired federal judge Richard B. Kellam
EARL M. TEBAULT
former Beach City Council member
KEYWORDS: VIRGINIA BEACH SCHOOLS BUDGET GRAND JURY VIRGINIA BEACH
SCHOOL BOARD by CNB