THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Tuesday, January 30, 1996 TAG: 9601300290
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY ALETA PAYNE, STAFF WRITER
DATELINE: VIRGINIA BEACH LENGTH: Medium: 93 lines
According to a recent report by the school district's internal auditor, some budget transfers approved by the School Board in 1994-95 fiscal year were never made, others were made but not in the amount authorized, and some funds were moved without required authorization.
``There were massive, massive amounts of money moved around,'' said Victoria L. Lewis, the director of internal audit who compiled the report.
Among the findings, Lewis lists more than $6.4 million in transfers larger than $10,000 which, according to district policy, should have been approved by the board but never were. She also cites a request for one $400,000 transfer to pay for occupational and physical therapy services that was signed by Director of Budget Development Mordecai L. Smith and posted a month before it ever appeared before the board in December 1994.
``Basic School Board policy was not being followed consistently,'' Lewis said during an interview. ``As budget director, it was his job to make sure policy was followed on transfers.''
Smith, who also served as the division's chief financial officer for most of that fiscal year, said Lewis's conclusions reflect her unfamiliarity with some of the ``nuances that are associated with a budget transfer format. I don't think Vicky has worked in a system that uses a budget transfer format like Virginia Beach.'' Lewis joined the district in September.
Smith said the bulk of the $6.4 million in transfers - which went into individual school accounts - was implicitly authorized by the board when it approved the budget as a whole.
Lewis argued that some of the same types of transfers were brought back to the board for separate approval while others were not. And she said, overall, an unusually large amount of money was moved around.
``If your budget is a realistic spending plan, there's little reason to make that many transfers,'' Lewis said.
Among other findings in the report:
The amount transferred was not always the same as the amount approved by the board. For instance, a September 1994 transfer of $98,068 was approved but $122,551 was transferred. More frequently, less money was transferred than was approved.
Smith said accounts sometimes did not have sufficient money in them to transfer the full amount by the time the approval process was completed.
As budget director and chief financial officer, Smith should have known what money was available and what would be spent for the rest of the year, Lewis said.
Three transfers, worth more than $2.4 million as a group, were approved but never made.
On at least one occasion, Smith directed a clerk in the budget department to take a $40,000 transfer entry and divide it into four entries. By breaking the amount down into sums of $10,000 or less, board approval would not be needed for the transfer.
Smith said such transfers were usually urgently needed and would have been directed by then-Superintendent Sidney L. Faucette.
``It's not something that is practiced often, but you can do that,'' Smith said.
Interim superintendent James L. Pughsley said he was hesitant to discuss the report in detail because of the ongoing personnel situation with Smith, who has been on paid leave since the fall. However, Pughsley did say ``I have every confidence in (Lewis') report.''
After the district ended the 1994-95 fiscal year with a $12.1 million deficit, an external audit report found that $43 million had been transferred between line items, an unheard of amount in a $340 million budget where more than 80 percent of the money is fixed for salaries and benefits.
The external report raised a number of concerns about the district's fiscal management practices in the previous year, but stopped short of laying blame on individuals.
That task may be taken on by a special grand jury currently probing the district's finances. The panel began meeting in December and will hear testimony from Faucette on Thursday. Faucette left the Beach schools this summer to head up a division in Gwinnett County, Ga.
The magnitude of the budget transfers and the manner in which they were handled has been an issue, and board member Tim Jackson asked for a report analyzing them. Lewis spent six weeks compiling the data.
Jackson said he has asked for additional information from Lewis because he feels the report is vague. Jackson said he wanted specific, detailed information about budget managers and which departments overspent, and that was not included in Lewis' analysis.
``I have concerns that almost everything is directed at Mr. Smith,'' Jackson said. ``I never see (Faucette's) name in anything.''
Jackson said he is not trying to excuse anyone's errors by seeking more information.
``I'm not concerned that the report could hurt (Smith),'' Jackson said. ``I'm concerned with truth.''
KEYWORDS: AUDIT VIRGINIA BEACH SCHOOL BOARD VIRGINIA BEACH SCHOOLS by CNB