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Churchill Accounting Questioned

Internal Audit identifies debt, mismanagement and questionable accounting practices.

An audit of Winston Churchill High School’s Independent Activities Fund conducted by the Montgomery County Public Schools department of Reporting and Regularity Accountability found a lack of control over its funds and a subsequent operating deficit of nearly $250,000.

The Independent Activities Fund holds the money that each school raises through ticket sales, activity fees and fundraising events, said Brian Edwards, a spokesperson for Montgomery County Public Schools.

"Basically [it is] all the money the school raises on its own," Edwards said. That does not include funds raised by school PTAs, as they are independent organizations, said Edwards.

The money that each school raises for its Independent Activities Fund can be used any way the school sees fit as long as those uses are for the benefit of the school and are within the framework of the MCPS Board of Education guidelines and regulations.

The internal audit showed that many of Churchill's expenditures violated those regulations.

The irregularities found in the audit involved school events and activities including the 2006 “Blast” musical production, the 2006 golf fundraising event and many other school trips and expenditures.

“Controls over the school’s [Independent Activities Fund] are seriously deficient and have resulted in a large negative cash position,” wrote Roger Pisha, Internal Audit Supervisor, in a letter to Churchill Principal Joan Benz. That deficit amounts to $224,224.45 in negative balances, according to Pisha’s letter.

The conditions described in the audit had been reported to Benz in two previous reports and corrective action had been slow and incomplete, Pisha wrote. In particular the school’s response to a report in 2005, required to be made within 30 days of the report, was not written until almost a year later.

“The corrective actions identified in each response were not implemented and the conditions remain unresolved,” Pisha wrote.

“As principal, you have fiduciary responsibility for the IAF. … In this role, you are the decision maker charged with determining the manner in which student body funds are expended and responsible for ensuring that these funds are administered in accordance with MCPS regulation,” Pisha said in his letter to Benz.

PISHA WROTE that there were “serious weaknesses in controls” in Churchill’s administration of its funds and that the audit found a continued and “serious deficiency in control over disbursements.” This lack of control was found in a wide range of activities.

“Deficiencies in internal controls contributed to the loss which resulted from the 2006 ‘Blast’ musical production fund raiser,” wrote Pisha. The reasons for the net loss was due to unapproved reimbursements to staff and parents and a lack of monitoring over the production’s expenditures, according to the letter.

An account labeled “Auditorium Pit Cover” was established in October 2004 and the school paid $27,953 for the new pit cover, but an additional $68,337 in additional school improvement were debited from that account, resulting in a negative account balance of $72,363 at the time of the audit.

Several other accounts showed the commingling of account funds and the mislabeling of accounts. Expenses for a school trip to South America were charged to an account titled “Spain Trip,” and the “Scotland Trip” account included proceeds and expenses from a trip to the Kennedy Center in Washington, D.C., Pisha wrote.

Maintenance for the athletic field totaling $44,999.97 was split into three contracts, each in the amount of $14,999.99. “This account should have been competitively bid and processed through MCPS procurement,” Pisha said. Edwards said that any contracts greater than $15,000 must be bid on competitively.

An additional payment of $30,100 for the maintenance of the athletic field was disbursed with no invoice, according to the report.

“Four disbursements exceeding $6,500 did not have approval of the chief operating office as required,” Pisha said.

The school expensed $14,062 worth of staff clothing and promotional items to an account labeled “Churchill Leadership.” Only $120 was collected from staff to cover that cost. “Such purchases are prohibited unless funded from staff activities or donations specified for that purpose,” wrote Pisha.

A stipend for more than $11,000 was disbursed to a staff member with no documentation or reason given for the payment, according to the letter.

“The Booster Club passed proceeds and expenses for their annual golf fund raiser through the school’s IAF, making the activity an official MCPS function,” Pisha wrote. Alcoholic beverages were served at the event, a violation of MCPS Regulation COF-RA prohibiting the possession or use of intoxicants at the location of any MCPS-sponsored function, Pisha wrote.

The school also sold some of its audio equipment to Northwood High School for $7,000, another violation of MCPS policy. Pisha wrote that that $7,000 should be refunded to Northwood.

ONE THING that Pisha did not mention in his letter to Benz was a charge that Churchill High School has been requiring students in Advanced Placement classes to pay for their textbooks.

In an e-mail to the Montgomery County Council on June 28, Janis Sartucci, a former Churchill cluster coordinator whose son attends Churchill informed, the councilmembers that of the practice.

“According to [the] state law, textbooks are to be supplied to public school students ‘free of charge,’” Sartucci said, citing Section 7-106 of the Maryland State Code. “Why does this state law not apply to Churchill High School?” Sartucci asked. “What about Churchill High School allows it to be an exception to state law?”

"We're working with the school's business officials, the community superintendent, the auditors and Dr. Benz to correct the problems so the school does not make the same mistakes again," Edwards said. "While the audit shows serious discrepancies, it did not show any evidence of malfeasance."

As for the textbook allegations, Edwards said that MCPS was looking into the matter.

"We are looking into those allegations ... and investigating it with the school," Edwards said.

Churchill Assistant Principal Dr. Leo McDonald said on Tuesday that Dr. Benz was out of the office until later in the week and that he could not talk about the matter.

“It’s a mess,” said Wayne Goldstein, who follows education matters for the Montgomery County Civic Federation.

“The fact that there was so much mixing and matching, and certainly labeling one trip as another. … I don’t think that can be seen as accidental. There had to be some thought put into this as to doing that,” Goldstein said.

Goldstein said that he saw the problem as indicative of a systemic problem within the county’s school system.

“If they’re doing all these audits and they’re seeing all these discrepancies but they don’t compel the school to do what they need to do to get their affairs in order … that’s the problem with the school system,” Goldstein said. “If they find a problem they respond episodically, they don’t look at how to prevent it from happening again.”