Digging Out

Digging Out

School Board looks to remedy Churchill’s ‘extremely rare’ budget deficit.

Is a spending deficit of nearly a quarter-million dollars at Winston Churchill High School the fault of Joan Benz, the school’s principal? Is it the fault of Montgomery County Public Schools, who failed to follow up on two audits that showed a lack of spending control and poor accounting practices at the school?

The Board of Education’s Audit Committee indicated at a meeting on Monday, July 23 that they believe both Benz and the school system are at fault for the $224,224.45 shortfall that was uncovered by an internal audit of the school’s Internal Activities Fund in March of this year.

What happens now is key, committee members said.

“There’s nothing there that I think can’t be cured, and there’s nothing there that I think reflects bad [intentions] on anybody,” said School Board member Stephen Abrams (District 2).

High schools are audited annually, and while the misnaming of accounts that was revealed in Churchill’s audit is a common mistake, a school having a negative spending balance is “extremely rare,” said Larry Bowers, chief operating officer of Montgomery County Public Schools.

“We’ve put an extensive plan in place to make sure [Churchill] gets back to where it needs to be,” Bowers said.

The school system’s auditors are working with the school on a weekly basis now and Community Superintendent Sherry Liebes is working with Benz to establish how the school will pay off its obligations, Bowers said.

“I think none of our schools should be in this position,” said School Board member Christopher S. Barclay (District 4), the chair of the Audit Committee.

THE ANNUAL audit of Churchill done in March raised concerns about the school’s administration of its Independent Activities Fund. The fund is the money that each school raises on its own through fundraisers and ticket sales and can spend as it sees fit, provided it does so within the school system's guidelines.

In Churchill’s case, the school has spent far more money than it has raised, resulting in an overall negative cash position of $224,224.45, according to the report issued by Roger Pisha, the Internal Audit Supervisor the county's schools.

In a letter to Benz dated March 8, 2007, Pisha detailed several instances that raised the auditor’s concerns. In one, 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 school improvements were debited from that account, resulting in a negative account balance of $72,363 in that account 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.

“You have to get the money in the right account and you have to make sure the accounts don’t get mixed,” said Bowers.

Similar deficiencies had been reported in Churchill’s two previous audits, Pisha noted in his letter, with little to no corrective action taken by the school.

“Clearly, if we make a report it shouldn’t take two years to correct,” Barclay said.

Abrams and Barclay said they faulted both the school and the school system for that lack of corrective action.

“I want to see us become more of a partner with our business managers at [the] schools,” said Abrams. Abrams said that the Churchill audit revealed school officials dealing in uncommon territory, but not nefarious activity.

Bowers said that the Office of School Performance will work more closely in the future to keep in touch with principals and to follow up on negative audit reports.

ONE EXPENDITURE for field maintenance brought to light by the audit caught Barclay’s eye. In it, three separate payments of $14,999.99 were made to one company for a contract to maintain the school’s athletic fields. The threshold at which contracts must be bid for competitively is $15,000, according to the school system's regulations.

Abrams chalked up the broken-down expenditures to the school not knowing how to properly navigate the waters of expenditure and bidding regulations. Benz likely thought she was handling the situation correctly, Abrams said.

Barclay saw it differently.

“They clearly knew what they were doing and they made a decision to fall under the radar,” Barclay said.

Abrams said that he sees it as school officials not knowing how to handle accounting practices more commonly used in private enterprise.

“It’s a cultural issue — what you have is you’re holding people up to a good business practice. You’re holding it up against a private sector standard,” Abrams said. Asking school officials to handle the school’s finances in accordance with extensive accounting regulations was too much to ask.

“When you ask them to act in a private sector way they can’t do it,” said Abrams.

Bowers said that Montgomery County Public Schools had an external auditor conduct a separate review of Churchill’s finances. That review led to the same conclusions as the internal audit and led Bowers to conclude that the audit revealed bad accounting, but not bad intentions. The board members agreed.

“I think it’s obvious that it wasn’t criminal intent — it wasn’t done intentionally,” said Patricia O’Neill (District 3).

“I’m heartened to hear that there weren’t any shenanigans,” Abrams said.

THE REGULATIONS regarding the administration of each school’s Independent Activities Fund require that the principal at each school approve every expenditure from that fund, Bowers said. Principals or one of the signatories on the school’s account must sign every check that is written.

Right now there are no clear procedural repercussions for poor administration of funds, but Bowers said that negative findings in audits should be made a part of the principal’s records, as the administering the fund is their responsibility.

“It needs to become part of someone’s review,” Bowers said. “This has to do with the principal’s performance.”

Pisha noted that the school system’s auditors have always been available for schools to use on a daily basis for advice on financial matters.

“As long as they ask the questions,” Barclay said. That the school officials do not seek advice is part of the problem, the other is that the school’s business officials are not always well-versed in the school system’s accounting regulations, Bowers said.

Further complicating matters is that the school system’s auditors have no way to monitor each school’s spending without the school’s cooperation.

“Right now if I want to see how a school is doing I have to ask them to send me a report,” Pisha said. Abrams said that will change next year as the county school system converts to a new county-wide software system that will more closely link the school system with each of its schools.

SOME CHURCHILL parents who attended Monday’s meeting said afterwards that the meeting did not produce as much as they had hoped.

“This is parent money, this is family money — where’s the outrage?” asked Suzanne Weiss. “They still haven’t given us any indication of how the controls will be better.”

“I didn’t think it was entirely conclusive at all,” said Al Jordan, whose son attends Churchill. “I think this whole meeting accomplished nothing.”