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Audit uncovers ‘serious problems,' misuse of $700K in MPS

Updated: Feb. 24, 2020 at 6:13 PM CST
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MONTGOMERY, Ala. (WSFA) - A recent audit of Montgomery Public Schools revealed more than $700,000 of public money was misused due to a “lack of internal control” over receipting and the custody and disbursement of school funds.

The audit focused on finances from October 2017 through September 2018.

In total, six former and current employees were named in connection with $703,297.66 that was misused or missing.

Some of the money was used on strip clubs, liquor stores, nonexistent vendors and scholarships benefiting an administrator’s children, according to the audit.

The audit revealed MPS hadn’t complied with statutes related to expenditures and a series of problems with internal controls over financial reporting and compliance with federal assistance programs.

MPS Superintendent Dr. Ann Roy Moore, who was hired in May 2018 after serving as interim MPS superintendent, said she and MPS Chief Financial Officer Arthur Watts uncovered these issues and reported it to the state.

“We were brought in to help make things right," said Moore. "And so we’re trying to right the ship. And under our watch, when we find it, we will do something about it. It is the responsibility of anybody in our positions to make sure that things are done correctly.”

Moore reiterated that the funds in question are student fees and donations, not allocated tax dollars.

WSFA 12 News asked Moore and Watts whether they believed those involved knew they were coloring outside the lines, Watts responded, “based on many of these instances, there’s just no excuse for depositing monies in off-book accounts, outside accounts…it’s not something we are not going to put up with.”

MPS hosted a mandatory training for those across the district who handle money. Now that training is being offered to everyone.

“We’re going to hold people accountable when they do it the wrong way,” Moore said. "We’re going to make sure they know upfront though, here’s the training, here’s how you do it. So there’s no excuse for someone being able to say I didn’t know we were supposed to do it like that.”

In a statement, State Superintendent Dr. Eric Mackey said the audit uncovered serious problems, including the “blatant” misuse of public funds in some of the instances.

“In all, hundreds of thousands of dollars that should go toward providing MPS students with the best educational experience possible has been misused by the very people who were entrusted to make students, and their wellbeing, a priority,” Mackey said.

Mackey says, despite the findings, the Alabama Department of Education remains “cautiously optimistic” about the future of MPS finances.

“Our role in the intervention effort is to provide effective oversite to the system and put MPS in a position to handle its affairs independently,” Mackey said. “Although I will stop short of saying every financial discrepancy has been unveiled, as there very well could be new discoveries in the future, we believe the internal controls now in place within MPS are stringent and professional development concerning appropriate compliance to statute is sufficient and ongoing.”

This audit comes on the heels of the Board's request to increase the ad valorem tax in Montgomery to better fund the district. Montgomery's rate sits at 10 mills, which is the lowest in the state. Moore says she understands this request may be difficult for taxpayers to reckon with. But as she and Watts continue to do what's right and hold MPS employees accountable, they're asking residents to do the right thing for Montgomery's public school students.

“We still want them to know that the responsibility of taking care of the schools still lies in their hands,” Moore explained. “This increase that we’ve asked for is legitimate and it needs to be done. If we care about our children and we care about where they have to go to school every day then they need to take that in consideration.”

Moore says the aging school buildings across the district are no secret, she says it's time to make the schools a priority.

"Although what these people did was wrong, it’s still not going to take care of $250 million in deferred maintenance,” she said.

As for the missing and misappropriated funds, it's uncertain if and when MPS will recoup those dollars. Watts says any money that comes back to the system would likely be through court-ordered restitution.

The following individuals were named in the audit:

Former Brewbaker Technology Magnet High School Athletic Director Chauncey Shines:

According to the audit, the former Brewtech athletic director spent well over $40,000 with no supporting documentation or for unauthorized purposes. The audit says Shines made purchases at a local bar, online gaming, and video sites, a gentleman’s club, gas stations, payments to family members and a collection agency.

Funds totaling $3,320.00 were withdrawn in cash from ATMs, including a $400 withdrawal at a local casino. In addition, ATM surcharges and overdraft fees of $896.40 were incurred on this account.

Shines failed to show up for a meeting with the chief examiner or give a reason for why he shouldn’t have to repay the money, according to the audit.

Former Brewtech teacher Marsha Baugh:

The audit revealed $177,23.07 in scholarship money was paid to three universities for two Brewtech students who didn’t appear to meet the criteria to receive the money.

According to the report, the two recipients of the scholarships were Baugh’s children. The audit says there was not a record of either student applying to receive the money from the scholarship fund.

Baugh failed to show up for a meeting with the chief examiner or give a reason for why she shouldn’t have to repay the money, according to the audit.

MPS indicated Baugh’s positions were listed incorrectly in the audit. According to MPS Baugh was a teacher at Brewtech when the scholarship fund was established. She was serving as Career Technical Director at MPACT at the time the state alleged she directed the scholarship payments.

Baugh had resigned by the time the audit was released, according to MPS.

Former Jefferson Davis High School Assistant Principal Walter James:

The audit found James’ spouse was set up as a fictitious vendor at the school and was paid according to purchase orders for shirts for staff and students. Once the check paid to the fictitious vendor was cleared, the check was then endorsed to James and deposited into his bank account.

In total, James was connected to $330,060 in payments to vendors that weren’t properly documented, according to the audit.

James failed to show up for a meeting with the chief examiner or give a reason for why he shouldn’t have to repay the money, according to the audit.

Former Carver High School Basketball Coach James Jackson:

The audit shows Jackson was responsible for $76,975.43 in expenditures that weren’t supported by documents or were for unauthorized purposes.

Those expenditures included purchases made at liquor stores, a local probate office, a pet store, a car wash, an eyeglass store, and a withdrawal to close bank accounts. The audit found Jackson was connected to a total of $3,655 in ATM cash withdrawals that weren’t supported by documents, $13,713 in funds that were transferred to a personal bank account, and $762.24 in bank fees and ATM surcharges that were incurred on this account.

Jackson failed to show up for a meeting with the chief examiner or give a reason for why he shouldn’t have to repay the money, according to the audit.

Carver High School Principal Gary Hall:

The audit found Hall misappropriated $2,045 of school funds in order to purchase state basketball championship rings and pendants. The school had collected $13,245 in donations towards the items, but the total of the purchase was $15,290. Hall paid the difference using the wrong school funds, which the audit says is not an allowable use of public money. Moore stated Hall's actions weren't intentional, he simply used money that was earmarked for something else in this incident. She confirms this situation has been rectified. The audit states Hall appeared before the commissioner and repaid the money used.

Carver High School JROTC instructor Michael Walker:

Walker opened a bank account without the school’s knowledge or permission to deposit money raised from boosters and fundraisers for the JROTC program, according to the audit. In total, Walker misused $5,332.27 from the booster account. Walker was arrested and eventually pleaded guilty to first-degree theft of property. He was sentenced to two years, which was split. He was ordered to serve a supervised probationary period of 12 months. He paid full restitution following sentencing, Alabama Attorney General Steve Marshall announced in January.

In an unrelated case that was part of a different audit, former MPS employee, Tiffany Franklin, pleaded guilty to first-degree theft of property after admitting to stealing $13,216 from Goodwyn Middle School during the 2017-2018 school year.

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