Statement by Department of Education on Release of Department Audit Findings

OKLAHOMA CITY (March 7, 2011) — Damon Gardenhire, communications director for the Oklahoma State Dept. of Education, issued the following statement after the release of an investigative report by State Auditor Gary Jones, which found that past agency employees over a period of ten years had operated unauthorized accounts that appeared to have been slush funds:

“We are troubled and concerned by the State Auditor’s findings about past practices under the previous administration. These things can’t be condoned or tolerated. Last year, we brought our concerns about irregular travel claims by an employee to the State Auditor, which ultimately led to the findings in today’s report. While the issues raised by the State Auditor in today’s report are not within our purview, we urge the appropriate authorities to take action to address any possible wrongdoing from past years.” ~Damon Gardenhire

Audit of Education Department Finds Secret Accounts and More

Gary Jones
State Auditor and Inspector

A Supplemental Investigative Report of the Oklahoma Department of Education was released by the State Auditor and Inspector this afternoon.

The State Auditor performed the investigation at the request of current State Superintendent Janet Barresi. The audit covers the period of time from July 1, 2008 through June 30, 2011. An initial report was released on January 4, 2012.

The report released today is a supplemental report addressing additional concerns identified during the first investigation. 

Executive Summary of the Audit:

We performed a special audit/investigation, pursuant to a request by the Department of Education (OSDE), in accordance with the requirements of 74 O.S. 2001, § 227.8. The concerns we investigated included concerns related to travel claims filed by a now former OSDE official. We have previously issued a report related to those concerns.

During our investigation of the circumstances surrounding the official’s travel claims, we obtained records from a hotel which included a check on an account that, although not an authorized account of the State of Oklahoma, listed an address of 2500 N. Lincoln Blvd, Oklahoma City, the address of the Oliver Hodge State Office Building where OSDE is located.

We began an inquiry to determine who or what entity was using a bank account listing the address of a State Office building. Through our inquiry we identified three accounts being managed by OSDE employees that were not official accounts for the State of Oklahoma.

Over a period of years OSDE employees have been soliciting and receiving donations and/or receiving funds for booth space rental at various conferences then depositing those funds in accounts purporting to be accounts belonging to a private nonprofit organization.

The Oklahoma Curriculum Improvement Commission (OCIC), is a non-profit organization whose board members were aware that OSDE officials were managing one account, an operating account, but were not aware OSDE officials had opened and were operating two other accounts under the OCIC name. From interviews with OSDE officials and employees, as well as records we obtained, it appeared not only were the OCIC board members unaware of the accounts, but some of the OSDE officials may have deliberately concealed those accounts from the OCIC board of directors.

These off-book and unauthorized accounts allowed OSDE officials to pay, at a single event, $2,600 for 85 bottles of wine and 3 kegs of beer and $5,700 for food items including a “chocolate fountain,” “Maryland crab cakes,” “mini beef wellingtons,” and “smoked salmon mousse in a puff pastry,” without following any of the requirements normally associated with government expenditures.

Later, as the accounts were being separated, OSDE employees orchestrated the movement of $14,899 from one “OCIC” account to another “OCIC” account. Then arranged for another third party entity, the Oklahoma Director’s of Special Services, to create another third party account and moved the money to that newly created account.

The Oklahoma State Auditor and Inspector (OSAI) is the independent financial oversight body responsible for auditing the books and financial records of OSDE. These accounts were not audited by the OSAI because the existence of the accounts had never been disclosed to OSAI.
The accounts were not official accounts for the State of Oklahoma and would not have appeared on any official listing of the OSDE accounts.

A “slush fund” is typically regarded as an unregulated fund that has little if any oversight and which can be used with little or no accountability. The accounts we identified appear to have been operated as slush fund accounts allowing OSDE officials to issue payments shielded from governmental oversight as well as public scrutiny.

Over a period of 10 years, in excess of $2.3 million has been expended from these accounts.

The Oklahoma State Auditor is responsible for investigating irregularities in governmental agencies and routinely performs financial investigations into questionable matters concerning the operations of state and local governments. However, the Oklahoma State Auditor lacks the authority to perform special or investigative audits unless requested to do so by other statutorily defined offices.

We have reported the results of our limited inquiry into these accounts, identified additional concerns related to the accounts, as well as the actions and activities of the state employees involved with the accounts.

Link to full audit: http://www.sai.state.ok.us/Search%20Reports/database/OSDE%20Supplemental%20Investigative%20Report%20030712%20Final.pdf

Auditor Gary Jones summarizes education department findings

By Patrick B. McGuigan at CapitolBeatOK.com (Published: 12-Jan-2012) 

Oklahoma Auditor & Inspector Gary Jones, in a video interview with CapitolBeatOK, has summarized findings of a special audit investigating questions raised about the travel claims of a former Assistant Superintendent of Public Instruction. 

 

The auditor and his staff concluded that there was evidence of possible falsified claims, and other concerns. Other issues were found that have triggered a broader inquiry, Jones said in an interview this week.

Auditor & Inspector Gary Jones

Jones explained that the investigation was undertaken at the request of Superintendent of Public Instruction Janet Barresi, who now runs the state Department of Education. The special audit covered the period July 1, 2008 through June 30, 2011. 

In the interview, he also provided a broad outline of other audits he is pursuing.

 

Jones said, “We received a request from Superintendent of Public Instruction. There were allegations that an employee was falsifying travel claims. They made the request, we sent our investigative auditors in. They did a very good job of interviewing people and presenting the results to the Department of Education.”

In summary, Jones said, “They discovered there were instances of travel that could not be documented, times where the individual claimed to be attending meetings and there was no evidence of that happening.”

Jones said the audit is a “customary thing that we do.” He reported, “We receive requests from District Attorneys, from boards of county commissioners, from school districts. So, this is one of our divisions. This is a routine thing that we do.”

Jones told CapitolBeatOK his office is pursuing a wide range of investigations: “We have a large number of requests that have been made, whether it’s from school districts and counties. We’re in the process, at different stages in those investigations. We’ll release those reports as they become available.”

Six of the new report’s “objectives” touch upon the work of Misty Kimbrough, a former Assistant Superintendent of Public Instruction. The final report from Jones pointed to what appear to be significant areas of concern that could become the basis for further action, including another audit report in 30 to 60 days.

Board of Equalization funds OHLAP, but designates use of agency reserve

By Patrick B. McGuigan at CapitolBeatOK.com (Published: 20-Dec-2011) 

The Oklahoma Board of Equalization (BOE), chaired by Governor Mary Falllin, met today (Tuesday, December 20) to fulfill statutory requirements to give preliminary certification to general revenues available for appropriation during the 2012 Legislature. The seven-member panel fulfilled its required function at its regularly-scheduled gathering, but also unexpectedly boosted anticipated funds available for general appropriation by $6 million. 

Mid-way through the meeting, during what was expected to be a routine discussion as prelude to BOE approval of $63 million for “Oklahoma’s Promise” scholarships administered by the Higher Regents, Treasurer Ken Miller asked staff about the program reserve fund. That’s when members of the Board were told the reserve was about $15 million.

(The Office of State Finance later confirmed the precise figure is $14,530,300.85, a sum that should increase when additional dollars are transferred shortly.) 

The information provoked discussion and introspection among members of the board. Legal counsel for the state government confirmed the BOE could approve less than the $63 million requested, but fully fund the program request by specifying that some of the reserve could be used for the difference. 

Miller and others on the board made it clear they supported “full funding.” At the same time, Miller articulated a view, apparently shared by every member, that “a more rational reserve balance” seemed in order. It was clarified in discussion with staff and counsel that the reserve may only be used for scholarship awards, and not for other purposes. 

In the end, state Auditor & Inspector Gary Jones moved, and Treasurer Miller seconded, a motion to fulfill the $63 million request for funding of the higher education scholarships, directing $57 million from general revenue and the remaining $6 million from the OHLAP reserve. 

Rep. Murphey: State Government Needs A Performance Audit

Rep. Jason Murphey
R-Guthrie

Oklahoma City - Rep. Jason Murphey, R-Guthrie, discusses on his blog the need to establish regular performance audits by the State Auditor. Below are excerpts from his post this morning.

"One of the most important components of this year’s House government modernization effort will involve acting on a request from State Auditor Gary Jones.

"Jones has requested the Legislature to take action and allow his office to establish a performance audits division that could conduct a series of performance audits of state government entities during each year.

"The proposal would allow the people of Oklahoma to vote next November to place this proposal into the Oklahoma Constitution.

"Currently, the Auditor can conduct these audits at the request of the Governor, the Legislature, or the head of an agency. As you might image, it is highly unlikely agency officials from a poorly performing agency would ever request the Auditor to audit their agency.

"Earlier this year, Governor Fallin authorized a performance audit of the state-owned Grand River Dam Authority. That audit was released last week and brought to light a number of concerning details questioning the method by which millions of dollars were being spent."

Click here to read Rep. Murphey's complete post

Auditor & Inspector Gary Jones: “rapid progress” in closing audit backlog

By Patrick B. McGuigan at www.CapitolBeatOK.com (Published: 22-Jun-2011

Oklahoma Auditor and Inspector Gary Jones
was surprised, he says, at how far behind the office was on required audits of county governments when he took the helm on January 10.

“As policy, those audits are supposed to be done every year, and must, by statute, be done every other year. When I took office and worked with the staff to identify challenges, it became clear that some counties had not been audited since 2005,” he said in an interview Wednesday (June 22).

It was a challenge, he admits, “to figure out how to approach the backlog, do the audits right, yet get caught up. There are 77 counties, and the simplest way to put it is that we have to do at least two years of work in one year.”

The pace of work is summarized, he said, by comparing three months of productivity this year with that of 2010. The agency completed 78 audit reports in the first three months of 2010; it had finished 112 audits the same time period this year.

Jones is most concerned about special investigative audits -- which come at the request of the attorney general and local District Attorneys -- must be given priority. The long-anticipated investigatory look at the Broken Arrow public school system was finished this month. That audit was first requested in April 2009.

“I thought that kind of time gap was the exception, but learned it was the norm,” Jones told CapitolBeatOK.

Attorney General and State Auditor Release Investigative Audit of Broken Arrow Public Schools

Audit reveals possible criminal violations

Attorney General Scott Pruitt

Attorney General Scott Pruitt and State Auditor and Inspector Gary Jones today released an investigatory audit of Broken Arrow Public Schools. The audit, which was requested by the Attorney General’s Office in late 2010, outlines several allegations of competitive bidding act violations and malfeasance by public officials.

The audit is the second review of Broken Arrow Public Schools by the state auditor and was requested by the Attorney General’s Office after an initial audit was deemed unsatisfactory.

The investigative audit covers multiple areas of interest between July 1, 2006 and March 31, 2009. Following a thorough review, the Attorney General’s Office found possible criminal violations in at least two areas – open records and special favoritism for vendors. The AG’s Office will continue a criminal investigation in these areas, and pursue those criminally responsible, if warranted.

The 84-page audit is the result of months of work by investigative auditors from the state auditor’s office.

“We’ve been working diligently to complete this audit since taking office on Jan. 10,” Jones said. “A report of this type seeks to answer numerous questions. Auditors identify possible violations of policy or statute, and offer recommendations to assist the public entity in improving its internal practices to better safeguard public assets. I am confident in our findings.”

An investigatory audit or “18f” is requested of the state auditor by the attorney general to assist the attorney general in an investigation. Unlike regular or other financial audits,
18f audits are part of the investigation and litigation files of the Attorney General’s Office and are kept confidential to preserve the integrity of the investigation until it’s complete or criminal charges are filed.

In the audit of Broken Arrow Public Schools, two objectives have been temporarily redacted. Once the AG’s office has completed its independent criminal investigation into these specific matters and a conclusion has been reached, those portions of the investigatory audit will be made public.

“In the interest of transparency and for the sake of those who were falsely accused, we felt it important to release the vast majority of the audit prior to our completed investigation,” Pruitt said. “My office will continue to review allegations of wrongdoing in the remainder of the audit and seek prosecution of individuals who are criminally responsible.”

The audit was estimated to cost the district about $40,000. Broken Arrow Public Schools was billed and has paid $39,868.17 as of Jan. 10 when Auditor Jones took office. A decision was made by the State Auditor’s Office to stop all additional billing as of that date and complete the report with no additional costs to the school district.

Link to audit: http://db.tt/rLRsLDS