Auditors have raised concerns about financial management at the Central City charter school whose chief financial officer has been accused of violating state ethics law for being paid on the side to do accounting work.
Auditors reviewed 25 checks chosen at random from the files at Edgar P. Harney Spirit of Excellence Academy. They found no evidence of proper approval for 19 of them.
In five cases, there was no evidence the purchase was for an appropriate school purpose. In nine, the school couldn’t demonstrate that it had received what it paid for.
Auditors found unsupported credit card charges and a failure to track donated materials.
And Harney’s one-man financial department raised questions about proper oversight of its $3.5 million annual budget. The school responded by saying it had hired an accountant experienced in school-related financial reporting.
Washington’s side work raised eyebrows with the Louisiana Board of Ethics because employees of government agencies aren’t allowed to contract with their employer and can’t receive anything of economic value for services closely related to their job. The state agency began investigating in 2016 and filed ethics charges in October.
Washington, who will reign as King Zulu this year, did not respond to requests for comment.
Barrett Wheeler, an assistant professor of accounting at Tulane University, read through Harney’s audit and an accompanying letter.
The concerns about one person being responsible for approving transactions, recording them and keeping financial records are important, Wheeler said.
“Certainly when you have someone doing all three of those things, the risk for fraud is higher,” Wheeler said. “It sort of opens the door to fraud; it’s unclear to me whether someone walks through the door.”
But, he said, these sort of issues are not unusual at small organizations.
Like Harney, almost every public school in New Orleans is a charter, publicly funded but privately run. In order to remain open, they must meet academic and financial benchmarks.
Harney, which has about 315 students, has a C letter grade from the state, which is mostly determined by standardized test performance.
The school submitted its audit to the Orleans Parish School Board and the Louisiana Legislative Auditor. The school board provided it to The Lens in response to a public records request. The state auditor will release its copy after it reviews it.
The auditors assessed whether Harney’s statements accurately reflected its financial position. They conducted a limited review of the school’s internal controls in the course of that work, but they did not express an an opinion one way or another as to whether there are serious deficiencies with those controls.
However, in a management letter, auditors raised eight areas of concern.
Among them: The school is tracking $19,880 that it says is owed to employees for unused vacation time, but its employee handbook says the school will not pay people for unused vacation time upon termination.
The 25 transactions reviewed included two to independent contractors, but the school couldn’t show that the contracts had been approved by the board.
Auditors found several instances in which they noted weaknesses in the school’s systems for reviewing and approving purchases.
For instance, the school’s credit card policy says the card is to be used at the discretion of the board president and the school during travel and emergencies and when vendors don’t accept checks. It says the CFO must approve credit card purchases and documentation must be provided to back up purchases.
Auditors checked transactions in one month and found two of the three charges that month lacked receipts. They found five more transactions without receipts.
The auditors recommended the charter school’s board exercise more oversight over school finances.
The Rev. Charles Southall III, president of Harney’s board of directors, signed off on Washington’s contract to provide accounting services. He was paid $75 an hour to handle tasks related to audits and reports to the state Board of Elementary and Secondary Education.
Southall did not respond to a request for comment.
The school has not provided any documents in response to The Lens’ requests to see complete board minutes, credit card statements and contracts with Washington.
Those requests were made on Jan. 4 and Jan. 11; state public records law says records must be provided immediately if they are not in use. The school’s attorney, Kenya Rounds, blamed the delay on the weather.
Rounds is also listed as Washington’s attorney in the ethics case, but he said Friday he isn’t representing him.
The Recovery School District raised questions about the school’s finances this spring. Harney then transferred to the oversight of the Orleans Parish School Board, which issued a letter of non-compliance after administrators failed to turn over documents.