Two days after The Lens’ story about questionable financial practices at Edgar P. Harney Spirit of Excellence Academy, the Orleans Parish School Board has requested three years of the school’s financial records.
The Central City charter school withheld employees retirement contributions for weeks, sometimes months, potentially depriving employees of investment gains. The delayed contributions could violate federal guidelines for retirement accounts. A similar case in Baltimore resulted in a federal theft conviction.
In a letter last week, the school district requested information about the school’s retirement benefits, among other financial records.
Executive Director of School Performance Dina Hasiotis told Harney leaders that the charter school’s contract permits the district to “take all reasonable and necessary steps to ensure that charter schools comply with the agreement and all applicable laws.” Hasiotis warned that the school could lose its charter if it fails to respond to the district.
“The district is aware of this issue with Harney as well as additional level two violations at the school and has been working with Harney’s board to address them directly,” district spokeswoman Dominique Ellis wrote to The Lens Wednesday. Level two warnings are the most serious type issued by the district.
The district’s letter closely followed The Lens’ June 20 story on the school’s delayed retirement contributions. But Ellis denied that the article prompted the district’s request.*
It’s not the first time Harney’s finances have attracted critical attention.
The Recovery School District, which oversaw the school until it was moved under Orleans Parish control in July 2017, warned the school about late quarterly financial reports last year.
In October 2017, the Louisiana Board of Ethics filed charges against the school’s chief financial officer, Brent Washington. He had a separate contract to do accounting work for the school in addition to his CFO duties, which violates state ethics law, the board alleged.
The charter school also failed to submit financial documents that the Orleans Parish School Board requested, including documents related to Washington’s contract. That resulted in a slew of warnings from the district.
Now, the district has requested a laundry list of financial records from the 2016, 2017 and 2018 fiscal years.
Along with employee retirement records, the district wants monthly financial statements, bank reconciliations, payroll and benefit records, bank statements, consulting agreements and records of outstanding checks. The district also wants the small school’s federal grant budget, including the staff members associated with each grant and their salaries and benefits.
The Lens found that the school held onto at least 40 employees’ 2017 retirement withholdings for months before depositing them in their retirement accounts. And a review of one employee’s records found apparently late and inconsistent contributions going back years. The employee asked not to be named, fearing for her job.
A tax attorney said that holding onto the money as long as the school did likely violates IRS guidelines, which call for the contributions to be deposited into employee retirement accounts within 15 days of the end of each month.
In 2015, the head of a Baltimore nonprofit pleaded guilty to a federal theft charge and sentenced to prison for delaying his employees’ retirement contributions. The CEO used the money to pay company expenses, repaying it into the retirement accounts late and without interest or additional funds to account for potential investment losses. It’s not clear how Harney employees’ retirement money was used before it went into their retirement accounts.
In the school district’s June 22 request, officials also asked for monthly credit card statements and receipts. The Lens reviewed six months of Harney’s credit card statements and found board President Rev. Charles Southall III spent $1,500 at fine dining restaurants.
At a board meeting earlier this month, Southall pulled a Lens reporter aside and said he’s spent much more money on school activities than he’s been reimbursed by the school.
Southall did not respond to a request for comment for this story.
*Correction: The original story and headline incorrectly reported that the June 22 letter was prompted by The Lens’ reporting on Harney. The error was due to a miscommunication. (June 28, 2018)