The Orleans Parish School Board confirmed Tuesday that a charter school improperly withheld employees’ retirement contributions, which The Lens has reported could have reduced their investment gains and may violate federal guidelines.

The school district is looking to hire a forensic auditing firm to help investigate Edgar P. Harney Spirit of Excellence Academy and other schools with financial issues. The audit could help quantify employees’ losses.

By The Lens’ count, Harney has received six warnings since last fall related to finances, enrollment, special education, public records and improper restraint of a student. Two more warnings are on the way.

Meanwhile, its chief financial officer is under an ethics investigation for being paid on the side to do school accounting.

Orleans Parish schools Superintendent Henderson Lewis Jr. said the embattled Central City school might not reapply for its charter, which is up for renewal this fall.

The Lens reported in June that the school had held onto employees’ retirement contributions for weeks, even months.

Last fall, the school held onto at least $55,000 earmarked for retirement accounts before transferring the money months later. That included about $24,000 withheld from employees’ paychecks for October, November and December. The rest was the school’s contributions.

”We now feel confident that … there was a failure to put the funds into place.”—Dina Hasiotis, Orleans Parish School Board

The practice could have deprived employees of investment gains and could violate Internal Revenue Service guidelines for retirement accounts.

In a similar case in Baltimore, delayed retirement payments resulted in a federal conviction and a two-year prison sentence.

Two days after we published our story, the Orleans Parish school district requested a trove of documents from the school, including three years of bank statements, credit card statements, and payroll and benefits records.

“A few things have emerged since we last met in June,” Executive Director of School Support and Improvement Dina Hasiotis told the school board’s accountability committee Tuesday. She described several outstanding issues at Harney, including “allegations of failure to apply the correct funds to employees’ retirement accounts.”

In response, the school district met with the charter school’s board and staff. “Based upon all of that, we now feel confident that … there was a failure to put the funds into place,” she said.

The school district is working on its response, which will include an official notice of concern, she said.

Hiring a forensic auditor is part of a bigger plan to increase financial oversight over the city’s charter schools, Hasiotis said. The district is moving from reviewing schools’ finances annually to doing it quarterly.

By August the district hopes to hire the auditor “to conduct specific, rigorous financial oversight when we need it,” Hasiotis said.

Board member Ben Kleban, who represents Harney’s district, said the school should make up any losses to its employees.

“Part of the reason for us hiring this forensic auditing firm is so that we can quantify what those amounts are,” Kleban said.

Two outstanding warnings, two more on the way

The Recovery School District, which oversaw Harney until last summer, warned the school last year that it had filed its quarterly financial reports late.

The charter school also failed to submit financial documents that the Orleans Parish School Board requested, including documents related to a contract with Brent Washington Sr., Harney’s chief financial officer. More warnings followed.

In October, the Louisiana Board of Ethics filed charges against Washington because he was paid on the side to do accounting for the school. The ethics board has accused him of violating state law that prohibits government employees from doing business with their agencies.

”They may make a decision not to seek renewal of their charter.”—Henderson Lewis Jr., Orleans Parish School Board

Washington received $54,500 for the extra work from 2014 to 2016. That’s on top of his annual salary, which was $75,000 in the 2016-17 school year, according to state records.

Hasiotis said at Tuesday’s board meeting that the district is monitoring problems with the school’s special education and financial management. Both are “level two” notices of noncompliance, the highest warning level.

The district’s special-education warning prompted an investigation and a corrective action plan from the Department of Education.

Harney was also flagged for enrollment problems. Hasiotis didn’t specify what the issues were, but she said it will result in another level two warning.

The withholding of employee benefits will lead to another warning, she said.

When she finished, Kleban asked, “Has it been communicated to them … that multiple level-two noncompliance notices may lead to [charter] revocation?”

“Not only are they aware,” Lewis said, “they may make a decision not to seek renewal of their charter.”

*This story has been corrected to fix an error in a graphic. Harney had received six warnings as of publication. (July 20, 2018)