Audit of Ennis School District finds $7M misspent

2012-11-01T06:42:00Z 2012-11-05T13:55:20Z Audit of Ennis School District finds $7M misspentBy NICK GEVOCK Montana Standard The Billings Gazette
November 01, 2012 6:42 am  • 

BUTTE — An audit of the Ennis School District’s finances over the past eight years found more than $7 million in misspent funds on a new grade school, housing for teachers and some salaries.

But the report conducted by Denning, Downey and Associates of Kalispell also didn’t find that money had been taken from the district’s coffers and that with changes the problems can be solved so they don’t happen again.

“They transferred some money from transportation and adult ed into the flexibility fund and the way the law reads you can do that, but that money has to be spent the way it was originally intended,” said John Overstreet, Ennis superintendent who took over the job this year. “But there were no surprises, no real glaring fraud or embezzlement.”

The audit that was ordered by Madison County commissioners came after Montana Attorney General Steve Bullock this year found that Ennis had broken state law by diverting adult education and transportation money into a flex fund to build a $9 million school. The district had leaned on a letter it received from the state Office of Public Instruction that said adult education and transportation money could be used for new school construction as long as their use was for the purposes they were taxed for.

The school’s construction without a public vote sparked a bitter fight in Ennis. The audit came at the request of residents who were miffed that the district didn’t float a bond issue to pay for the building.

County commissioners met with the school board Monday to hear from Kim Downey, an accountant who conducted the audit.

Jim Hart, county commissioner, said while there were numerous problems with Ennis finances, they can be addressed and resolved.

“She indicated there were receipts for much of what was there, some of the transactions did not have supporting evidence,” he said. “There was definitely accounting of money coming in and money coming out.”

Downey found a host of other problems with the district’s books. The main one was that just over $7 million in adult education, transportation and flex funds were found not to be allowable costs for the purposes that were collected and spent. She also said that it couldn’t be determined whether $805,000 were allowable for the purpose they were used.

In addition, Downey found that the use of $202,175 in transportation and $208,716 in adult education funds to buy houses for beginning teachers was not appropriate. And she also found that the use of some of those funds to pay for a portion of staff salaries was not allowable without an allocation plan.

Finally, Downey determined that the district was improperly paying Walsh as an independent contractor, instead of as a regular employee.

That was the result of the board making Walsh a one-third time superintendent and two-thirds time bus driver after he retired in 2001. That has been the subject of an inquiry by the state Teachers Retirement System, which determined last year that Walsh and the district owe the fund more than $750,000 in retirement benefits that should have been paid into the system, as well as benefits Walsh received, plus interest. The case is still being reviewed by TRS.

Overstreet said the report will help the district move forward and get beyond the fight that has ensued over the school’s construction and other financial issues.

“Most of the recommendations from the auditor will be controls or recommendations for the future on how we set up controls so this doesn’t happen again,” he said. “It will go a long way toward the healing of the community.”

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