Legendary Ledger

School officials don't seem interested in tracking down $9.3 million in overspending.

What a difference a disaster makes. For six years, State Auditor Brian Sonntag has repeated the same criticisms about Seattle School District accounting and gotten the same lack of response. Last year, for example, the auditor said an effort to catch suspected thieves in the act was sabotaged by district managers (see "The New Math," Aug. 7, 2002). Now, with the embarrassed school district climbing out of a $35 million financial hole, school officials are practically begging the auditor to get jiggy with them. "We've asked the state to look for any kind of theft, any misuse of funds, any inefficiencies," says acting finance director Steve Nielsen. "We think that if we don't get every little thing out in the open, we just won't have the public's confidence." Encouraging words from a district whose former chief financial officer thought the schools didn't have time or money to go after minor heists and inefficiencies that amounted to hundreds of thousands over the years.

Still, during a meeting last week to respond to a recent review of district books by an auditing firm, school leaders and an oversight panel left a related question hanging in the air: Where did $9.3 million in public money go? That's how much private auditor Moss Adams says is still lost among the district's haywire ledgers. The auditor couldn't say if it was spent, misplaced, or ripped off, due to a sometimes-dead-end audit trail. If that's the case, Sonntag's office, which is expected at the end of this month to hand down another critique of district spending, might be stumped, too.

"We'll be looking at compliance with state, federal, and local laws," says Mindy Chambers, a state auditor's spokesperson, "but if there's no budget trail, we may not be able to find out, either."

What is known is that the district blindly overspent its supposedly balanced budget by $23.3 million in 2001-02, causing a deficit of another $12 million this school year. In October, Superintendent Joseph Olchefske reassured the public that "after weeks of careful analysis, we now understand the scope of the problem and how it evolved. We have a plan to fix it and to ensure that it never happens again."

The private audit released three weeks ago suggests the district's recovery effort has fallen short on all counts. Rather than finding all the reasons for the deficit, officials made some up. Rather than accounting for all funds, they picked figures out of the air. And some of the things that were never going to happen again have already happened, the audit said. According to the audit, officials now admit they "plugged" figures into their October recovery analysis without justification, just as the district's former chief financial officer is accused of doing to fill past budget gaps. That's one of the ways the district got in the hole in the first place.

Olchefske, for example, said the district had found a $7 million computer error that led to the deficit. The recent audit found this "systems disconnect" explanation was actually "a quick attempt to group various problems together and call it a major source of the deficit." The $7 million, Moss Adams said, "is acknowledged by district staff to be a plug." And the hurried, "fragmented and theoretical" explanation lacked conclusive documentation, auditors said.

The audit also found the district plugged another, unrelated $7 million figure into its recovery findings. That's how much the schools said they miscalculated by twice counting revenue from vocational students. That wasn't accurate, auditors said, although they subsequently determined the double count had led to a slightly lesser, $6.6 million error.

Ultimately, auditors said they were able to identify just $21 million of the $23.3 million in overspendingeven if, as in the case of the $7 million "systems disconnect," they couldn't always tell how or on what funds were spent. They also couldn't document the remaining $2.3 million difference, leaving a grand total of $9.3 million unaccounted for. "No audit trail was found to support the $9.3 million," Moss Adams concluded.

The mysterious figure never came up during last week's two-hour meeting between school officials and the Committee for Fiscal Integrity, an outside group appointed to review the district's deficit- recovery effort. Olchefske and Chief Operating Officer Raj Manhas put on a PowerPoint show and handed out a 134-page, point-by-point response to the audit, in essence agreeing to follow most of Moss Adams' procedural recommendations. But neither they nor their report nor committee members discussed the $9.3 million figure. Afterward, acting finance director Nielsen told Seattle Weekly he thought the district could actually account for most, if not all, of that money. "We can track it," he said, "but Moss Adams, for some reason, couldn't. I was surprised to see the way they wrote it up in their report."

If it's just a difference of opinion, shouldn't someone settle it before the district moves on? If your bank couldn't account for $9.3 million of your money, wouldn't you like to know why or if it's true? Perhaps, once again, it's up to the state auditor to solve it. "We can probably do it," says spokesperson Cameron, "if, as I said, there's an audit trail to follow."


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