Arkansas district improperly spent $766,000 from funds targeted at low-income children, auditor says

Payouts at Earle deemed improper

A map showing the location of Earle.
A map showing the location of Earle.

The Earle School District improperly spent about $766,000 on personnel costs from state funds targeted for enhancing education programs for low-income children, and used about $323,000 in federal funds on disallowed personnel costs during the past fiscal year, a state auditor told lawmakers Friday.

The school district will pay back about $600,000 to the federal government because the district used federal Title I funds on disallowed costs during the past two fiscal years, said Greg Rogers, a state assistant education commissioner for fiscal and administrative services.

But the school district won't have to pay back the $766,000 in improperly spent state funds, he said. The district has reallocated funds from unrestricted revenue, and "they have zeroed that negative out," he said.

Deputy Legislative Auditor Larry Hunter said an audit by legislative staff of the district for the fiscal year that ended June 30 revealed problems ranging from spending more than state law allows on rings for student athletes, to not seeking School Board approval for salary increases of at least 5 percent, also in violation of state law.

In November, Arkansas Education Commissioner Johnny Key exercised his legal authority to assume control of the school district. Key suspended the School Board's authority and appointed Department of Education official Richard Wilde as superintendent. Wilde replaced then-Superintendent Rickey Nicks, who resigned after seven years in the post.

The school district served about 573 students at an elementary school and a high school during the 2016-17 school year, Hunter told the Legislative Joint Auditing Committee on Friday.

The audit also showed the district had $22,254 in credit card purchases without supporting documentation or approval for things such as hotels, meals, a cellphone and a computer. The district also had another $31,724 in credit card purchases without proper approval, he said.

Hunter said Nicks was overpaid $4,515, which consisted of a $4,000 annuity overpayment and $515 resulting from clerical errors, and did not provide documentation to the district, as required by his contract, for personal use of a school-owned vehicle that was to be reported on his IRS W-2 form.

He said the business manager and a licensed employee were overpaid $3,835 and $4,550, respectively, in unused leave payments that didn't comply with district policy.

Five employees were paid stipends totaling $14,508 that were not listed on the district's approved salary schedule.

Hunter said the district purchased 103 athletic rings costing a total of $36,157, of which $10,810 was paid using athletic event gate receipts, and the remaining balance was still owed to the vendor, after the audit was completed.

Of this amount, $22,824 was for 64 student athletes, resulting in an average cost of $357 per student, which conflicts with state law that limits districts to spending an average of $100 per student per activity for such items, he said.

The other $13,333 was spent for 39 rings, including 13 rings for coaches, eight rings for Nicks and other administrators, two rings for board members, three rings for spouses of the superintendent and a coach, six rings for other employees, and seven rings for other individuals.

Rep. Gary Deffenbaugh, R-Van Buren, said, "At the rate they were going, it looked like almost everyone in town got a ring for a championship."

Cindy Smith, coordinator for fiscal and support services at the state Department of Education, said money should have been raised or paid by students for the rings or donated by somebody.

"I think what happened was all these people ordered the rings and they should not even have ordered them through the district. They should have ordered through the company ... but the district placed the entire order and they never collected the money from those people," Smith said.

Hunter said Nicks was reimbursed $828 for a trip to Denver and a board member was reimbursed $300 for a trip to New Orleans, both without supporting documents or approval, Hunter said.

The district had $666 in bank fees related to insufficient funds during September 2016, Hunter said.

The combined balances of the district's teacher salary, operating and debt services funds were at a deficit June 30, 2017, causing spending to exceed revenue by $153,465 in violation of state law, he said.

Wilde said the high school building is about 21 years old and that's usually when a district would renovate and upgrade a building.

He said the district is building a new elementary school.

"I wouldn't send my children or my grandchildren" to the current school, he said.

Sen. Cecile Bledsoe, R-Rogers, praised Wilde for accepting the superintendent's job.

"'I'm sitting here thinking why in the world would you do that?" she said. "This almost seems like an impossibility."

"It is not just the challenge, but it is the idea that that community deserves better ... and sending a novice there, a beginner there, probably would not have been appropriate on the part of the department," Wilde said. "The department does not have a lot of options when we are looking for a superintendent to place in a district under state control."

Sen. Joyce Elliott, D-Little Rock, said, "Much of the predicament you see Earle in is not different from so many school districts who are suffering not just from bad management, but from hundreds of years of systemic poverty.

"You can raise every dime that you can with that millage in Earle and you are still going to have a school district that is unable to function in a way that it might function in your school district, which is perhaps why you are so aghast at the conditions and wonder why somebody would go there," she said.

Metro on 06/09/2018

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