Dan Hust | Democrat
TAKING PART IN Wednesday’s press conference to discuss the Fallsburg CS audit were, from the left, Assistant Superintendent for Business Daniel Grecco, Superintendent Ivan Katz and School Board President Michael Zalkin.
State Audit Slams Fallsburg Central
By Dan Hust
FALLSBURG November 30, 2007 In a sense, Fallsburg asked for it.
The school district’s board, alarmed by an external auditor’s report of the 2004-2005 school year, requested the NYS Comptroller’s Office to conduct a financial audit.
Comptroller’s staff obliged, pouring over documents about activities and transactions stretching from July 2003 to August 2006.
What they found confirmed district officials’ concerns that internal controls were not adequately safeguarding Fallsburg’s millions of dollars in equipment and funds.
But auditors also discovered that a convicted child molester had been employed within the school walls and a simple fingerprint check could have prevented the problem.
The resulting report was released by the Comptroller’s Office this week, and the picture it painted wasn’t pretty.
“It’s terrible to see a school district go through this,” remarked Superintendent Ivan Katz during a press conference Wednesday.
The silver lining, said Katz and Board President Michael Zalkin, is that the possibility of these problems reoccurring has been largely eliminated, thanks to a restructuring of internal controls.
They added that the current administration and board had nothing to do with the issues noted in the report, save for the task of correcting them. Nor did they feel the prior board intentionally did wrong.
Though the Comptroller’s Office painstakingly avoided naming names, here’s what auditors said happened and the personnel involved:
• Former Superintendent Walter Milton Jr., who served at Fallsburg from 2003-2006, was overpaid $44,457. Less than $10,000 of that was actual salary overpayments (in other words, unsupported by the existing employment contract), according to the Comptroller’s Office. More than $35,000 were non-payroll disbursements like use of the district’s credit card for personal meals, car washes, video rentals and store purchases.
Milton repaid about $2,400 but still owes $4,600 for those charges that the Comptroller’s staff could verify as personal. The rest of the money was considered improperly spent as a result of a lack of supporting documentation verifying if it was a school-related expense.
Current Supt. Katz said the district will seek reimbursement of the entire amount, though at least $14,182 worth was informally (and thus improperly) approved by the board.
• The district did not conduct the required fingerprint and background checks on two independent contractors, one of whom was Julius Anthony, primary consultant for Gateway Learning and a personal friend of Milton’s at the time.
Gateway provided curricula evaluations and recommendations to Fallsburg from January 2004 to May 2005, and the district situated Anthony in an office in the elementary school and later in the business department to conduct his work.
Anthony, however, had been convicted in the years prior of sexual battery, stemming from a charge of child molestation in Fulton County, Georgia. Though that original conviction was vacated this past January, in August Anthony was retried and convicted of the original charge of child molestation. He’s now serving five years in a Georgia prison.
During the audit (which Katz said never involved Milton’s participation), district officials told the Comptroller’s Office they did not realize they needed to do such checks on outside service providers.
However, that has since changed, according to Katz and Zalkin, and staff have been instructed to conduct such checks on any and all contractors, in addition to faculty and staff.
• Gateway Learning received $233,700 for its services to Fallsburg on Milton’s recommendation alone, without competitive bidding. In addition, its contract was not signed by the board until August 2004, yet it had been working for Fallsburg since January 2004.
The Comptroller’s Office could not determine if the expense was justified, since invoices were not itemized.
Anthony himself received $5,658 in reimbursements for undocumented and/or illegitimate expenses. Indeed, auditors said Milton required staff to pay a $5,000 claim to Anthony even though no documentation was provided.
Katz and Zalkin said procedures are now in place to prevent such actions.
“We do have a dollar limit [on expenses],” said Zalkin. “Beyond that [limit], we have to have a contract in place.”
Did Milton knowingly commit any wrongdoing? The current superintendent of the Springfield, Illinois, School District, Milton did not return a call for comment, and Zalkin said Milton’s intent could not be proven either way.
• Two former business officials were inappropriately paid as well, said auditors.
Margot Getman received $5,000 for moving expenses, though her contract did not call for that. And Robin Zimmerman received $891 for a reason no one could recall, in addition to $451 for a car rental in North Carolina that had no documented connection to district business.
Through the school’s attorney, the district will also attempt to recoup those monies, said Katz.
• Due to the technology director’s concerns that some staff had unauthorized access to sensitive data on the district’s computers, Fallsburg hired a security consulting firm for $13,000 to determine whether a breach occurred.
Since the district’s system did not monitor and log access either externally or internally, the firm could not determine if a breach did happen though it did note that the business office’s server could directly be accessed via the Internet.
Also, two laptop computers were found to be missing, with one suspected of being appropriated by a retiree of the district and another stolen while being updated. Police were contacted, but the computers were never found.
Auditors considered that symptomatic of a system that did not adequately track the district’s electronic assets.
Zalkin told auditors that physical assets are now routinely inventoried (including being tagged) and that the system logs identifying information of any district computer connected to the network.
A disaster recovery system is also being tested, and new policies are being drafted to monitor users, among other issues.
• Duties relating to checkwriting, bank reconciliations and data entry were not sufficiently segregated, the investigation found, with business staff each able to do jobs which, for security purposes, should be handled by others and/or reviewed by supervisors.
Auditors, however, did not find any discrepancies, and the board and administration have already segregated the duties so as to improve oversight and accountability.
• The district has also hired an independent claims auditor, Shelly Marcus, to review and approve all claims without having to answer to the business office or the superintendent.
At the time of the investigation, Fallsburg did not have such an auditor, and more than $16,000 in payments were deemed questionable by the Comptroller’s Office, including travel expenses handled by a “vague and non-specific” reimbursement policy.
The January 2007-appointed independent auditor answers only to the board and recommends approval or denial of claims based on itemized documentation.
* * *
For the full Comptroller’s Audit Report, call the district at 434-5884 or log on to www.osc.state.ny.us/localgov/audits/2007/schools/ fallsburg.htm.