No evidence of crimes in audit

Tuesday, April 15, 2003 | 10:17 a.m.

State Superintendent Jack McLaughlin defended the management of the Nevada Education Department's nonprofit foundation Monday, after the release of an audit that found several violations of generally accepted accounting principles and procedures.

"There is no evidence of any intentional misdoings," McLaughlin said Monday. "The people working at the foundation are doing so as volunteers, putting in hard work on their own time, for which we are deeply grateful."

The draft audit report was presented Saturday to the Nevada Board of Education, detailing irregularities such as a lack of financial transaction records and an employee who was reimbursed for travel expenses above what the state allows.

Although highly critical, the audit did not uncover any evidence of crimes, Keith Rheault, deputy state superintendent of public instruction, said. There is no intent to turn over the findings to the Washoe County District Attorney's Office for prosecution because no money was missing and "there was no criminal intent," he said.

McLaughlin said he was concerned the audit report would cast the foundation in a negative light, even though the majority of the findings were positive.

"This is a group that hasn't been operating very long, and is getting itself in order in terms of rules, regulations and policies," McLaughlin said. "For the first time they're starting to bring in some significant dollars and are helping a lot of schools."

Gary Waters, president of the state education board, said he was "deeply concerned" by the audit's findings and wanted to see more direct oversight of the foundation by the board. Waters cited the lack of follow-up by the foundation when a $10,000 check intended for a Sparks Charter school was altered and instead deposited into a different account.

Charlotte Curtis, who was appointed about two years ago to oversee the foundation and has worked as a consultant to the state education department for 10 years, said she was dismayed the draft audit report had been made public. Curtis said she would have preferred only the final audit report -- which would include the foundation's explanation of how irregularities had been corrected -- be released.

"All of the issues will be remedied, and many of them already have," Curtis said Monday.

A full response to the auditor's request for additional information is being compiled and will likely be submitted by the end of the month, Curtis said.

Deborah Feyder-Cress, principal auditor for the education department, said the audit was conducted at the request of the foundation.

"That says a lot about their sense of fiscal responsibility," Feyder-Cress said.

While the foundation was created by the department in 1991 to handle grants and donations, it has been active only for the past few years, Feyder-Cress said. The irregularities uncovered by the audit can be expected when a foundation goes from near-inactive status to handling $23,000 last year, Feyder-Cress said.

"These are typical growing pains," Feyder-Cress said.

John Gwaltney, a member of the Nevada Board of Education and the liaison to the foundation, said Monday he had a "great deal of faith" in how the funds were being managed. The foundation's response to the audit will show the problems have been corrected and new policies are in place, Gwaltney said.

"They're doing a good, solid job," Gwaltney said.

The 21-member foundation was created by the state Board of Education to seek money to help support kindergarten through the 12th grade.

The foundation, started about three years ago, did not have any staff and "operated out of a shoebox," said Rheault. It had no money for the first few years but then started to receive funds.

There were three secretaries working part-time to handle the books, Rheault said.

The foundation did not follow appropriate accounting procedures and Rheault said a plan of corrections has been developed.

"We agree everything will be cleaned up. We take this seriously," he said.

Sun reporter Cy Ryan contributed to this story.