Audit problems at Swink Schools

In the wake of alleged misappropriation of funds at Swink Public Schools, the State Board of Education approved establishment of a task force to create an action plan for the school district in southeastern Oklahoma.

In reviewing an audit of the small district, board members and State Superintendent of Public Instruction Joy Hofmeister also expressed concerns that a Broken Arrow-based auditing firm hired by the district had found no financial problems over the previous five years.

A review by the Oklahoma State Department of Education (OSDE) showed that the firm of Sanders, Bledsoe & Hewett had failed to uncover alleged embezzlement in the district that totaled nearly $235,000. Eventually, a June 30, 2015, audit by the firm outlines several instances of alleged fraud by the district treasurer and encumbrance clerk, including:

  • Altered school district checks payable to the treasurer and her relatives;
  • Travel reimbursement for trips not taken;
  • Unapproved fuel charge cards; and
  • Unauthorized purchases, including alcohol and tobacco.

The FBI and U.S. Department of Education are investigating the allegations.

The board questioned Swink Superintendent Mark Bush and officials of Sanders, Bledsoe & Hewett as to why the firm — which has been performing annual audits for the district since at least 2011 — did not find any suspicious activity in the district’s books until this year. Alleged instances of fraud have increased each year, with $7,200 misappropriated in 2010-2011, to $89,600 misappropriated in 2014-2015, according to the audit. Of 114 school district audits conducted last year by Sanders, Bledsoe & Hewett, all but seven were “clean” and absent of findings.

Representatives of the firm told the State Board that irregularities they find are often conveyed in letters to the district instead of in actual audits.

“I have a real problem with audit findings that don’t make their way into the audit,” Hofmeister said. “This is a cautionary tale for other districts around the state. If an audit looks too good to be true, it might be. It is important for administrators and board members to maintain tight controls and ask questions, especially given the fiscal challenges facing our schools.”

In the June 30, 2015, audit, the auditing firm highlighted a number of incidents of alleged fraud and made 10 recommendations for the 164-student district to strengthen internal controls.

Board members voted unanimously to establish a task force comprised of OSDE officials and chaired by board member William Flanagan, a retired certified public accountant and personal financial specialist. The panel will work with officials in the Choctaw County district to strengthen financial oversight. In turn, these recommendations might be worth consideration by school districts across the state.

OSDE General Counsel David Kinney, who is also a CPA, consulted with State Auditor and Inspector Gary Jones and the Oklahoma Accountancy Board in the department’s review.