An audit by Richmond Public Schools finds no evidence of fraud but plenty of mismanagement of funds collected for student meals and activities at Patrick Henry School of Science and Arts.
The audit, released late Friday night, cites "lack of management oversight, inaccurate monthly financial reports, failure to follow established procedures, an ineffective filing system, and incomplete documentation of transactions" for funds held in accounts controlled by the charter school's principal, Pamela L. Boyd.
"These internal control weaknesses increased the risk for a loss or fraudulent transactions," said Debora R. Johns, chief of internal audit services, in a memorandum accompanying the 11-page report.
Johns added, "Based on the available documentation, we found no evidence of fraud in the (student activity fund) transactions."
The Virginia State Police confirmed this week that it is investigating an allegation of embezzlement involving the school, although police have not linked the investigation to management of the student activity fund. The Richmond Commonwealth's Attorney's Office is assisting the investigation.
The audit report adds fuel to concerns about management of Patrick Henry, whose employees work for the public school system instead of the board of directors that runs the nonprofit organization, as required under Virginia law.
"Charter school laws need to be changed so there isn't this gray area of confusion and so employees of a charter school are employees of that charter school," Patrick Henry Vice President Kristen Larson said Saturday. "The charter school board should have control over that."
Larson said the auditor's findings are consistent with the findings of Patrick Henry's accountant, who audited the student activity funds this spring. "It validates what we've been doing," she said.
Johns said that Boyd, who asked for the review in late April, agreed with the audit findings, which require the principal to write a check for almost $3,000 to the school system to deposit in Patrick Henry's operating budget.
The Richmond School Board will review the report with "a sense of urgency," Vice Chairwoman Dawn C. Page said Saturday. "We are deeply concerned."
Page said the report underscores the need to reassess oversight of a new type of school for the city.
"We're dealing with uncharted territory," she said. "We have to clearly, clearly delineate the roles and responsibilities of the charter school and the district and hold everyone accountable."
The budget, controlled by the school system, has been used to pay the food vendor since October. Previously, while the public procurement process was under way to hire the vendor, Patrick Henry collected the money and paid the caterer directly.
The report recommends that the principal keep an accurate ledger of accounts receivable, which auditors said they could not accurately determine because of incomplete and disorganized records.
It also recommends that the principal exercise stronger oversight of the student activity fund records and purchase a safe to hold the money until it is deposited.
The report noted that the school had used three administrative assistants as finance officers during the period audited, but concluded, "The ultimate responsibility for management of student activity funds is the school principal."
Concerns first surfaced in January about the meals and activities funds, which were held in bank accounts created by Boyd under the public school system's tax identification number.
The city School Board authorized Boyd and two other Patrick Henry employees to create the student activity account Oct. 29; the principal opened a second account for cafeteria funds the next month.
Patrick Henry officials were concerned that the money collected for meals was low for the amount provided by the caterer that the school hired instead of using the public school system's food services.
They also discovered that a second account had been opened, using an address for a public elementary school in the East End. School system officials say the address was a bank error. Boyd closed the second account in mid-February.
Boyd also had used a debit card for the activity fund to buy $770 in gift cards from local retailers for teachers and students. A new line item in the school's operating budget called the gift cards "incentive awards."
Johns said the money was reimbursed to the activity fund. The revised budget presented to Patrick Henry officials this month shows $1,045 budgeted for the awards, including the $770 spent on gift cards.
Richmond Public Schools says it discourages the use of gift cards but does not have a policy forbidding them. Johns said the principal should not use a debit card for transactions with the account, but instead make payments by check.
Patrick Henry officials first asked the school system for an audit in early February, but the auditor wanted to wait until summer to have a full school year of transactions. Instead, the system provided school administration with training and a management review of how to account properly for the funds.
The audit covers the period from Oct. 29, when the account was authorized, through the end of April. Normally, audits cover the period from July 1 through June 30.
Auditors began the interim review because of "internal control issues" raised by the principal, Johns said. "After a cursory review of documents and reports, we determined a more detailed review was required."
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Staff writer Will Jones contributed to this report.
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