Former BISD auditor defends CPA license at state hearing

Former BISD auditor defends CPA license at state hearing

Even though he paid out three-quarters of a million dollars to the Beaumont Independent School District earlier this year to settle a civil lawsuit brought by his former employer, Certified Public Accountant (CPA) Gayle Botley was not making any concessions when he fought to keep his professional license this week in Austin. 

Botley stood steadfast in his resolve, saying he was not to blame for failing to detect the poor financial controls at the school district he was paid to audit even as state licensing officials offered a litany of ways Botley was not only negligent in his professional duties to BISD but, they said, also at least partially responsible for thefts from the school district in excess of $4 million while he systematically signed off on external audits at BISD year after year as massive amounts of money were siphoned from the district’s coffers.

Centering on audits that would’ve been performed for BISD in fiscal years ending 2010, 2011, and 2012, Botley was called to answer questions about his role in ensuring financial stability at the school district.

“We all did reviews of the finances as well as the controls in place,” Botley told attendees present June 28 at the State Office of Administrative Hearings (SOAH) boardroom in the state’s capital, referencing he and his staff’s auditing process. Testimony in Botley’s hearing review began Monday, June 26, and is expected to wrap up by the end of the week.

According to Botley, his crew performed reviews “throughout different areas of the audit” utilizing “all the resources that were available” as well as independent access his firm possessed to the district’s bank accounts, accounting journals and the like. He could show no proof of that, however, he said, because he never received back all the working audit papers seized by federal agents in 2013 when they raided BISD and found that now former Chief Financial Officer Devin McCraney and Comptroller Sharika Allison had embezzled roughly $4.1 million from BISD right under Botley’s nose. Federal agent Tim Brewer categorically denied that the federal officers kept anything that was not made available to the auditor, his attorney or BISD’s attorney, but Botley time and time again argued that Brewer’s testimony was flawed.

Botley said among the missing workpapers are his “permanent file,” which had all the previous years’ documentation of internal controls, and cash workpapers, as well as parts of data for federal award planning. “For some reason,” he said, “I don’t think all the information is still there.”

Botley said he never asked the FBI for copies of his workpapers, which, according to auditing standards, he is required to keep copies of, although he hasn’t seen his complete paperwork since the federal agents came and took it away. According to him, former BISD attorney Melody Chappell was supposed to be in charge of recovering his work documents. He said she acquired “some” of the impounded paperwork in 2014 “but not all of it.”

Offered as justification as to why he couldn’t support claims he actually reviewed and tested BISD’s controls, wire transfers and journal entries – negligence of which is said to have allowed for McCraney’s and Allison’s theft – Botley said he knew the work was there but now it isn’t.

Before the SOAH, Board of Public Accountancy attorney Mary Alice Boehm-McKaughan reminded Botley that he did have a complete set of working papers – as the AICPA had requested copies of those very same documents long before the FBI’s arrival on scene.

“I actually forgot,” Botley said. But the attorneys did not forget. According to testimony from Botley’s attorney, Frank McElroy, he did obtain the documents Botley supplied to AICPA in advance of the 2013 raid, but nothing in those documents would support his client’s claims either.

Boehm-McKaughan said Botley’s assertion that he performed the work as required of licensed CPAs is at the heart of the matter – as are working papers to support his claims. For four hours, Boehm-McKaughan urged Botley to produce even one instance of a documented controls check.

He did not.

“We’ve been asking the same question since the beginning,” Boehm-McKaughan said. “Nothing in the thousands of documents shows a test of BISD’s internal controls. We were hoping at some point during the last three years that this has been going on they could just identify this,” but she would be disappointed.

Although never producing or pointing to any of the thousands of pages of documents held in dozens of binders and boxes of evidence produced in the case, Botley assured the attorney that he did do the work – even if she couldn’t see it.

“They may not be documented … as per the standard … but they are documented,” he said. “We’re auditors, so we are trained to validate and verify.”

What training “we” received in auditing was unclear from Botley’s testimony as he further admitted that the chief staffers performing the audits, Cheryl Botley (his wife) and Pricilla Hawkins, were not certified CPAs. Boehm-McKaughan asserted none of his staff was ever CPA certified.

The lack of credentials among staff was one of the many problems cited by the Board of Public Accountancy in the need for SOAH review. Boehm-McKaughan, in her request before the administrative law judge presiding over the hearing, said that and other acts such as “dishonesty” and “a lack of fitness” necessitated that Botley have his Texas CPA license revoked and pay administrative costs of at least $14,669 on top of an additional $25,000 administrative penalty.

Furthermore, according to Gibson Ruddick Patterson LLC CPA Belen Briones, “It is evident that Mr. Gayle W. Botley & Associates either did not have the adequate technical training and proficiency to perform the audit of a Texas school district, failed to test the requirements or simply failed to report any findings related to both lack of internal controls and noncompliance at the Beaumont lSD for the years ended Aug. 31, 2010, 2011 and 2012.”

Briones’ review directly links Botley’s failure to properly perform his auditing job to former finance employees McCraney and Allison stealing more than $4 million from the school district during the scope of review, as well as former BISD assistant superintendent Patricia Lambert’s schemes to pilfer funds by (among other schemes) diverting tens of thousands of dollars to her son’s printing companies. All three are currently in federal prison for their crimes against BISD.

But the BISD embezzlers should have been caught long before they were exposed in the pages of The Examiner in 2014. In 2010, 2011 and 2012, Botley should have seen red flags, Briones testified.

“For example,” she noted, “Campus Activities Funds were not reported in the financial statements. Activities such as fees for textbooks, library fines and revenue from vending machines appear to have been either recorded in Student Activities Funds or stolen.”

There were also instances of over-reporting property tax revenue and under-reporting debt, the evidence revealed, as well as improper expenditures of funds that are under state or federal oversight. Testimony revealed at least one instance of payment from the nutrition fund to pay vendors such as electrical contractor Calvin Walker and for invoices indexed for the BISD Education Summit, held annually under the direction of BAABSE (the Beaumont Area Alliance of Black School Educators), board members of which included convicted BISD embezzler Allison and Lambert’s admitted co-conspirator and federal convict Victoria Gauthier Steward.

Botley, he said, never participated in the Summit – “I just heard about it.” One of his many uncertified staffers audited the event, according to evidence offered in the SOAH hearing, although she admittedly neglected to report instances of impropriety.

“Those didn’t seem material,” Botley said. And neither did any of the wire transfers Botley alleged he reviewed in respect to McCraney, even though it has been proven and admitted by McCraney that he used wire transfers, and the lack of controls on making wire transfers, to steal millions of dollars from BISD by moving the funds from BISD’s Bank of America account to his own personal banking accounts.

“Some of the transfers, I can’t recall the exact ones …” Botley said, “you should see them” in the workpapers. No one at the hearing saw them in the workpapers, they stated.

“It was my knowledge there was a check and balance with (McCraney) and (Allison) and their secretaries,” Botley said. Botley then read into evidence Texas Education Agency findings that the district or its designee “failed to implement internal controls and procedures to protect the district’s resources…”

“Not totally” in agreement with the TEA findings, Botley asserted the theft was undetected “because of the collusion that took place.”

“By the time anyone finds out … usually it’s too late, and the damage has already been done,” he added. “Collusion is collusion.”

The case against Botley was sparked by citizen input in March 2014, when BISD stakeholder J. Glenn Cummings lodged a complaint at the state oversight office alleging that Botley “did not comply with generally accepted auditing standards in auditing BISD and that (Botley) failed to report, ‘serious conduct that would be obvious to an auditor.’”

Although already invested in the investigation now for roughly three years, after four hours of questioning Botley and still coming up with no logical rebuttal for deficiencies she believed are proven beyond doubt, Boehm-McKaughan said she did learn something new in the hearing – that Botley’s logic makes no sense.

“It made it take a lot longer than I expected,” she said.

 

Hearing administrative law Judge Michael O’Malley said he will not likely have a decision this week; after testimony concludes, he will need some time with the evidence presented in the lengthy hearing.

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