Two versions of audit for the same year uncovered

Two versions of audit for the same year uncovered

A comprehensive financial audit report (CAFR) for fiscal year 2010-11 approved by the Beaumont Independent School District Board of Trustees at its Jan. 19 meeting is different than the one filed by the district with the Texas Education Agency (TEA) a week later, an investigation by The Examiner has uncovered. And that information has now prompted the state to take action and demand answers from the district.“I talked to the audit director, and what she said was that we are aware of this and we are contacting the BISD board members to confirm what the board actually approved,” said DeEtta Culbertson. “And once we have that information we will determine what (action) next, if any, will be taken. They have until March 23 to provide us with an answer.”Independently, The Examiner was able to confirm that the TEA has sent BISD a letter requesting an explanation, and a source inside the district said there are concerns that TEA could send in a conservator to take control.A TEA conservator has the authority to trump any decision by principals, the superintendent or the current board of trustees and can make decisions he or she believes are in the best interest of the district overall.Texas law states, “The commissioner (of education) shall appoint a conservator under TEC, 39.102(a)(7) and 39.111, or a management team under TEC, 39.102(a)(8) and 39.111, when: (1) the nature or duration of the deficiencies require that the TEA directly oversee the operations of the district in the area(s) of deficiency; (2) the district has not been responsive to or compliant with TEA intervention requirements; or (3) such intervention is needed to prevent substantial or imminent harm to the welfare of the district’s students or to the public interest.”BISD trustee Tom Neild was the first to notice the differences in the two documents, and when The Examiner reviewed it closely and put it in front of an accountant, a difference of more than $2.2 million was found missing in the district’s line item for cash on hand. Additionally, the audit approved by the board in January was marked “DRAFT” and does not have a signatory page containing an affidavit that the board approved the document. However, the CAFR filed with TEA claims it was reviewed on Jan. 19 and is signed by BISD board president Woodrow Reece and board secretary Terry Williams.According to the audit voted on by the Board Of Trustees, the district should have $142,083,822 in “cash and cash equivalents.” But the document submitted to the TEA and certified by Reece and Williams states there is only $139,868,996 in the “cash and cash equivalents” account.“How is that possible?” Neild asked. “You either have it or you don’t. Out of everything, that number should be consistent. Any time you are doing a financial report, that number should be the same. We are talking about cash on hand. Where did it go?”Neild said he had no other choice but to approach the TEA about the discrepancies and he has written a letter to BISD Superintendent Carrol Thomas seeking answers.“When we were handed a 150-page document and in less than 24 hours asked to blindly approve it, it makes no sense,” Neild said. “We are dealing with $150 million dollars of taxpayers’ money, and those actions throw up a huge red flag. This kind of action is why the public says the BISD Board of Trustees is a nothing but a rubber stamp committee, and based on this action, that is a true statement.“And now you find there is a $2.2 million dollar difference in our cash on hand. Incredible.”The Examiner also found a difference of more than $65 million in the property valuations in the foreign trade zone that the district receives money from.According to Roland Bieber, chief appraiser for the Jefferson County Appraisal District, federal law allows tax breaks on items stored within a foreign trade zone – in BISD’s case, crude oil storage for ExxonMobil. These arrangements allow companies to import raw materials and defer taxes on it until it is sold as a final product. In return, school districts enter into in-lieu of tax agreements where the companies pay to the district a portion of what they would normally have paid if the items were not part of the trade zone, and the money that is not paid to the district (the companies save about 50 percent on their tax) is made up without penalty from state funds.In this case, BISD’s draft audit claimed, “miscellaneous local and intermediate saw the most significant increase of approximately $115,365, 631 due to an increase in the value of the foreign trade zone, along with the proceeds from the settlement of a lawsuit related to hurricane losses.”In the document that was presented to the state that number dropped to “$50,409,905.”Along with Neild, board members Mike Neil and Janice Brassard made an attempt to stop the process from going forward at the January meeting. But the district’s business office said there was no time and there appeared to be confusion about exactly what the board was approving – some board members believe that was by design.Trustee Neil said BISD assistant superintendent for business and finance Robert Zingelmann waited until the last possible opportunity to present the CAFR to the board, saying, “We are going past the deadline if it is not voted on tonight.”Neild openly objected to voting on the audit without giving it a thorough review by entering a motion to table the decision until the board’s next meeting, but it failed to get enough votes.“My concern is that we did not receive this 150-page (audit) until last night, and I am wanting, since we have not had time to do a thorough study of it, to make a motion to table it until the next meeting after we have time to review and study it and come up with questions on it,” Neild said to the board.His protestations picked up the support of Neil and Brassard, who both expressed concerns about the lack of time to review the document.The trustees had only heard auditor Gayle Botley talk about his opinion of the audit, not about any specific findings within his review. Even Botley admitted to the board, “It doesn’t mean that everything was perfect.”Brassard said she couldn’t vote on the audit because it wasn’t in its final form but again, Zingelmann said the board was only voting to accept what was presented.“Maybe it is the wording of the item on our agenda, but I was assuming that we were not necessarily, when we approve it, that we are not saying, ‘Yes, we agree with it,’ but we are voting to accept that document from the auditors,” Brassard asked. “Not that we are saying we agree with everything in the audit but we are accepting the audit from the outside auditor into our possession. Am I assuming correctly?”Zingelmann’s response was, “That is correct. As it is presented to the board and that you are accepting the opinion of the auditor.”But Neild quickly pointed out that the wording being used was not consistent with the explanation being given by the administration. He said the item on the agenda was to approve the audit, “not to consider, not to think about but to approve. The way this is stated is that we, as board members, are approving that document when we have not had time to review it.”Thomas had already gloated over the audit and even had Botley reread a portion of the document proclaiming that BISD not only had a surplus of cash but that its fund balance had increased from the previous year.“Wait, wait, wait. Say that again; they might have missed that,” Thomas said during Botley’s presentation. “I don’t want anybody to miss that, so be sure you say it again.”Botley then repeated his statement about the district’s total fund balance having increased from the previous year by more than $1.5 million.“Everything that you do is lined up to TEA, as well, so there are a lot of attachment to whatever we do with taxpayers’ money that you can trace it back to see exactly how money is spent,” Thomas said during the meeting. “And it is good to have the outside auditor, such as you Mr. Botley, to come in and see and we are able to get a clean opinion and be sure this community know that their dollars spent like it is, like they should be. But more important than that, board, is the fact of the matter, I do appreciate Mr. Zingelmann spending that money in such a way that we don’t overspend, that we live within our budget but also that that fund balance is growing.”Looking back, Neil said he has some serious concerns about what happened at the January board meeting and he not only wants answers, he also wants a criminal prosecution, if one is warranted.“At the time, I wasn’t necessarily thinking that something sinister was going on, but now that I see they have changed the numbers and knowing that the audit turned in to the state was different than the one that was presented to the board, I certainly have a lot of questions,” Neil said. “First, I don’t even know what the numbers are now. I want to know if the numbers are solid. If they stand for themselves then why didn’t they present (them) to us? Looking at it now, either Mr. Botley didn’t get it done in time or the district withheld it because they didn’t want us to see it. I tend to believe the latter.”Sid Cohen of the accounting firm of Pollans & Cohen in Beaumont told The Examiner that submitting a draft document for approval by the board and then changing the number is “extremely unusual.”“What was approved by the board is supposed to be the final numbers,” Cohen said. “If the board approved a draft and the final numbers are different, then there ought to be an explanation about why there were changes. There are a lot of judgment areas in audits, but when you are talking about cash on hand, that number should not change – cash is cash. That is one of the essential numbers in an audit. You either have it or you don’t.”When asked if he has ever presented a “DRAFT” audit to the Jefferson County Commissioners Court for approval, county auditor Patrick Swain confirmed he had not. He said he might circulate a draft to get input, but what is presented to the board are the final numbers.Neil said he understands that some people may think he and Neild overly critique the goings-on in the district, but he said it’s this type of situation that causes that to happen.“The district knows what kind of microscope they sit under with us, and the fact that they have turned in an audit where the numbers changed from the one we were presented and not given enough time to review puts a big questions mark on just what in the hell is going on,” he said.Neil was furious that four BISD trustees voted to approve the audit without looking at it and he called out Zingelmann for misleading the board.“You can hear him on the video; he was pushing us to approve this. His whole excuse was that if we didn’t do it that night, then we would miss the deadline,” Neil said. “It’s not like we haven’t violated the rules before in this district. To me, he was trying to crawfish by indicating this is not a big deal. The guy who runs the business part of this district misrepresented what the vote was about. He was the one saying, ‘y’all are just accepting the recommendation of what was given.’ That is when we brought up that his comments weren’t consistent. That is serious. I think he was intentionally misleading the board.“If this is a criminal matter, then I would implore the proper people begin looking into it immediately. I know I didn’t vote to approve that audit. I don’t know where the responsibility lies, whether it is with the two board members who signed the affidavit certifying that was the document we reviewed and approved or if it is with the three administrators – Thomas, Zingelmann and director of finance Devin McCraney – but there is no way this was done by mistake.”The affidavit signed by Reece and Williams stated, “We, the undersigned, certify that the attached annual financial reports of the above named school district was reviewed and (x) approved ( ) disapproved for the year ended August 31, 2011, at a meeting of the board of board of school trustees of such school district on the 19 day of January 2012.Neil said, “Those two board members are the ones who signed that document claiming that was the document we reviewed, and that is 100 percent false. I am just glad that Janice Brassard stood with Tom and I and refused to vote on an audit that we weren’t able to look at.”Attempts to reach Botley, Zingelmann and Thomas for comment were unsuccessful.Jerry Jordan can be reached at (409) 498-1074, or at jerry [at] theexaminer [dot] com.

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