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Scam rips ID schools

January 4, 2019

Teton Valley’s school district discovered a fraudulent payment of $784,000 right before Christmas, but its counterpart in Wyoming is confident that safeguards would keep that from happening in Jackson Hole even though the Idaho district had similar measures in place.

“I think our district is very fiscally responsible and has processes and procedures in place to ensure public funds are spent appropriately and as intended in relation to our budget,” said Charlotte Reynolds, information coordinator for Teton County School District No. 1. “Is every process 100 percent foolproof? Maybe not, but I think we certainly have those checks and balances in place to minimize any potential of something happening.”

The Teton Valley News broke the story on Dec. 21 that Teton School District 401 reported a loss of more than three-quarters of a million dollars to the Teton County (Idaho) Sheriff’s Office. The sum was a monthly payment of bond money, passed by the community in November 2017 to deal with old buildings and to improve classrooms.

Superintendent Monte Woolstenhulme and the school board spent the rest of the holiday break dealing with the fallout — cooperating with the regional FBI agency that is leading the investigation, notifying the Idaho State Department of Education and the Idaho State Treasurer’s Office of the incident, working with the district’s insurance company, Idaho Counties Risk Management, and meeting in an executive session.

The board also accepted the resignation of business manager Carl Church, who allegedly sent the large sum to scammers after receiving a fake email asking for payment. His resignation is effective Jan. 7, the day school is back in session and normal office procedures resume.

Idaho readers interested in learning more should attend the school board’s meeting Monday from 4 to 7 p.m. at the district’s office, 445 N. Main St., in Driggs. The meeting will be live-streamed on Facebook.

Different process

Teton County School District No. 1 in Jackson has recent experience handling large sums of money during the construction of Munger Mountain Elementary School. But because that was funded by the state of Wyoming’s school capital construction money, not a bond or specific purpose excise tax vote, the process for sending payments varied.

The district followed a process set by the state’s School Facilities Commission. Vendors submitted pay applications that were first reviewed by the construction manager at risk. Once all expenses were confirmed and referenced back to project schedules, the bill went to the district — in this case, usually Assistant Superintendent Jeff Daugherty. Daugherty reviewed and approved the expenses before the bill made its way back to the state for staffers to do their own review, approval and authorization of the payment.

There were also regular monthly meetings at which the owner, architect, engineers and other involved parties could go through and double check payments.

If any future construction is funded with state dollars, Reynolds said, the district would follow the same process. Besides school construction the school district regularly makes large purchases for things like curriculum and technology leases.

“The key piece for the community to understand is that we do have checks and balances for not only large-scale projects, like construction of a new school, but also our day-to-day operations,” Reynolds said. “We take expenditure of public funds seriously and make sure we have systems in place to safeguard those public funds so they’re used as intended. ... People have to trust that their tax dollars are being spent appropriately and legally. I think that’s critical.”

For district-level payments a bill first goes through the program lead, then the business office. If it’s an expense above $25,000 it’s treated as a warrant for the Board of Trustees to approve. The assistant superintendent and superintendent are involved when appropriate. If a charge is below the $25,000 threshold and is already identified in the board-approved budget, principals have the authority to authorize payments at their school.

The fiscal year 2018 audit of Teton County schools did find a couple of financial weaknesses, including too small of a staff to always segregate duties effectively (especially at “remote locations”), administrative employees not following policies and procedures consistently, and the need for additional record keeping to stay up to date with new requirements. Additional training in some areas was recommended.

While some invoices may come in the form of an email, no payments are made electronically. If invoices are emailed, Reynolds said, they are printed, cross-checked with money in the budget and processed through the business office staff, which sends a check. A spending management system from Visa called IntelliLink helps manage credit card payments by acting as a registry of receipts to expenses.

“I’m not aware of any sort of situation where we would get an e-notification where a payment is due, where you’d click a button and the money goes from the district accounts to pay for an expense,” she said.

Reynolds said Teton County School District employees are up to date on cybersecurity training and regularly receive emails from the IT department reminding them of current scams. One such email was sent out right before the holiday break.

“The IT department reminds us that if it sounds too good to be true, it probably is,” she said. “And no one is waiting to send you a big pile of cash if you just authorize $29.99 on your credit card.”

Deviation from protocol

People in Victor, Driggs and Tetonia, Idaho, are clamoring to know what exactly happened. But board Chairwoman Chris Isaacson said that what the district can say is limited due to the investigation. What could be said publicly has mostly been addressed in press releases and social media posts, she said.

“I just feel that the checks and balances were there,” Isaacson said. “I feel that our superintendent immediately addressed the situation, and we had policies and procedures in place from how you issue the check to how many signatures are on the check, all of those kinds of things.”

Since this summer, when construction began, the school’s architectural firm reviewed all of the bills from Headwaters Construction to make sure the work was completed and materials listed were received. Once it signed off, the bill went to Woolstenhulme, Church and a board member to be signed by all three.

“After that they designate their approval. Then a check is cut and delivered or picked up by Headwaters physically,” Isaacson said. “We don’t do electronic payments for the bond.”

In not following that process, Isaacson said, Church “made a decision out of the normal protocol” and “deviated from the protocol for procedures.”

She praised Woolstenhulme’s quick response, saying that the “outcome would be better than it would have been otherwise.” She said outside companies that worked with the district during the bond rating process were “extremely complimentary to us in terms of our fiscal responsibility and our budgeting and our excess revenue.”

The district is now working to create additional security measures that will be more concrete when approved by the board this month. One step the district announced in a press release is hiring external accounting professionals to get everything back on track. Isaacson told the News&Guide she didn’t know how much that would cost.

It’s also unclear how much of the loss might be covered through insurance. Isaacson said the insurance might cap at $500,000, leaving the district to shoulder the $284,000.

“We’re still going through the process,” she said. “We don’t know what will be covered.”

Tetonia resident and mother of two Mandy Rockefeller said she wants more answers from the school district.

“I share the sentiment of most people reading the news,” she said. “How in the world is this situation even possible?”

Rockefeller knows school improvement is a “very real need, not a pie-in-the-sky thing.” Sometimes, she gets emails from Driggs Elementary School that the heat isn’t working and she should dress her daughter warmly.

“The confidence has really been broken with the school district and the stewardship of the funds that were entrusted to them,” she said. “I think at this point everyone is sitting with their heads spinning. I know I am.”

She is worried about the lasting implications.

“I unfortunately think any future bonds will either not be passed or met with huge opposition just because of this one instance, and it’s unfortunate that the acts of this one person could cause this ripple effect.

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