Audit: ‘Discrepancies’ at Krueger
MICHIGAN CITY – An audit by the Indiana State Board of Accounts found discrepancies in accounting practices at Krueger Middle School in Michigan City, and asked for money to be repaid by three former employees.
Two of those, a former principal and treasurer, repaid the funds. The third still owes nearly $6,000, and criminal charges could be filed, according to school officials.
The SBA audit found problems in the Extracurricular (ECA) Account used for money from student activities, such as athletics, field trips, and clubs.
The ECA treasurers for the school were Nancy Hurley (2013-15), Debbie Bye (2015-16), and Karen Parrish (2016-18), the report said. The treasurer was “primarily responsible for the accounting of these funds,” though Vera Jones, former principal, had “direct control over the management of the funds, including the authorizing of transactions and signing of checks.”
In June 2016, Michigan City Area Schools officials discovered checks made payable to Jones. Issued from the ECA Account, they were “described in the memo section of the check as reimbursements for purchases for the middle school; however, no documentation was presented to support the purpose of these disbursements,” the report said.
After an internal review, Jones was asked to reimburse the ECA Account $1,719.37, which she paid on July 25, 2016, the report said. Jones had resigned as principal on July 7, 2016, according to school officials.
MCAS said, in a statement, “Our internal controls identified financial concerns at Krueger Middle School in June 2016, and we promptly reported the matter to the State Board of Accounts for investigation. Our district’s insurance coverage ensured that students and families were not impacted.”
Following Jones’ resignation, the SBA performed a followup audit of the account from July 1, 2013, to June 30, 2017, and found further discrepancies in the handling of funds from student activities and textbook rental fees.
For the 2013-14 school year, Krueger hosted 13 athletic events for which tickets were sold, the report showed. After an event, ticket stubs and money collected went to the ECA treasurer, along with a ticket sales report and ticket stubs.
However, the report found that for the 2013-14 school year, “no ticket sales reports or ticket stubs were presented to account for the admission proceeds from these events. ECA records reflect eight deposits for ticket sales for the school year, totaling $1,581.83. Because ticket sales reports and ticket stubs were unavailable, we were unable to verify the amounts deposited and recorded into the ECA Account.”
And for the 2014-15 school year, five ticket sales reports with ticket stubs were presented for admissions to events, but “ticket sales reports were not available for examination for the remaining eight events,” the report said.
Based on similar ticket reports for the 2014-15 and 2015-16 school years, the SBA estimated $3,758 should have been deposited, but the audit found only one deposit, totaling $234.75. It concluded $3,523.25 was unaccounted for.
Funds that are “misappropriated, diverted or unaccounted for through malfeasance, misfeasance, or nonfeasance in office of any officer or employee may be the personal obligation of the responsible officer or employee,” according to the SBA.
It requested Hurley to reimburse $3,523.25 to the school for accountable items not deposited, but so far no money has been repaid, according to the SBA.
Hurley retired from MCAS on June 30, 2016, according to school officials.
As for book rental fees, the audit said those were also paid to the ECA treasurer, whose responsibility was to prepare billing invoices, collect fees, record payments and deposit collections.
Hurley was ECA treasurer for the 2014-15 school year, and the audit found total collections of $1,848.25, but deposits of only $1,718.35, resulting in $129.90 cash not deposited.
Parrish was ECA treasurer for the 2016-17 school year and the audit was “unable to trace total payments for eight days to a bank deposit, resulting in a discrepancy of $419.29,” the report said.
Including costs of the investigation, Parrish was asked to reimburse the school corporation $691.02, which she did on Oct. 3, 2018, the report said.
Parrish resigned from MCAS on Sept. 17, 2018, according to MCAS.
While Parrish and Jones repaid the school corporation before leaving, Hurley has not, according to the SBA, which says she owes a total of $5,958.86 for non-deposited items and costs of the investigation.
According to the MCAS statement: “The audit report was shared with the Indiana Attorney General’s Office and the La Porte County Prosecutor. The prosecutor would determine if criminal charges are going to be filed.”
In its summary, the SBA mentioned the following internal controls were lacking at Krueger;
• no segregation of duties or oversight for recordkeeping
• ticket sales reports and ticket stubs were not retained for the 2013-14 school year and eight games of the 2014-15 school year
• receipts were not issued at the time money was remitted to the treasurer
• there was no reconcilements performed between textbook rental software reports and deposits