Feds seek fraud probe of State Education Department programs
Published 11:05 am Thursday, April 27, 2017
By Kate Royals
The federal government is calling for a forensic audit — an effort to look for potential fraud — of two of the Mississippi Department of Education’s programs, according to State Auditor Stacey Pickering’s office.
The state auditor’s office is performing the audit on behalf of the U.S. Department of Education’s Inspector General’s office, spokeswoman Kelley Ryan said.
“We’re coordinating our efforts with the U.S. Inspector General’s office and are doing this work on their behalf and to their satisfaction,” Ryan said. She declined to answer additional questions about the audit.
Requests for comment from the Inspector General’s Office of the U.S. Department of Education, which requested the special audit, were not returned Wednesday. The areas being audited are 21st Century Community Learning Center and Title I funds, both federal programs.
Last school year, Mississippi Department of Education officials overspent the 21st Century funds. When they discovered the deficit, they then used Title I funds to fill the deficit, which is not allowed.
The Department eventually had to repay $7 million from its general fund to cover the Title I funds that had been misspent and State Superintendent of Education Carey Wright announced three employees had been fired as a result.
The misuse of the funds also led to the loss of many federally funded after-school programs for low-income students this school year. In the aftermath of the revelations, Pickering instructed the Mississippi Department of Education to contract with an outside firm to conduct a regular financial audit of five federal programs managed by the department.
That audit was performed by Minnesota-based accounting firm CliftonLarsonAllen. A financial audit, such as that one just completed, looks to see whether financial statements are materially misstated due to error or other issues.
A forensic audit — the type that is about to occur — refers to a process of resolving allegations of fraud from inception to disposition, according to the Association of Certified Fraud Examiners. In general, forensic accounting is the use of professional accounting skills in matters that involve potential or actual litigation.
State Board of Education Chair Rosemary Aultman said she and other board members were aware of the involvement by the U.S. Department of Education Inspector General’s Office and had expected them to perform an audit following the misspending of federal funds last year by several former Mississippi Department of Education employees.
“There’s no indication there were any missing funds, just that the money was overextended, or there were more grants (for federally funded after-school programs) out there than there were funds,” Aultman said.
The board decided last month to hire an outside accounting firm to do the forensic audit alongside state auditors. That contract is for around $114,000.
“Our board decided we would engage CLA (CliftonLarsonAllen) because they were very familiar with everything and had just finished our general audit,” Aultman explained.
She said the board decided to hire the firm to ensure the accuracy of any findings.
“Our information is that the people from the (state) auditor’s office who were going to do the audit were not forensic auditors,” Aultman said. “And CLA (CliftonLarsonAllen) does have a forensic audit department, and we wanted to make sure that the information that was audited was correct and that we had someone there watching out for the (Education) department’s interest.”
The auditor’s office declined to respond to general questions about the audit, including whether it has forensic auditors on staff. However, the office’s website indicates it has an investigative division which is “responsible for the investigation of alleged or suspected violations of Mississippi law, including fraud and embezzlement, by public officials.”
The general financial audit performed by CliftonLarsonAllen was released to the public last week. That audit revealed significant deficiencies and material weaknesses in the Department’s accounting and program administration last fiscal year.
Auditors also noted delays and missing documentation but said MDE has created a corrective action plan and already implemented some of those measures.
The team from the state auditor’s office is expected to begin its work in May.
“We welcome a thorough review of our federal programs to be absolutely certain there are no outstanding issues,” Wright said in an emailed statement. “We have already corrected the major issues cited in our financial audits of federal program and have put systems in place to ensure strong oversight to prevent any future fiscal errors.”