Pontiac audit reveals 'unheard of' handling of school district's millions

PONTIAC, Mich. (WXYZ) - It’s a troubled school district - more than $24 million in the red - hoping to convince state government officials that their latest deficit elimination plan will work.

But 7 Action News has learned that Pontiac schools leadership has known for years that millions of dollars have been flying out the door with basically no oversight.

Exactly where all that money goes remains a multi-million dollar question.

The 7 Action News Investigators obtained a detailed audit that shows tens of millions of dollars left the school district and no one knows for sure where it went.

“Simply put there is a complete lack of institutional control,” said financial analyst and certified public accountant George Smith. Action News asked him to review the 2010 Pontiac School audit, which covers four years of spending by Pontiac administrators and staff, beginning in 2006.

Smith’s initial reaction after reading the audit findings - “Just incredible, it’s just mind boggling!”

To say the results were shocking is an understatement, says Smith. “You shouldn’t see 28,000 errors or abnormal responses in a sample - that’s unheard of.”

The audit shows that more than 17,270 checks totaling more than $86 million dollars were written to vendors or people who possibly should not have received them.

Another 3,000 checks totaling more than $13.6 million were written without the proper documentation or approval, the audit says.

And district employees spent more than $33 million that they didn’t have clear authority to spend.

Add that to thousands of duplicate payments made - and thousands of other checks written without school board approval - and the audit says you have just under$157 million school district dollars that left the district from its accounts payable section, and no one can say for sure where it went.

After much debate, the audit was commissioned - only by the school board who finally voted to hire an outside company for the review.

We asked Smith how many mistakes you would expect to see when dealing with this much money.

“Six or seven is normal,” he said. “Everyone does have some of these, it just happens in the course of any business. But over this period of time to have that large of a sampling is just incredible!”

Another $279,000 in payroll checks was given to people without any authorization.

The total amount from payroll errors alone: more than a half million questionable dollars were sent out.

Smith says with such loose control; it would be easy to steal from the district.

“That money was unauthorized, given to either friends, relatives, or perhaps the person even wring the check to themselves that shouldn’t have gone out the door,” he said. “So in essence, it was stolen: there’s a very strong likelihood.”

The audit made recommendations to correct the problems, but the current interim superintendent Walter Burt admits in a telephone interview another shocker - He hasn’t read the report.

“Well as a matter of fact I have not read the report, but I do know that the district has made some changes in terms of its accounting,” Burt said.

The audit results and recommendations have been in the districts hands for more than a year, but Burt says only now are changes being completed.

“We are moving to a more sophisticate system. A new system is going into affect on or about July 1.” Burt said. “Some software issues need to be addressed.”

The audit cost the district more than $60,000, but it’s not clear if the consultants’ recommendations have been or will be put in place.