Fund Was Poorly Monitored, Audit Finds

D.C. school system officials failed to properly monitor spending in a special account that allowed them to carry over funds from one fiscal year to the next, according to an audit released by the city's chief financial officer yesterday.

The audit focuses on the school system's Central Investment Fund, a repository for more than 125 accounts that held such deposits as private donations designated for needy students and fees charged to the Board of Education's charter schools to run its office. The investment fund allowed school system officials to bypass restrictions of general accounts, which require them to spend funds at the end of a fiscal year or risk losing them.

The audit was prompted by concerns over the use of the investment fund by Brenda L. Belton, the former executive director of the school board's charter school office. Belton, who was fired in the fall, deposited $200,000 annually in fees collected from charter schools and used the proceeds to pay hundreds of thousands of dollars in invoices to the contractor Equal Access in Education, city officials said. The billing address for Equal Access is a property formerly owned by Belton, and federal officials are investigating whether there is a connection between Belton and the firm.

After discovering the charter office problems, D.C. Chief Financial Officer Natwar M. Gandhi shut off access to many of the accounts in the investment fund in May, when it had a balance of $1.3 million.

Auditors reviewed the investment fund activity from October 2005 to May 2006.

According to the report, school system officials had not obtained necessary approval from Congress to spend the charter fees.

Neither Janey nor school board President Robert C. Bobb responded to requests for interviews about the audit. But in a written response contained in the audit, Pamela D. Graham, the school system's chief financial officer, who reports to Gandhi, said her office has hired a consultant to clean up the problem to "avoid waste, fraud and abuse of public funds."

Auditors also focused on the Neediest Kids Fund, an emergency account that provides food, clothing, dental care and eyeglasses for destitute students.

They found that 15 checks were not properly recorded; 81 of 203 disbursements exceeded the maximum amount that could be given by $3,929. And 71 of 203 disbursements were used for purchases not allowed under fund guidelines. Among the 71 purchases, according to Gandhi's spokeswoman, was pizza provided to students at Cardozo Senior High School in Northwest Washington in 2005 when they were relocated to University of the District of Columbia after a mercury spill in the building.

The schools need to follow guidelines, but they should also have the flexibility to help students in need, said Mary Levy, director of the Public Education Reform Project for the Washington Lawyers' Committee for Civil Rights.

"Why should it be complicated to buy pizza for kids booted from their school for a mercury spill?" she said. "Shouldn't we have a system that permits that?"