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State audit details misspending in Montgomery school system

An ‘off the books’ vendor account, ongoing theft led to changes in the transportation department’s leadership this year

A Montgomery County school bus in Kensington, Md., on Feb. 25, 2019. A September 2022 state audit cited several financial improprieties in the school system's transportation department. (Bonnie Jo Mount/The Washington Post)

A state audit revealed more details of financial misconduct in the transportation department of Montgomery County schools, including ongoing theft, thousands of dollars in questionable credit card purchases and an “off the books” vendor account that have led to changes in the department’s leadership.

The details were part of a Sept. 29 audit by the Maryland Department of Legislative Services of the school system’s financial management practices.

The school system’s procurement department became aware of questionable purchases last year during a routine review of school activity of school system-issued credit cards, the state audit said. An internal audit of an employee’s spending found questionable credit card purchases, including gift cards, furniture and other items shipped to the employee’s home.

Montgomery County Public Schools also found an account maintained by a transportation vendor, which was funded with money owed to the school district. The account was used to make payments to several employees and purchase items outside of the school district’s purview, according to the state’s report. The school system then notified the Montgomery police, who initiated their own investigation in November.

Until now, school and police officials have declined to provide information, saying only that the investigation was into possible “financial improprieties.”

Police investigating Montgomery County schools’ transportation department

At the time of the county investigation in November, the school system placed Todd Watkins, the former head of the transportation department, and Charles Ewald, the former assistant director, on leave. Two employees who were involved are no longer with Montgomery County Public Schools, spokesman Chris Cram said in a statement Tuesday. The state audit report does not name any employees involved in the investigations but noted that one of the employees previously placed on leave was terminated in February and that the other employee resigned a month later.

Phone numbers listed for Watkins and Ewald were not answered. A spokeswoman from the Montgomery County Police Department said the investigation is still ongoing.

The school district hired an outside accounting and advisory firm in December to direct an independent forensic investigation into the “off the books” vendor account and transactions from July 2016 to January 2022, according to the state’s audit. That investigation — released in February — found that about $1.2 million was deposited into the account. There were also payments totaling around $649,000 made directly to school district employees or to purchase goods and services — “purportedly on behalf of MCPS” — from October 2017 to November 2021, according to the state’s audit.

When Montgomery County Public Schools announced the police investigation Nov. 16, the account had a balance totaling $535,036, according to the state’s audit.

The firm also found up to $572,000 worth of credit card purchases it deemed questionable or needing further review from July 2016 to January 2022.

Cram, the Montgomery school district’s spokesman, said Tuesday that “a great deal of work has been done by MCPS staff over the past year, including hiring forensic auditors and a significant amount of work with our police partners.” The school district has recovered in excess of $800,000 as of Tuesday, Cram said.

As a result of the district’s internal investigation, the school district has identified a new vendor for purchasing buses, revised internal structures that monitor finance and procurement, reviewed purchasing card transactions retrained staff who have purchasing cards, evaluated employee access to purchasing cards and decreased card purchasing limits, Cram said.

The school system declined to comment further, citing the ongoing investigation.

No charges have been filed in the investigation as of Wednesday, according to a spokeswoman from the Montgomery County State’s Attorney’s Office.

Beyond the transportation department details, the state audit also found that the school district had significant security risks within its computer network, procurement policies that were “not sufficiently comprehensive” nor consistently used, and a need to improve internal accountability in some areas. The school district agreed that each of the audit’s findings were factually accurate and agreed to follow several of the audit’s recommendations.

Auditors noted that the school district’s response was “sufficient to address all audit issues.”

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