Read a copy of Layton High School's audit (This may take a moment to open)
LAYTON -- A Davis School District audit says Layton High School used improper accounting procedures and violated district policy by diverting funds from their intended purposes.
The audit released Friday states that Principal Paul C. Smith "established a fictitious club called the 'Russian Club.' This club does not exist and was established, in the auditor's opinion, for the sole purpose of having a slush fund."
The amount in the Russian Club account ranged from $28,063 to $38,611 from April 3, 2003, to the time of the audit, according to the documents.
Having a slush fund is "a serious violation of regulatory requirements," according to the audit.
The report included a response from Smith, who wrote the Russian Club fund was carried over from an Ambassador account and the funds came from a "special reserve general account."
The funds are necessary, Smith wrote, because of "the increased demands on our building finances -- software licensing fees, textbooks and technology -- are being stretched like they have never been before."
Smith said in a telephone interview Friday the Ambassador account has been at the school for the past 20 years. When the school changed to a new financial system in 2009, it changed the name of the account to the Russian Club.
"Most (high) schools have discretionary funds," Smith said. "I would not assume my practices are too much different than others."
Christopher Williams, the district's community relations director, confirmed that schools do have a discretionary fund and those funds come from either soda and candy machine revenues or donations made directly to the school.
According to the audit, the "Russian Club was a slush fund and its purpose was to hide money from the district in order that the funds could be used in any manner determined by the principal." No transactions were conducted from the fund in six years, which "reveals a questionable need for the funds."
Appropriate district officials, with one computer click, have access to the school's budget and how it is spent, Smith said.
"We're audited every year," he said.
Williams said annual audits are conducted at every school, including Layton High School. Williams said he does not know why the concerns at Layton High School were not raised until this latest audit.
Smith said he had not seen the final audit report that was issued Friday.
Larry Newton, the financial director with the State Office of Education, said that office will not take any actions unless members of the State Board of Education request that a state internal auditor review the Davis School District's findings.
Legislators could also ask for a legislative audit of the district.
Sen. Stuart Adams, R-Layton, said he is not aware of any legislator asking for a legislative audit of the high schools in Davis School District.
"It is concerning for legislators," Adams said. "But I have full faith in the district that they will review and take actions necessary to find out what is going on, not only at Layton High School, but at other schools."
The audit also reported other financial deficiencies at Layton High School.
Those include:
* On Aug. 4, 2009, cash was found in the school's vault totaling $2,356, but not on accountable records.
* On Oct. 20, 2009, the audit showed $1,400 in cash, and $15 in envelopes labeled as belonging to two organizations.
* During the audit, an unauthorized petty cash fund was found containing $110 in cash and $18.41 in receipts. "Operating personnel stated that the head secretary had told staff members not to disclose the fund to district personnel. Maintaining this fund was in violation of district policy."
* During the audit, auditors found in the school's vault $628.32 worth of stamps and $26.40 worth of stamps in a counter drawer.
* Rental fees, including related personnel costs equaling $53,693 from fiscal years 2005 to Sept. 18, 2009, were recorded in the school's custodial supplies account, not in the building rental proceeds account. The district should have received 50 percent of the rental fees but did not, according to the audit.
* Graduation ticket sales for June 4, 2009, were estimated at $4,000 but were not deposited, but used as awards to secretaries and others. No records were available to show how those funds were distributed.
* Tickets were not used to validate sales to football and basketball games until August 2009. "Many of the boys basketball games had gate receipts totaling around $540, which would equate to about 70 students at $3 apiece and 66 adults at $5 apiece. This number appears low," according to the audit.
* Smith approved a plan to allow the drill team adviser to receive $30 from each of the 14 drill team members from May until December of 2008. The district was also paying the adviser a stipend, which "precluded the adviser from collecting fees from team members," according to the report. "When team members became aware that the adviser received a stipend from the district they discontinued their payments." The audit said since the practice was resolved, "no further audit effort is required."
Smith said in the telephone interview most schools, including Layton High, used hand stamps, not tickets, for admission into games.
District officials placed Smith on paid administrative leave on Oct. 12 while the district conducted an internal investigation. He returned to the school Monday and plans to retire on Jan. 31, Superintendent W. Bryan Bowles said.
Meanwhile, a criminal investigation by Layton City Police is under way concerning possible financial improprieties, according to a news release sent out earlier this week by Chief Terry Keefe.
An e-mail on Friday from Williams said, "Because of the ongoing police investigation, the district, at this point, has chosen not to make any further public comment or go into a detailed explanation about the findings. Such statements may occur later, but at the present time, we have chosen to let the audit speak for itself."
Comments