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State Education Department forms task force in response to fraud in Swink, Oklahoma

State Superintendent of Public Instruction Joy Hofmeister. Photo provided.
State Superintendent of Public Instruction Joy Hofmeister. Photo provided.

Staff Report

OKLAHOMA CITY – In the wake of alleged misappropriation of funds at Swink Public Schools, the Oklahoma State Board of Education has established a task force to create an action plan for the school district in southeastern Oklahoma.

Board members and State Superintendent of Public Instruction Joy Hofmeister expressed concerns that a Broken Arrow-based auditing firm hired by the district had found no financial problems over the previous five years.

A review by the Oklahoma State Department of Education (OSDE) showed that the firm of Sanders, Bledsoe & Hewett had failed to uncover alleged embezzlement in the district that totaled nearly $235,000. Eventually, a June 30, 2015, audit by the firm outlines several instances of alleged fraud by the district treasurer and encumbrance clerk, including:

•    Altered school district checks payable to the treasurer and her relatives;
•    Travel reimbursement for trips not taken;
•    Unapproved fuel charge cards; and
•    Unauthorized purchases, including alcohol and tobacco.

The FBI and U.S. Department of Education are investigating the allegations. Prosecutors are expected to file criminal charges against the pair.

The board questioned Swink Superintendent Mark Bush and officials of Sanders, Bledsoe & Hewett as to why the firm — which has been performed annual audits since at least 2011 — did not find any suspicious activity in the district’s books until this year. Instances of fraud have increased each year, with $7,200 misappropriated in 2010-2011, to $89,600 misappropriated in 2014-2015, according to the audit.

Of 114 school district audits conducted last year by Sanders, Bledsoe & Hewett, all but seven were “clean” and absent of findings. Representatives of the firm told the State Board that irregularities they find are often conveyed in letters to the district instead of in actual audits.

“I have a real problem with audit findings that don’t make their way into the audit,” Hofmeister said. “This is a cautionary tale for other districts around the state. If an audit looks too good to be true, it might be.”

In the June 30, 2015, audit, the firm highlights incidents of alleged fraud and makes 10 recommendations for the 164-student district to strengthen internal controls. Board members voted unanimously to establish a task force comprised of department officials and chaired by board member William Flanagan, a retired certified public accountant and personal financial specialist. The panel will work with officials in the Choctaw County district to strengthen financial oversight.

“Misappropriations of funds is a charge we take very seriously, and we are holding the Swink school district and board members accountable for both the actions of its employees and the auditing firm they hire,” Hofmeister said. OSDE General Counsel David Kinney, who is also a CPA, consulted with State Auditor and Inspector Gary Jones and the Oklahoma Accountancy Board in the department’s review.

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