LEGISLATIVE JOINT AUDITING-EDUCATIONAL INSTITUTIONS

AI recap

Transcript

members we will call this legislative audit subcommittee to order thank you for being here today let's start with the word of prayer let's stand up thank you Lord thank you for today thank for chance to get to serve the people of our consult today and ask for your wisdom and appreciate the beautiful weather the fall weather that we've been able to experience we just ask that we get to serve the children across all of our school districts that you can trust with us with good stewardship do you say I'm pray I'm in all right members thank you for being here if you'll get seated and sign in in the back and then if you've got questions please just light up your microphone to work through it we've got six reports but first let's go to be the adoption of the minutes of the September 10th 2026 meeting we need a motion to motion a second there's second all in favor signal by saying aye opposed likewise all right adoption of minutes has passed we'll have to see the review of the reports mr. think thank you mr. chair and as the chair mentioned today there are six education audit reports for the committee's review additionally we have a bottoming man from the prosecutor coordinators office here to discuss the audit finding referral process which we will do after we finish up the review of the reports so we will begin with the tax arcana school district which was deferred from the September meeting they had two findings the first finding was related to a drawdown of magnet schools assistance program funds and essentially what happened on this one is there was a lapse of time between them drawing down the funds and then spending the funds when you receive direct federal aid you have a certain amount of time that you have to spin it by or you have to send it back to the feds and draw it down later on and so you know a lot of schools get their money through desi so we don't see as many direct aid grants to schools and so it appears based on their response that they've taken action to mitigate this the second finding it was referred to the prosecuting attorney and attorney general the district initiated seven ACH payments totaling 286 thousand dollars to fraudulent accounts between April and June of 2025 after receiving emails to change vendor bank information without properly verifying the authenticity of the change request district personnel discovered the unauthorized withdrawals after a vendor contacted the district for non-payment the district notified the financial institution and one of the seven transactions totaling 58,000 dollars was recovered however the remaining 227,000 dollars could not be recovered officials from the district are present to answer committee questions thank you mr. Fink are we'll invite our representatives from Texarkana to the table please if you'll make your way to the end of the table and you can turn the microphones on in front of you and introduce yourself for the record and you'll be recognized boy Jackson superintendent all right hit that is that button on yes sir oh great okay that's great Jesse Buchanan more president thank you okay all right well thank you for being here I think what we'd love to do is open up just with any opening statements you have about these findings and maybe your responses certainly so I'll share both of these as you've seen in your packet there have been rectified on our end in the sense that we have put in additional stock gaps to ensure that that additional drawdown for the magnet dollar doesn't occur without proper protocol and so we are going through a approval process to check and recheck that the right amount is being drawn down and so this individual was managing this drew down a year to date amount instead of the actual what we should have been drawn down and we found out we did ask questions and what to do next and so we just stopped we're drawing and so I just been down what we spoke what we had but it was still more than what was required and so but again that process has been refined to that the magnet coordinator has to manage that as well as our chief of schools before it gets to our chief of finance officer to make sure that we're drawing down the right amount and then for the fraudulent scammed emails that went on there again we have an individual who did not follow protocol and did not of make us aware at the district leadership level until we were seven drawdowns in and at that point we went into action in the sense of working the work our bank institution to make sure that anything else would be stopped and whatever we could could recover we could get that recovered and that's how we ended up with 58,000 being recovered because we caught it in time but by then we were three months in two of these particular payments and so did not follow the process that was in place at that time which is to verbally verify information having our system not only is that information in the system every invoice that we get from any of our vendors has her ACH on the actual invoice and so again that individual we put on leave as soon as we figured it out checked into it make sure nothing really nefarious was happening and that it wasn't just a human era and then we discipline that individual moving well terminate individual into that cycle and so again additional processes which includes our chief operating officer being involved in any verification processes there and that that's a verbal verification of what we have in our system not what the change or the request for change is but here's what we have is this correct and they all leave the tell us yes and no with a verified individual because every vendor we use we know who they we work with an account specialist of some sort more regularly than not thank you mr. Jackson and so just to clarify you feel like your your procedures are correct they just weren't followed in this this situation correct so how you describe that okay and we've added additional layers to make it even more challenging in the future okay and Jesse I didn't catch your last name say it again Buchanan Buchanan okay from the board's perspective do you have any any comments or specifically related to the first finding about best practices or the board's involvement maybe in review of this situation yes when when Dr. Jackson was made aware of the situation he notified us immediately or within a reasonable time that day and we did review the processes and and it's basically operating procedures so there was nothing in policy that needed to be changed at that time and then we did again he came back with the recommendation for disciplinary action against the individual who did not follow the procedures that were in place and we took that action actually in June of 25 so all that was done before the audit and taking care of and and with all these procedures put into place and it's just a note too we did notify the audit I don't know the terms legislate about it person that it was our point of contact at time when this happens so that we make sure that we did follow proper procedures in attempting to recover and management moving forward thank you very transparency members any questions all right or if long you recognize thank you mr. Chairman doctor you mentioned the job put in some new protocols could you tell us what those are and also do you have anything in place is for requiring two signatures maybe for larger type of of disbursements yeah and so we are to have again those are things are in place currently two signature requirement verification when it comes to any kind of a ch change what we're doing now is before after you verify you now you go and you share that verification with the chief financial officer before you make any changes with that chief financial officer may go back and then call to re-verify if we see a need to do that who's the two people currently required to sign signed to check so it's me as the superintendent and then we have our board secretaries that treasure there's the signy on the on the accounts as well okay so somebody basically presented y'all with the need for sign checks but that the person that presented to you that's the person that was responsible for verification you got it yes sir thank you Senator Mayberry recognized thank you this actually is more of a question for legislative audit so unfortunately you're not the first school district to have this happen to them okay I wish that it didn't happen to you but it is happening more and more is there any type of mastered list of it and dollar amount connected to that so we as legislators could see the big picture of how much money has fraudulently been taken in a year's time I mean whatever we can go back to or or even look you know five years ago this hardly ever happened and now there's so much more happening this is the dollar amount is there some way to do some type of cumulative look at this I'm talking about finding number two and and just kind of see the big picture and and really highlight this is a this is a big problem a similar report was requested I believe either earlier this year or last year for this committee and so we provided that information and then also when we do our PA disposition report at the at the end of the year it's also accumulated in that as well for the ones that suffered an actual loss okay and money not recovered to so okay thank you thank you members any other questions coach here Duke thank you all for being here I just have a couple of quick questions first of all I want to commend you for communicating with your board because that was one of my initial questions was how quickly did he communicate with you the board about what happened here so I'm really glad to hear that but one of my questions is I know you dealt with the staff member who that you had a discipline have you all also kind of up the training and reminders and refreshers for everybody else the board also like in making sure that they were you all remain engaged in knowing and checking on your superintendent and his staff you know three or four or six months down the road because two representative may be as point we are seeing this is in so many different layers in schools but not just schools yes on the other side the technology side of the world we're also put out refreshers and reminders about the importance of looking at and authenticating just your normal email because you can you know scamming happens all in all kinds of ways so we put out those scam alert kind of test and those kind of pieces and it gives them examples we'll be on the look out for even though you're by the time you look at an example it's after it's already done as past practice but be looking at his moving forward and then for as relates to our board our board is also involved in our TSD emails that go out to the staff around scams and what to look out for and the best practices around that and so they're engaged in that way and then I also send out every month every week a newsletter to our board that gives communication around the things that we got going on and also any kind of reminds me to put out there when they come to training and how about your co-op I mean are they job our technology they have a whole technology training group so our team technology team is supported within that cooperative and if we have a knees that go beyond even our staff's realm of expertise we can lean into them as well and support so do you feel like whenever this happened that discussion kind of flow to the other schools that are part of your co-op again like which is kind of raising awareness because I think the more discussions and communication that is out there for districts to be aware of what's going on do you feel like that free flow of communication is happening whenever one district finds an issue that it the other districts within the co-op are aware and raises their awareness yeah some of the first phone calls I made were around my colleagues and our co-op asking what are some next step this it was new to me it was the first time for me and so what are those steps you need to take in order to one make the necessary reports do the things we need to do when it comes to recovering but also making our team aware so in our board meetings within the co-op both as superintendent but also within the instructional side of things that kind of conversation of here are some things I'm facing what are some things that you're challenging this came up in it for sure and that flows across so until you experienced it yourself you weren't really aware that this was happening in other places in the state correct not not well I heard about it happening but I didn't know what's happening in the state of Arkansas to the rate because soon after we did see as came out some other districts and even yeah institutions of higher learning be impacted by it all right thank you members any other questions well I will take a moment of personal privilege to I do want to condemn you more for beating silence rings by 30 points a few weeks ago art texture can my hometown is one of our two we know thank you again for being here and members value further objection this will be this will be filed so thank you all right members we're going to move on the list of reports to if you've got your packet their page three to the Institute of Creative Arts of Sebastian County because we also folks here from from there and so you can make your way up to the table on mass mr. Fink to read through these reports I'm going to summarize the finding for the Institute for the Creative Arts I see it was a new charter school that opened to students in the fall of 2024 as the chair said it's located in Sebastian County had an average daily membership of 50 students for the 2024 2025 school year during our audit we noted the following issues section 5.3 of the charter agreement which requires the charter school to comply with all requirements imposed by law or regulation and fully participate in Arkansas public school computer network finance and education data reporting system the activity of two bank accounts with gross transactions totaling 1.7 million were maintained outside of abscan these transactions were not recorded by fund or by expenditure function which is required by the regulatory basis of accounting these transactions were included in the financial statements via adjusting journal entry during audit fieldwork the operating bank account was not properly reconciled during f-25 resulting in an an original unexplained variance of $172,000 between two accounts leg audit staff identified reconciliation errors during fieldwork leaving an unexplained variance of $62,000 at June 30 2025 cash was overstated by $113,000 in the general fund due to recording errors we were unable to obtain a budget prepared on a fund basis format by expenditure function thus a budget an actual income statement comparison for the general and special revenue funds was not presented in the financial statements which is required by the regulatory basis of accounting during our testing of non payroll expenditures we noted the adequate supporting documentation was not maintained on file by the charter school for disbursements totaling $282,000 in non compliance with Arkansas code the auditor was able to obtain invoice copies from the federal grantor pass through entity for testing purposes 11 disbursements did not have any indication of approval all checks tested contain only one authorizing signature and non compliance with Arkansas code and bids were not obtained for four disbursements totaling $445,000 as required by Arkansas code during our testing of payroll we noted issues related to time sheets contracts that did not agree to the salary schedule payments that lack supporting documentation or approval and issues with lead balances being properly supported capital asset records were not maintained in abscan as required by section 5.3 of the charter agreement the inventory tracking system used tracked all equipment and supplies regardless of cost and asset tags on equipment did not correspond to asset IDs in the asset listing additionally all property within the charter school facility was not clearly identified as owned by the charter school charter sponsoring applicant or another entity as required by section 5.9 of the charter agreement due to the deficiencies identified during the audit we were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the regulatory basis financial statements resulting in a disclaimer of opinion on the regulatory basis of accounting charter school management has provided a detailed response to the issues noted which is included in your packet and that concludes the findings for ICA thank you mr. Finck I'm glad that was the summarized version hey thank you for being here today if you will turn your microphones on and introduce yourself for the record please sure Dr. Rosalie Russell I'm the president of ICA we have our resident account Miss Kathy Cardi and our business manager Miss Miss Marsha Crow thank you for being here so I think maybe before we get started will you this may just be for myself but maybe help me introduce yourself to me your school tell me about your school and where you're starting our year three and more in Fort Smith we are a specialized charter where the only what we call an immersive performing in visual arts high school meaning it's a training type of center it's a pre college program where students enter the program and select a track whether it be art dance film music theater and then they have their full academic program math science English social studies all of the AP courses but they spend about three and a half hours each day in their arts track to prepare for a creative field in college and so this school day is actually a little bit longer it's from eight to four and we have you know very experienced core very experienced artists professional teaching artists what I would say about this it's it sounds like a lot I would tell you just to encourage everyone is that many and most of these issues now going into year three we've been working on them through year two year one when we could figure out that what the issues were and I can say going into year three now we're through period three of payroll and in all the payments and all that and and the abscond system I think we're in very good shape going into year three I think we've corrected a lot of the the issues can I ask you about that Mr Russell so this is June 23rd June 30th 2025 correct that would have been complete at the completion of year two completion of year one year one for your organization yes and so we've been dealing with correcting your one yeah in late in year two and then now to year three because the audit for year one you just came out recently so so the majority of this you would it sounds like what I'm here in your description is you're getting off the ground you're establishing a lot of details and we didn't have some checks in place maybe that we should have yes and so help me understand maybe the governing board or who's the oversight of this institution I'm the the president of the school founder and president and so I have oversight and sign off on on everything we have a governing board a five-member board we have a a treasure who also is a and was enacting CPA and just happens to be our city auditor and she's very actively involved as is our chair of our board who's a retired superintendent public school superintendent so they're and they're very active they're very involved they know everything that's going on we we know we've been dealing with trying to understand the abscond system the whole e-finance and we've been actively I mean actively daily working with them working with APSRC having the oversight of a of an accountant lots of help with APSRC and lots of help with a retired public school finance officer that comes in and works with our business manager on a day-to-day basis and then so it sounds like when I was listening to the report reading through that there were multiple accounts or buckets that were maybe misaligned or drawn out of and so where do we stand today has has everything been correctly categorized and it and accounted for because yeah in the report hearing we heard of $62,000 variances and $113,000 in cash reporting errors so where do we stand today we at the end of 2526 we had a zero you know had a zero fund balance it all the funds no negative there is a period one two and three are all balanced in year three there's a variance there's a variance still left over from year one I'm I'm with I'm an actually work for a ICA I'm an outside accountant that came in in December of 2025 to try to help ICA out with a lot of these issues and so we were trying to get things going forward correct and so there is still an variance in the cash account from year one but it's been the same now you know every time since then we know it's it's back with year one somehow and so we're we're trying to find that variance as we go along but also trying to make everything right going forward now I think that I can say that that's simply an error of something not being put in properly it's not that cash is missing at all because ICA also has to report not just regulatory accounting but we have to report gap accounting because of some of our financing that our parent organization has and because of that I reconcile all of the cash accounts under the gap method and everything is accounted for and the and the reconciliation is zero there's no there's no reconciling items on any of those thank you miss Cardi all right members any questions I was in belong or represent Mayberry you're recognized thank you and help me understand because it sounds like from the get go it kind of started on the wrong foot knowing that this was not being recorded in abscan which to me is like a basic thing right and so help me understand who was there in the beginning that kind of started it off the wrong track or could there have been what was it just not explained well enough that that needed to be recorded and and if there is another charter school that wants to start something what are some things that you learned that could maybe help someone else get on the right foot from the very beginning because to me that's what it sounds like this is is that you just didn't get started right you have a lot of things can you expand correct correct and good question one of the main issues is that in December and you have this in your notes in December of 23 we were approved to become a to have a charter high school Ica it was approved to the sponsoring organization we're not a CMO a sponsoring organization called Community School of the Arts at that very same moment in time that's in 23 so school starts in August of 24 we go into the system is my understanding the whole state system in July 1 of 24 at the very same time in December of 23 we were awarded a CSP grant 625,000 so you have to spend money to be reimbursed on that grant the sponsoring entity put that money in so you're that 1.7 million that you mentioned that was not recorded in AppScan we the CSA the sponsoring entity was providing borrowed money to spend on that CSP grant so that we could spend it and then be reimbursed that's how that grant works so we would just have and none of that went into AppScan we weren't an official school at this point this is now January 1 of 24 we're still seven months out from school even starting and this is all a grant that was awarded to the sponsoring entity for the high school so there's 625,000 right there on top of that and so we had a we had a temporary account we hadn't opened our official first national bank account or anything like that just getting that CSP grant take care on top of that we have which is what Kathy was talking about federal new markets tax credits and that is a lot of money that was again awarded to the sponsoring entity that carries accounts for the high school and again we were those accounts are required to be at a separate lending firm and so at the time we still were not open as a high school and still using money to cover that CSP grant and then of course the new markets tax credit money would not have gone into that AppScan because it's for it's for the sponsoring entity but the high school benefits from it because much of that money is to was to build a building outfit the building and the sponsoring entity and the high school benefit from it but it's not money that would go into AppScan the mistake would have been July 1 and I assume at July 1 the State E Finance Department opened an account because by the end of July we were receiving State funding the mistake would have been that we didn't finish our CSP funding until the end of September so we didn't move the State funding went in I believe it went in the AppScan but the other funds did not during that July to September 1 school is open so primarily that 1.7 million has to do with prior to school starting and money moving back and forced to have to cover to be reimbursed. Did I say that correctly? You did a great job. It's complicated. It comes from not knowing really starting out and not knowing how to put that money into E Finance into the system because it wasn't an actual bank account of the charter school it was a bank account of the sponsoring entity and so it was hard to handle that in the public accounting world we would just do some due to firms back and forth and be done but in E Finance that's very hard to accomplish how to do that it's bulky and so I see I just didn't really know how to handle that kind of flow in and flow out so that's what got us started off the wrong way in E Finance because we just didn't they just didn't know how to record it in E Finance that way and it was all being handled under the CSA banner of the sponsoring entity of CSA so that's how it got started. The other issue is that we did change finance officers in October there was an issue with that particular person and we removed that individual I wasn't getting board reports and finances financials except through gap accounting and there was an issue and so Miss Marsha came on board literally that person left on a Monday and Marsha started on Tuesday and has been with us ever since October of 24 and learning the system that's you know if there was one thing I would say about charter schools you know having to learn the app scan system and regulatory accounting is extremely difficult and we need lots of help on that I think Marsha would agree and and we're getting that I mean we have a team of people everywhere now that we can call and people that sit with us my relief about all of it is that we've always had backup external accountants that can say show where the funds are that nothing has been lost stolen and then I'm very particular so I have my own personal spreadsheets every time I had to move money and when it where it came from when it went there what it was for when it went back all of those things because I'm very particular and so this is like to me just you know what can I say and the sponsoring entity is also has always been audited by an outside public accounting firm and especially with all these with the new market and everything and they've had an audit every year thank you miss Cardi represent along you're recognized thank you Mr. Chairman represented by very kind of covered part of what I was going to ask but I don't know anything about starting a charter school does the state education department give you any kind of guidelines saying you know this is what's expected kind of a checklist of things that need to be done or you know you just kind of making it up as you go because it sounds like you're just making it up as you went I would say certain things know for example we we didn't realize there needed to be two check signers on all checks until very recently well that's an easy fix and we've taken care of that no we have multiple check signers and we have you know a segregation of duties but there's training and Marsha can come in on that I'll let her there's plenty of training and we're doing that but you know you have to you have to have some finance people that you trust which we do that do the proper financial reporting but then there's the state system and if you don't know you don't know it's just a matter it's a process of learning that and it does take time it's the training being offered by the Department of Education or well what I would say is that the abscan people their an APSRC has been extremely helpful as far as getting me the knowledge that I need and if there are classes like particularly today I was going to be on a Zoom call for the assets which is my next project and getting done but fortunately for me they record those and I'm able to look at those I have abscan has a field rep that I can call anytime I can email them I can give them a call any type of help that I need they're always there to help me I will say that in the beginning with us being in a charter charter facility that was a little of it's it's a whole lot different than what the regular standard school is I've not ever worked in the school systems in the state of Arkansas I've always been in private accounting in that type that type of atmosphere but they're very helpful in that the trick was we are so new and with the new tax credit new market tax credits and all of that stuff that hit us at the very beginning we were a very unique situation which I believe within the 24-25 year is what we're still trying to figure out that was done in error so that's the only thing that we're doing now that was done but all of our checks and balances have been done I just brought that over from where I used to work as far as documentation signatures segregation of duties when I started because I didn't have any background with the state system fortunately that kind of corresponds with both sides of accounting where you just kind of want to cover everything cover all your bases so that's what I've done and I've just been really into the sandbox as far as my getting information because when I started I had I didn't even have a sign on in the state system and I had to have payroll done that day because the person in front of me did not even do payroll for the month so that was the biggest get-up was jumping into a system with no training but those people at AppScan and APSRC they jumped right in and they walked me through payroll literally step-by-step the first day so I could get my teachers paid so you have there was enough training out there is just shown but where I didn't do it until I did it as I went yes yes sir but there was there is sufficient training out there that will take you how to do a payroll how will do how to do cash receipts how to how to do assets how to do all of that and it's pretty much I mean pretty much line by line by line step-by-step and that's what got me through honestly the first year and having those people that I could help her recently probably in the last six months I've been very blessed to have a retired public school business manager who has come in with me we've gone through every aspect of what I do which is what she did I mean she was in finance when the finance started so to have that knowledge that I can tap into that if she's you know she only comes in two days a week I have a I have a read-a-list she sees my read-a-list if I there's something I need to know about or have a question about we save it for the next time she's coming in but she has literally been with me for the last six months at least three to four days a week which has been tremendously helpful and I know a lot of people don't have that access but that's been a godsend maybe we just need a requirement that these classes be taken before the school launches in the future to keep from bringing the same problem you do well and my understanding was it was offered the summer that the school before the school opened in the fall but that would have been the previous person okay thank you thank you representative Senator Sullivan you're recognized thank you mr. Chair and I've listened to your explanation weren't all those things supposed to start happening or happened before you opened as far as the training yeah no as far as knowing I mean I would have assumed so yes and they just didn't happen prior and the people that opened the charter school didn't understand all that was involved I would have seemed I would have seemed so I I mean I can't at what point does the charter become in danger of not being renewed well I mean to my to my knowledge all of the training was done that summer before the report isn't about training right the point that the report is about performance okay and at some point the performance doesn't justify the renewing of a charter do you know what that point is I do not I mean would you know what what point that is you know we're we're providing everything to the charter authorizing panel there were an open book so at this point no issue no issue because we're we're providing all of our financials they see everything that we're sending we're sending okay with my point would be if my point would be one should if one started a business what you did one started a business one would have understood not only the requirements to run the business but what you needed to do if pieces fell apart what's our backup if somebody resigns and at some point the you're going to ask the state to renew your charter with this kind of a report so I'm not asking a question as much as I'm making a point that you can correct them or not correct them but I'm on the education committee and this is very concerning to me that we're endorsing a program that apparently hasn't planned well enough and it's misusing dollars whoever's dollars those are somebody's investing in it and if this is what the outcome is going to be in the result it's going to be it's going to have an outcome eventually that's not going to be pleasant for anybody thank you mr. Chair thank you senator real fast y'all accept EFA accounts yes okay no I think staff just correct me there so on the open enrollment charter you don't accept they do not know okay great co-chair Duke you're recognized thank you mr. Chair so my questions a little bit more down these have been great questions some of them what I had already so that said it's a little bit of time but I'm down on the payroll portion there's several different items here with like the employees that tested and look at my notes here real quick but above contract couldn't find the information on them then three employees have personal leave days although they're positioned to not qualify lot of lack of documentation and things and in the grander scheme maybe that seems kind of small but those are attention to detail things to kind of what senator Sullivan was talking about some of this stuff seems pretty basic that we should know even without having desi or someone tell you you need to have all these ducks in a row you need to be doing these things you need to document this if you had policies on this and you weren't following your policies on these items and part of why it sticks out to me a little bit is because we've had other schools in here in previous audit months who similar issues and some of them are just not paying it into detail but sometimes it's also people are not doing right and so it I guess my point right now is I mean you may have an explanation for it I don't know really what it would be other than just not paying attention to to details and those are only those are hard ones to know we should be following that just like we should have all of this stuff in line before we open the doors and start going I realize you had a lot to a lot to juggle opening a new school but those are things that we we do need I think there's some ways that we can help but it sounds like there was a lot of help out there it was matter of accessing it at the get go and also because you you mentioned that you had a former superintendent that's on your advisory board and then an auditor from one of your your town and that also kind of why were they not asking some of these things I'm pointing some of these things out if they're your advisory board they should have seen some of this as well they should have had some of these questions going on as well so you're welcome to kind of respond to that but I guess I'm saying kind of a cautionary thing I've got some red flags and concerns about you guys am I going to see you back here in another year with some of these similar things and I think that's probably the reason why we wanted you all to come in to understand that this committee takes this so very seriously because we see some of these exact same things happening in other schools and so we want to make sure that they get under control you know and as you all start out that we get it all corrected and keep keep going and that also that your advisory board understands the significance of making sure that their engagement in this is very important as well because they're there it sounds like you're depending upon them for some of that some of that resources you know are the two people you talked about on our our board came on in 2526 so they were not part of this 2425 so they're they're very aware now have been this last year 2526 is strictly trying to clean up some things trying to learn yes and paying attention to detail you're right we we must pay very strict attention to all of these details and I think we're doing a good job of that now going into year three I think items here with your personnel all that's going to be documented and is being documented and verified and checked and we don't have any of these we don't know for sure if they've got a stipend or not or what the sick leave or any of that it's it's no we've put some additional documents in place marshal you can speak to that yes we've put some additional documents in place for stipends for stricter on details on personal days professional development days sick leave all of those things and I am a believer in paying attention to detail so it's yeah it grates when I it's not correct and we're really working on that in year three to make sure everything is in place I appreciate that hope that we don't see you guys back again we always very much cheer on our ones that get it all fixed and our staff that helps them do that and I think it also maybe is a little story for all of us that we need to make sure that as these roll out maybe they all understand the expectations at the get-go of of what the state wants from them and the documentation that they're going to need thank you mr. chair take your members any other questions yes senator selvin recognize did your school come have a grade from the state yes we did and I'm very proud to say that year one probably I'm not unlike our financial issue here was an F and we are now in A with the highest growth store score in the state of Arkansas glad to hear that you're talking about outcomes that's a primary outcome yeah you can mess up on from a few things you can correct if you're getting if students are learning and they're achieving that's a big deal so I appreciate that thank you well and let me just comment I don't want to leave here with you thinking we have misused funds things may have been recorded incorrectly in abscan that we have cleaned up but the funding that we received prior to the school opening it's all very well documented and and used as it was meant to be used so it's that's not that the issue is not that the issue is learning to record things correctly in abscan and just simply learning the system and being very detailed with what that system requires so I didn't want you to think that we were we're not we're not at all we're very couple things one I'll think what I think okay thank you for your recommendation but I think it's a big deal and I hope your charter gets renewed because of what you're achieving with students but I and I hope what you say has been cleaned up but I'm still very cautious thank you thank you members and thank you again for being here present as a reminder for this body and for the public their institution was not referred to the prosecuting attorney to Miss Russell's point this was reporting air related and so we we do encourage you to clean that up so not only for yourself but for all charter schools too y'all you have some weight bearing across the state as well so thank you for being here congratulations on your a rating and with no further questions without objection this report is filed thank you all right members we have you're dismissed thank you we have four other reports without guests here for those and Mr. Fink will be reading through those Mr. Fink UCA had one finding and it was referred to the prosecuting attorney and attorney general university management identified multiple non-existent students enrolled for the 2026 spring semester doing online fraud and identity theft scheme the students appeared eligible to receive aid totaling $77,000 and the funds were dispersed by the university the university has recovered $11,540 as of the report date funds totaling $65,790 had not been recovered you can see that management has provided a response they are implementing some best practices you may remember back in August I spoke about the changes to the FAFSA from the federal government level as well as best practices that the federal government has put out and so part of that is is those best practices that the feds put out that they are now following so this would have occurred right before that change to the FAFSA at the federal level but that's the finding for UCA Mr. Fink just for all of us we see referred to the prosecuting attorney and attorney general which is a little bit different than normal referrals is that because of the federal side of the FAFSA is that why it's attorney general side on there so the law changed maybe just a couple of years ago that it has to be the legislative auditor has to refer matters to both the prosecuting attorney and the attorney general so nothing nothing on this instance is different then okay all right members any questions on this finding all right without objections is reviewed and filed next and the next one is a Dermott special school district it had a finding that was referred to the PA and AG I won't read the finding but essentially they had a direct deposit banking change come in they did not verify the authenticity of that request and ultimately they lost $1,698 from this fraud and that concludes the findings for Dermott special school district all right members you've heard the description any questions all right see now without objection this is filed next there were two other reports on the agenda neither of these were referred to the prosecuting attorney nor were they referred to the attorney general at desarc school district and siloam springs school district each had one finding related to an administrative review that was performed by desi child nutrition unit desarc had a few exceptions related to classification of free and reduced price mill classification and siloam springs had an issue related to time certifications for child nutrition staff both submitted plans of corrective action to the child nutrition unit and have provided a detailed response for the action taken to address the issues noted staff recommends these be filed as reviewed thank you mr. fink members any questions on these two representative duke recognize this is a short one mr. fink so on the on on desarc I don't know if I'm saying that correctly but so they filed these these ones they had they didn't have the signatures or whatever but they filed them and it would did they receive funds based on those I mean I know exactly how that works but I just wanted to see if that's incomplete yes they would have they would have received funding based on this and so when the child nutrition unit comes in they make sure there's resolution before they complete their review they won't finalize it until their review is completed and they've if they've need to recruit funds they'll do so so you just tested a few and you found those errors that you found here on that correct and so I'm just kind of curious and making sure that I know all that's all taxpayer dollars wherever it's all coming from that the details are not getting pushed through without and getting that funding for it and when it's not accurate because that accuracy does matter so yes when we when we do there so this one was actually done by desi child nutrition unit and so we report it because it's a federal compliance issue we have to report certain matters to the federal government so this is one of those times and then when we did our tests we tested 17 free and reduced price smell applications we noted one issue as well during our review so we added that to the finding but yes we test for those things for federal compliance thank you members any other questions on those two all right without objection those will be filed all right members that's all the reports we have we do have one other business correct mr. Fink okay we're going to bite mr. Bob McMahon to the end of the table this came as a request from a previous meeting just for just for our edification and benefit and to talk to through from a prosecutor's perspective and so if you two will introduce yourself for the record and then we're going to recognize you and maybe just ask a few questions general questions hey Bob McMahon prosecutor coordinator and I can briefly tell you a little bit about our office if we don't normally appear in the education to me so this may help we are state agency all the one second mr. McMahon would you recognize yourself Michelle actually legislative audit staff okay just make sure once it's all kind of work all right yeah state agency we've been around since 1975 so sometimes you will see me appear over here on behalf of my agency you know we have a state budget and all that you also see me appear on behalf of the Arkansas prosecuting attorneys association for our deputy salary issues our prosecutor issues and then for the legislative package that the prosecutors will will push each each session swimming with us that's normally what we're over here for but I'm here to again talk about this process we have to answer any questions but did you want me to start or I think we're going to ask just a few questions and really members just kind of the general process but I've got a few but I want to start with reps and a painter if you want to you're recognized thank you mr. Chair I guess just for me and we hear it all the time in this committee you know we see these reports in the referred to the prosecuting attorney and I think we brought up last month how many how many of these cases that get referred to you actually get prosecuted actually move because sometimes I don't think we hear that and it gets frustrating sitting on this committee knowing are these getting prosecuted or not okay so first of all I just want to address the fact that um statutorily there's a mechanism for tracking every single thing that this committee and other committees refer to the prosecuting attorney and it's what we call our annual disposition of matters and so here's last year's report so annually legislative audit prepares this report and presents it to you and so that report we hope we will get out in December of this year um so it varies each year on what is how many have a conviction but I will say that for every matter that is referred to prosecuting attorney and the attorney general's office legislative audit receives a disposition of those matters in which we report back to you and represent again as Michelle said it varies I know that I'm going to say that on average 160 to 250 it just depends are referred annually to a prosecutor some of those are by the time the report is done they haven't reached a disposition so they're kind of carried over it might be pending what is reported to you all as how many have been actually disposed of during that year period so a lot again a lot of numbers haven't been disposed of a lot of cases haven't been disposed of they'll be carried over to to the next year and those dispositions vary it just depends on on what a prosecutor can prove um here's the difference that we try to explain every year when we go to the I usually appear at that at that hearing and I will bring any prosecuting attorney that you need me to bring so if there's a specific case that you want to hear about I may not know of all between you know 150 and 250 I won't be familiar with all of those but I can find out by talking to the elected prosecutor or the deputy that handled that case and then I can show up and answer questions or most of the time I'll be happy to get them here you know as well so that's kind of how we how we do that um audit does a great job um finding uh missing money and that things are you know uh improper or things are missing it's very different though when those cases are turned over the prosecutor because things really change at that point we've got to prove you know beyond a reasonable doubt who did it and so a lot of times though things are referred to us and we clearly know something's fishy or something's missing it's then up to us to prove beyond a reasonable doubt so a lot of times we're unable to do that simply because maybe 32 different people had access to a particular fund or you know a booster club money or or something that does with the city or county it's very difficult for us to prove that and if we can't then we don't file charges on that um and so that's something that's that's kind of a misunderstanding sometimes um and for us again sometimes there's just no criminal intent um and with criminal cases as y'all know it's kind of like a formula we've got to prove each and every element plus criminal intent before we can go forward so in certain situations maybe something that's improper or someone made a mistake or didn't understand a process or it's an ethical violation it doesn't mean we don't look at those it just means we don't go forward in a criminal sense because we can't prove either who did it or we can't prove that criminal intent so that's just a general statement on how things work i hope that it's yeah that's very helpful thank you mr man and and uh i think maybe even just one other step in this process so out of this committee a school district let's say is referred um to the prosecuting attorneys it it would be uh directed to the local prosecuting attorney for that school district is that correct that is correct uh in the majority of cases if for example that particular prosecuting attorney has a conflict of interest i mean again in small towns you know you do know people but let's say uh the school and i'm making this up of course school superintendent is his brother-in-law you know while obviously the prosecutor will say hey i have a conflict of interest um we'll usually file a motion or petition with a court saying we have a conflict when that's articulated to a judge a judge will say yes she do and then often judges direct in order to me to then find a special prosecuting attorney so how i have two people on staff that handle special prosecution cases they cover the whole state so you know they can't handle everything sometimes i will reach out to the adjoining judicial district and sometimes i can go to the special prosecution unit of the AG's office uh so it's possible that the attorney general could get a case that way um and that's really the main way they do get a case because the the AG doesn't have original jurisdiction you know to handle a case so again it would be it could be handled by that particular prosecutor if there's a conflict it would it would go maybe to my office or to the AG or to an adjoining district but it is initially referred to that local prosecutor with jurisdiction since thank for the description senator solvent you recognize yeah thank you very much for bringing this to us i learned after i asked the question that we had a report now that's on me uh my question will be on the report is that a live report that's updated regularly and is that accessible by the members of this committee could we go on a website that say you had a pro a referral three months ago and the prosecutor said we're not pursuing it is that updated live for us no sir senator it's not it the law requires that the prosecutors have to provide a disposition to audit by June 30th for matters referred in the prior year so the most current report that we have um right now publish on our website is for the matters referred during calendar year 24 we are currently in the process of completing the report for matters referred in 25 at the same time we are constantly referring things because we are now in year 26 i will say if this committee or or anyone needs an update you know all they have to do is is go to staff and make that request and we can provide that to the committee if there's a particular case that you would like a more current response on we can we can work to good but like right now we are currently tracking over 20 cases that are in the judicial system waiting you know for a court date to be updated or sent along that so we are constantly tracking every case that's referred so it sounds like if we change it take a change in the law if we wanted to have reporting on a more regular basis however that's going to be very cumbersome when we can just go to BLR and ask BLR individually for an update because I know none of us wants to run more legislation that be accurate not BLR but leg audit correct though leg audit leg I'm sorry I asked leg audit for an update on a particular case if we're interested that's already an optional for us that's correct great thank you thank you mr chair absolutely thank you senator if I if I can have best and it's also possible I mean if you know of a specific case and you know which prosecutor has that case you can contact me and I can reach out to that prosecutor and and maybe get an update that way in fact I had one this week something similar to that now the only thing I was able to report is it's still under investigation and in law enforcement is still looking at it but at least you would have a little bit more of an update to know something was still being done if that helps it does and I think it's particularly helpful if it's in our local it's been in my jurisdiction and I've got people that want to know I made this complaint you found this in audit and it was referred to the prosecutor and I want to know where we are then it's easy to for me to call a prosecutor or to go through audit or to go through you to find out to get an update so I appreciate that thank you members any other questions representative Mayberry recognized thank you I appreciate you coming in I think you know you're pointing out that some of the reasons why prosecuting attorneys don't prosecute in certain situations hard to prove beyond reasonable doubt and you were saying sometimes it's an ethical violation or what have you which brings me to the point that I think that this committee has just recently learned that we can refer things to professional licensing standards which I think opens up a whole possible opportunity sitting on this committee it's been frustrating that we will see that there's been an employee that worked with one school district and lost their job or quit whatever based on some audit findings and then gets hired at another school district and sometimes even then gets hired to another one I mean it's just like how how does that happen and we know that these things have been referred to prosecuting attorneys so would you agree that some of the times when maybe a prosecuting attorney can't prosecute that looking at it that there might be some ethical violations that could be considered would you agree with that yes representative there are specific statutes that that control that that we regularly talk to prosecutors about audit has come and done presentations to us to try to make prosecutors aware of the other options that might be out there but it's just very different in terms of what the ultimate you know punishment or sanction would be but I would agree yes ma'am. Do the prosecuting attorneys have the authority to send it to professional licensing as well like we I think we just kind of or at least I did you know recently discovered we could we could do that is that something that prosecuting attorneys have always had the option of doing I would have to check in terms of referring on the front end but I do know that after we get convictions in certain cases we have the ability to you know for someone had a license was a school teacher something else it was licensed we do have an opportunity to refer that to that appropriate agency so that they would know otherwise you know someone might not know there was a conviction so we we do after a conviction do that on a regular basis I don't know in the front end how how that would work I'd be happy to look but I don't know off the top of my head I just know that after convictions we do have the opportunity to refer those convictions and let that licensing board know they've got somebody that they obviously need to look at okay because that that might be another option that that maybe you know this committee didn't raise the red flag and it's just one more opportunity to say look we're noticing a pattern here can we do something we can't legally you know again prove beyond reasonable doubt for a conviction but maybe this could still be an opportunity to raise some red flags and say look we've got it we've got to slow some things down here we've got to we've got to stop this problem right and I'll be happy to leave I think I know what case you're referring to and I'm not sure off time ahead we didn't handle that specific case I believe it's still under investigation so it might be a little early to make such a referral because they haven't concluded yet whether there was anything criminal or not if that helps but there's there's not specifically one just over years I mean we've just seen things that have come up that's like oh goodness okay so anyway thank you thank you members any other questions representative painter you just just maybe a discussion and I'll form the end of it for a question to be technical but that may be something that we mainly look at as an audit or just as an educational committee if they're not able to but we continue to find people going hop in and skip and from district to district like we've had in this year so far that are returning back to this committee maybe we need to look at a mechanism of somehow say hey you know that person showed up for the fourth time with the four different school and they're driving that into the ground too how we can do that and then if they can't refer that helps us to track that and refer that to the licensing board that for when you agreed maybe that would be a good idea to be technical in the questions if not representative Duke's gonna yes I would agree appreciate your comments and questions members any other questions or comments all right thank you for being here appreciate miss Ashley and and thank you mr. McMahon thank you for having me thank you members any other business seeing none we stand adjourn