State audit of Richard Allen Schools results in $929,850 in findings for recovery

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The state auditor’s office on Tuesday said “booze, missing money, missing records and self-dealing” has led to $929,850 in findings for recovery in a special audit of the Dayton area Richard Allen Academy charter schools.

About $888,411 has not yet been paid back.

“It’s a shame that well performing community schools are being undermined by this kind of conduct,” State Auditor Dave Yost said.

Officials for Richard Allen Schools, the Dayton-based system with three schools in Dayton and one in Hamilton, responded to the audit findings in a statement Tuesday. School officials said they are “resolute in our desire to learn from these situations and work with our sponsor and relevant governmental agencies to ensure that the operation and management of our schools is on par with the academic performance of our students.”

Richard Allen Schools were the subject of an in-depth Dayton Daily News report last year that examined questionable oversight of how the schools are run and how their money is spent.

During the regular financial audits of the four Richard Allen Academy schools for the fiscal year ending June 30, 2009, the auditor’s office identified several issues that prompted it to conduct the special audit.  Many of the areas of concern were related to payments to management company president/CEO Jeanette Harris and included potential conflicts of interest with family members, overpayments to the management company, and lack of policies, procedures and documentation, according to the auditor’s office.

The audit found Harris purchased alcohol for the schools’ Monte Carlo holiday party and was reimbursed in the full amount of $1,002. A finding for recovery for that amount was filed against Harris, who has since repaid it under audit.

“It’s just amazing to me that anybody would think buying booze with tax money is a permissable thing,” Yost said in an interview.

Richard Allen Schools officials said in the statement, “The language chosen for use in the audit report attempts to create the perception that there was intent to run afoul of the laws of this state by the parties referenced therein. What the auditors were tasked with ascertaining was whether the funds expended by the schools were for a proper public purpose. As stewards of public funds we would expect no less. However, we are dismayed by the arbitrary and capricious nature in which the auditors determined what documentation they would and would not give credence to.”

The special audit covering July 1, 2008 through June 30, 2010 was conducted to determine whether certain expenditures and payments to credit card companies were supported and related to the operations of the schools.

Harris served as president/CEO of the schools’ management company, the Institute of Management and Resources (IMR). She also owned and operated a for-profit business, the Institute of Charter Schools Management and Resources that leased building space to the schools and, along with her husband, founded the schools.

Of the $929,850 in total audit findings, a finding of $408,240 was issued against the Institute of Management and Resources for overpayments and insufficient supporting documentation for expenditures. An additional finding for recovery in the amount of $215,058 was issued against the Institute of Management and Resources for insufficient supporting documentation, overbilling, and incorrect billing for employee payroll and benefits.

During the audit period, unsupported funds transfers were made in the amount of $238,389, the auditor’s office said.

Richard Allen Schools’ sites include Richard Allen Academy at 700 Heck Ave., Richard Allen Academy II at 184 Salem Ave., Richard Allen Academy III in Hamilton and Richard Allen Preparatory at 627 Salem Ave. Richard Allen Academy, II and III were rated as “Continuous Improvement,” the equivalent of a C letter grade, on the 2010-11 state report card. Richard Allen Preparatory was not rated.

Richard Allen Academy and Richard Allen Preparatory, Inc. had lease agreements with the Institute of Charter School Management and Resources, and of the fund transfers, it was determined that $65,600 was for lease payments.

The schools did not have any other contracts with the company to receive other services.  A finding for recovery in the amount of $172,789 was issued against the Institute of Charter School Management and Resources for unsupported funds transfers.

The auditor’s office said the portion of the audit related to potential conflict of interest has been referred to the Ohio Ethics Commission. Among the incidents cited involved:

• School board member Dixie Allen and her husband, Jimmie Allen, who was owner of Allen Painting and Decorating. IMR and the Schools paid Allen Painting and Decorating $7,199 and $8,878, respectively.

• Harris’ husband, the Rev. Ed Harris, an emeritus member of the schools’ board of directors and pastor of Greater Allen AME Church. IMR and the Schools contracted with Greater Allen AME Church for rental of building space for teacher training and an after-school program. Minutes from the Sept. 2, 2010 board meeting showed Ms. Harris asked the board to approve a rental agreement between Greater Allen AME Church and the Schools. The contract was signed by Rev. Harris and Michelle Thomas, daughter of Ms.Harris. During the period, IMR and the Schools paid the church $37,350 and $8,646, respectively.

In its statement, Richard Allen Schools said, “We are unwavering in our belief that documentation fully supporting many of the expenditures and findings referenced in the audit report was provided to the auditors and are disappointed that our efforts and our commitment to student performance and operational transparency are not accurately reflected in the state’s report. As we begin the 2011 audit process, we are confident that our records will show that the recommended corrective actions have been made and the appropriate internal controls are in place.”

Contact this reporter at (937) 225-2094 or mkissell@DaytonDailyNews.com.

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