Forensic audit finds misclassifications and large transfers but no evidence of fraud in Bridgeport schools

A forensic audit of the Bridgeport School District's general fund for fiscal years 2024 and 2025 found accounting misclassifications and large transfers that reduced transparency, but the auditors reported "no evidence of fraud or misappropriation," presenters told the Bridgeport Board of Education on Aug. 4.

The audit, performed by CliftonLarsonAllen LLP (CLA) at the Connecticut State Department of Education's request, reviewed policies, interviews, Munis financial data, board minutes and a risk-based sample of transactions to assess whether spending aligned with budgeted categories. "Our focus was on the operational budget expenditures," said Emily Debero, signing director at CLA. The engagement was not a financial statement audit under AICPA standards and did not include a full budget-to-actual review of the special revenue fund.

CLA said it obtained read-only access to the district's Munis system, reviewed board meeting minutes, conducted 10 interviews, and performed data analytics to identify anomalies and trends. From that analysis the team selected 60 high-risk transactions, totaling about $14 million, for detailed testing. The auditors also performed a targeted search of more than 97,000 emails and reviewed procurement files.

Key findings included multiple instances where expenses were moved between budget categories and where transactions had been recorded under a generic "other services" account rather than more specific object codes. The auditors identified seven large transactions misclassified as "other services," including one HVAC installation recorded at just over $800,000 that auditors said should have been coded to facilities or HVAC. CLA reported about $16 million transferred from an internal retirees fund account to various active payroll accounts; the firm said the specific details of each transfer were not examined in-depth because the engagement was risk-based and time-limited.

"It appeared that these misclassifications were manipulating the budget to make it appear that certain expenditures were falling within the budgeted amounts," Debero said. The firm concluded the budgeting process appeared "siloed" in the CFO's office with limited input from department heads and school leaders, and that retroactive budget adjustments were sometimes made without documented board approvals.

CLA offered 34 recommendations across five categories, emphasizing greater board oversight and transparency, clearer account definitions (to avoid broad "other services" catch-all classifications), separating operating and grant budgets in reporting systems, centralizing purchasing and approvals in Munis (rather than split systems), giving department heads read-only Munis access to view budgets-to-actuals, and annual employee training on policies, procedures and fraud awareness. The report also recommended formalized inventory and employee-record review procedures and stronger segregation of duties for journal entries.

Audit scope and process details were a focus of board questions. Auditors confirmed the work budget for the engagement was $150,000 and that the work was limited to a risk-based sample rather than a 100% transactional review. When board members pointed out one background statement that referred to a "10-year contract" for a former superintendent, auditors agreed to remove the word "contract" and revise that wording after board review; the auditors said the detail had been found in public searches rather than through contract files and that employee contracts were not in scope.

Board members pressed auditors for additional context about the 60 transactions sampled and the $14 million sample size relative to the district's overall budget; auditors said they selected transactions by dollar amount in the highest-variance and highest-transfer categories and would have expanded testing if they had found anomalous indicators that warranted it. The auditors reiterated they did not perform a detailed budget-to-actual analysis of the special revenue fund and were not engaged to opine on whether budgeted amounts themselves were appropriate.

The superintendent and board members responded in public comment that district staff will use the recommendations to change processes and implement training and system updates. "We were already thinking about this 2 years ago," Interim Superintendent Royce Avery said in response; he described plans to integrate more of Munis' K‑12 functionality and to phase in training and improved workflows.

Questions raised by board members during the session included: who selected interview subjects (auditors said they used the district org chart and board minutes), whether student activity funds were tracked in Munis (auditors said many were tracked outside Munis in spreadsheets), and why some procurement actions used a "special source" designation (auditors said such designations are common for emergency or limited-scope procurements).

Next steps recorded during the meeting: auditors will supply the board with the presentation slides and agreed to edit the report wording about the former superintendent's public statements; district staff committed to review the 34 recommendations with a timeline for implementation and to pursue Munis training and system configuration changes to centralize purchasing and student-activity tracking.

Votes and formal actions were not taken on the audit presentation itself during the meeting; the board moved into an executive session later in the evening for an evaluation of the interim superintendent and then adjourned.