Forensic audit: No fraud found at Newburgh City School District but auditors flag transparency, controls gaps

Special meeting, July 17, 2025 — Newburgh City School District board President John DeRay opened a special meeting Wednesday announcing the public presentation of a forensic audit commissioned earlier this year. Auditors from O'Connor Davies presented a report dated June 20 that found no evidence of fraud but described multiple weaknesses in financial controls and transparency.

The report, the auditors said, covered 13 categories including budgeting and financial reporting, capital projects (including Proposition 5), energy performance contracting, grants and procurement. "We didn't find any fraud within any of the areas that we looked at," said Keith Balham of O'Connor Davies. He added that "nobody was a whistleblower either to say, hey, there's fraud going on in this particular area either." The firm nevertheless recommended changes across six themes to improve oversight.

Why it matters: the auditors told the board that gaps in routine financial reporting, unclear budget-transfer explanations, uneven claims-auditor checklists, incomplete capital-project documentation and overly broad user access to the district's financial system increase the risk of errors, hinder accountability and limit the board's ability to make timely decisions.

Auditors said the engagement began after a February 5 RFP, the contract was signed March 15, and the fieldwork ran through the end of May. The engagement consumed roughly 400 professional hours across six staff, and the report notes the initial project budget was $316,000 with an actual cost of about $175,000. "We performed our field work through May and then did our analytical work and the report and issued our report dated, June 20," Balham…