External auditor flags $200,000 credit‑card fraud in Knox County Schools internal funds; schools say funds recovered

An external audit of Knox County Schools’ internal school funds flagged two new findings — an external credit‑card fraud incident that generated roughly $200,000 in unauthorized charges and issues with supplemental salary payments — the county Audit Committee heard Jan. 29, 2025.

Ted, audit partner with Pugh CPAs, told the committee the schools’ internal school funds audit covers activity at about 90 schools and noted the auditors identified 12 findings this year. "External fraud incident involving credit card theft," the auditor said in his summary, adding that the district eventually recovered the funds so there was no net loss to schools.

Ron McPherson of Knox County Schools told the committee the fraud was discovered by central office review and occurred in March 2024. "We immediately alerted the schools. And then we alerted law enforcement," McPherson said. Gary Radin, director of internal school funds, confirmed information was provided to the Tennessee Comptroller's Office and to the district's external auditors; he said no formal comptroller report had been issued to the audit committee, though information had been shared with the external auditor.

Commissioners pressed for investigative details and controls. Commissioner Jay described the incident as "not trivial" and asked whether the matter had been referred to the district attorney or other authorities. Auditors and school staff said police reports were filed and that the comptroller’s office was notified; they also said controls caught the activity within five days and the district received refunds by the end of the fiscal year.

The auditor recommended a deeper look at schools’ purchasing‑card and credit‑card controls going forward. The committee discussed options such as restricting card geography and using purchasing‑card controls that allow central-office approval rather than standing high limits on individual school cards. Ted also flagged supplemental salary payments (payments from school support organizations to coaches) as a carry‑forward area of emphasis that the state is monitoring.

Committee members asked that internal audit or external auditors follow up in the coming audit cycle on purchasing‑card controls, limits and reconciliations. The committee did not take a formal action on the schools’ report during the meeting; staff said findings and management responses are in the audit packet and staff will track follow-up steps.