Legislative audit panel refers three school-audit findings to prosecutors, defers district responses to June meeting

The Legislative Audit Education Institution Subcommittee reviewed 57 education audit reports and referred findings in three school districts to the prosecuting attorney and the attorney general, staff told the committee.

"Today, there are 57 education audit reports for the committee's review," said Mister Fink, a staff member with Legislative Audit. Staff said 52 reports had no findings and five included findings; three of the reports—Camden Fairview, Forest City and Nettleton—had been referred to prosecutors.

The Camden Fairview audit found the district expended $10,668 from operating funds for an end-of-year awards banquet that staff said was in conflict with the Arkansas Constitution as interpreted in the Attorney General's opinion. Mister Fink told the committee the banquet costs included $7,260 for meals, $2,958 for door prizes and $450 for facility rental; staff also reported $2,140 in unauthorized credit-card charges between Sept. 9, 2024, and Feb. 27, 2025, of which banks reversed $1,878, leaving a $262 loss.

Representative Mayberry said she was concerned no district officials were present to explain the expenditures. "That's a significant amount of money," Mayberry said. The chair proposed, and the committee approved, deferring the Camden Fairview report to the June meeting and asking district representatives to attend.

Forest City’s audit listed $33,436 in operating-fund expenditures for an end-of-year staff celebration, which staff said also conflicted with the Arkansas Constitution as interpreted by the Attorney General. Mister Fink provided itemized questionable charges including $17,390 for decorations, $10,596 for catering and $4,235 for entertainment. Representative Beatty moved to defer the Forest City report and request the district’s attendance at the next meeting; the motion carried.

The Nettleton School District audit reported four transactions totaling $1,900,000 that were sent to a fraudulent checking account after email requests to change vendor bank information. Mister Fink said the bank recovered about $1.5 million, and the vendor agreed to reimburse $204,890 by monthly installments, leaving a loss of $204,890. Senator Love asked whether the vendor actually received the funds and pressed staff for clarification; the committee voted to hold the Nettleton report over to the June meeting to obtain answers from the district.

Staff also summarized other findings: Cedar Ridge had payroll and reconciliation issues including $9,200 charged to Title I for a non-Title I position and a $12,943 unexplained variance as of June 30, 2025; Greene County Technical reported a $1,400 check diverted and later recovered. Mister Fink said auditors are advising districts to avoid email-only changes to banking information, consider in-person verification when appropriate and use bank controls such as positive pay.

The committee filed the 52 audits with no findings and encouraged members to recognize schools with clean reports. The panel adjourned after the chair stressed stewardship of public funds and the importance of internal controls.

The Subcommittee deferred the three referred reports to its June meeting and requested representatives from those districts appear to answer questions.