Guest Column

Waking Up to Fiscal Consciousness

by Marc F. Bernstein

The financial scandal in the Roslyn, N.Y., School District has “adorned” the pages of The New York Times and Newsday on a frequent basis since January 2004 when the district’s own high school newspaper first broke the story.

The issue of school financial improprieties quickly moved statewide as this $11 million, multiyear embezzlement was followed by allegations against school officials in several other Long Island districts. The lessons to be learned from these scandals are worth sharing nationally.

There have been arrests of Roslyn’s former superintendent, business official and accounts clerk. The independent auditing firm that handled scores of school district accounts has gone out of business. Three of Roslyn’s seven school board members decided not to seek re-election at the end of their current terms, two resigned and one was removed from the board by her colleagues. A second round of investigations into a separate $24 construction project has been launched.

As experienced school administrators know, for our schools to be effective we must have the public’s confidence and trust. Not only do we depend on the public for our budgets, without their respect for our ethics and integrity, how do we make wise decisions guiding their children’s education and futures?

Ingenious Perpetrators
A three-stage process has begun in Roslyn to regain the public’s trust through the joint participation of the district attorney, the state comptroller and the school board. The three stages are (1) investigation and exposure of the wrongdoing; (2) demand for personal accountability, usually through criminal proceedings; and (3) corrective legislation to prevent future occurrences.

Phase one concluded with New York State Comptroller Alan Hevesi’s audit report, “Roslyn: Anatomy of a Scandal.” The 60-page report described the various illegal activities, including almost $6 million of misappropriated credit card use and ATM withdrawals against more than two dozen credit cards and more than $1 million of private mortgage payments on behalf of school officials. It then detailed the apparent conspiracies among school officials that permitted the circumvention of normal accounting procedures, including unapproved salary adjustments to members of central administration.

Among the state comptroller’s most interesting findings were those describing the ingenuity of the perpetrators in their seductions and manipulations of school district employees, community residents and school board members, including the alleged gift of computers to some board of education members. The audit report concluded that the egregious lack of oversight by Roslyn’s elected school board enabled many of these activities to occur. Phase one is complete. The public understands the scope of the $11 million misappropriation of funds.

Phase two, involving criminal investigations, grand jury indictments and eventual trials or plea bargains, is under way. We’ll soon learn how many and which individuals were innocently unaware of the almost 10 years of conspiracy and theft and who benefited by turning a blind eye. Beyond those who will be brought to justice through the courts, the pre-2004 Roslyn school board, according to Hevesi, “abdicated its oversight role and essentially did not monitor the district’s financial operations.”

The school board was more than merely lax in not having implemented adequate policies to direct proper business practices. Most significantly, the school board may have compromised the district’s ability to recover through its insurance policy any of the stolen millions. In October 2003, to avoid negative publicity and perhaps personal embarrassment, Roslyn board of education members decided not to report to the district attorney or its insurance company the revelation that the business official had misappropriated $250,000, the amount that had (finally) been discovered through the most recent audit. A more prudent decision would likely have led to a smaller, recoverable loss because the insurance company would have been notified in the required timely manner.

Full disclosure requires me to say that I’ve been a Roslyn resident for 27 years, a superintendent in Nassau County, N.Y., for 15 years and a Roslyn school administrator during the late 1970s and early ’80s. Thus my feelings of both betrayal and embarrassment may exceed those of many others.

Outdated Laws
Phase three—the process for putting in place new state laws, audit procedures and board policies—has begun. Too many New York state education laws relating to the operations of school boards and districts date back at least 50 years when districts were much smaller, less complex and had budgets that were a fraction of their size today. Recently-adopted laws address several previously ignored concerns. New requirements include:

  • Financial oversight training for school board members;
  • Creation of “audit advisory” committees;
  • Appointment of an internal claims auditor; and
  • Formal presentations to board members of independently conducted audits.

Other areas remain ripe for legislative consideration. For example, incomprehensible as it is, no legal requirement exists for the position of treasurer to be held by an accounting professional. Shouldn’t elected and appointed school officials be required to disclose any potential conflict of interest in terms of family members employed by the district or transacting business with the district? All payroll transactions and reimbursements of top administrators should be independently audited. And, any public employee convicted of a crime related to his or her duties should not be permitted to receive a state pension by retiring prior to the formal conviction.

Scandals will occur periodically. The wisest legislators and comptrollers can’t anticipate all contingencies. There always will be individuals whose greed and need for power will conspire to cheat and steal. However, through law and public exposure, we must hold all public officials, appointed and elected, to the highest legal and moral standards as we punish the wrongdoers and update our laws.

Marc Bernstein is superintendent of the Valley Stream Central High School District, 1 Kent Road, Valley Stream, NY 11580. E-mail: bernstem@vschsd.org