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Previous audits of La Promesa questioned

Copyright © 2017 Albuquerque Journal

For six years, La Promesa Early Learning Center’s former assistant business manager allegedly diverted nearly half a million dollars from the school into her personal bank account and deposited about $177,000 worth of questionable checks.

Like all state charter schools, La Promesa was audited annually by an independent firm – a process organized by the New Mexico Public Education Department.

But the alleged fraud and embezzlement were not detected until a vendor called the Office of the State Auditor’s confidential hotline in April to report a suspicious tax form.

So how did years of alleged financial misconduct get past the audits?

State Auditor Tim Keller told the Journal that the problems at La Promesa are part of a larger pattern.

“This isn’t just about one instance, the state needs to do a whole lot more supporting and overseeing of our education dollars to protect them from fraud, waste and abuse,” Keller said in an emailed statement.

“Over the last several years, we’ve urged the Public Education Department to step up oversight and provide the training and support our schools need to succeed. Unfortunately, by the time the Department stepped in at La Promesa, nearly $700,000 was already gone.”

PED spokeswoman Lida Alikhani countered that PED prioritizes “quality financial management within all New Mexico public schools.”

“That’s why we conduct annual audits and rely on independent external auditors – that are approved by Tim Keller’s office – to take the lead in these audits and provide us with the correct information to ensure proper financial management,” she said in a statement.

“During this administration the Public Education Department has worked diligently to improve financial performance within schools across New Mexico by stepping up oversight and providing better training and support.”

Keller said the annual audits are not as exhaustive as forensic audits, which are used to uncover fraud and require special expertise.

PED’s independent auditors look at a random sampling of a school’s financial documents – to find fraud, they would have to “get lucky” and review documents that reveal the misconduct, Keller said. For instance, if the auditors pulled out a document that looked suspicious, they could flag possible fraud.

Keller noted that annual audits have uncovered fraud in other districts.

Another potential obstacle: School staff could falsify documents to throw the auditors off track.

“(School) management is responsible for providing information to the auditors,” Keller said. “If management literally fakes information like false invoices, things of this nature, you would never know that unless you subpoenaed bank accounts and things like that. That’s what a forensic audit does.”

Keller said New Mexico has many high-performing, fiscally responsible charter schools, but PED needs to exercise more oversight throughout the year because annual audits can’t catch every problem.

“I think the best thing that would be helpful is if we had confidence in the accountability and transparency that PED was providing for our charter schools,” Keller said.

On Thursday, the U.S. Department of Education announced that PED will receive a $22 million federal grant for its charter school system.

Part of the funding will support efforts to improve the fiscal and organizational performance of the charter school sector, according to grant documents. For example:

• PED will use a portion of the grant funds to partner with national authorizing experts and state authorizers to strengthen the quality of charter authorizing practices, particularly financial oversight. The group will develop a set of charter authorizing standards by the end of 2018.

• The grant proposal includes funding to provide technical assistance and share best practices for financial and organizational management.

PED also has taken steps to boost oversight independent from the grant:

• PED has posted a job opening for a charter school data and financial analyst, a new position to enhance oversight.

• PED also increased school board training requirements this year. Specifically, new board members must now get two hours of training on financial oversight, within seven hours of total training, from PED before they can cast votes. Additionally, all board members must annually get three hours of financial training from a qualified provider approved by PED.

Under state law, about 2 percent of a school’s costs can be withheld to help cover the cost of oversight and other administrative support to the school.

That money, roughly $18.5 million over a recent five-year period, should be used effectively to oversee charter schools, Keller said. In August, Keller released a report calling for New Mexico do a better job of tracking these funds.

Alikhani described Keller as “a politician looking for cheap headlines.”

“One of our top priorities will always be to ensure that classroom spending is used properly and well-accounted for,” she said in a statement. “That’s why we provide regular training to districts and charters in developing their budgets – including in an annual training session each year as districts and charters prepare for the upcoming school year. And when districts and charters need help or guidance in managing their budgets effectively, we are always happy to assist in any way we can.”

Longtime disagreement

Keller and PED have sparred over charter school oversight for some time.

In March 2016, Keller sent then-Education Secretary Hanna Skandera a letter warning that “millions of dollars of funds are potentially at risk” and “schools are susceptible to fraud, waste and abuse.”

He noted that fiscal year 2015 audits uncovered 195 findings at the roughly 60 state charter schools, including “procurement violations, overspending, lack of sound accounting practices and payroll deficiencies.”

“Many of these findings were repeated from previous fiscal years and have continued to go unaddressed,” he said.

When the fiscal year 2016 PED audit was released, Keller wrote another letter to Skandera, stating that he remained concerned “regarding the adequacy of the Department’s support and oversight of charter schools.”

Keller noted that the overall number of audit findings had decreased to 178 in fiscal year 2016 and recognized that PED was addressing problems at a number of schools, but he said PED should do more to prevent issues.

Paul Aguilar, PED deputy secretary for finance and operations, told the Journal in a February 2017 interview that charter school management had improved during Skandera’s tenure.

“We are confident next year we will have fewer findings and still fewer the next year,” he said.

Management problem

The revelations about La Promesa Early Learning Center have put charter school management back in the spotlight.

Earlier this month, Keller issued a report outlining extensive fiscal mismanagement at the K-8 state charter school on Albuquerque’s West Side.

Analee Maestas. (Dean Hanson/Albuquerque Journal)

According to Keller’s investigation, Julieanne Maestas, La Promesa’s former assistant business manager, diverted more than $475,000 from La Promesa into her personal bank account from June 2010 to July 2016. In addition, she deposited about $177,000 worth of checks that were payable to the former executive director – her mother, Albuquerque Public Schools board member Analee Maestas – as well as to her boyfriend, who was a school maintenance vendor.

The Office of the State Auditor discovered the nearly $700,000 in questionable transactions after a La Promesa vendor called the office’s confidential hotline saying a 1099 tax form he received from the school showed $7,128 in checks having been written to him and “endorsed by persons other than myself.”

The vendor said he’d never received the money and the work he supposedly did had never been performed.

Issues with La Promesa’s finances first arose in February 2016 after the school submitted a suspicious receipt to the New Mexico Public Education Department for reimbursement. Analee Maestas claimed the $342.40 invoice was for carpet cleaning at the school, but it appeared to have been written over, and the cleaning company reported that it actually worked on ducts at her home. She has denied any wrongdoing.

She has also said she did not know about the alleged $700,000 embezzlement and blamed her daughter’s substance abuse problems.

Analee and Julieanne Maestas left their positions at La Promesa in September 2016.

Last week, Attorney General Hector Balderas called for Analee Maestas to resign from the APS board.

Her attorney said she is innocent and has no plans to step down.

Journal staff writer Dan McKay contributed to this report.

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