Metro

House Republicans call on state auditor to investigate Boston student activity accounts

JESSICA RINALDI/GLOBE STAFF
Boston Public Schools Superintendent Tommy Chang (right).

Two Massachusetts House Republicans on Friday urged the state auditor to launch a thorough investigation into the Boston Public Schools’ student activity accounts — and all other school budget matters — after an IRS audit found a dozen schools had mishandled funds.

In a letter they sent to Auditor Suzanne Bump Friday, state Representatives Shawn Dooley of Norfolk and Shaunna O’Connell of Taunton said the investigation is needed because many details about the IRS audit are vague, including who is responsible and how long the funds have been misused. They also expressed frustration that school and city leadership have engaged in “shameless political games” since the audit findings became public Monday.

“News reports detail how Boston Public Schools officials covered up their knowledge of the misuse of funds for several months, how the issue was swept under the rug and released to the public only after the municipal election in Boston, and now how everyone with a stake in the issue is pointing their finger at someone else,” they wrote.

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The representatives were referring to news reports that indicated Superintendent Tommy Chang had known about the IRS findings since June, but did not inform the School Committee about them until a reporter began asking questions about two weeks ago.

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Mayor Martin J. Walsh accused Chang of keeping him in the dark about the findings, even though Walsh’s financial team was dealing directly with the IRS since the audit began more than a year ago.

Chang defended his handing of the IRS findings Friday, noting that he had informed principals about them in June and provided training to them in August on proper procedures for spending student activity funds.

“That is a far cry from sweeping anything under the rug,” he said in a statement.

Chang also sent a letter to families Friday evening informing them of the IRS findings and actions taken by the school system to fix them.

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A spokesman for Bump said that under state law her office can only pursue a review if it is requested from the leadership of the municipality. The office issued the same response Tuesday when the right-leaning Massachusetts Fiscal Alliance asked her to audit the student activity accounts.

It appears unlikely that Walsh will request a review from Bump. On Thursday, he announced that he had tapped accounting firm Ernst & Young to conduct an independent audit of all student activity accounts across the school system.

“Mayor Walsh is confident we will receive the information we need to correct these issues, achieve complete transparency, and continue to earn the trust of the public we serve,” said Nicole Caravella, a spokeswoman for the mayor, on Friday.

Walsh said he is hoping to have the audit done as soon as possible, but at this point neither he nor school officials know how many accounts actually exist and how much money is in them.

In an interview, Dooley expressed disappointment that Bump won’t investigate.

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“That makes no sense that an independent auditing office can only do something if the group that did something wrong asks for a review,” he said. “It doesn’t pass the smell test.”

The IRS, which initiated an audit of Boston finances in the summer of 2016, examined student activity accounts at 16 schools and discovered problems at three-quarters of them, including sloppy bookkeeping, missing receipts, stipends being paid under the table, and expenditures on items unrelated to student activities.

Under state and federal rules, student activity accounts can only be used on items that enhance a student’s education outside the classroom, such as field trips and student clubs. State and federal rules stress the money is for students, and not adults or the institutions. Money generated for the accounts comes from fund-raisers, unsolicited donations, or proceeds from student events, such as proms.

The IRS also uncovered problems with the city’s payroll: failing to deduct Medicare withholdings and other taxes for some groups of employees and overtaxing some employees who are not US citizens.

The findings resulted in nearly $1 million in penalties, most of it to cover back taxes for 2014 and 2015, which were the years scrutinized by the IRS. The city issued a check to the IRS on Nov. 7, which was Election Day.

Walsh said the problems with the city’s payroll, due mostly to miscoding and misinterpretation of rules, have been corrected.

But he contends the city needs to get a better handle on any other problems that may exist with the dozens of student activity accounts that were not examined by the IRS, prompting the independent audit. Walsh said most of the city’s 125 schools have student activity accounts.

James Vaznis can be reached at james.vaznis@globe.com. Follow him on Twitter @globevaznis.