The Oklahoma state Education Department is in trouble again for using state employees to solicit private donations and passing the money through questionable nonprofit accounts.
A special investigation released Monday by the state auditor and inspector’s office outlines how education officials under state schools Superintendent Janet Barresi set up a “front organization” to receive more than $200,000 in donations. The organization then spent the money on a 2011 conference for educators across the state.
In its rush to privately finance an educational conference within six months of taking office, Barresi’s administration made many of the same mistakes as the administration of former state schools Superintendent Sandy Garrett, which was criticized in an earlier audit, Jones said.
Barresi’s administration has since adopted a donation and gift solicitation policy designed to prevent similar problems in the future, he said.
“We’re not doing that anymore,” Barresi said. “This is not an excuse because it’s under my watch, but during that time we were also trying to put together a state budget, a very aggressive legislative agenda, and we were trying to hire people to fill several vacancies.”
Barresi said she was the one who requested the audit of their practices and that she appreciates the auditor’s work.
The last education conference, in 2012, was paid for almost entirely by state funds or donations accepted by the Education Board on behalf of the state, Barresi said.
Ashley Hahn was a temporary employee at the department when she was tasked with finding an alternative way to house funds for the State Department Innovation Conference, according to the audit.
In an email she sent in April 2011 to Jennifer Carter, chief of staff, and Damon Gardenhire, director of communications, she outlines three options, including having Attorney Anthony J. Ferate set up a nonprofit.
The Oklahoma Foundation for Innovation in Education was established with Hahn as one of three board members.
The other board members were her uncle and her friend.
The board never met and never voted on bylaws.
Yet the nonprofit received just over $200,000 in donations and expended those funds on the Innovation 2011 education conference.
“We have real concerns about that,” Jones said. “That’s been referred to the attorney general.”
Barresi said she has run not-for-profits before and had mistakenly assumed that Hahn also was familiar with the process.
“I didn’t know until the audit happened that they hadn’t had a meeting,” Barresi said.
“It was not my intent to treat it that way. Not-for-profits are fine as long as they are set up a certain way. The only solace I have is that we accounted for all the money, and we will not be doing it anymore.”
Hahn told auditors she was acting under the direction of Gardenhire and Carter who have since left the department. Hahn still works with the agency.
The Oklahoman reported first in March that one of the three board members was not aware she was on the board and that the board had never met.
It was after that story that lawmakers began calling for an audit.
Barresi requested the audit of her own agency and the nonprofit in response.
Documents filed with the Oklahoma secretary of state falsely attest that the foundation had met and had voted on bylaws. The document includes only Hahn’s signature and the handwritten names of the other two board members with Hahn’s initials beside them.
Ferate said Monday he couldn’t comment on the audit which he hadn’t seen but contends that the nonprofit was legitimate and that all procedures had been followed. Ferate said the foundation had received a certificate from the IRS attesting it was a legitimate nonprofit organization.
The audit questions how Ferate and two other individuals who did work for the nonprofit were paid for their services if the board never met.
“According to A.J. Ferate, his pay was determined by Executive Director Todd Pauley,” reads the audit. “Foundation Accountant Pam Pollard told us her pay was set by Todd Pauley and A.J. Ferate. Todd Pauley told us his salary was determined because they (Ferate, Pollard, and Pauley) ‘just put a number out there’ that was thought to be fair and equitable.”
Taxpayers picked up an unpaid debt of the foundation to the tune of almost $16,500.
“Who’s to say the state of Oklahoma owed that?” Jones asked. “That was a contract entered into by the nonprofit, not the state of Oklahoma, and there’s no contractual agreement that says the state would be liable for that.”
The invoice was from Event1 Productions Inc. in Sand Springs for rental of tables, drapes and other displays for the Innovation 2011 conference.
An email from Hahn in the audit indicates this was the final bill to be paid before the nonprofit was dissolved with no funds remaining.
A majority of the money came from vendors at the conference who were either donating money or paying for booths in an exhibition hall.
Jones raised concerns similar to those in the previous education audit that some of those vendors — donating thousands of dollars — had lucrative contracts with the Education Department and there may be a conflict of interests in the transaction.
The foundation has since been dissolved, and the auditor’s investigation notes that many financial records for the nonprofit were never made available to inspectors despite requests to both the Education Department and the foundation.
Jones said another real concern is that there was no contract between the “so called nonprofit” and the state Education Department.
“We’re trying to figure out exactly how much money was brought in, how it was spent, and unless you have the records, you cannot verify how everything was spent,” Jones said.
He said the auditor’s office considers some of the issues unresolved and that they have forwarded their findings to the attorney general for consideration of possible charges or further investigation.
Contributing: Staff Writers Randy Ellis and Carrie Coppernoll