Sunday, September 21, 2003
Copyright © Las Vegas Review-Journal

SCHOOL ATHLETICS: Financial practices assessed

Whistle-blower, energy study led to audit showing six-figure losses

Two unrelated factors led to the internal audit that uncovered six-figure losses of public money and questionable financial practices in the Clark County School District's athletic department.

The first was a district employee who acted as a whistle-blower. The individual, who spoke to the Review-Journal on condition of anonymity, said he approached both a School Board member and Superintendent Carlos Garcia about former district Athletic Director Larry McKay's management of funds related to the Holiday Prep Classic, a district-sponsored winter basketball tournament that draws national participation, and the unequal treatment of teams that sign up to participate.

"All high schools in the CCSD are supposed to be equal in athletics, but some are more equal than others," the whistle-blower said. "That was a concern. I'm very satisfied that Mr. Garcia said he would look into this and that he did. It wasn't swept under the carpet."

The second area of concern was a district study of energy use, which showed excessive utility costs at schools during the winter and summer breaks, when buildings were closed. A district inquiry showed that athletic tournaments, such as the Holiday Prep Classic winter basketball event and The Big Time, a summer basketball tournament staged for college recruiters, were not bearing the costs of building operations, contrary to district policy.

"I know when I heard about this, I was in a state of shock," School Board member Shirley Barber said. "Something is wrong here. It didn't just start this year."

Garcia said that he has shared the audit with the district attorney's office and the Nevada Division of Criminal Investigations. Both entities are assisting school police in an ongoing inquiry.

The audit covered the past three years and found:

• Documentation to substantiate receipts and deposits was not maintained as required in district policy by former district Athletic Director Larry McKay. Auditors cited this as their greatest obstacle in verifying financial reports.

• Tournament financial reports filed with the National Federation of State High School Associations, which regulates events such as the Prep Classic, were significantly different from the records provided to auditors by McKay. Those reports addressed sponsorship fees, salary expenses, the cost of team travel, and room and board. The federation records show nearly $60,000 more in sponsorships than district ledgers indicate. Tournament income reported to the federation in 2000 and 2001 is $40,000 more than is shown in district books.

• Costs for game officials and security were paid for out of the district athletic department's budget, not tournament funds. The event is supposed to be self-supporting. The audit shows the event lost money in each of the past three years.

• A random review of 73 checks written on behalf of the Prep Classic showed that 11 canceled check copies provided by the bank had different payees than the payees listed in tournament records. In several cases, checks entered on the ledger as "money market transfers" showed up as payable to McKay in bank records.

• The deposit of $38,930 in district funds into a Bank of America account for the Big Time Tournament. The Big Time, the nation's largest high school basketball summer event, is not a district event. While athletic director, McKay worked for the private Big Time tournament as a director.

• In 2000 and 2001, $176,768.39 was charged on McKay's personal credit cards for the Prep Classic. However, the audit found that $198,089.19 was transferred from the tournament bank account to McKay's personal credit cards. In the audit, McKay agreed that he was overpaid, but said he made personal contributions that offset the overpayments.

Bill Hoffman, attorney for the district, said that corrective measures have already been put in place to prevent a repeat of such an event. That's something that's vital in assuring the public the district is handling its money properly, said Carole Vilardo, president of the Nevada Taxpayers Association. Corrective measures should include regular audits of departments that handle large amounts of money, she said.

"The onus is on the school district to set up procedures that will now be followed," Vilardo said. "The fact is, this tournament went on for 26 years. Thank God it wasn't another 26 years before this all came to light."

Vilardo also said that one person should never have sole authority over public monies, something the whistle-blower agreed with. Although how Prep Classic money is handled has long been questioned by those in the athletic community, the whistle-blower said individuals were reluctant to report McKay for fear their teams would be excluded from play or their campuses would not be used for tournaments, which generated significant income for schools that profited from the sale of concessions.

Hoffman said that training on the proper way to handle funds generated by sports and other activities began in June for school athletic directors and principals. He also said that a new district athletic director has been named and that a full-time accountant is now assigned to that department. The district does have a staff of auditors who regularly review district departments and schools.

"My big question is how did this happen," School Board President Sheila Moulton said. "Because it shouldn't have."

Moulton said that the audit will cause the board to re-examine its policies regarding finances and the administrative follow-up in making sure policies are enforced. Barber agreed.

"I feel like we failed," Barber said. "We are responsible for everything going on in the district. If we had been evaluating people and holding people accountable, we should have picked up on this long before now."