A state prosecutor is investigating more than $400,000 in purchases of computers and technology services by the Huntsville, Ark., School District. The probe began after state auditors reported that the company selling the hardware and services to the 2,000-student Madison County district had been set up by Huntsville’s superintendent and a former administrative aide.

Investigators also are looking into a district-established payroll-deduction program that allowed teachers to make personal purchases of computers from the superintendent’s company and into whether the school district paid for equipment that area businesses intended to donate to the schools.

In an exclusive interview, state Prosecutor Terry Jones told eSchool News that Huntsville Supt. John Bass and his former administrative assistant, John Harris, might have violated an Arkansas statute forbidding “self-dealing,” that they could be subject to a $500 fine, and might have to repay any profits the company made on the school sales.

At the request of his school board, Bass has taken a leave of absence.

“Inherent conflict”

A routine audit of the Madison County school system turned up purchases from a company reportedly set up by Bass and his aide. Jones described the situation as creating “an inherent conflict.”

In a report filed on Aug. 6 with the Legislative Joint Auditing Committee, legislative auditor Charles Robinson recommended further investigation.

According to the auditor’s report, Bass and his aide established Academic Computer Systems Inc. on May 30, 1997. During the next month, the company reportedly sold the Huntsville schools $4,650.97 in services. During the following fiscal year– ending June 30, 1998–the school district bought another $416,493.89 worth of computer systems and services

from the superintendent’s company, the auditor’s report said.

The purchases, said deputy legislative auditor William Baum, seemed to violate the state’s “self-dealing” laws. An Arkansas statute prohibits school superintendents or their employees from “receiving compensation for recommending or procuring the use of any school apparatus in any public school.” eSchool News has learned the prosecutor’s office also is looking into whether the district purchased computers that area businesses had intended as donations to the schools. According to Jones, investigators are trying to determine if $50,000 worth of computers earmarked as contributions to the school system were the same machines a private company allegedly sold to the schools.

The Madison County Telephone Co. confirmed that it donated “thousands of dollars” in equipment and manpower to wire all the classrooms in Huntsville. A spokesman for the company said he had not been contacted about possible misuse charges. He would not comment on the matter, he said, except to say his company donated wiring equipment, not computers.

Payroll deductions

Another potential violation cited by the auditor’s report involves computer sales to Huntsville teachers. The district reportedly made payroll deductions that allowed teachers to buy computers from the superintendent’s company, an action that might have violated the Arkansas laws governing disbursements from the Teacher Salary Funds. According to Jones, the most serious question involves any profit that might have resulted from self-dealing. If Bass’ company profited from the sales of the equipment to the district, then the superintendent and other company officials could be forced to reimburse the schools for any expenditures that exceeded the actual cost of the equipment.

“Whatever profits were made from sales to schools would go back to [school district] coffers,” Jones said. “One has to determine if the transaction was good for schools or bad for schools.” But that determination could be expensive to make, Jones told eSchool News. It would require the use of outside “forensic auditors” who specialize in reviewing accounting records for fraud and misuse of funds, weighing the actual cost of the equipment against what the district paid for it. And it’s not likely that Madison County could afford such services, Jones said. “That’s the hard part for us,” he said. The case was scheduled to be presented to an audit subcommittee Thursday, Nov. 19, but was deferred until the subcommittee’s Dec. 10 meeting, at the request of Bass and his attorney, Baum said.

The superintendent reportedly wanted time to consult with his lawyer and to respond to the audit in writing. Bass’ attorney, Jim Rose, said he has no problem with the audit finding, according to the Associated Press, but does protest the wording of the finding. He has asked that the report’s language be modified “to soften the blow.” “They wanted to say no money was missing,” Robinson told reporters, “but, obviously, I’m not going to say that.”

The school district confirmed that Bass had taken an “administrative leave,” but eSchool News’ requests for interviews with Bass or the district’s interim superintendent went unanswered.