Legislative Joint Auditing-Educational Institutions
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Welcome to the Legislative Joint Audit Subcommittee. Thank you for joining us. We're going to start today with asking Representative Furman if you would lead us in prayer today. Let's stand. Our Father and
Speaker 2
0:12
our God, I thank you for today and the ability we have to gather in people's business. I pray that you'll be with us and give us all wisdom to make the right decisions. Keep our conversations. Well,
thank you all for being here today. We have a pretty light agenda, so we'll move pretty quickly.
But as always, if you've got any questions or comments, please make those notices aware. Let's see. Madam Co-Chair, any comments today? Not yet. Okay. All right. We'll kick off. So first thing we have on the agenda is moving to B is adoption of the minutes of the September 11th, 2025 meeting. I see a motion. I see a second. Second. All in favor of the motion? Signal by saying
aye. Opposed, like sign. It is approved.
Speaker 11
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All right, moving to C. Mr. Fink. Thank you, Mr.
Speaker 12
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Chair, and good afternoon. Today, there are seven educational audit reports included on the committee's agenda. Six reports contained audit findings, and there was one with no finding. None of the reports contained repeat findings. We will begin with Mammoth Spring School District, which was previously deferred. they had one finding. On May 2nd, 2024, the district promoted a board member's son-in-law to high school principal for the 2025 fiscal year with an increase in compensation of approximately
$11,000. Although meeting minutes indicate the board approved this promotion immediately after the board member resigned, approval was not obtained from the Commissioner of Elementary and Secondary Education as required by Arkansas Code. Additionally, the minutes of the board meeting held on May 2nd indicated that the board member was present and participated in the executive session discussion immediately prior to his resignation in non-compliance with Arkansas Code. It should be noted that the board member resigned immediately following the board's return from
executive session and immediately prior to their approval of his son-in-law's promotion. However, he was reappointed to his board position before the end of the same meeting. And that concludes the finding for Mammoth Springs School District. Thank you, Mr. Fink. I
believe we've got some representatives from Mammoth Springs. We're going to invite you to the table at this time. Welcome, and if you will please identify yourself for the record.
Speaker 15
2:42
I'm Mark Taylor, superintendent at Mammoth Springs. Devin
Smoot, School Board President. I'm sorry, Devin what? Smoot. Smoot, thank you. All right, thank you for being here. We'll just allow any opening comments from your team here
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to this finding, if you have any. Well, I hope that safeguards are in place. I was not the superintendent at that time, and I was the interim appointed in January of 25.
So I received the audit finding and came up with the response to the audit finding. Anything, Mr. Smoot? I
really don't have any comments. Okay. Well, thank you for being here today. So I'm looking at the timeline. So this was May of 24, and Mr. Taylor, you started January 25. Is that correct? That's correct. Okay. And, Mr. Smoot, you were board president. How long have you been board president?
Just this year. This year. Okay. But you were on the board in May of 24? Correct. Okay. Can you just give us some, maybe some color commentary about what happened? And it sounded like, frankly, it sounds like some maneuvering that went on to get this person promoted and resigning from someone resigning from board was that yourself that resigned from the board and added back yes sir that is correct okay will you
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just kind of talk through what happened in that meeting and what the thought
Speaker 27
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process was well I had so I was a school board
president then but I was a board member and my son-in-law applied for the job I you know excuse myself, had no part of the interviews, anything like that. And during that time, I contacted Mr. Cody Keys. I said, Cody, what do I need to do here to do the right thing? What's my options? And me and Cody visited. I believe he talked to Lucas also, one of the other lawyers, and he said,
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one, you could resign, or the other option is to do what was stated
in the minutes. Okay, and who is Mr. Keyes? Okay, wonderful. Yeah, you're welcome to sit at the table as well. Thank you.
Okay, so you said the option was resign and what was the other option? To do what was stated, what was read in the minutes. Well, in the minutes it said that you did resign, so what was the other option? Well, I could
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resign and not reappointed or I could resign and walk away from the school board or I could
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resign and the board could reappoint me. Okay.
Speaker 34
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Well, can I clarify? Yes. The other one would be he simply stays on the board but removes himself from the discussion. If the board so chooses to hire his son-in-law, then they would have to get approval from the Arkansas Department of Education. Okay. So in this instance, he resigned. I mean, technically everything here was legal. I could see the optics of it since he was appointed back at that same meeting might have been better optically if they waited to the next meeting, but that was what they did here. They chose for him to resign
so that his son-in-law could be appointed if that be the choice of the remaining board members. Okay. I've got some
more, but members, any questions for the witnesses here? All
Senator Dan Sullivan
Unverified
6:30
right. Senator Sullivan, you're recognized. Thank you, Mr. Chair. Guys, this
just doesn't look good. Your thoughts on the optics of this, people resigning and hiring and coming back in?
Nobody's got a problem with that? I
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think it looks odd. I felt that it looked odd, and so the optics of
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it were not good, and I feel that the new 60-day waiting period would help the optics of that, certainly, And also just the fact that you have to understand I have four out of five board members that have relatives that work for the school. So the optics, while appearing bad, they have the potential for being bad all the time.
So we're working to work through that and make sure that this doesn't happen again. And, yes, I agree that those optics are bad had we had a time frame between the resignation and the reappointment. that would have had a better look to it, or if the hiring of the principal was delayed a month after the resignation. Something would have made that appear better. Okay, so
Speaker 45
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in your comment you said we want to do something so it
Senator Dan Sullivan
Unverified
7:40
doesn't happen again. If that's true, why would you let it happen
Speaker 21
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in the first place? Well, I wasn't there in the
Senator Dan Sullivan
Unverified
7:49
first place, so that's why. Why would anyone let it happen again in the first place if we're all in agreement it looks bad and we're leaving it in place. We're leaving something in place that looks bad and people agree was bad, but we let it happen anyway. And it just doesn't look good. The attorney, did you
Speaker 34
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have a comment? Oh, no. I mean, it couldn't happen anymore because the new law requires that they wait a period of 60 days before they can appoint. Well,
Senator Dan Sullivan
Unverified
8:14
I mean, listen, it's your board, it's your community. If your community is happy
and you guys get along with it and that's the way you want to operate, you know, I'm not going to step in and try to blow anything up. It just, you know, as a legislature, we see these kind of things happen, and it gives us pause to think this happens, and everybody goes, okay, we're all good, but it's your community. I understand
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that, and if the gentleman in question, the boy, the person that was hired to be the principal, was doing a poor job, that would be one thing. He has worked for the school for seven years and done an excellent job. He was our girls basketball coach
and a teacher, English teacher, done an excellent job at that and was qualified to be a high school principal and had an opportunity to go for the
Senator Dan Sullivan
Unverified
9:03
position. Yeah, listen, I've got no more questions. Your community, your community is happy. Everybody signs off on it. It just looks odd sitting up here
in Little Rock. Thank you. Thank you, Mr. Chair. Members,
any other questions? All right, co-chair, Duke. Thank you,
Representative Hope Duke
Unverified
9:21
Senator Dees. I appreciate it. I appreciate you all coming here.
I've got several questions. I'm going to start with how long, Mr. Smoots, have
Representative Hope Duke
Unverified
9:34
about 17 years. 17 years. So you've had training every year for those 17 years? Yes, ma'am. Whenever your son-in-law applied the first time, I assume you
Speaker 17
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were on the board? No, ma'am. You were not on the board? No, I did a
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12-year stint from 2000 to 2012, and then I took eight years off and ran again
Representative Hope Duke
Unverified
9:54
for school board. Okay, so I, too, come from a school board experience, as several members of this committee do, and also come from a small town.
So I understand having people on the school board who have relatives who work in the school district. I was faced with that potentially if my daughter had decided to apply at our school district, what was I going to do? I've never seen anything like this happen. I've sat there and watched and have had school districts reach out to me because they were waiting on DESE. That bothers me, first of all, that you didn't get the waiver from DESE, and you had to know you needed to get the waiver from DESE. And I realize that sometimes they take their time, and that's sometimes where legislators come into play to make the phone call saying,
not will you approve it, but can you get them an answer? So I don't, I think this is, I think there's some real ethical issues here. You may have been able to skirt the law, which I don't know about that either. But ethically, I don't think what you did here was right. I don't think it was right to sit there and whether you brought yourself out of that process or not, you should have gotten the waiver and made sure that was in place before he got the job. That should have happened, and that happens in school districts all across the state
where they make sure that happens because there's lots of small rural schools that deal with this. And whether the law, and I'm not sure what the law says on reappointments, but I have never seen a resignation coming out of an executive session. So you participated in an executive session, correct? Yeah, we talked about quite a few
Speaker 23
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things in there, yes. Yes, but you can't
Representative Hope Duke
Unverified
11:29
talk to us about what you talked about. So we don't know if you talked about your son's position or not. Nobody knows that. But what we do know is you came out of executive session, resigned, and then your board hired him.
And then they reappointed you in the same meeting, which I've never heard of that happening. But your public had no notice. What if there was other people who wanted that position? And in my opinion, I don't know what the law is. I always assume the law because the way I operate in a school district where people have resigned is you went through the process of letting people apply Now we have a more legal process in place, but school districts had a process where other people from the community could participate in. And your son-in-law may be a fabulous teacher and a fabulous coach, and obviously you all are happy with him,
but this just puts a cloud over everything, and it puts a cloud over him. And if you don't think that the other employees in that district don't notice stuff like that, I'm afraid you guys are kidding yourselves because they do, and the optics matter. They matter a lot. It's what teaches our kids. how to behave. And so when I saw this, I was shocked. I was shocked at every level of it. The executive session participation, the resignation, the reappointment, the not getting the waiver. I mean, so many things. If you've served on 17 years and whoever your former
superintendent is, you knew you weren't dotting these I's and crossing these T's. What was the urgency? Why couldn't you wait to get the DESE approval? Because you could have hired him with you being on the school board without there being any clouds to any of this. It does happen all the time. What was the
Speaker 27
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urgency? I don't think there was any urgencies. I know there was other candidates that interviewed for the job, and they went through the whole process. So as far as being any urgency, I don't think there was any urgency to hire him.
Representative Hope Duke
Unverified
13:27
Was it just, I mean, I find it hard to believe it was a lack of knowledge that you needed to follow
Speaker 27
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these certain procedures. Well, I mean, I went through the training and done all the stuff. I was unsure of really the process. That's why I called Mr. Keyes on the phone and said, hey, what do I need to do here? And those were the options he gave me. I'm just a railroader and a farmer. I mean, I don't study law. I never have. I never will. So that's why I picked the phone up and called Cody and said, hey, what do I do here?
Representative Hope Duke
Unverified
13:59
Well, that ball got dropped somewhere. And Lucas has been with the School
Board Association for a while and has given, I'm sure, countless school districts advice on this. So it's hard for me, knowing that he's given advice to school districts I work with, that his advice was this procedure here. So I do understand school board members are not paid. It is a hard, time-consuming job, and I have a lot of respect and appreciation. That's why I guess it bothers me particularly whenever something like this comes up because I feel like some of the school board members that are legislators now
are constantly trying to, you know, support our school boards and appreciate the job that y'all are doing sometimes against the attacks. And so when something like this happens, I take it really seriously because I think it does feed into the narrative that is out there sometimes that school boards aren't doing things above board. And so I would just encourage you in the future that when in doubt, make every phone call, call DESI too, you know, ask them as well because they would have told you, you know, what you need to do here.
And make sure, you know, stay out of that whole little piece, right, that executive session piece. Stay out of all of it so that there's just no question whatsoever that anything improper was done. Because I understand your heart. I understand the dilemmas sometimes. But it just, it was really not well done and really puts a cloud over that area. So I do thank you for your service. I thank you for coming down here.
Hopefully that will help in the future to make better decisions and make sure, because I know you need those people that work within your district, because they're school board members, families, they care a lot about those kids in a different way and a different community. So we need to have those, but we just need to make sure that it always meets the smell test. And I'm afraid this action here didn't quite meet it.
Representative Keith Brooks
Unverified
15:57
Thank you. Representative Brooks, you're recognized. Thank you, Mr. Chair. General, thank you for being here. Just a quick question. It talks about the increase in compensation, $11,236.
Was that over additional to what he had made in his role as a teacher and a coach, or was that above what the previous principal was making? No, that's above
Speaker 21
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what he was making as a teacher and a coach. That's the principal's salary. Okay, perfect. That's what that would be. Thank
you Mr. Chair. Thank you. Any other members? Well gentlemen thank you for
your time today. I think Representative Duke summarized it well. That's our goal. That's all of our goals is to do things the right way and I think that's the probably biggest highlight of this is we want
to not disparage any of you or your principal. That it's all earned on merit and done the right way, um, and can stand the test with transparency, uh, members with no further questions, uh, without objection, this will be filed. Thank you. All right. You're dismissed. Thank you. Thank you. Uh, Mr.
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next three reports contain findings, which were referred to the applicable prosecuting attorney and the AG Helena West Helena school
District had two findings. Finding one on October 10th of 2024, the district discovered that an employee's payroll direct deposits totaling $4,451 have been fraudulently deferred to another bank account after the employee contacted the district about not receiving their direct deposits. It was determined that the district made the direct deposit change after receiving an email request from what appeared to be the employee's email account without properly verifying the authenticity of the change request.
The district notified the financial institution. However, as of our report date, the funds had not been recovered. Finding two, during our review of payroll, we noted the head football coach received the athletic director stipend in addition to being paid via timesheets for duties that appeared to be covered by this stipend. He was also paid $2,400 for performing three years of off-season duties, even though the employment contract was for 240 days, and this was done without documented approval of the superintendent.
During our review of payroll, we also noted the executive director received an overpayment due to clerical errors. That concludes the findings for Helena, West Helena
School District. Thank you, Mr. Fink. Members, any questions? All
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right, without objection, this will be filed. Let's go to the next. Next report is Mountain View School District. On May 23rd, 2024, after an employee contacted the district about not receiving payroll direct deposits, the district discovered that the employees' April and May deposits totaling $2,422 and $2,485 have been fraudulently diverted to two different bank accounts.
It was determined that the district made the direct deposit changes after receiving two separate email requests from what appeared to be the employee's email account without properly verifying the authenticity of the change request. The district notified the financial institution, but they were unable to recover the funds, and that concludes the findings
for Mountain View. Mr. Fink, I do have a question. Just clarity on this. Was this a cyber offense?
Was this the employee had two different accounts? Is there any more detail on the two different
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accounts on this? Yes. So what happened is a bad actor sent an email to the school district bookkeeper acting as if they were an employee of the school. They asked for basically the authorization form to be able to update their banking information, did it one time, then emailed again another time and said they needed to change it again,
apologize for the inconvenience, all that, and change it to actually another bank. So the perpetrator, the bad actor, used two different banks to do this fraud. Members, any questions?
Speaker 81
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Senator Scott, you're recognized. Thank you. I do realize I'm not
Senator Jamie Scott
Unverified
20:22
on the committee. But this is two different school districts that this has occurred in. Is there anything we need to
look further into as far as, you know, this being a potential issue across the state of Arkansas?
You know, as crimes are escalating via cyber, it's just concerning to me that in the same report, two different
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districts. I appreciate that. Mr. Fink, any comments there? I actually prepared a report of all the findings for FY24 school districts. Many of you should have received that email if you were on the
full membership, full House and Senate? Yes, so here's what we had.
Speaker 11
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We had, for the FY24 school year, 26 schools
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were impacted. There were 65 incidents that had some sort of unauthorized withdrawal, which that could be anything to like an altered check that was stolen in the mail. That could be these situations where they're adjusting payroll information, and it could also be related to vendors as well. And so the total was about $648,000.
Of that amount, $605,000 was recovered from the bank. So the net loss was basically around $42,000. That's helpful context for sure. And I think also, Senator, that one
Representative Hope Duke
Unverified
21:52
of the things that, if I remember correctly, Mr. Fink, that they're seeing that in other areas like the cities and municipalities too in larger numbers this year than what we've had. So I think a lot of people are looking at how to change their processes. And I think we as a legislative body, if we can come up with solutions for this too,
we're definitely going to have to look at it because the criminals, the bad actors are finding every which way they can. I think a lot of schools are going to having them come in person and sign, you know, very old school style now if
Senator Jane English
Unverified
22:26
they want to change things. Thank you. Senator English, you're recognized. So I'm wondering, so these people whose payroll checks were stolen, did
they get paid? Yes, they did. Okay, thanks. Great. All right. Any other questions, comments? All right. Without objection, this will be filed.
Speaker 12
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Mr. Fink. The next report is Nevada School District. Finding one, during our examination of payroll records, we noted that one employee was underpaid $4,200 from their contracted amount. Finding two, a review of credit card disbursements revealed $2,800 in questionable transactions. We noted transactions that had no supporting documentation. We noted transactions that appeared to be allowable business purpose, but did not have adequate supporting documentation. And then $377 that
were related to interest and late charges. And so without adequate supporting documentation, we could not verify the validity of these payments. And that concludes the findings for Nevada School District. Members, any questions or comments? All right.
Seeing none without objection, we'll file this report. Next. Okay. The next two
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reports contain findings. These were not referred to the prosecuting attorney or the attorney general, and these did not contain repeat findings. Staff recommends the committee
take a moment to look over these findings and file as reviewed.
All right. Members, take a few minutes just to look at these with Cabot and
with Danville. As a reminder, these were not referred to prosecuting attorneys.
All right, members, any questions or comments? Yes, Senator English, you recognized.
Senator Jane English
Unverified
24:19
So $67,000 is a lot of money. Is that one person did that?
Speaker 12
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Yes, that was one check actually made out to an engineer and
Speaker 11
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architect firm. The check was intercepted through the mail, and it was altered by a bad actor. So we're not going to
Speaker 94
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refer these to the prosecuting attorney? So the school
Speaker 12
24:47
recovered these funds, and so it would have been in the bank's hands at that point.
And that's been our standard policy for the last four years, at least. If they recover the funds from the bank, we typically do not refer those to the prosecuting attorney unless it involved someone within the actual school district. And we don't believe that the bad actor was within the school district. All right, members, any
questions or comments for Cabot or for Danville findings? Seeing none. Without objection, those will be filed.
Speaker 11
25:27
The remaining report was one with no findings, and that was the University of Central
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Arkansas, and that is on your last page, and staff recommends this be filed as reviewed. Members,
any questions, comments? With the non-finding? All right. Seeing none. Without objection, that'll be filed. Members, any other business to bring forward? All right. Thank you your service today. Record meeting from what we've had. I really appreciate your service. We have, and the reason for that is a lot of the reports and findings, all the reports have been
worked through for the majority's sake. Staff tells me that that will pick back up around March or April. So hopefully we'll have a nice streak of lighter meetings here. Hopefully they'll come back with no findings.
Speaker 26
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With no findings, hopefully as well. Appreciate
Speaker 50
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everybody. Have a great week. We're adjourned. with the tuberculosis.
Agenda
A. Call to order by Co-Chairman.
B. Adoption of Minutes of the September 11, 2025 meeting.
C. Review of Reports.
D. New Business.
E. Adjournment.
Documents
| Title | Type | Pages | Source |
|---|---|---|---|
| Agenda — LEGISLATIVE JOINT AUDITING - EDUCATIONAL INSTITUTIONS, Oct 9, 2025 | Agenda | 2 | Official source ↗ |
Speakers
Senator Tyler Dees Chair
Unverified
Speaker 2
Speaker 11
Speaker 12
Speaker 15
Speaker 21
Speaker 9
Speaker 27
Speaker 17
Speaker 23
Speaker 34
Senator Dan Sullivan
Unverified
Speaker 45
Representative Hope Duke
Unverified
Representative Keith Brooks
Unverified
Speaker 81
Senator Jamie Scott
Unverified
Senator Jane English
Unverified
Speaker 94
Speaker 26
Speaker 50