Mayor Walsh said today Boston is hiring Ernst & Young, which is already doing auditing work for the city, to review several years of student-activity-fund spending at the roughly 100 BPS schools that were not randomly audited earlier by the IRS.
At a City Hall press conference, where he was accompanied by School Superintendent Tommy Chang, Walsh said the problem at the 16 schools audited by the IRS was not that money was going to things it shouldn't have, but that the people to whom it was paid were classified on tax forms as vendors or independent contractors, rather than employees.
The funds, collected through bake sales, shows and other events organized by parents or school supporters, stays with the schools for which they were raised, rather than being funneled to BPS headquarters.
Walsh said the workers hired with the money worked in positions such as coaches, after-school tutors and exam proctors - some on top of their full-time BPS jobs. "A lot of times people knew where the funds were going," he said. "The problem was the district was reporting it wrong. "
At the same time, the IRS audit also found issues dating back to the 1980s, in some cases, where city workers who had left their jobs, then came back, where not having the correct amount of money withheld for Medicare taxes, he said.
Walsh said that, in total, the city agreed to pay the IRS employee taxes that should have been collected but weren't. On top of that, the city did pay a fine, but only of $2,000, or $200 for each of 10 instances involving employees paid through 1099 forms - used for independent contractors - rather than employees.
Walsh said he is pushing for the Ernst & Young audit to be completed within a few months. Although some schools, such as Boston Latin School, have large student-activity funds, most do not, he said. "We're not talking millions of dollars here, we're talking tens of thousands of dollars here."
He added BPS has ended the use of debit cards for the accounts and instructed staffers on how to account for workers hired with the money. And while the schools will retain any money they collect, it will all be funneled into a sort of master account at Citizens Bank to make auditing easier.