The Jemez Mountain School District is reeling from allegations that fired business manager Kathy Borrego pilfered hundreds of thousands of dollars from the cash-strapped rural district during the last school year alone.
“This is a pretty quiet town, a simple town as far as the community we live in,” District Superintendent Adan Delgado said. “This has really turned everything upside down.”
State Auditor Hector Balderas’ office has already verified that over $292,000 is missing from District accounts, and that may be just the tip of the iceberg. The figure comes from an analysis of two accounts from a possible 10, and from the 2008-09 school year alone, Balderas said.
“This is very egregious,” Balderas said. “This is one of the largest embezzlements that we’ve seen.”
The District’s annual budget is roughly $9 million, according to Delgado.
Balderas said his investigators are now conducting an aggressive special audit that will analyze every District account during Borrego’s employment.
Borrego was employed with the District for 10 years. She was fired June 17 and the investigation has not implicated any other employees, Delgado said.
The Rio Arriba County Sheriff’s Department is conducting a criminal investigation but has refused to discuss details. Borrego had not been charged with any crime as of Tuesday.
Borrego’s husband Jerry Archuleta reported her missing June 25 after he couldn’t find her at local casinos or friends’ homes, according to police dispatch logs. State Police Capt. Daniel Lovato. Lovato said she was located Wednesday (7/1) morning.
Two Schools Closed
The state Education Department gave the District an emergency cash infusion of $285,000 so it could make payroll for the fiscal year that ended June 30, Department Deputy Secretary Don Moya said. That followed $550,000 in emergency supplemental funding that the District had requested earlier in the school year, Moya said.
Over the last nine years, the Department has given Jemez Mountain $1.2 million in supplemental funding, Moya said.
Moya said that didn’t really raise a red flag because the current school funding formula disadvantages small rural districts, many of which request the supplemental funds.
“In all reality, essentially it’s really not an emergency,” Moya said. “It’s money that they need to open the doors.”
The District has had considerable trouble opening school doors in recent years. The amount already verified as missing is more than the amount needed each year to operate Coyote Elementary, which was closed permanently in May after its enrollment plummeted to just eight students.
The school cost $235,024 to operate, according to District documents.
District officials also cited dropping enrollment and tight budgets when they closed Lindrith Elementary in 2006. Delgado said it’s devastating to find out that past decisions were based on false information.
“As I do get to talk to people, I just let them know how devastating this has been to the district, to find out that all the planning we had done, all the cutbacks that we had done, all the shortcomings that we ran into were based on a false reporting of what our financial status was,” Delgado said. “The only possible positive statement that can be made is that now that we’ve found it and eliminated it, we look forward to a much brighter future.”
Before Delgado was hired, Borrego’s boss at Jemez Mountain was current Mesa Vista School District Superintendent Robert Archuleta. Archuleta held the top job at Jemez Mountains from 2002 to 2006.
“I’m astonished,” Archuleta said of the allegations against Borrego. “I don’t know. I can’t believe it. I guess I was a little bit in shock. She was a very loyal employee, very committed.”
Archuleta added that his family and Borrego’s family have been friends. He feels sorry for Borrego and his prayers are with her, Archuleta said.
Ironically, a relative of Archuleta’s is actually leading the criminal investigation of the alleged embezzlement. Sheriff’s Det. Adam Archuleta is the son of Mesa Vista School Board member Steve Archuleta, Robert Archuleta’s cousin.
A search of Borrego’s criminal history reveals only that she is a leadfoot, with seven speeding tickets since 2001. She has no other infractions, according to an online database of court records.
Late Audits
Delgado said he began unraveling the alleged embezzlement when he found a discrepancy in District financial reports.
“That discrepancy itself wasn’t the problem,” Delgado said. “It just gave hints and pointed me in the right direction to be able to research it and get over to the bank and do some digging and find out what happened.”
He’s now working with attorneys and the State Auditor’s office to figure out how the District’s contracted auditors could have missed it, Delgado said.
“It’s unfathomable that it did get through,” Delgado said.
Moya said at one point, Jemez Mountain was three to four years behind on its audits, and it’s not the only district in that boat. That’s why the Department supported a bill in the 2009 state legislature that will penalize districts with late audits, Moya said.
“That’s really the mechanism through which you would detect these things,” Moya said.
But Balderas said it’s not entirely surprising that embezzlement might go undetected.
“The financial audits that every district’s mandated to complete do mainly focus on the financial condition of the district,” Balderas said. “There is some testing that is geared toward waste, fraud and abuse, but it’s not as aggressive as the special audit.”
Furthermore, in a small district like Jemez Mountain, the business office employs only three people. Auditors rely on the business manager to provide the financial information.
“They are generally the point of contact for communication and providing documentation to the independent auditor,” Balderas said. “In rare cases, it tends to be problematic if they’re engaged in falsifying or forging documentation, because the auditor’s relying on that presentation from that sole point of contact.”