DURHAM -- N.C. Central University has asked state and local prosecutors to help it recover hundreds of thousands of dollars in what state auditors are calling questionable payments from a secret bank account.
The former head of an education agency based at NCCU diverted more than $1 million into the undisclosed account over a six-year period, spent nearly $300,000 of it on herself and improperly paid $62,000 to a former NCCU provost, according to a state audit released Tuesday.
Nan Coleman, executive director of the Historically Minority Colleges and University Consortium, was fired in 2009 for poor performance, and Chancellor Charlie Nelms ordered an internal audit of the program.
NCCU turned over its findings to state auditors last year. They found that from 2004 to 2009 Coleman had spent $287,000 from the account on herself and improperly paid tens of thousands more to others associated with the program, including nearly $62,000 to former Provost Beverly Washington Jones, according to the audit report.
Neither Jones nor her attorney returned calls Tuesday. Rhonda Young, one of two attorneys representing Coleman, said she hadn't had time to read the audit and couldn't comment yet on its contents.
"We do have full confidence that our client has not done anything illegal or improper," she said. "There was maybe some sloppy bookkeeping, but we have full confidence in her integrity."
According to the audit, some of the money was spent via check card on "questionable" purchases such as repairs to cars apparently owned by Coleman and her husband, travel expenses for him, women's clothes and hair care products.
A freeze on the account
In a statement released Tuesday, Nelms, who began scrutinizing the consortium not long after he was hired in 2007, said the organization had been discontinued and that none of the leaders responsible are still employed by NCCU. The undisclosed checking account has been frozen, and new policies and procedures are in place.
"Personally and professionally, I am disappointed and dismayed regarding the alleged behavior of a few to the detriment of the university as a whole," Nelms said. "However, I am confident that North Carolina Central University will emerge from this situation stronger and even more committed to excellence."
The audit's recommendations include that NCCU seek repayment of the money and consider criminal or civil legal action to get it back.
A spokeswoman for NCCU said Tuesday afternoon that it had already contacted the state Attorney General's Office and the Durham district attorney to ask for help in recovering any money that was paid improperly.
Coleman had sole control over the undisclosed bank account and by opening it may have made herself responsible for repaying the full amount diverted into it, the audit says.
The consortium represented a dozen public and private institutions of higher education across the state that have traditionally had heavy minority enrollment. It got millions of dollars in state, federal and private grants to help minority children close the achievement gap with white children.
NCCU was a member of the consortium and served as its fiscal agent.
The money that went into the secret account came from a host of sources including local school systems, nonprofit community organizations, individuals and the university, according to the audit report.
Coleman wrote more than $60,000 in checks from the account payable to herself. Checks totaling $62,000 were paid to a company she owned, and nearly $47,000 was taken out in ATM withdrawals, according to the audit. Two of the ATM withdrawals, totaling $900, came after she was fired in August 2009.
Where control resided
Two administrative assistants told auditors that Coleman was the only person with access to the bank account's checks and ATM card.
Checks payable to a company owned by Jones total $37,700; checks payable to "cash" and endorsed by her totaled $13,000, and checks payable directly to her were $11,259.
When auditors repeatedly asked Jones about money she might have received from the account, she told them she had gotten reimbursement only for travel expenses to conferences, according to the audit report.
They showed her two checks totaling $3,750, and she said those were the travel expenses she had referred to. Auditors then showed her $8,009 in checks made out to her for "vendor services" and "evaluation services."
"This is interesting," she said, according to the audit. "Maybe I did receive funding."
After auditors showed her $13,000 more in checks made out to "cash" that bore what appeared to be her signature and asked why she would have received that money, she said she didn't have a response.
Also, the audit said, $23,500 in questionable payments was made from the account to two administrative assistants and a former consortium contractor.
The state audit found that the mailing address for the undisclosed bank account was initially a mail drop box in a Durham shopping center, about six miles from NCCU's campus. The address was later changed to another mail drop box in Raleigh, and then to Coleman's home in Raleigh.
The account was not discovered until the university's internal audit after Coleman was fired.
Early last year Chancellor Charlie Nelms said he had fired an unnamed auditor who wrote an initial draft of the internal audit, saying the auditor had done work that was so sloppy he didn't trust it. Then, after its investigation turned up the undisclosed bank account, NCCU suspended the internal investigation and turned its findings over to the state.
Nelms asked Jones to step down as provost in 2008 for unrelated reasons, and she took a six-month paid leave, receiving $104,000 as she prepared for her return to teaching. At the end of the leave, though, she retired. The move was considered proper under UNC system policy.
Coleman also once received an unusual payment at the end of a previous job. In 1999, the Durham school system didn't renew her contract as its director of vocational education just weeks after she was named by her peers across the state as the best in North Carolina. She petitioned a judge to force the school system to restore her contract, which she said had been improperly terminated.
The school system paid her $12,500 to end her effort to be reinstated.
