The former director of a statewide education agency based at N.C. Central University diverted more than $1 million into a secret bank account over a six-year period and spent nearly $300,000 of that total on herself, according to a state audit released Tuesday.

The Historically Minority Colleges and University Consortium was established in 1999 with the goal of closing the “minority achievement gap.” It partnered with the state’s 12 “historically minority” colleges and worked with public school systems throughout the state.

But according to the state auditor’s investigation, N.C. Central, which served as headquarters and “financial agent” for the consortium, failed in its oversight duties.

Since its inception, the consortium received more than $3.5 million in state tax dollars, as well as an undetermined amount from local school districts, nonprofit groups, faith-based and community organizations, individuals and others.

After a series of complaints from parents concerning the consortium, Nan Coleman, the former executive director, was fired in 2009 for poor performance, and N.C. Central’s chancellor, Charlie Nelms, ordered an internal audit.

It was then that N.C. Central discovered an unauthorized bank account. The university gave its findings to the state last year for further investigation.

According to state auditors, the former director diverted more than $1 million into the secret bank account and converted $287,716 to herself through checks, wire transfers, ATM withdrawals and other purchases.

Another person identified as a former N.C. Central provost and ex-dean also received $61,959 from the undisclosed bank account without providing any services for the consortium, the report said.

While some expenditures drawn from the secret account appeared related to the consortium's goals, some of the money was spent on women's clothing, car repairs and hair care products and a personal computer delivered to the former director's home, the report said.

Because the bank account was unauthorized, state audit investigators said all of the expenses should be considered “questionable.”

"It appears that the former executive director engaged in activities that fit the definition of a skimming scheme as described in professional literature to benefit herself and other university consortium staff and contractors," the state’s audit report stated.

The report has been turned over to state prosecutors.

Nelms, the N.C. Central chancellor, said he was “saddened and outraged by the findings of wrongdoing outlined in the report.”

“As chief executive officer of NCCU,” he said, “I have made it clear that the university will conduct its affairs with the highest levels of transparency and integrity, and we will hold employees accountable for their actions. Personally and professionally, I am disappointed and dismayed regarding the alleged behavior of a few to the detriment of the university as a whole. However, I am confident that North Carolina Central University will emerge from this situation stronger and even more committed to excellence.”

The report noted the following “14 areas of concern:”

1. The former Executive Director opened a bank account over which she had sole control and diverted over $1,000,000 of University Consortium funds into it.

2. The former Executive Director converted over $287,000 from an undisclosed bank
account for her personal benefit.

3. The former Provost received almost $62,000 from the undisclosed bank account
without providing any services.

4. A former Administrative Assistant received salary advances that were not repaid and
bonuses that were not adequately supported.

5. Another former Administrative Assistant received a bonus made payable to her
personal business to circumvent approval by the Dean of the University
College.

6. A former contractor for faith-based programs received payments for accounting
services for which she was not qualified and continued to receive payments after the
former Executive Director was terminated.

7. The University Consortium, the University, and the Foundation failed to maintain
adequate documentation to support payments for programs, grants, and other
activities.

8. University Consortium staff received payments for services without contracts or
agreed-upon salaries.

9. The University Consortium operated without adequate oversight from University
management.

10. The University Consortium was not properly established as a center or
institute.

11. The University Consortium inappropriately used Foundation accounts for some
program activities.

12. The University Consortium used the Foundation’s non-profit corporation tax
identification number to operate a revenue-generating program.

13. The University Consortium did not prepare and submit required tax documents to
the Internal Revenue Service, North Carolina Department of Revenue, employees,
or contractors.

14. The Smoking Cessation program did not relate to the University Consortium’s
mission of closing the achievement gap.

Download the full (.pdf) report

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