Here is another article on a large fraud hitting a school district - in this case Florida's Miami Dade school district. I will keep posting examples here until I see more support for the internal audit and other management control procedures at the Lake County (FL) School District. This article is from 2004, so I will locate follow up information and post it after this article as I find it.
vj
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Commentary from the Reason Foundation
School Reform News
June 1, 2004
$100 Million Fraud in Miami-Dade Schools
By Lisa Snell
Corruption and mismanagement have cost taxpayers more than $100 million, according to a forensic audit of the Miami-Dade County (Florida) School Board conducted at the request of a state oversight board.
Independent auditors from Lewis B. Freeman & Partners, who produced the report, recommended the appointment of a special prosecutor and statewide grand jury to investigate the Miami-Dade school district's multibillion-dollar Facilities Construction Department, alleging massive disorganization and waste as well as "probable malfeasance, misfeasance, and potential for fraud."
District officials dispute the April 28 Forensic Audit Report and argue the auditors provided no evidence to substantiate their claims. The Freeman auditors respond that the district has refused to cooperate and has not provided a complete set of records that document how and where construction funds were distributed. The auditors found the district's reporting systems could not even provide definitive answers to such basic questions as "How many schools do you have?" and "How many students do you have?"
Report Charges Mismanagement, Fraud
The initial report from Freeman & Partners found many indications of severe mismanagement and fraud:
- "The District failed to monitor a myriad of warranties, or even perform rudimentary preventative maintenance resulting in warranties being voided or allowing them to lapse, causing enormous fiscal waste and costly litigation."
- "There are a number of curious documentary links that demonstrate a possible common interest showing that the lease-purchase site acquisition methods provide a profit bonanza to the underlying fee owner (until all facts are verified and further probed, it would be inappropriate to name parties involved at this time)."
- "Pandemic malfeasance and misfeasance and potential fraud that appears to have begun before the 1988, $980 million capital bond's largess, continues largely unabated, despite numerous external investigations and reports and cries for reform."
- "We have so far identified a number of District employees, six, whose actions/inactions appear to rise/fall to an unacceptable level, possibly to the level of malfeasance/misfeasance in office (additional, in-depth investigation is required before confirming these initial impressions)."
- "Capital funds appear to be rolled over year-to-year and appear to be frequently used for non-capital purposes, causing significant cost overruns, delays and ultimately, deficits and inaccurate reporting."
- "District staff pawn off critical inspection to incompetent or negligent third-parties, which produces lingering District-wide student life-safety code violations despite the ability of other government inspectors to perform these functions."
- "Politics dictate awarding contracts to small local contractors who appear to be ill-equipped to undertake and complete the work."
- "Initial impressions include a sense of improper expenditures and Board member self-dealing with little or no monitoring of employee hiring to match positions."
- "Several projects lingered for years on the District's five year work plan until they mysteriously vanish from new plans."
- "In all our prior experience, we have never seen such complete lack of organization, communication, professionalism and waste. For a publicly funded organization charged to construct and maintain facilities for our future generations, the probable malfeasance, misfeasance and potential for fraud have led to continued overcrowding of schools and the perpetuation of unsafe schools, including real probabilities for financial fraud and possible loss of life through the lack of attention to rampant life-safety code violations."
Grand Jury Recommended
The auditors recommend the State of Florida assign a state-level grand jury and appoint a special prosecutor to organize a new investigation with an Independent Private Sector Inspector General (IPSIG) to fully and completely review and investigate the Facilities Construction Department. The goal of the special prosecutor and the IPSIG, according to the audit report, would be to investigate and prosecute individuals and/or entities responsible for the "obvious fraud and malfeasance" that has resulted in the wasting of millions of public dollars.
The report also calls for the state to take immediate control of the Miami-Dade facilities program.
"The oversight board (M-DAB) should petition the State to immediately take over planning, construction, renovations and capital maintenance of all educational facilities currently overseen by the Miami-Dade County School District," the Freeman auditors write.
The oversight panel for the district's construction programs--the Miami-Dade School District Land Advisory and Facilities Maintenance Operations Board--was appointed by the State of Florida in 2001, following revelations by then-Surfside Mayor Paul Novack of severe fire safety hazards in district schools that had been reported for years but remained uncorrected. The school board at first ignored Novack's findings, then denied there were any problems, and subsequently attempted to conceal their seriousness. (See "Children Forced to Attend Dangerous Schools," School Reform News, October 2000.)
The Miami-Dade district's maintenance operations last year were the subject of an award-winning series of articles on "Crumbling Schools, Crowded Classrooms" in the Miami Herald. In addition, reporter Jilda Unruh and "The Investigators" of Miami's Channel 10 News have over several years unearthed unflattering examples of excessive payments by the district for land acquisition and development. (See "A Merry-Go-Round of Irresponsibility," School Reform News, April 2003.)
The district and school board have demanded proof of the allegations from the Freeman auditors, apparently unaware that Florida newspapers during the past year have created a climate of expectation in the state that organizations receiving public dollars must be able to show those dollars are being spent for their intended public purpose. For example, the State of Florida recently demanded that nonprofit organizations providing private tax credit scholarships must show proof of how they are spending the charitable contributions and where private scholarships are going.
A similar demand would force the Miami-Dade school district to provide adequate records that document how school construction dollars have been spent over the past decade. That may not be possible because of the district's mismanagement, according to the Miami Herald.
"The broader concern raised by the auditors is that proof of fraud or corruption may be impossible to pluck from the construction department's morass of mismanagement, which is mired in chaotic accounting, lost and misfiled paperwork and isolated, incompetent employees," noted the newspaper.
The district currently has more than $1 billion in pending construction projects.
For more information ...
The April 28, 2004 report by Lewis B. Freeman & Partners, Inc., "Forensic Report prepared for Miami-Dade School District Land Advisory and Facilities Maintenance Operations Board," is available online at: http://www.town.surfside.fl.us/schools_forensic-audit_04-28-04.html.
Former Surfside Mayor Paul Novack describes problems with Miami-Dade public school construction and maintenance in an April 2003 School Reform News interview, "A Merry-Go-Round of Irresponsibility," http://www.heartland.org/ArticleProcessor.cfm?theId=artId11784.
See also the October 2000 School Reform News article, "Children Forced to Attend Dangerous Schools," http://www.heartland.org/Article.cfm?artId=10895.
Further information on safety and construction issues in the Miami-Dade school district is available at the Town of Surfside's Web site at http://www.town.surfside.fl.us/schools_construction.html.
The Miami Herald's "Crumbling Schools, Crowded Classrooms" series is available online here.
Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.
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