REVISED - On Apr. 16, we added the response opinion article from the Orange County Public Schools Superintendent - it is at the end of this post. It is pretty reasonable, so maybe this audit wasn't as big a deal as the paper made it to be.
vj
Our next door County neighbor, the Orange School District in Orange County, FL just got hammered by State Auditor General audit for poor construction program practices. About a year ago, I tried to find if the AG had any auditors that specialized in construction audits, and they said no. I wanted them to audit construction at the Lake County (FL) School District. Instead, the Lake Audit Committee engaged the CPA "internal audit services" of RSM McGladrey and four audits are going on right now. However, RSM uses the old fashioned audit practice of a "close out" audit, which means they wait until all spending is done, then they audit and find the mistakes. Most corporate internal audit departments run by Certified Internal Auditors have practiced "front end" audits for about 15 years, where the auditor reviews contracts, systems and procedures for construction at the front end of the construction project, and fix weaknesses before spending starts.
You might say the front end audit method is like building a racecar and you retest the torque on wheel bolts before the race, rather than waiting until after the wheel breaks off the car and writing a report about it (the close out audit method). You can also use less experienced staff, since they only have to follow a checklist that says "write down any broken parts" rather than understand about wheels, lug nuts and torque wrenches.
The article below is from today's Orlando Sentinel. Read and weep, since the Orange School Board Chairwoman, Karen Ardaman, makes excuses by saying "when you have an organization as large as this one with as many projects as this one, there will be some anomalies...".
The article cites some procurement irregularities, and the District's attorney sluffed off the audit findings by saying "the bottom line, is, the kids are safe..." - but what about taxpayer funds???? AND, why aren't they talking to the District's CFO or someone responsible for fiscal processes. It seems that some government agencies leave "fiscal processes" and procurement processes up to the program manager, and they are not under the authority of the CFO, and maybe that is the case here.
Here is the link to the Florida Auditor General index of published reports, and below the link I have attached the full 98 page report.
http://www.myflorida.com/audgen/pages/subjects/dsb.htm
Download fl_ag_orange_district_report_number_2008150_full_rpt_98pgs.pdf
vj
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from:
orlandosentinel.com/news/local/orl-badaudit1108apr11,0,4296663.story
OrlandoSentinel.com
Audit finds serious financial problems in Orange schools construction program
State audit finds flaws in bidding, contractor fees
Erika Hobbs
Sentinel Staff Writer
April 11, 2008
A new state audit found what state officials describe as serious financial problems within the Orange School District's multibillion-dollar construction program, ranging from questionable bidding practices to undocumented contractor fees.
The audit, a routine review the state conducts every three years, faulted the public school system's construction program in seven broad areas that, together, indicate significant problems with the district's practices, the audit report said.
"Collectively, they are more than inconsequential," said Greg Centers, the state's audit manager for school boards.
The audit called the problems a "significant deficiency" inOrange County's construction program.
School Board Chairwoman Karen Ardaman said the district will put a stop to the practices.
"When you have an organization as large as this one with as many projects as this one, there will be some anomalies," she said. "But we need to address this and we need to be on top of it . . . and that is what I expect from the superintendent [Ronald Blocker]."
Frank Kruppenbacher, the school district's attorney, acknowledged that some of the paperwork has been "sloppy," adding that the district has begun to shore up its operations in the department and would monitor the progress with its own audits later on.
In each of the bidding cases, he said, his legal staff advised him that Orange operated within the law. The school district, he added, would not knowingly engage in unethical or illegal contract practices.
"The bottom line is, the kids are safe," he said.
Orange County has the nation's 11th largest district, with more than 175 schools and 174,000 students.
The troubles cut across both the $1.9 billion new building program and a $2.2 billion renovations initiative, which is funded by a half-penny sales-tax increase voters approved almost seven years ago.
For example, the district allowed developer Beat Kahli to build Stone Lakes Elementary and Avalon Middle School but later bought it back from him. However, Stone Lakes cost $172.20 per square foot, compared with the district average of $145.45 per square foot. Avalon, too, cost more -- $174.34 per square foot -- compared with the district's $168.73 average.
The audit also showed that Orange's School Board erred in its purchase agreement with Kahli. According to state law, the audit notes, the district should have gone to bid on the projects, or should have written a different type of contract to clarify the arrangement. District officials did neither.
"In this manner, the District has circumvented the competitive procurement process required by law," the audit said.
Kruppenbacher said his legal staff and the auditors simply disagree over the law.
"Our interpretation is that everything is acceptable," he said.
He further defended the arrangement with Kahli, saying it gave children new schools years ahead of when the district could have built them.
"If you figure out what the schools would have cost at the time we would have built them, we would have paid more than what we [actually] paid for them," he said.
Among the audit's other findings:
*More than $1.5 million left over from Princeton Elementary's renovations languished in bank accounts instead of being used for other projects.
*Last year, Orange assigned four contractors to build four high schools that were bid in a single group, contrary to state statute. The district should have bid each project separately before awarding the jobs, the audit showed.
*In several cases, Orange paid subcontractors more than called for in their original invoices. For example, one invoice called for the district to pay a subcontractor $14,759, but the district paid $18,415. It's not clear why the costs increased.
"District records were not available to explain the difference," Centers said.
Lin Wright, spokesman for the district's construction department, could not elaborate on the invoice discrepancies.
In addition, seven of eight new schools the state sampled were given a temporary certificate of occupancy. Four of them expired before the district got final certificates. On average, the schools waited 95 days to get a final inspection from the district.
"Without a valid certificate of occupancy, the risk increases that the facilities may be unsafe for occupancy," the audit report said.
Wright could not say for sure whether children were in any of those schools when they had the temporary certifications, but he did say that the district can open a campus under those circumstances because essential services such as sanitation and food are ready to go. The final certificate just means that there are no more touch-ups needed, such as painting.
In any event, he said, the students would have been safe.
"That is our priority," Wright said, "the safety of the kids."
Erika Hobbs can be reached at [email protected] or 407-420-6226.
Copyright © 2008, Orlando Sentinel
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Response opinion article from Orange County School District Supt Ron Blocker:
from
orlandosentinel.com/news/opinion/letters/orl-myword16b08apr16,0,660309.story
OrlandoSentinel.com
OTHER VIEWS My WORD
Orange superintendent: A very full glass
Ronald Blocker
April 16, 2008
The Orlando Sentinel reported Friday on a routine audit by the state. The audit cited and the Sentinel summarized several of the 20 findings. To some readers, they will see our glass as half empty (or worse); and to those familiar with the audit and school business, they will see the glass (at least) half full. I would like to tell you the water in our glass is clear; and so is my intention to ensure our building program is meeting the promise I made to voters in 2002 that we would be good stewards of tax dollars and provide better schools for children.
First, let me reiterate two points made in the article: (1) we are a large organization, with an annual $1.5 billion general fund budget and $1.6 billion capital-project fund budget; and (2) there are occasional anomalies in our practices. The ultimate purpose of an audit -- which every government agency receives -- is to ensure compliance as taxpayers would expect.
The first sentence of the summary report said the district "has established and implemented procedures that generally provide for internal control of District operations," and "generally complied with significant provisions of laws, administrative rules, contracts and grant agreements." Even though a state official said in an interview with a Sentinel reporter that there are "serious financial problems" at OCPS, we believe his comment is not consistent with the written opinion.
Seven of the findings were categorized as having "significant deficiencies" and with that we will continue to disagree, legally and practically.
Since 1999, Orange County has built 73 new schools to accommodate unprecedented population growth and to relieve and replace overcrowded and aging schools. We have pushed many buttons to build schools quickly, with critical oversight by external experts in their fields of construction, law, finance and audit.
That push, by board members and staff, has allowed us to advance school projects with developers, years before we had the money to build them. Who benefits? The children and the economy. Hundreds of students avoided being crowded into portables. The schools came on line faster; and they cost less than they inevitably would cost in the future.
We grouped the bidding of four new projects to expedite the start of four identical prototype high schools. The top four qualified contractors were selected and we competitively negotiated the best price with each of them; all done with supporting opinions from outside legal counsel. We took the economic and practical approach that is lauded in the private sector and endorsed by the experts in our citizen oversight group.
I am not letting up on our promise to deliver schools. Our board has approved the advance of $12 million to start design now on 15 school renovations so they can open six to 12 months sooner than scheduled and boost the construction business at a time when you need it.
I welcome comment and sensible criticism from all quarters. Auditors. Parents. And even editorial writers. It comes with the territory, and we know it. We take it all in and work to make public education better. For those who form opinions, there will always be half-full and half-empty glasses. I believe our glass is very full.
Ronald Blocker is superintendent of Orange County Public Schools.
Copyright © 2008, Orlando Sentinel
