Fiscal Rangers

Columbus, Ohio School District Loses Control of Sam's Club paid Membership cards

Businesses periodically review spending patterns for cost reductions. But, as the story below says, School District's don't seem to monitor even the easy, small stuff. Apparently, an audit found that the School District was paying fees for Sam's Club membership cards for many people, including former students, former District employees and one parent, plus "dozens" of employees that did not need them. The District also didn't have any process to obtain the cards back from people once they left the District. The money isn't much, about $3,000, but it is the lack of a control process that is disturbing. Someone in the HR department or Finance should be sanctioned for not having such a control proceduree to ensure only authorized District staff were using the discount cards, ESPECIALLY if the District was paying a fee for them. It makes you wonder what other control processes are missing. However, one positive indicator was that a Principal asked for, and got an audit based upon his initial concerns. vj ===================================================== from the local NBC TV affiliate in Columbus, Ohio: http://www.nbc4i.com/midwest/cmh/news.apx.-content-articles-CMH-2008-06-03-0009.html Audit Finds Unnecessary Spending In Columbus Schools Tuesday, Jun 03, 2008 - 09:52 AM COLUMBUS, Ohio -- According to an audit of... Read more →

NY School District Pension Scandal Grows Again

We reported earlier about how NY State has started a large investigation on how contract attorneys for School Districts were also getting pensions improperly. Now, Newsday reports that NY state Attorney General Andrew Cuomo has found another scandal. Apparently a lot of "interim" School District Superintendents were being hired and kept on the payrolls and double dipping by also receiving full pension payouts. Apparently, the interim jobs continued longer for retired administrators rather than actively filling the position with new recruits. It seems that a way to change the constant problems in School Districts is to maybe mandate strong independent audit departments, but also make the elected School officials somehow liable for ignoring good business practices. I don't see the same wave of fiscal problems in City or County governments, but it seems School Districts constantly popup with new ways to skim or waste taxpayer funds. Perhaps a big part is that School Districts seem to promote ex-teachers into management positions, rather than hire qualified and certified professionals in those administrative posts. They also focus mostly on student performance, and ignore balanced fiscal management by tracking performance in non-teaching functions. A few MBA's might help. Or, start outsourcing departments. vj... Read more →

New York State School District Issues 147 page Audit Report on Event Revenue Skimming

A New York State City School District in Ogdensburg waited 17 (SEVENTEEN) months before issuing a 147 page audit report about how school administrators failed to deposit ticket revenues collected at School events, and held the funds in an undocumented slush fund. Funny, the same indicators exist in Lake County when the recent audit of school accounts indicated that all the High Schools had problems with ticket counts. But, there was no work to determine if funds were missing. As a former member of the Audit Committee then, I asked that the information be put in Principals evaluation files because this was not the first time they had not had acceptable ticket controls. Another issue is that the Schools make decisions on which firms will get the business for graduation items like class rings, photos, etc. The risk is that kickbacks are given to school staff, or the funds are taken and used also for a school slush fund outside of normal district accounting. I was told verbally that at least two school administrators had signed contracts with supply firms when they have no legal right - all contracts should be signed by the District Administration in formal processes. This... Read more →

Florida Website Discloses Teacher Misconduct

Most Florida teachers work hard and have no personal misconduct. BUT, there are a few who do act improperly, and a Florida Dept. of Education website, www.Myfloridateacher.com is listing new and old cases of teacher misconduct, officially called "Disciplinary Actions against Educator Licenses". This website is limited in search capability - you can't just scroll through teacher names, even by District or School, and you have to enter one teacher name at a time after specifying a District or Any District. There also are no statistics by District or School. They should provide a capability to list the names of all disciplinary actions for all teachers by District or School. And, what happens if they change their name? The website only lists names of those with a disciplinary action after January, 2006 - if there are no "final" actions, no data is shown. We had to travel via the web to the Houston Chronicle to get this article written by the St. Petersburg Times (Tampa area) that describes the website's disciplinary reporting system, which is buried several levels down in the website using obtuse language. To get to the main "Bureau of Professional Practices" page, go to: http://www.fldoe.org/edstandards/ And to... Read more →

Rules before Voting for a School District Board Member

It seems in Texas there has been a huge credit card scandal where a School District in Dallas let employees have credit cards and they wasted millions. Then, several School Districts cut contracts with Superintendents that gave them big payoffs if fired. So, below is an article from on Texas blogger explaining some rules he would demand from School District Board Members before he would vote for a Board member (called "Trustee" in TX). They should be considered for the Lake County, FL School District as well. vj =================================================== from: http://www.humanevents.com/article.php?id=26196 Six Simple Rules for Being My School Trustee by Lynn Woolley (more by this author) Posted 04/24/2008 ET Updated 04/24/2008 ET Some people call Peyton Wolcott a watchdog or even a bulldog. Some within the education establishment likely call her far worse for her relentless pursuit of open and ethical government. Having convinced many ISD’s to post their check registers online, she’s now asking school trustees to make an ethics pledge. If you’re thinking that ethics in government should go without saying, you’re absolutely right. If you take it for granted that all school districts operate within the boundaries of ethics, you are quite wrong. The Dallas ISD, for... Read more →

Full Disclosure Video News Announces CD Series on Belmont School $170-million Fiasco

One of my early posts on this blog was about the infamous Los Angeles School District construction fiasco where LAUSD (Los Angeles Unified School District) built a $170-million High School on an old oil field tract of land that had bubbling gases oozing out of the ground even as construction continued. It is considered a classic case study on how an inept School District mismanaged a construction project, and the entire school had to be torn down due to the environmental problems that were ignored. Now, the Video News service "Full Disclosure" has issued a collection of CD's of interviews of all the participants and observers in the mess and it is quite enlightening. Below is the press release, but go to their webpage and watch the 7-minute YouTube preview of the CD series. If you are a School Board member, construction manager, etc. you should get his series to ensure you don't make the same mistakes. vj ================================================ from: http://www.emediawire.com/releases/BELMONT_LASCHOOLS/SCHOOL_CONSTRUCTION/prweb883694.htm Full Disclosure Network® Presents: LAUSD's "Belmont The World's Most Expensive High School" a Commemorative DVD Collection from the Cable TV Series To Commemorate the official opening celebration for the notorious Belmont Learning Center by the Los Angeles Unified School... Read more →

More School District Pension Payment Scams in Long Island, NY

We just had a post about some employees in a New Hampshire School District who managed to get increased pension payments when the administration condoned adding "illegal" amounts to the base pay used to calculate pensions. Here is another case - this one in New York, where about 90 attorneys used on a contract basis by various school districts managed to get their contract earnings to be used as qualification for pensions. New York State Attorney General Andrew Cuomo says that is illegal and the attorneys should never have qualified for pensions. Cuomo started his investigation after Newsday published investigation reports on the problem. What does it take to get competent financial oversight in School Districts so this type of thing does not occur? Why is it we must rely on newspapers to uncover these issues, and not School Administrators? Maybe another taxpayer revolt? I hope Cuomo also prosecutes the School Administrators who allowed this to happen. Favorite quote from the article below: Cuomo said his office was considering bringing criminal or civil charges against the lawyers and seeking to recoup potentially "tens of millions of dollars" in pension monies that the lawyers may have improperly received at the expense... Read more →

New Hampshire School District Illegally Hikes Pension Payments

One of the most inflammatory areas where government employees may try to cook the numbers is to mess with the method used for calculating the value of payments for sick days, vacation or pension calculations when they retire. My first internal audit position in California at the County of Los Angeles taught me how it was done. Employees or benefits clerks would include extra work days or years in calculations of the amount used for retirement. A common trick was to include high overtime in the last 2-3 years and the payoff value of sick leave into the pension calculation numbers, inflating the base value used to calculate pensions. We caught a few of them because many payroll and benefits records were still manual in the early 1970's. (The article below indicates this practice is still legal in New Hampshire - what private corporation would ever agree to such practices?) Another way is for unions to push through changes in the payment calculation methods. Around 2000, in Orange County, California, when the economy was still running great before the dot.com crash, the Sherrif's union got the County Board to increase pension payment credits for pensions by 50%. That is now... Read more →

Orange School District (FL) audit bashes construction program

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... Read more →

Michigan School District's Poor Fiscal Controls Allow $2.3-million embezzlement over 8 years

Another school district, this one with about 20 schools in Chippewa Valley, Michigan, fell victim to lack of proper purchasing systems and controls and allowed a bid rigging scheme to run for about 8 years. As a result, the school district's "executive director of support services" set up secret companies that he gave business to, paying inflated prices of about 46% for purchased goods and embezzling excess profits of about $2.3-million between 1998 and 2006. Favorite quote: The scam escaped the detection of school board members and administrators who reviewed bids and billings until school officials received an anonymous tip in 2006. After an internal investigation, the school board quickly moved to fire Tague and implement new safeguards to prevent a similar scam from happening again. AND, finally: Chippewa Valley also was the victim of a former elementary school principal convicted of stealing. Richard Zaranek is serving a 31-month prison sentence after he admitted taking $400,000 in money and goods from a child care program. There was no mention anywhere in the article about what sanctions were implemented with the school staff and CFO for allowing such lax controls, or whether there were any audits of school operations. vj ============================================... Read more →

Arizona School District Suffers Massive financial mess created by former Superintendent

This article describes an extreme case of School District mis-management in Arizona that caused massive financial problems that could lead to bankruptcy, or being closed and students being bused to another District. The district had to pay an outside consultant to write a 107 page report on how to unravel a financial mess apparently created by a former Superintendent, and the consultant said he should be "should be stripped of his teaching, principal and superintendent certificates." I don't have any information that Lake County has problems anywhere near those described like in Arizona, but read this and learn the red flags to look for. Once again, this Arizona example seems to indicate the K-12 "education" profession lacks requirements for Superintendents to have management ability to actually be able to manage business operations of a District. Favorite quote on how bad this was... "Possible outcomes for resolutions of the district's financial problems include no change in the district's overexpenditure corrections period, legislative extension of that period, converting into a transportation-only district, converting into a charter school district, or bankruptcy." vj ================================================== from Kingman, AZ 2/1/2008 1:44:00 PM Report: Educator should be stripped of credentials Terry Organ Miner Staff Writer (Kingman, AZ)... Read more →

Memphis School District Wastes $207,000+ on Copiers Approved by Dead Official

Here is a classic case of waste in a School District, caused by a "virtual breakdown in purchasing controls". An aggressive salesman oversold a district manager on the merits of THREE $200,000 copying machines that then were NOT used because the schools didn't have the electric power to run them. Additionally, the purchase was endorsed in a letter with a forged signature of the Schools' attorney who had been dead for 7 months. It appears the letter was used to convince a financing company that the deal was sound. And, the salesman is accused of offering free computers to employees who made the decision (but not proven), clearly indicating the need for a strong ethics policy on the part of both the District and the copier vendor if that actually happened. This article highlights a trend where capital equipment is purchased or leased without any regard to the operating costs or ability to run the equipment (lack of adequate power capabilities). This is like the Dell computer purchase fiasco at Lake County where they bought Dell computers without including the cost of an operating system, and installing servers in schools that do not have adequate air conditioned rooms for them... Read more →

Philadelpia Area School District SECOND Payroll Manager "Fooled Auditors for Years" and skims over $500,000

A Philadelphia area School District payroll manager siphoned the funds out of a unwatched bank account containing payments from retired employees for insurance costs. The article below says she "fooled auditors" for years, making payments to herself using a forged check signature. She took over $500,000 and spent it on gambling trips. The problem was uncovered by the bank, and not staff or auditors. BUT, she is the SECOND school district employee in Pennsylvania's Delaware County to embezzle funds. As described below, another employee took $287,000 from "lunch money" funds and also spent it on gambling. From an accounting perspective, it seems the following standard accounting controls were NOT used: - Reconciliation of ALL bank accounts by separate individuals, with sampling of analysis of payment recipients. - Lack of follow in notifying the bank when an approver for the checking account left the District. - Budgeting and cash controls must have been lax, because we assume the bank account collections should have been used for County expenses, rather than left without action over several years. If someone actually was supposed to use the collected funds to offset District insurance expenses, they would have noticed missing funds if they had been... Read more →

San Diego Charter School Staff Embezzle Millions (2005)

This is a 2005 entry from a blog includes an Associated Press articlew about a private Charter School Management firm in California where the management siphoned funds off for excess salaries, inflated purchase payments for supplies to personally owned "side" companies, etc. California shut down four charter schools run by them and left about 10,000 students to find another school. It seems charter schools is another k-12 quagmire susceptible to corruption. This article has a good quote: A California state law that took effect last year gives the school districts that authorize charter schools more control, but critics say even more oversight is needed. vj ================================================== from http://lizditz.typepad.com/i_speak_of_dreams/2005/04/waste_fraud_and.html Friday, April 15, 2005 Waste, Fraud, and Self-Enrichment In Charter Schools California Charter Academy a good deal for one family. Audit: Calif. school misspent millions By Jennifer Coleman, Associated Press Writer | April 14, 2005 SACRAMENTO, Calif. -- Operators of California's biggest charter school system pocketed much of the $139 million the state gave them, spending a fortune on fat salaries for family members, side businesses and overpriced textbooks, according to a state audit issued Thursday. The audit paints a damning picture of the California Charter Academy -- four charter schools that... Read more →

El Paso County & School District Bribery & Fraud Convictions Increase

Finally, we found LOTS of details on all the School District and County bribery and fraud cases in El Paso, TX. Here they are. Two Bear Stearns Investment bankers just pleaded guilty to bribery, which triggered the long article below. Read and learn about how local governments can become corrupt... it also appears that Bear Stearns didn't have an aggressive ethics policy for their representatives. vj ====================================== from http://www.elpasotimes.com/news/ci_7784203 Bankers plead guilty to fraud, bribery in FBI probe By Ramon Bracamontes and Tammy Fonce-Olivas / El Paso Times Article Launched: 12/22/2007 12:00:00 AM MST # Read all FBI public corruption stories Two investment bankers who were financial advisers to almost every government entity in El Paso pleaded guilty Friday to fraud and bribery charges, increasing to six the number of people who have been convicted in the ongoing public corruption investigation. Roberto Gerardo "Bobby" Ruiz pleaded guilty to four counts combined of conspiracy to commit mail fraud, wire fraud and a scheme to bribe elected officials. He is the former managing director for the Bear Stearns Cos. office in Dallas. Christopher Chol-Su Pak, who was known in El Paso as Chris Pak, pleaded guilty to engaging in a scheme to... Read more →

School District in India uses Sole Source food purchase that sickens kids

OK, so this blog seems hard on School District managements, especially the ones that lose over $500,000. But, if you were in India, it could be worse as the article below describes. It seems a school district made a sole source contract for "dal", a food issued to students for lunch, and the quality of the dal was so bad it made lots of kids sick. But, the supplier wasn't investigated because he had ties to a regional Minister. And, complaints by a Parents organization were ignored. So, they have bribery, sole sourcing, political coverups and upset citizens all in one district. My favorite quote: "The quality test report of the supplied dal has been fudged." vj ====================================== from the Statesman.com in India http://www.thestatesman.net/page.news.php?clid=9&theme=&usrsess=1&id=181882 (This is a rather rough translated version, so go with the flow...) No more dal in schools... Statesman News Service KENDRAPARA, Dec. 21: The alleged supply of sub standard and worm-infested dal for the free mid-day meal of the children in government run schools and toddlers in ICDS centres has triggered a simmering controversy with reports of children falling sick pouring in from across the coastal district. Even as allegations of officials concerned being gained over... Read more →

Auditor says Lee County, FL Schools at high risk for fraud

I recently posted an article about check scams in Tulsa that cost them over $500,000. Here is a long article describing more how it could happen in Lee County, FL. It seems the Lee County Internal Auditor left the State, but said there was a big risk that poor controls over vendor files used for authorizing payments to vendors could let someone change a vendor's address, or create a fictional vendor, then initiate a process that would issue a check to the fictional vendor. This article gives good detail on some of the risks when government agencies do not pay attention to standard accounting control and risk reduction processes. In this case, they apparently don't review and control the massive vendor database they have. The staff also apparently did not retain documentation on changes made to the vendor file. None of the quotes by the accounting management were detailed enough for me to determine if they were valid. Another War Story related to check scams: An IT computer operator used his access to the accounts payable software to issue several payables checks to himself in the 1970's for about $24,000 which he used as down payment on a house in... Read more →

Topeka, KS School District faces court battle over 2003 $515,000 scam

It seems in 2001-20033, the Topeka School district didn't use very good controls over bank account reconciliations, ignored auditor reports about the weaknesses, and scammers figured how to write 17 fraudulent checks on the School District's checking account for $515,900. Now they are in court trying to sue the bank for processing the checks, even though both the bank and the school district lacked controls to detect the scams. They also sued their auditors, who actually pointed out lack of accounting controls over check account reconciliation procedures. In this case, it partly paid to ignore the auditors, since the District got the auditors in 2004 to cough up $163,000 and provide litigation support. This is a clear example where government administrators were apparently provided reports on accounting control weaknesses which they ignored and it cost them quite a bit. What I can't figure out is why the general director of fiscal services still has a job there if he ignored the audit findings and controls were so weak the scammers got away with over $500,000 without being noticed OVER A TWO YEAR PERIOD. vj PS: My personal War Story: While in college, I worked as a night computer auditor at... Read more →

Voucher Program Failure in Milwaukee

We haven't covered voucher programs much here, because there isn't one that I know of in Lake County, But there are Charter Schools which are similar. However, Charter schools in Florida are subject to some reviews and quality criteria. But, in the article below, it describes how a school voucher system was set up in Milwaukee in the 1990's and became a huge failure. One big reason is that ANYONE could set up a private school using voucher income without any quality or professional standards, and numerous schools became funding programs for the leaders, and not the kids education. Read on - I don't think this can be an indictment of all voucher programs, but an indicator how government can set up a voucher program WITHOUT any oversight, controls or standards, and it becomes a failure. You might say it resulted from a complete lack of government fiscal management, which is the point of this website. It is time that taxpayers get the same quality of fiscal management from elected politicians for government programs that private businesses practice all the time. vj =============================================== from the Milwaukee Journal Sentinel at: http://www.jsonline.com/story/index.aspx?id=684457 Some bad choices were made regarding school choice By WALTER... Read more →

El Paso School District FBI Public Corruption Case kills $150-million contract

Update: 12/20/2007 - Here is a link to several articles on the El Paso school district corruption case - I added some of the articles at the bottom of this document. vj A Health Care Administration Provider in El Paso lost a $150-million contract with two school districts in the area after an FBI public corruption investigation found that the President of the Provider saved the job of the son of a District Trustee who voted for the contract. There aren’t a lot of details in this article, and the case is ongoing with other indictments, but the trustees son apparently worked at the Health Care Provider and was absent a lot and doing a terrible job. But they kept him on because his father, the Trustee, voted for the $150-million five year contract. vj From http://www.elpasotimes.com/publiccorruption/ci_6408323 By Tammy Fonce-Olivas / El Paso Times El Paso Times Article Launched:07/19/2007 12:00:00 AM MDT Details in a court document filed Tuesday provide a deeper insight into an FBI public corruption investigation implicating an Ysleta Independent School District trustee in an apparent plot to exchange his vote on a multimillion-dollar health contract for a job for his son. The document filed by Assistant... Read more →