Significant Opportunity For Fraud

Board of Ed

As jaded as I like to think I am about the school board, and the senior administration of our district, I have to say, there are times when they still manage to shock me. Last night was just such a night.

As I mentioned in my last post, I had asked Dr. Robinson for an explanation of a few of the recent actions (or lack of actions) on the part of the board.

Specifically, I wanted to know:

  • When did the board approve the contract with Mr. Headrick and LEAN Frog to conduct the audit that was completed with a reporting of his findings on February 16th?
  • How much did the audit cost?
  • Why is the company that conducted the audit now being hired to recommend changes to the business practices of the district based upon the findings of the audit?
  • Was this contract with LEAN Frog executed in accordance with the bid law?

Interestingly enough, LEAN Frog was specifically hired (at some undetermined point, but probably around October) to review the business practices of the district.

One significant part of the findings that Mr. Headrick presented to the board on February 16th had to do with the Procurement Department. This department is responsible for overseeing the “Bid Invitation/Analysis Process,” “Purchase Orders,” and “Inventory Control.”

As I pointed out, I had no recollection of the board actually approving the hiring of Mr. Headrick and LEAN Frog Consulting. A subsequent review of the minutes of the meetings since that time confirmed my recollection as correct. Since through January the district has paid Mr. Headrick, $26,270, I was surprised that I could not find any record of the board approving his contract for those services conducted from October 2011 through February 16, 2012.

Yesterday at 9:31:48 PM CST, Dr. Robinson responded to my questions with the following email:

As necessary to ensure the integrity of district financial and business activities, and to ensure to their conformity to statute, and regulation, the CFO engages auditors and other experts to review transactions, policies, and regulatory guidance and to render opinions. In audit functions, discretion in the use of external auditors is particularly important when fraud or abuse are suspected as was the case in the present situation. Therefore, in such cases public BOE (Board of Education) discussion is inappropriate.

Funds expended for Leanfrog we disbursed from the board approved budget and the CFO has authority for certain budgeted expenditures.

Also note that Lean Frog has moved beyond an audit function to the creation of processes and operating procedures and thus their services have been engaged via BOE action.

Jennie Robinson, PhD.

Lets unpack this response just a bit.

It’s Not the CFO’s Job

First, Dr. Robinson seems to be quoting a specific policy statement in her opening comment. I’ve asked her where that policy can be found, but she hasn’t responded yet. Since I’ve never been good at waiting, I went online to review the policies myself.

Guess what, that is not a Huntsville City Schools policy. In fact, nearly the only comment that the Policy Manual makes on audits is found in Procedure 100-1P “Functions of the Board of Education” Paragraph C, on page 2 of that procedure entitled Audit states:

The accounts of the Huntsville City Schools shall be audited annually by a certified public accountant selected by the Board of Education. Reports of such audits shall be delivered to the Board of Education, the superintendent of schools, and others as the Board may direct. (Emphasis Added)

So you see, it is not the job of the CFO to “engage auditors and other experts to review transactions, policies, and regulatory guidance and to render opinions” as Dr. Robinson claimed. It is instead the job of the Board of Education to select the auditor to be used.

This kinda makes sense, doesn’t it? I mean if an audit is going to be conducted of the business practices of the district, the Chief School Financial Officer also needs to be audited, doesn’t he?

Who Is The Discretion For?

Second, Dr. Robinson claims that, “In audit functions, discretion in the use of external auditors is particularly important when fraud or abuse are suspected as was the case in the present situation. Therefore, in such cases public BOE discussion is inappropriate.”

Who is the discretion necessary for? Should we keep the audit quiet from the public? If so, then why did Dr. Wardynski, in one of his first meetings with the public on July 25, 2011 tell a group of Special Education parents that he would soon be conducting a full audit of the Special Education and other Departments in the central office.

Discretion wasn’t necessary for the public.

How about the people being audited? Well, we certainly don’t want them to know they’re being audited. But, of course, the first people in the district to know that they were being audited were the directors and their directorships. Mr. Headrick stated that he began the audit by “conducting interviews” with the directors.

It’s kinda hard to conduct an audit interview without the person being interviewed knowing that an audit is going on, isn’t it? I began hearing from multiple district personnel that LEAN Frog was conducting an audit beginning in November 2011.

Discretion wasn’t necessary for the district personnel.

So, who exactly was the discretion for? Perhaps the discretion was for the board as they seemed to be the only group in the city who didn’t know it was happening.

CFO Has Authority For Certain Expenditures

The next second of her response contains the true kickers. Dr. Robinson stated that, “Funds expended for Leanfrog we disbursed from the board approved budget and the CFO has authority for certain budgeted expenditures.”

Dr. Robinson seems to be claiming that Mr. Frank Spinelli has the authority to expend district funds, accepting of bids, and contracting with vendors all without any board or public oversight. As I mentioned on Saturday, through January, the district has paid LEAN Frog $26,270.00. As the report to the board did not take place until February, once the check register is published for that month, I’m sure we’ll find that the $26,270.00 has increased to nearly $30,000.

So, according to Dr. Robinson, Mr. Spinelli, has the authority to commit and expend $30,000 in public funds without any oversight.

You’ll note, as I did, that there was no discussion of the questions concerning the bid law. While there are perhaps hundreds of Lean Six Sigma consultants in the country, and surely dozens of them in Huntsville (as this is a standard evaluation for military contractors), did Mr. Spinelli issue a call for bids?

I have no idea.

Significant Opportunity For Fraud

Mr. Headrick stated in his presentation on February 16th that the current business practices and System-Wide Issues/Opportunities for Huntsville City Schools presented:

Significant opportunity for fraud, waste and abuse and legal liabilities associated with non-compliance to state and federal law.

It’s a shame that Mr. Headrick wasn’t tasked to audit the means and methods that were used to actually hire him. Perhaps then his findings wouldn’t be tainted by the superintendent having refused to bring a recommendation to the board to hire him as is required by board policy and state law.

As it stands, the audit that will be used on Thursday night, March 1st to fire up to one hundred directors, coordinators, principals and teachers, and staff should itself be considered in non-compliance. Thus every single one of the district employees who are fired tomorrow night should challenge their dismissal in a court of law.

Wardynski’s going to be known as the best friend to lawyers in this town as he’ll not have doubled legal fees but rather quadrupled them.

Is it possible that there were some legal violations found by Mr. Headrick? Yes, there are. Three of the five board members who are allowing Mr. Spinelli to expend district funds without oversight likely did the same thing five years ago. And anyone found breaking the law should be punished.

If this contract was not approved by the board, and it doesn’t appear that it was, the money should be refunded, the findings should be dismissed, and those violating standard practices should be fired.

However, Dr. Robinson, the ends never justify the means.

Since Mr. King has been advertising positions for the district on his Facebook wall since January 2nd, he can just add a few more positions to his list.

Tomorrow night’s board meeting is the culmination of a witch hunt that is being used to cover up current violations. It’s time that we the public take back our school system.

 
Russell
"Children see magic because they look for it." --Christopher Moore, Lamb: The Gospel according to Biff, Jesus' childhood pal.

13 Comments

  1. If the bid law was, in fact, violated then under state law the person who executed the contract is guilty of a class c felony as is the vendor if they knowingly entered into a sole source contract in violation of the law.

    Additionally, such a contract would be null and void, and the district should be reimbursed the money spent.

    The bid law is confusing, complicated and cumbersome. Those contracts that don’t require open bidding are numerous and often times vague. For example, contracts between teachers and districts are specifically exempt, as would make sense. In general, contracts between employers and employees also are exempt. The BOE stretched this clause to the breaking point in hiring TFA to provide teachers. Personally I think it went beyond the breaking point and should be reviewed.

    In this case, I’m sure that they are going to call this “financial consulting” since that is also vaguely mentioned as an exempt activity. In fact, her statement to you seems to be leading down this path since they are calling the LEAN Frog consultant a “financial” expert.

    However, it is my understanding that this expert is an expert in LEAN Six Sigma. I have not seen his CV so I do not know if in addition to holding a “black belt” in LEAN Six Sigma, he may also be highly qualified as a financial expert.

    Assuming he is not a CPA, CFA, CFP or some other person of financial expertise, it is most odd and certainly outside the general scope of LEAN to audit business and financial activities under a legal and financial model. Looking at Mr Headricks bio on the LEAN Frog website gives no indication that he nor any member of the LEAN Frog team is qualified for forensic auditing, financial auditing or accounting.

    At the very least, the spirit of the bid law was violated, if not the words. Funny thing, the bid law specifically tells school districts to enact bidding policy according to the spirit of the bid law.

    1. Thanks for this excellent explanation. I believe it was said that the forensic accountant who spoke on the 16th was hired by Mr. Headrick. I’ll have to go back and review the check registers to see if he was paid separately or not.

      Thanks.

      1. I was unaware that a forensic accountant was involved. If her was not hired by LEAN Frog, then that makes it even clearer that LEAN Frog performed duties that are outside of the scope of the spirit of the bidding law. If he was hired by LEAN Frog, the additional “consulting” performed by LEAN Frog, the most glaring example cited in the Times being the HR Department, is clearly LEAN Six Sigma and not financial in nature. So a part of the work performed by LEAN Frog should have been put out to bid.

        It’s simply baffling how this administration does things. Typically in a LEAN Six Sigma “audit” the consultant or “black belt” will do a process map of how things work now, and a process map of how things could work more efficiently. Was either of those things included in the presentation when talking about the HR department? Or was the “32 hours” of interruptions the only thing shown?

        I’m not opposed to doing a LEAN Six Sigma on the school system. Frankly, I’d like to see them do a LEAN Six Sigma audit on teachers, focused on teachers in Title I schools. I think most of us would be surprised to learn how much wasted time and effort goes in to filling out redundant forms, filling in check boxes and all of the other things that are not really necessary or helpful when it comes to educating underperforming students.

        1. I’m not opposed to doing a LEAN Six Sigma on the school system. Frankly, I’d like to see them do a LEAN Six Sigma audit on teachers, focused on teachers in Title I schools. I think most of us would be surprised to learn how much wasted time and effort goes in to filling out redundant forms, filling in check boxes and all of the other things that are not really necessary or helpful when it comes to educating underperforming students.

          I agree that a analysis of the current process map of classroom activities would be eye-opening. I have many first-hand reports that teachers are not educating and I tend to be very critical of teachers who do not educate. However, it is difficult to blame teachers entirely when they do seem to spend so much time filling out forms and check boxes, activities again confirmed by first-hand information.

          1. David and Mike…here’s a story from last week that is a microcosm of this issue. A former student contancted me and told me that she’s getting really frustrated because of new policies. This is what they were told last week (she teaches first grade). Each student has to take a STAR test once per week to gather data on their math progress. Starting now, each teacher has to make a folder for each student (this teacher has 38 because she switches students and only teaches math)…In each of these individual folders, the teacher has to document the day and time which they taught each individual EACH skill in which he or she is deficient. So instead of simply looking at the scores and modifying instruction, the teacher has to modify instruction and THEN document it for each student. She said to me, “It’s not enough that with the test scores we can see their academic improvement, but we have to document when we taught it. It’s just another layer of bureaucracy that takes away from planning and instructional time.” She’s frustrated enough that she’s thinking about switching school districts. But this plays right into the hands of HCS. If she leaves, she loses money paid towards retirement and time earned towards tenure AND she can be replaced by a Teach for America Corps member who will only stay two years…As a teacher educator, it’s getting harder and harder for me to tell my UAH students to apply for jobs at HCS. As a dad with five kids in HCS, it’s frustrating that teachers’ morale is so low right now.

  2. So do you think we have enough evidence now to file a state complaint against the board? That’s what it’s going to take, because I don’t think we can wait until another election.

  3. “So you see, it is not the job of the CFO to “engage auditors and other experts to review transactions, policies, and regulatory guidance and to render opinions” as Dr. Robinson claimed. It is instead the job of the Board of Education to select the auditor to be used.”

    Robinson is saying because fraud was involved public BOE discussion was not appropriate, she is giving her interpretation the the policy as a means of covering this exception. In other words she is claiming ” we skipped the discussion and went straight to the police(LEAN) because we didn’t want to tip off the crooks”.

    These are the same BOE members who got caught not once, but twice violating the open meetings law, and one member who moved from the district he was elected to represent and didn’t inform the voters. Sounds like frauds examining frauds to me.

    “As it stands, the audit that will be used on Thursday night, March 1st to fire up to one hundred directors, coordinators, principals and teachers, and staff should itself be considered in non-compliance. Thus every single one of the district employees who are fired tomorrow night should challenge their dismissal in a court of law.”

    Significant Opportunity for Abuse
    http://redeyesfrontpage.blogspot.com/2012/02/color-of-change-in-culture-of-fear-and.html

  4. I thought you would find this interesting.

    Huntsville City School Purchasing Policy” is the official policy on how purchasing is supposed to go. HCS has chosen instead of enacting their own policy on purchasing, as the law calls for, to instead adopt the Code.

    So not only is the LEAN Frog contract one that needs to be looked at, but also all the contracts that were adopted following the consultant’s presentations. I’d really like to know where they were advertised, how long they were open for a bid, and how many companies bid on them. The email services contract is of particular interest. At $5 an account every month, that stands to be a hefty sum over the period of a year. I’m sure several big IT companies would have loved to have something like that.

    1. “I’d really like to know where they were advertised, how long they were open for a bid, and how many companies bid on them. The email services contract is of particular interest. At $5 an account every month, that stands to be a hefty sum over the period of a year. I’m sure several big IT companies would have loved to have something like that.”

      I’d really like to know how many contractors are minorities and if the school system is in compliance with federal law regarding minority set asides. A few years back it was noted minorities made up 1% of the total contractors.

  5. I’m not sure I understand all (or any) of the implications, but might one of the reasons that the Board of Education was let out of the loop be that they were part of the fraud audit?

    Just a question.

  6. The whole school board needs to go. They are simply not capable of doing their jobs and they continue to make poor decisions. How can we trust them with our kids? They need to go NOW and so does the superintendent.

    1. I’m with you Chantaye. There are more interested in spending our money on consultants, and funneling public money to private entities than educating our children.

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