DeSoto- DeSoto ISD Board of Trustees received three draft reports from forensic examiner Weaver & Tidwell LLP at the Monday, April 27, 2020, regular meeting, recapping the findings of the months-long review. While many specifics were discussed in executive session, investigators, Bill Brown and Travis Casner, provided a general overview of findings categorized in three key areas:
1. Factors outside district control
2. Financial mismanagement
3. Suspected fraud, waste, abuse
The Board reviewed the draft reports to ensure that all key questions were answered and to evaluate sharing with outside agencies, including the Texas Education Agency and law enforcement. One of the drafts is anticipated to be available for the public while the other two reports will remain confidential pending reviews and actions by outside agencies.
Following the overview of the draft report one open session, the Board also heard and discussed findings from draft reports two and three in executive session.
Board members expressed gratitude to the investigators for a thorough report, as well as frustrations with prior personnel and leadership.
Board Vice President DeAndrea Fleming explained “When anything comes to me I examine it, I over examine it, I ask questions because it is my duty to do so. We, as board members, are accountable for the decisions that we make. If we don’t ask the right questions, we’ll never get the right answers.”
Board Secretary Kathy Goad agreed. “…the board sure should have asked a lot more questions.”
In fact, both Goad and DeSoto ISD Board President Karen Daniel were vocal advocates who have long pushed for a forensic evaluation.
“We just didn’t have the votes at the time,” Goad said.
OVERVIEW OF FINDINGS
The following summarizes the firm’s findings which are outlined in the first draft report which began in December of 2019. These findings included:
- information obtained from more than 30 interviews of former and current district personnel
- a review of more than 1.2 million emails
- a review of more than 16,000 credit card transactions from roughly 200 credit cardholders within the district totaling more than $3 million
- a review of management and activities associated with the 2006 bond which included $32 million spent on the construction of Katherine Johnson Technology Magnet Academy including reports from the district’s financial advisories and architecture and construction firms
- a review of reports from outside agencies including the 2016 Legislative Budget Board
Management and Performance Review
Representatives from Weaver & Tidwell LLP stated that, during the investigation, the firm identified two situations wherein possible criminal acts were indicated. The amount of the possible loss to the District is roughly $300,000. The firm recommended the District consider making a referral to the appropriate law enforcement agency for further action.
Factors outside district control
A steep decline in enrollment began during the 2017-18 school year, significantly reducing district revenues due to the lack of average daily attendance state funding. Budgets should have been reduced to align with the decline in anticipated revenue.
Concurrently, changes in the transit system caused by the dissolution of Dallas County Schools resulting in the necessity for expenditures for buses and drivers in preparation for the 2018-19 school year. These concerns cost the district roughly $7 million.
Investigators noted four major areas of financial mismanagement that led to the most significant portion of the $21.6M short fall. The largest exposure was the mishandling of the 2015 Tax Ratification Election expending $14M of revenues as general fund without consideration of outstanding debt that should have been paid from these revenues. Debt payments were taken from the district fund balance until the balance ran out leaving no means of funding the 2018 payment and no reserves for the district.
Secondly, $2.6M was overspent in building the Katherine Johnson Technology Magnet Academy (KJTMA) with poor oversight and failure to provide spending updates to the board. Critical factors including building the road to access the school and complete architectural fees were not included in budget projections, and many weekly construction meetings did not have a district representative present.
A third issue was related to $1.8 million in technology infrastructure that should have come from bond funding but could not due to KJTMA overrun.
The fourth mismanagement issue was related to a $5.1 million loan payment that was underfunded by $800K.
Suspected fraud, waste, abuse
Excessive spending on travel, including stays at hotels with rates well above recommended General Service Administration rates and lodging, combined with higher than average corporate card spending was cited by the investigators for further review with suspicion of fraud. In addition, payments were highlighted that were outside normal procedures and made to questionable recipients who may not have been actual vendors. Adequate financial policies that were in place were not consistently followed by the previous administration and inaccurate information was regularly provided to the board regarding updates and developments related to finance and changes to the budget.
Additionally, the firm offered the following recommendations to mitigate the reoccurrence of this behavior:
- Regular reports to the Board regarding financial changes and developments, especially negative trends or required corrective actions.
- Regular training of personnel regarding purchasing procedures including competitive bidding, the purchase order process and other such practices and policies.
- Limiting travel and implementing a requirement to share acquired learning obtained from conferences and professional development.
- Conflict of interest policy should be strengthened and enforced.
- Clarification and expansion of the district’s policy on nepotism, hiring practices, and awarding of vendor contracts and payments.
- Implementation of sub-committee to monitor spending and budgetary adherence for major projects.
Prior to the Board voting to approve the forensic evaluation, current district leaders already implemented a number of changes to assist in deterring such financial mismanagement in the future including heightening internal controls, adding additional layers of financial approval and increasing training and updates for staff regarding finance and purchasing procedures.
“Commissioning this forensic evaluation was critical for our ability as a community to close one chapter of our story and move forward with another,” DeSoto ISD Superintendent of Schools Dr. D’Andre J. Weaver said. “Our Board of Trustees led this effort to provide an additional layer of transparency for our community. During the last 20 months, my team has worked tirelessly to institute and enforce proper internal controls to prevent any further misuse of public funds as referenced in these findings. We’re focused on continuing the process of healing, redefining our future and restoring trust with our community.”
Current DeSoto ISD Board members and administrative leaders commended the efforts of the investigative firm citing the importance of the investigation in an effort to address and provide finality to a difficult chapter in the district’s past.
“As a Board, commissioning the forensic audit provided an opportunity to be responsive to the concerns of our community and issue accountability where appropriate,” President Daniel said. “It is our desire to guide the district and community forward as a more ethically-focused, fiscally-sound, and operationally-transparent organization in which our community can trust and believe.”
At the conclusion of the meeting, the Board approved the release of phase one of the investigation upon it being finalized and approved. The Board also approved the release of phases two and three of the investigation to the appropriate administrative and law enforcement agencies upon completion and approval of those reports.