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A devastating indictment

FinanceTechnology IndustryAccounting and Auditing

Because Baltimore City has long struggled to correct the problems of its chronically underperforming school system, Maryland has for decades funded education in the city at a higher level than other jurisdictions. That is why a preliminary audit report detailing evidence of waste, fraud and abuse in the system represents a potentially devastating indictment of the city's school reform effort. If allegations of mismanagement, lax oversight and incompetence lead lawmakers in Annapolis to question the city's use of the public funds it receives, support for school reform here could dry up overnight.

As The Sun's Erica Green reported on Sunday, the auditors' preliminary draft report found dozens of instances in which the school system's controls over spending failed egregiously. The system paid millions of dollars in questionable overtime, sick leave and vacation pay to teachers and administrators who may not have been entitled to it, for example, and failed to collect millions more in unpaid bills that were never referred to a collection agency. In one case it kept making payments for two years after a $6.9 million contract to special education providers expired.

The report also documents dozens of potential conflicts of interest in which part-time central office workers were allowed to double dip as independent vendors providing essentially the same services. Other employees were given the authority to approve purchases in the system's automated procurement system even though it wasn't required for their jobs. The system failed to verify bills submitted by school bus contractors, and in at least one case paid an operator for transporting students on days when the schools weren't even open. Auditors found financial oversight to be so inadequate that officials couldn't account for the whereabouts of some 1,400 school system computers.

How do you "lose" 1,400 computers, or pay a bus company to ferry students on a day that the schools the are closed, without raising a red flag somewhere in the system? In a well-run organization such scenarios would be impossible. Yet the report depicts a system so riddled with failures of accountability and oversight as to suggest that nobody in the central office knew what was happening or took responsibility for keeping track of how much was being spent, for what purpose, or where the money was going.

The state audit report is particularly damaging because it comes in the wake of a series of recent revelations of financial mismanagement, including a $65 million payout as part of a liberal accrued-leave policy, $500,000 in credit card charges by top administrators for pricey meals and luxury hotel accommodations, and a $250,000 makeover of the school system information technology director's office at a time when officials were lobbying lawmakers for millions to repair dilapidated school buildings.

What the public needs to see is a tough central office staff that is keeping track of every penny the system spends in order to make sure the money goes toward improving the schools, not evidence that school employees are squandering public funds on high living or wasting it through incompetence. Where were the school system's own auditors when all this was going on?

One of schools CEO Andrés Alonso's critical reforms was a reduction of central office staff in order to facilitate the transfer of more financial resources and accountability to individual schools. But that wasn't supposed to mean that no one at headquarters was minding the store.

If student test scores were still rising rapidly, as they were two years ago, perhaps the lapses in oversight documented in the auditor's report might not loom so large in the public perception. But since the scores have remained flat or even declined slightly over the last two years, there's no way to paper over the system's financial mismanagement and incompetence. That puts Mr. Alonso's ability to move the system forward at greater risk than ever because it threatens to diminish his support among the very people he needs most to keep up the momentum for change.

Copyright © 2014, The Baltimore Sun
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