Baltimore City

City school credit, procurement cards show culture of spending

Despite tightening school budgets and a perpetual rallying cry for more funding, Baltimore school administrators spent roughly $500,000 during the past year and a half on expenses such as a $7,300 office retreat at a downtown hotel, $300-per-night stays at hotels, and a $1,000 dinner at an exclusive members-only club, credit card statements show.

City school officials defend the majority of the credit card expenditures — outlined in statements and receipts obtained by The Baltimore Sun through a Maryland Public Information Act request — as "the cost of doing business," saying only a handful of "outliers" show questionable judgment or disregard for taxpayer money.

"We are working around the clock to engage our partners and move our agenda forward," said Tisha Edwards, chief of staff for the school system. "Every transaction has a business purpose in mind."

Among those transactions were a $450-per-person office retreat at the downtown Hilton, during which the 16 employees of the Information Technology Department were also treated to a $500 dinner at Brazilian steakhouse Fogo de Chao; and a $264 lunch for students at Hooter's.

A review of credit card transactions and receipts by The Sun found that the bulk of the expenditures — about $300,000, generated by 16 central office employees — were made under a new procurement-card program that has operated with virtually no controls or oversight since it began in January 2011.

Card statements show that many of the expenditures violated the school system's own protocols and restrictions for use of the cards, such as a prohibition on using them for travel or to buy gifts for employees.

Amid Sun inquiries, city school officials have acknowledged that they took a series of corrective actions:

•The head of the Information Technology Department will have to personally reimburse the system $5,000 for charges school officials deemed inappropriate.

•The district has launched an investigation into several restaurant charges made by a former employee — including a $136 visit to the Greene Turtle on his last day on the job.

•The school system's new chief financial officer has begun to overhaul the guidelines for using the credit cards, after The Sun found that many cardholders weren't following the rules.

City schools CEO Andrés Alonso acknowledged a "tension between controls and guidance" in the program he created last year.

Still, the schools chief — whose card, sometimes used by his assistant, incurred a $66.77 charge to Victoria's Secret on Valentine's Day that was later removed after the system reported it as fraudulent — defended the program.

"Overall, people use the program in exactly the way we thought they were going to," Alonso said in an interview. "There's always going to be a margin where you give people flexibility, and they're not always going to use it in the way that you want [them to]."

Other school officials also defended much of the cardholders' spending choices under the new program.

Edwards said the $13,600 of catering from David & Dad's and Jay's Catering brought into the central office reflects a "fellowshipping around food that has existed in city schools for decades."

The $67,000 in travel to conferences for a handful of office administrators, including an $8,000 trip to Las Vegas for a bullying conference, reflects the system's "overinvestment in professional development," she said.

And Edwards said that when a school administrator took a group of high school students to Hooter's during a student leadership conference in Atlanta, they didn't eat in the main dining room, where waitresses were wearing their trademark skimpy uniforms, but rather in a separate area served by a fully clothed manager.

Still, groups who scrutinize the spending of taxpayer money said the charges illustrate what can happen with loose oversight.

"It's clear that whatever the checks and balances in place are, they aren't working," said James Browning, regional director of Common Cause Mid-Atlantic, a government watchdog group. "And it seems that for many of these expenses, there should be approval and disapproval before they're ever made."

"In the time of tight budgets and crowded classrooms," he added, "it doesn't look good to have fancy catering for the administrators."

A 'district in demand'

Before last year, most school officials who needed to make work-related purchases had to either use their own money and seek a reimbursement or borrow one of several Bank of America credit cards used by the schools and registered in Alonso's name.

Asking people to pay their own travel expenses and seek reimbursement later would pose a financial burden for many employees, Edwards said.

To offer more flexibility and less paperwork, Alonso created a program in January 2011 that issued credit cards — which the schools call procurement cards — to 38 employees. About half of the cards went to principals, whose expenses were redacted from The Sun's request, and others mainly to executive assistants at headquarters.

The system has still charged about $180,000 on the old credit cards since the new program began, primarily for travel by Alonso and school board members or officials.

The schools chief said that travel has allowed the district to repair its reputation nationally and forge new relationships that have helped garner millions in outside funding, though he declined to offer specific figures. Most of Alonso's travel expenses are reimbursed by conference organizers.

City school board President Neil Duke said the costs associated with the nine-member board's travel to conferences — $18,820 so far this year — reflect that Baltimore has become a "district in demand."

Board members, who are appointed and not paid, travel to conferences up to three times a month, records show, with as many as four members attending at a time.

"Because Baltimore now occupies a higher profile for the achievements that we've accomplished, there's an expectation that we would have board representation at certain national conferences," Duke said.

School officials typically stay where the conferences are held, which sometimes means costly hotels. For example, one school board member traveled to Memphis, Tenn., last year and stayed at the Peabody Hotel, a favorite of country music stars that starts at $300 per night. Another board member's stay at the Westin Copley Place Hotel in Boston totaled $1,800 for four nights, statements show.

Duke said the board plans to review its travel policies in the future to "make sure we're properly represented where it would benefit the district … and not at either extreme."

Similarly, school officials said that business dinners — some costing more than $100 per person — have helped further the district's agenda.

For example, as the deadline drew near for Alonso to renew his contract to stay in Baltimore for a second four-year term last year, he and the school board ironed out last-minute details over a $1,000 dinner at the Center Club. The board also met with Alonso in April of this year over a $735 dinner at the Capital Grille, which nine people attended.

Duke said the Center Club dinner was unique in that "the setting would be important to get the contract signed," and the Capital Grille dinner was "just to discuss general things in a more informal setting."

Records show that in the last few years, Alonso has also used meals to seal deals.

For instance, when he began negotiating the new Baltimore Teachers Union contract in 2010, he did so over a $190 dinner at the Prime Rib with the union's leadership. Last fall, he and the union heads continued to hammer out the pact's details over a $345 dinner at Ruth's Chris.

Records show he also frequents Papermoon Diner, Pazo, Petit Louis Bistro, and Shuckers of Fells Point to discuss business with community partners, board members, political leaders and visitors.

And he has occasional — and sometimes costly — meals with members of his Cabinet. For example, in July 2010 the schools chief discussed the "transition" with his former chief financial officer over a $236 dinner at the Capital Grille.

Alonso said he doesn't have such dinners with his staff frequently, but "when I do, it is because there is an instrumental purpose, and I need to go beyond the normal setting to get what I need from people or for the school system."

Call for tighter reins

The Sun's review also found that many of the transactions did not follow spending rules that are spelled out in guidelines presented to employees when they were issued a card.

According to the guidelines, the cards are not to be used on travel-related expenses like hotels and airfare. But since the program started, roughly $67,000 was charged to the cards for travel by central office administrators.

The guidelines also prohibit gifts for employees, but departments, including Alonso's, spent more than $600 on items such as fruit baskets, flowers and other gifts.

And the program's rules prohibit spending on programs that are funded by grant money rather than government funds — such as grants for student leadership development. One cardholder charged $97,000 worth of student leadership grant funds to the card to take students on several trips out of town.

Several cardholders exceeded the $500-per-transaction and $1,500-per-month limits imposed by the rules, and officials said that many of the cards were permitted to have no limits at all. And those who did have spending limits circumvented them by splitting charges into multiple transactions, which is also prohibited.

Receipts show that several of the cardholders paid hundreds of dollars in sales tax, though the system is a tax-exempt organization.

Victor de la Paz, hired in July as the school system's chief financial officer, said the city's guidelines are "outdated" and its training "low-quality."

City school officials said that supervisors reviewed and approved all expenditures, but de la Paz said the district plans to begin "random quality checks" to ensure that purchases are appropriate.

"We expect that the person using the card exercises good judgment, but we owe it to our employees to set some realistic parameters," de la Paz said. "We're not like other districts, and we have to make sure it reflects the needs of Baltimore City."

Procurement card programs are used in districts across Maryland, but counties like Baltimore and Anne Arundel spend millions of dollars on the cards, held by hundreds of employees, because they use them for larger purchases like new school furniture and district-wide office supplies.

Other school systems' programs have stricter rules and oversight, requiring extensive documentation before any purchases are made.

For example, in Howard County, which served as a model for the city's procurement card program, the county has limitations on purchases such as food, which is only allowed during all-day, required meetings. And employees who travel are reimbursed using federal per diem standards.

Employee ordered to repay system

City school officials say most problems with the program are isolated incidents.

"We have to remind people that they are using resources entrusted to them by the citizens and that they understand that just because it might be good intent, it might not be right — or look right," Edwards said. "But we believe there's almost always a purpose. And it always has to do with the work of children."

City school officials refused to disclose the specifics of the $5,000 worth of charges that Jerome Oberlton, the head of the Information Technology Department, was told to personally repay after The Sun's inquiries.

About $4,700 worth of transactions made by Oberlton's department included trips to retail stores like Bath & Body Works, Ross, Walmart, the Dollar Tree and BJ's Wholesale Club to buy snacks and refreshments, and gifts and decorations for holiday banquets, birthdays and baby shower celebrations, records show.

Other charges from that office included a $7,300 office retreat, a $500 dinner at the Inner Harbor's Fogo de Chao, and a $500 quarterly meeting for staff at Paradise Indian Cuisine.

Oberlton, whose controversial $250,000 renovation of his executive suite was detailed by The Sun earlier this year, declined to comment through a city schools spokeswoman.

Edwards said the Information Technology Department's cards were reassigned to people who could make more "mature decisions."

Additionally, officials could not explain charges one employee made at area restaurants last summer. On June 15, records show he made two transactions at the Los Amigos restaurant, totaling $219, and a $110 visit to Mount Washington Tavern the same day. On June 28, his last day, he spent $136 at the Greene Turtle.

Edwards said that the system did not believe the charges were valid, and the employee — who charged a total of $3,500 to his card between April and June of last year — submitted no documentation for them. The system is investigating.

School officials also declined to respond to repeated inquiries from The Sun about how the card used by Alonso's assistant, which noted the only fraudulent charges among the procurement cards, was compromised.

Alonso said that despite the incidents of inappropriate expenditures, he did not believe the school system should micromanage how departments choose to spend their budgets "as long as it's about the work and about getting it done the right way.

"These are a fraction of a budget, are budget-approved expenses and categories," he said. "The expectation is at the end of the day, the [educational] outcomes improve."

By the numbers

Some of the expenses on the city school administrators' credit cards include:

A $264 lunch for students at Hooter's in Atlanta.

•A $450-per-person office retreat at the downtown Hilton for 16 employees of the Information Technology Department, including a $500 dinner at Fogo de Chao.

$13,600 total of catering from David & Dad's and Jay's Catering brought into the central office.

A $1,000 dinner at the Center Club for city schools CEO Andrés Alonso and the school board to iron out details of his new contract.

A $190 dinner at the Prime Rib and a $345 dinner at Ruth's Chris for Alonso and the teachers union leadership to discuss the new teachers union contract.