School board will expand investigation of contracts


Baltimore school officials have decided to expand their investigation into the handling of two unrelated contracts for energy and computing services that raised questions about the way the school system does business.

The school board voted Tuesday to approve up to $50,000 more in payments, nearly double the original amount, to the outside auditing firm of Arthur Anderson LLP to look further into the award and management of the contracts.

The school board has already spent $40,000 to have the firm look at two no-bid consulting contracts on a $12.3 million energy project. The board did not offer specifics as to what they have asked Arthur Anderson to look into.

"They [the board] got a report from Arthur Anderson LLP that they felt didn't dig deep enough," said Carmen V. Russo, the school system's newly appointed chief executive officer. "They wanted them to go back and get more documentation."

Russo, who started this month, has been forced to deal with some of the contracting issues that arose during the tenure of her predecessor, Robert Booker.

School board member C. William Struever said the information received so far from the accounting firm was not in final form and was brief. He would not elaborate on what spurred the board to expand the work.

"We want to make sure we have the ability to get the best professional advice on questions that arise out of the contract," Struever said.

Arthur Anderson also has been asked to look into a contract with Information Control Systems Inc. that ballooned from $5.2 million to $11.4 million in a year. The board had ordered an internal audit of that contract in April that was expected within six weeks, but apparently has not been finished.

"Arthur Anderson is part of the team along with the staff," said Struever.

The audits now are expected to be completed at least by the end of the summer, Struever said.

Suspension, resignation

Roger Reese resigned his post as the school system's chief financial officer, and the business manager, Wilbur C. Giles Jr., was suspended without pay for a month for their roles in awarding the two consulting contracts for the energy project.

One of those contracts went to Columbia financial broker J.P. Grant, whose company, according to the school system, is making at least $1 million in fees - far above the industry standard. Grant and Giles are friends, and went on a four-day golfing vacation in March at a resort in Puerto Rico.

The other went to a Baltimore energy planning firm, Carnegie Morgan Resource Management, which came up with the idea to lower utility costs and was chosen by Giles without competitive bidding, to manage the project under a $670,000 agreement that wasn't executed.

The school board eliminated Giles' position last month by splitting two functions of the job - overseeing buildings and awarding contracts - stripping Giles of his power to award millions of dollars in school contracts.

But just before he left the system, Booker wrote Giles a letter saying he could come back to work after the suspension was over.

Since his return to work this month, Giles' future has remained unclear. But Russo said she will make a decision by tomorrow as to whether he remains with the school system.

Seeking 'closure'

"I'm trying to bring that to closure very quickly," Russo said yesterday. She said she wants to take action soon so that she can restructure the facilities and contracting staff and because she believes it is unfair to Giles to keep him in limbo.

Part of the reason the contracting irregularities arose was that the school board failed to put into place ethics and spending rules in 1997 after the school system became partially independent of City Hall.

Last month the school board took steps to tighten financial controls and has asked top officials to sign affidavits assuring that they don't have conflicts of interest.

It now requires that nearly all contracts over $15,000 be competitively bid and approved in writing by the board. The board's new policies on consulting and other professional services are more stringent than state law.

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