No Child Left Behind scam: Purchase orders bypass Columbus School Board approval to funnel millions of federal dollars to questionable vendors
by B. Kennedy Kent and James A. Whitaker - Parent Advocates for Students in School
November 9, 2010
The Columbus City School Board has abandoned its role to monitor the district's No Child Left Behind (NCLB) funds. The Board has remained silent after the district's Internal Auditor, Carolyn Smith, revealed the Board had not approved 20 million dollars in purchase orders referred to as Super P.O.'s. for the last four years. With preferential treatment in place and no incentive to provide quality-tutoring services, our students are being miserably shortchanged. (Super P.O.'s)
There is no better example of this shortchange than the district's Effectiveness Reports submitted to the Ohio Department of Education for fiscal year 2010 for Supplemental Educational Services (SES) vendors. The report shows only 4 out of 72 vendors received an effective rating. This means the other 68 SES vendors allegedly serving our students received well over $3,000,000 for FY 2010, but were considered either not effective or needing improvement in tutoring basic reading and math.
In the Internal Auditor's working papers, she notes Global Bilingual Services in FY 2009 was rated as needing improvement but was paid $306,188. In FY 2010, they were rated ineffective but still received $272,515 in payments. Waiss Network Technologies was rated ineffective for both FY's 2009 and 2010 but received payments exceeding $171,000. These are just a couple examples among many of the significant payments made to ineffective SES vendors; yet, the district auditor concealed this information and left the Board as well as the public clueless to the enormous waste of the Nation's taxpayer dollars. (ODE Effectiveness Categories for FY 2010)
Auditor Smith concealed other pertinent information as well. Part of the complaint filed by members of the district's community April 27, 2010 alleging fraud in the SES program, that initiated the internal audit, also alleged the Board had not approved the SES provider payments. The Internal Auditor's working papers used to construct a draft report dated August 26, 2010 presented to the Audit and Accountability committee and copied to the full Board concluded the "Board approved the SES providers payments". This is a statement the auditor later changes. (Auditor one page conclusion)
Less than two months later, on October 13, 2010, the district's Assistant Treasurer Mike McCammon on video contradicts Auditor Smith's conclusion that the Board had approved the SES provider payments. Mike McCammon stated the multi-million dollar Super P.O.'s did not have to be Board approved and that the Super P.O.'s were considered blanket purchase orders. He further stated the Super P.O.'s were not vendor specific. (Excerpt from October 13, 2010)
When Mr. McCammon was again asked about the purchase orders, this time specifically about the Super P.O. for $6,400,000 for FY 2010, he again stated the Super P.O. did not have to be approved by the Board and added when the purchase order is printed, the purchasing director by law is authorizing the purchase. When asked why the purchasing director's signature was not on the purchase order, he stated, "I know. This is the only district I've worked at that it's not." (Excerpt from October 13, 2010)
Teresa Pence, SES secretary, confirmed the Assistant Treasurer's statements by also explaining on video that the Super P.O.'s are blanket purchase orders and are not vendor specific. She added because the purchase order is a blanket p.o. and not vendor specific, there was nowhere to send the vendor copy so the district just retained it. (Excerpt from October 13, 2010)
Research and inquiries revealed blanket purchase orders are designed for frequent, relatively small or emergency needs from a designated vendor, and vendor copies are required to be sent to the vendor for acceptance of contract terms. Records of the vendors' checks for fiscal year 2010 show the majority of the SES vendors were paid $25,000 to over a half a million in three to four month periods; therefore, using blanket purchase orders and not ensuring acceptance by vendors makes no sense, common or business. These financial transactions that created super paydays for SES vendors scream preferential treatment and possible kickbacks. (Checks disbursed to vendors signed by Treasurer in fiscal year 2010)
On the same day Assistant Treasurer Mike McCammon made his statements, Purchasing Director Dennis Carney wrote the following notes on a requisition signed by Federal and State programs Director Jill Dannemiller.
"Why can't we issue individual purchase orders to each vendor?
Do not process until we get a good answer to the above question.
Left message for Jill at 5:47 p.m. on 10/13.
We don't know when this was boarded."
Dennis Carney obviously got a "good answer" to his question. The Super P.O. for fiscal year 2011 amounting to $4,000,0000 was created October 21, 2010, again, without Board approval. In addition, Dennis Carney placed his signature on the first two requisitions but not the last two requisitions. He also crossed off Mary Lou Cotter's name on the first requisition and placed his signature on the requisition instead. Mary Lou Cotter is a secretary in the district.
Page 7 of the Treasurer's handbook states, "Once the Board has approved the legislation the purchaser must enter a requisition online (with the Board approval date in the explanation)." Only 1 out of 4 of the requisitions show a board approval date and none of the requisitions appear to be computer generated online. (Super P.O. Requisitions)
One day after the Super P.O. for fiscal year 2011 was created, Auditor Smith in an October 22, 2010 letter changed her initial written conclusion that the Board approved the SES provider payments. She now stated on Item #2 of her letter, "The Board does not approve payments to providers." (October 22, 2010 letter)
The approval process required to purchase services from vendors for dollar amounts over $25,000 is clearly marked on the grid on page 18 of the Treasurer's Handbook. The Board approval for purchases is also outlined on page 7. To circumvent and avoid the total process for dollar amounts in excess of $4,000,000 must be categorized as a severe and significant violation of district policy and law. (Purchasing Requirement Summary Grid - 1 & 2)
Had the Board's required Division Legislation Review been implemented, the standard pertaining to comparative prices would have prevented a number of the preferred SES vendors from collectively raising their prices from as little as $20 to as much as $85 an hour for tutoring students in basic math and reading. (SES vendor rates for fiscal year 2010)
When Joyce Hackett, Director of the SES program, was asked about the exorbitant prices charged by vendors on September 10, 2010, she made the following comments on video, "They all get together and charge $70, $80, $90 an hour." She further admitted, "They're not charging the parents; they're billing the school district for those outrageous hours. That's why they submit the Claim for Consultant. We're just funneling the NCLB money back to them." (Excerpt from September 10, 2010)
Governmental purchasing must take place within a prescribed framework of law designed to protect the public's interests. Since the Board was copied on the October 22, 2010 letter in which Auditor Smith changed her statement, the Board is very much aware over $20,000,000 worth of Super P.O. were created and over $15,000,000 was disbursed to SES vendors during the last three years without their approval.
Presently, the district's internal audit controls are blatantly flawed; therefore, the Board is faced with a decision. Do they investigate and discipline their top-level managers for intentionally overriding the system or do they give them their stamp of approval and allow actions constituting fraud, waste and abuse in a federally funded program to continue?
1. These financial transactions don't make sense, business or common
2. Evasive or unreasonable answers to questions
3. Purchases are bypassing the normal procurement procedures
4. Checks going to P.O. Boxes
5. Vendors without physical addresses
6. Handwritten invoices vs. computer generated invoices
7. Invoices placed on unauthorized forms
8. Vendor receives multiple checks in one month
9. SES Director agrees vendor hourly rates outrageous even though contractual agreement with SES vendor states rates must be fair market value