State Auditor releases report Sept. 17 on Seattle Public Schools; District continues to implement internal controls
The Washington State Auditor concluded an investigation into Seattle Public Schools construction program small contracts from 2006 to 2009 and found a lack of employee oversight, operation outside normal accountability channels, failure of internal controls, and lack of an adequate means for employees to raise their concerns.
The District asked the State Auditor last fall to conduct an investigation after the King County Prosecutor’s office advised the District of additional potential illegal activity by a former employee. District adopted corrective measures to address the issues in this new report, so no new procedures or corrective measures will need to be adopted as a result of this review.
“The School District asked the State Auditor’s Office for this investigation, and we respect the findings,” said Sherry Carr, School Board Director of Chair of the Audit and Finance Committee. “In the past 18 months, the School Board has worked hard to strengthen internal controls and oversight. Through governance measures and partnerships, we are raising the bar with respect to ethical behavior at the District and are creating strong checks and balances for accounting.”
In the summer of 2010, SPS asked the Washington State Auditor to investigate issues surrounding the Regional Small Business Development Program. The District paid for that investigation, which resulted in audit findings released in the State Auditor’s Office Special Investigation Report on Feb. 23, 2011. The School Board also asked for an independent investigation, and that report by Patricia Eakes was released on Feb. 25, 2011.
The original investigation was primarily focused on the Regional Small Business Development Program itself and the recruiters and trainers and did not examine the small construction contracts prior to 2009. Once it became apparent that there may have been issues with the construction contracts, the District asked for a second investigation. This second investigation focused on small works construction contracts – those contracts that do not exceed $200,000 - issued from 2006 to 2009.
The Regional Small Business Development Program was eliminated in Spring 2010. All of the management leaders to whom former employee Silas Potter reported are no longer employed by Seattle Public Schools.
Since then, the District has strengthened internal controls, including:
• Ethics Program, Whistleblower and Anti-Retaliation Programs – The School Board has established a formal ethics program, naming the head of the Seattle Ethics and Elections Commission as the District’s Ethics Officer. Training is provided to employees on both ethics and rights and protections provided to whistleblowers. We will vigorously enforce these protections.
• Internal Auditor – An internal auditor has been appointed, to conduct independent audits at the School Board’s direction.
• Insurance Claim - We have made a preliminary claim with our insurance pool for coverage regarding the loss of funds. These additional amounts will be added to the claim. We will pursue this claim to ensure the District is compensated in accordance with its coverage.
• Recovery of Funds - Legal counsel has been retained to assess and pursue recovery of losses and investigation costs.
• Internal Controls – Departmental performance measurement reporting requirements have been instituted in the last year and new review procedures are being developed to address the recommendations. This will help ensure that programs and associated personal service contracts receive adequate oversight, invoices are adequate and properly reviewed, and staff is trained to comply with these requirements. Training on contract compliance requirements has been developed and delivered to both central and school based staff.
Last fall, the King County Prosecutor’s office filed charges against former Seattle Public Schools employee Silas Potter and two vendors who were part of the Regional Small Business Development Program. The case is still pending.
In Monday’s report (Sept. 17), the SAO recommends the District continue to:
• Obtain invoices with sufficient detail and documentation to support charges before paying vendor invoices, and that clearly demonstrate the benefit to the District.
• Obtain price quotations from more than one vendor when required by state law and District policy.
• Prepare and sign written contracts with vendors.
• Provide training to managers and staff about effective internal controls.
• Ensure that persons hired meet the experience requirements identified in the position description.
“My team is reviewing the report from the State Auditor and I take all issues of this nature very seriously. These issues occurred prior to 2009, and I am pleased that oversight and internal control measures are in place to ensure an issue like this will not happen again,” said Superintendent José Banda. “Moving forward, I will continue working with staff to create a culture of transparency and accountability, as well as rebuilding trust with our larger community.”
To read the report: http://www.sao.wa.gov/auditreports/auditreportfiles/ar1008301.pdf