Audit finds lax internal controls in KC schools

By HEATHER HOLLINGSWORTH

Associated Press

KANSAS CITY, Mo. (AP) - The Kansas City School District gave a former superintendent an $800-a-month car allowance and spent about $2.2 million on utilities and insurance for closed schools in one year. It paid a custodial supervisor $86,000 in overtime over a two-year period, and its elected board didn't always follow the state's open meetings law.

Those were among the findings released Thursday in a state audit focused on the historically troubled district's operations. An audit released in September 2010 focused on the district's financial condition as its enrollment dropped and its revenue shrunk. It found that a radical plan to cut jobs and close nearly half the district's schools helped, but that the district needed to keep watching its budget closely.

The district, which will lose its accreditation in January, said it has already addressed many of the issues raised in the audits.

Rebecca Lee-Gwin, who began work as the district's chief financial officer just before the state review began in fall 2009, said auditors helped the district make changes more rapidly to shore up its finances. She said the district has reduced its expenditures by about $105 million over a two-year period.

"We are well on our way," she said. "I think we've made tremendous progress."

State Auditor Tom Schweich said at a news conference that in the areas audited, the overall performance of the district was fair, "which is kind of like a C if you were a teacher and grading a student."

But, he said, "I think if we would have done this audit a year ago, it would have been a poor, and based on the improvements going forward, it would probably be a good or better. We see an overall positive trend in the district toward improvement."

For instance, the district said it has established a policy to reduce overtime and has canceled or renegotiated numerous contracts to address problems with overspending. A renegotiated contract with the provider of its before- and after-school programs reduced the cost from $5.5 million in the 2010 fiscal year to an anticipated $1.6 million in the 2011 fiscal year.

But the audit noted that some services were reduced, too.

The audit also faulted the district's monitoring of contracts, noting that losses on school meal operations run by a private contractor exceeded $2 million each year from 2007 to 2010. The district, which has resumed serving its own school meals, found the contractor failed to hold students accountable for unpaid meals.

The car allowance for former Superintendent John Covington was cited as an example of a questionable expense, given that the district has a car administrative staff can use. Auditors wrote that if Covington was reimbursed at 50 cents per mile, he would have had to travel an average of 1,600 business-related miles per month to earn the $800 in reimbursement.

Auditors also cited several Sunshine Law breeches, including that it appears closed meetings weren't limited to topics that can legally be discussed without the public present. The audit also said meeting minutes didn't always document why meeting were closed, and board members didn't always abstain from voting when a conflict of interest existed.

The audit also found an excessive amount of surplus property, such as lunch tables, office furniture and obsolete computer equipment, kept in storage and not adequately tracked. For instance, auditors found that at one point the district was paying to lease 11 copiers that weren't being used; two were at a closed school and nine were in storage. An inventory conducted in the 2010 fiscal year showed 4,420 items valued at $2.6 million couldn't be found, and nearly 4,650 items worth $2.7 million weren't found in the 2009 fiscal year. Most of the misplaced items were computers, cameras and other electronic equipment.

The district said a massive consolidation effort resulted in extensive shuffling of district property as items were moved from closed to open schools. Recently, the district has hired an inventory company to help it keep track of its property and is using electronic tracking to monitor the location of its computers.

Meanwhile, the list of unused schools had grown to 38 in June 2010 after the consolidation effort, and the auditors noted the properties were expensive to maintain.

"By allowing many of these building to remain unused and to deteriorate, the district will not receive maximum value for the properties," the auditors wrote.

The district said it has established a repurposing office to oversee the transformation of the closed buildings.