D.C. Public School officials spent $4.5 million in federal grants they weren’t entitled to, mismanaged the multimillion-dollar payroll system, lost track of tens of millions more in payments to outside vendors and broke rules on tracking the public’s money, a scathing audit has concluded.
Auditors at BDO Seidman discovered “material weaknesses” or “significant deficiencies” in at least 10 major categories of financial control. In their June 20 report obtained by The Examiner, BDO said that the chaotic finances could threaten the city’s fiscal health.
BDO’s report was commissioned by the D.C. inspector general, and was developed in conjunction with the citywide audit BDO released in April. The report found that school officials either hid or mistakenly chalked up expenses in the schools’ budget, overspent its federal grants by some $14 million and ignored rules on handling $2 million in cash kept in student activity funds.
Perhaps most troubling for taxpayers is an admission by school officials on page A-9 of the report that they have discovered some $4.5 million in federal grant expenditures that did not meet grant regulations.
The “disallowances” put the city at risk for federal fraud litigation.
D.C. has already agreed to pay millions to settle claims that it bilked the government out of money that was supposed to help the children of migrant farm and fishery workers. The city has also agreed to put its mental hospital into federal receivership because of irregularities in its Medicaid billing. Some $1.8 million in Medicaid costs claimed by the city’s schools in fiscal 2007 were “disallowed,” school officials said in the BDO audit.
Mayor Adrian Fenty took over the city’s school system to much fanfare last year. He promised accountability, but he and his schools chancellor, Michelle Rhee, have struggled to gain control of the $1 billion budget.
In their responses to BDO’s
findings, school officials did not dispute most of BDO’s findings and promised to improve their financial controls.
