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The High Cost of Fixing CISD’s Problems

The Hard Reality after CISD’s Misspending, Lies and Coverups

by Micki Nellis

July 27, 2008 – Costs of fixing CISD’s problem caused by misspending federal funds have already been high, and will be much higher before it is finished.

CISD has been ordered to repay within 30 days more than $362,000 in misspent federal grant funds, or 43% of the funds audited. Spending of any further federal funds by CISD must be approved by TEA before the expenditure, then spent with strict oversight by TEA.

As of Thursday evening, July 24, CISD’s Communication Director Lisa Magers and former Interim Superintendent Dr. James Warlick said they had no knowledge that CISD will get a Conservator appointed by the TEA. A Conservator must be paid $60 per hour with a maximum of $480 per day by CISD until such time as TEA deems a Conservator is no longer necessary. Dr. Warlick said he checked with Superintendent Dr. Ronny Beard who said he "had heard nothing from TEA today." Dr. Beard had directives from TEA earlier in the week, which presumably included the payback demand.

Lancaster ISD has recently had a conservator appointed by TEA after a 9-month audit. The story, including the sidebars, gives a good idea of what to expect if or when a conservator is appointed for CISD.
http://www.pegasusnews.com/news/2008/jul/11/lancaster-isd-conservator-start-unraveling-distric/

TEA in their final report recommended further audits. It is not known if a full audit will be conducted or only a limited audit. Whatever the extent, there will be another audit by federal agencies. Since 43% of the federal funds for the audited period were found to be misspent, we can expect $4 million or more to be found to be misspent if a full audit is done. CISD received $16.9 million in state and federal grants for the years 2004 – 2007.

Criminal action is a great possibility.

CISD has already paid out megadollars in payoffs to resigning personnel and to hire new people to do their jobs.

After the TEA Preliminary Report came out March 11, 2008, Superintendent Robert Damron was “reassigned” as a consultant but paid his full salary for four months until July 1. At his yearly salary of $140,920.00 per year, the cost for the four months was around $44,000.

Dr. James Warlick was hired as Interim Superintendent in April. His salary was on top of Damron’s salary.

CISD paid a consulting firm to help find a new superintendent. Cost of the consulting firm was about $5,000, according to School Board president Stu Madison. The CISD board ended up recruiting a new superintendent themselves. Dr. Ronny Beard is now onboard as Superintendent at a salary of $140,000 per year. Dr. Warlick still works part time helping Dr. Beard get up to speed.

The School Board has paid thousands of dollars to attorneys to contest the TEA preliminary report and to correct some of the problems.

Dr. Sharron Miles resigned as of June 30, but is being paid her full salary until November 7. Her salary was $84,375 per year plus $100 per month “travel and subsistence.” This amounts to about $7,000 per month or around $35,000 being paid to Miles for doing nothing. This is the second “retirement” for Sharron Miles. We have been told that she retired under a cloud from the Rio Vista school district before coming to Cleburne.

Mike Bailey, CPA, who was financial officer during the times of misspending, was relieved of his duties as Financial Officer but retained his job as Assistant Superintendent at his full salary of $102,086.00 a year, even though he has fewer duties. A new Financial Officer will be hired. Mike Bailey now gives construction reports during School Board meetings, a task that was formerly done by the Maintenance Supervisor.

The Cleburne Times Review quoted CISD administrators as saying Bailey was just a book balancer. We disagree. He was Financial Officer and a CPA since 1982. It may not have been his job to see that all expenditures met federal guidelines, but internal controls were certainly his job. Many of TEA’s findings refer to missing receipts, payments made before receipts were submitted, contractors and consultants being paid ahead of time with no proof that services were performed, and purchases on credit cards issued to administrators that circumvented the purchase order system. As a CPA since 1982, Mike Bailey certainly knew better. His performance does not seem to meet Texas State Board of Public Accountancy standards.

Specifically, TEA found that “the pervasive and systemic nature of the internal control weaknesses constituted material internal control weaknesses that resulted in a material impact on the grantee's compliance with 34 CFR 80.20(b)(3).”

The TEA report also said “The grantee's board approved travel policy indicated that "an employee shall be reimbursed for reasonable, allowable expenses incurred in carrying out District business only with the prior approval of the employee's immediate supervisor." However, in most instances, the grantee issued a travel advance to employees for lodging, meals and mileage. The checks were issued to the employees from a few days to a few weeks prior to the dates of travel.”

TEA also said “Based on their examination of the grantee's accounting and other grant records, auditors observed that in many instances the grantee prepared an internal accounting document (e.g., purchase order) after goods were received and / or services were rendered and the applicable invoice had been received. Specifically, auditors noted that the grantee prepared numerous purchase orders days after the original purchase date. The grantee's practice of not requiring the prior authorization of the use of grant funds demonstrated that grantee personnel effectively circumvented its internal controls over purchasing and illustrated the grantee's ineffective enforcement of internal controls. Furthermore, the grantee's practice did not allow it to adequately and effectively monitor the expenditure of grant funds.”

Some make the excuse that Mike Bailey was just doing what he was told. That is no excuse. The American Institute of Certified Public Accounts Ethics Decision Tree for CPAs in government says this: “When faced with a work-related ethical issue, we have been taught to challenge the situation and, if it is not resolved to our satisfaction (in the context of GAAP [Generally Accepted Accounting Procedures], we should resign.” It also says “A defense that another person induced the CPA to violate standards is not acceptable.” See website at http://www.aicpa.org/pubs/cpaltr/nov2002/supps/gov1.htm

Without Mike Bailey’s cooperation and facilitation as Financial Officer, none of this would have been possible.

Joe Ripple, who was Assistant Superintendent during much of the misspending, left the district soon after the TEA investigation was announced to take a job as Superintendent at Brazosport ISD.

We paid administrators well to do a job. They didn’t do it.

Here’s what we paid them according to salary reports and vendor payment files obtained through Open Records requests:

Superintendent Robert Damron - $140,920 per year plus cell phone plus computer plus $650 per month car allowance plus mileage.

Assistant Superintendent Joe Ripple – close to $100,000 per year.

Assistant Superintendent and Financial Officer Mike Bailey - $102,086.00

Dr. Sharron Miles - $84,375.00 plus $100 per month travel and subsistence. We paid Sharron Miles a $637.86 advance on travel on April 25, 2008 (check number 47157) even though the School Board was told CISD had cut out advances on travel. Also, on 4/21/08, check number 47008 paid $543 for “Computer for S. Miles” according to the vendor payment file. Both these checks were written after the TEA Preliminary Report was made public and after the School Board was told the district had changed its policies.

Sharron Miles’ daughter Amy Martin, who worked for her mother, was paid $52,588.00 plus a $2,000 Migrant stipend.

We paid these people at least $480,000 a year for doing their job, and they didn’t do it. Do we call it incompetence or deliberate malfeasance? Either way, should it be rewarded?

Moreover, Superintendent Damron, Financial Officer Mike Bailey, and Communications Director Lisa Magers appear to have participated in a coverup. The Cleburne Times Review constantly assured the community that the allegations were false, based in part on quotes and press releases from the above three.

Two school board members who were on the board and should have been exercising oversight during the time of the misspending and who participated in the infamous $908 meal at San Antonio’s Ruth Chris Steak House are still in place. Brad Allen and Brad Mead seem to act as a team.

Then there is still the appearance of nepotism.

Brad Allen has a brother employed as Assistant Principal at CISD, and Brad Mead has a wife employed as a teacher – she received promotions since Mead was elected to the School Board.

In addition, new Superintendent Dr. Ronny Beard’s wife has been hired. You will recall that when Access Cleburne first started investigating, Superintendent Robert Damron’s wife was the highest paid teacher at CISD even though she only had a bachelor’s degree. Sorry, Dr. Beard, but the bad feelings about that still linger.

You will remember that Lisa Magers came up with the name “Cave People” to belittle those questioning CISD’s expenditures. She also sent out news releases during the entire TEA investigation saying in essence that there was nothing to it. Lisa Magers got a $7,939 raise last year, from $56,001 to $63,940 in 2007-2008, plus she gets $100 per month for in-district travel, bringing her salary to $65,140 for distributing press releases that show the school in a good light. That’s a 14% raise. Compare that to the the raises the teachers got.

Administration, staff, and some school board members consistently made fun of those questioning the expenditures, even when hard evidence was published on the internet.

Then there is the matter of interlocking directorates with the city.

Dr. Sharron Miles’ son, Adam, is assistant City Manager.

CISD paid City Manager Chester Nolen’s wife Sally $13,598.12 as a substitute teacher.
On April 25, 2008, CISD check 47159 for $750 paid for 3 registrations to the TCEA Annual Conference for Sharron Miles and Sally Nolen and one other person. This conference is on computer usage, webmastering, and software apps. Why is a substitute teacher being sent to this conference? Is it because Sharron Miles is the mother of the Assistant City Manager and Sally Nolen is the wife of the City Manager? We haven’t figured out why the check was written on April 25 when the conference was held two months earlier, February 4-8, 2008. See http://www.tcea2008.org

CISD pays councilman John Warren $30,000 a year plus $400 per month travel and subsistence, bringing his salary from CISD to around $33,600.00.

CISD paid councilman Sonny Russell’s business, the Pin Center Bowl, $2,470.00 last year, and Mayor Ted Reynolds’ wife’s business, the Lemon Sisters Café, $3,538.90.

City councilman Kyle Boles is Principal at Coleman Elementary at a salary of $68,193.00 (as of 10/24/2007). His mother, Donna Boles was on the School Board during the period audited and was President of the board when Kyle was promoted to Principal.

The School Board is just now considering stopping the $30,000 per year that CISD has paid to the Cleburne Economic Development Commission for several years.

We don’t say the people connected to the city didn’t earn the money, but it certainly reinforces the interlocking directorate structure between CISD and the City of Cleburne. What better way to get good will than throw some taxpayer dollars their way. The wheels are still being greased.

CISD has just now changed the policy of paying Rotary Club and Lions Club dues and meals for administrators. That amounts to about $6,000 a year.

No one has been reprimanded. No one has been charged. No one from the School Board has apologized to either Access Cleburne or the community or the parents or the students. No one from the Administration has apologized to either Access Cleburne or the community or the parents or students or the School Board.

Instead, those responsible have been rewarded for their behavior.

If 43% of the federal funds were misspent, how many dollars of state and local funds were misspent? That problem is left to the school board and community to fix. TEA does not investigate local fund expenditures. Will the school board investigate?

How far do we still have to go to really fix the problems?