This article originally appeared in the St. Louis Beacon: The St. Louis Public Schools are headed for financial problems, do not adequately address the difficulties of students who fall behind, need to monitor test results more closely to detect possible cheating and should seek bids more often for goods and services, according to a state audit released Wednesday.
The audit also criticized the district for not following up completely on an earlier report that showed discrepancies in attendance at Patrick Henry Downtown Academy, where a principal was removed after inflated attendance numbers led to an unwarranted increased in money from the state.
Overall, the state auditor’s office ranked the evaluation of the city school system as fair, the second-lowest of the four possible categories of excellent, good, fair and poor.
The St. Louis Special Administrative Board responded to the findings in the audit, in many cases noting that it has been working to implement the recommendations.
The report, which was released by state Auditor Tom Schweich at a news conference at the Wainwright Building downtown, focused on the year ending June 30, 2012. Schweich said it was the last of four audits his office had decided to do on Missouri's four largest school districts: St. Louis, Springfield, Kansas City and Rockwood.
In the case of Rockwood, he noted that the original audit was very harsh, but a follow-up report showed a lot of progress had been made. By contrast, he said, the St. Louis schools were not always cooperative when his office tried to get information, at first even challenging whether the auditor's office had the authority to conduct a performance audit. He noted that such audits had been performed by his office for more than 40 years and called any contention to the contrary "silly."
He said the district's lack of cooperation almost pushed the audit ranking into the "poor category."
"No one likes to be audited," he said. "I understand that. It's not a fun thing."
Meeting with reporters after Schweich's presentation, Superintendent Kelvin Adams said the district had been advised that the state auditor did not have the authority to look into everything it wanted to look at, but it later relented. He would not say where that advice came from.
Noting that the St. Louis schools had been "almost under siege" lately, Schweich stressed that his office's report was designed to be "entirely constructive." He said his office planned to issue a follow-up report in 90 days to note what progress has been made on the issues the audit raises.
He also urged the district to hire an internal auditor to help address some of the issues that arose during his office's work. "I don't know of any $370 million-a-year business that doesn't have an internal auditor," Schweich said.
The 35-page report released Wednesday looked at a variety of areas, including the school district’s internal controls over management and financial operations, its compliance with state law in certain areas and how well it carried out specific management practices and operations.
Audit’s general findings
In general, the report said, the auditor’s office “identified (1) deficiencies in internal controls, (2) noncompliance with legal provisions, and (3) the need for improvement in management practices and procedures” by the St. Louis school system.
Specifically, the audit findings included:
-- The district “will likely face new funding challenges in future years” because of reduced funding from the state, declining enrollment, increasing enrollment in charter schools and the end next June of money from the desegregation settlement that has totaled $40.2 million.
Schweich said his main concern about the reliance on the deseg money is "what happens when it goes away."
He said the possibility of raising more money with a tax increase or a bond issue, raised by the district's SAB in its responses to the audit, "are unreliable contingencies, unreliable bases for planning for the future."
"We are not 100 percent confident that the district has a plan to deal with the cessation of that funding."
Talking to reporters after Schweich's presentation, Adams and Rick Sullivan, head of the three-member SAB, said the district would be reporting Thursday night a financial surplus of $15 million - $21 million for the upcoming fiscal year, in a budget of $370 million.
Sullivan said of the points that Schweich raised, funding is his least concern. "I think we have eliminated the longstanding deficit," he said."I think the district is getting itself on a sound footing."
-- Schweich said the district appears to be violating a state law concerning the promotion of students who are not reading at grade level. MAP scores from 2011 and 2012 showed “more than 2,000 district students in grades 3 through 8 were considered ‘below basic.
He dismissed a response to that point from the district that said it did not have enough money to bring all students up to the level where they should be. "In our view," Schweich said, "students who can't read ought to be the district's highest financial priority."
He noted that the district's response concentrated on how fourth graders were being handled, but the law applies to all grades. "We find this very, very problematic," Schweich said.
Adams said that the district is trying to make sure that all children can read at grade level, but he noted that simply failing to promote students who fall short can create problems as well unless the district can provide the interventions they need to succeed.
"If you keep kids back for one or two years," the superintendent said, "the likelihood is that they will never graduate from high school."
In a statement released Wednesday afternoon, state Sen. Jamilah Nasheed, D-St. Louis, said of the failure of students to read at grade level:
“It is my understanding that students attend school in order to be educated, not promoted to the next grade level if they are not equipped with the required skills. We are setting our children up for failure if we do not give them every chance to succeed. That includes teaching them the basics of reading, writing and arithmetic up to the expectations of each grade level.”
-- In its follow-up to the earlier audit on attendance discrepancies at Henry school, the audit said not all of its recommendations have been followed, though “the employee against whom the allegations were made is no longer with the district.”
But Schweich took issue with the district's response that an overpayment from the state, based on faulty attendance numbers, of as much as $145,000 is immaterial. "I don't think that's an acceptable response," he said.
Sullivan he did not mean to downplay the importance of the attendance problem or the money involved. But, he added, no one has asked the district to repay the money, and he characterized the issue as an "administrative matter."
"I can never say it's a small amount of money," he said. "But in an organization with a $370 million budget, it was a small matter."
-- After news articles pointed out possible cheating on MAP tests, the district authorized more monitoring. But the monitors did not always do their work properly, and the district “does not have a formal proactive process to identify and investigate unusual fluctuations in school MAP test scores from year to year, or adequately utilize test data to identify schools which should be monitored more closely in subsequent years.”
Schweich emphasized that his office is "not experts on cheating." Its function is to check on the district's procedures to detect whether cheating is taking place.
He noted that some outside monitors had been paid by the district but had not turned in the documentation required of them.
"They were still being paid $28 an hour," Schweich said. "They should have been doing their job."
Adams said the details involving the outside monitors were less extensive than the audit made it appear, including some monitors who were at schools where MAP tests were not even given. He said the public can be confident in the integrity of the MAP test results in the city schools.
-- The district needs to monitor and evaluate policies designed to boost student achievement more carefully. Many programs used in city schools are not even known to its central office, the audit said; often, the use of those programs “was ineffective, and in many instances, nonexistent." Further, the district’s accountability plan, approved in 2009 after the district had lost accreditation, needs to be reviewed and updated.
Schweich said the district had made distinctions between what it called programs to help students and what it called activities, as determined by how widespread it was and how effective it was. But he made clear he did not really see the difference, calling the comparison "legal mumbo jumbo."
"If a program has a small impact on achievement," he added, "they shouldn't have the program."
-- In areas such as bus transportation, textbooks, legal counsel, lobbying and grant writing, the city schools have not periodically sought bids to see if outside contractors could provide those goods and services for a lower price. It also had little success in attracting more than one bid in many cases to manage construction projects funded by its $155 million bond issue approved in 2010.
The auditor said the problems were not as severe as they were in Rockwood, where a conflict of interest was determined, but the city schools still need to improve the way outside contractors are chosen.
"When we find only one bidder," Schweich said, "something is wrong with the request for proposal process."
-- The district did not properly manage the contracts for former employees who continued working as independent contractors, including a chief of staff who earned $125,000, and it did not require proper documentation for car allowances for Adams or its former chief financial officer. They received monthly automobile allowances of $800 and $300 respectively.
-- In some cases, the district’s special administrative board discussed in closed session topics that should have been discussed in open session, and items approved in closed session were not properly announced as required by Missouri’s Sunshine Law.
Details and responses
In more detail, here is what the audit report said:
-- To improve its financial picture, the city school system cut $50 million from its budget between 2009 and 2011, the audit found. And after years of deficit spending, in fiscal 2011 it took in $9 million more than it paid out.
In November 2011, the district reached a settlement agreement to resolve school desegregation litigation with the state and got $55 million to wipe out its negative fund balance as well as pay for more early childhood programs and other activities.
But when the deseg settlement money runs out at the end of next June, the audit added, programs may have to be cut, including those that were started with the infusion of cash. Besides reducing expenses, the district may also seek a tax increase or a bond issue, according to its five-year plan.
In response, the SAB told the auditor’s office that it has taken steps to stabilize the district’s financial situation, including the enrollment of 2,500 former charter school students who brought with them state aid payments. After three years where income has exceeded spending, the district’s fund balance stood at $15.5 million at the end of June 2013.
-- State law requires schools to pay particular attention to students who are reading below grade level; fourth graders who are reading more than one year below grade level should be kept back. But the audit found that the city schools were not doing enough to help students who were behind in reading but did not attend summer school or did not make enough progress if they did attend.
Specifically, in May 2011, 749 students in third and fourth grades were identified as “at-risk” of reading failure. But only half of those attended summer school. In the end, all but two of the 749 were allowed to pass to the next grade level, including 375 "at-risk" students who did not attend summer school and 281 students who remained classified as "at-risk" despite attending summer school.
Asked about a new policy that addresses just fourth graders, not all at-risk students, the audit said that “a district official indicated the district does not have the resources to retain all students who are not reading at the required grade level, and full compliance with state law would place the district in undue financial hardship.”
In response, the SAB acknowledged it was not in full compliance with the law. It said that for students “who are promoted rather than retained (despite not attending summer school or showing sufficient improvement to escape the 'at-risk' category), the district has been diligent in recommending the development of reading improvement plans and ensuring that other targeted interventions are put in place.”
-- In its follow-up to the earlier audit about discrepancies in attendance at Henry school downtown, the new report said that most schools appeared to be following district guidelines, though there were some inconsistencies.
To guard against improper student attendance reports, the district put into place in July 2012 an audit trail log so changes made to attendance could be tracked by user. “However,” the new audit said, “as of February 2013 the district acknowledged it had not yet begun using the audit trail logging feature to monitor changes to the student information system database.”
In response, the SAB agreed with the importance of accurate attendance reports.
“Alleged discrepancy updates were not completed,” it said, “due to the decision made internally by St. Louis Public Schools that the financial impact would have been minimal. Based on the information provided, and using the assumption of specific attendance percentages between 85.2 percent and 97.4 percent, a modification would have warranted a difference of $54,000 to $145,000 which was considered immaterial. Furthermore, when modifications are made in a positive manner for the district, DESE does not send additional revenue to compensate for the change in percentage rates.”
-- Even though the district assigned “quality assurance monitors” to selected schools after news reports of possible cheating in MAP tests, the audit found that the monitors at about 30 schools had not submitted the required forms. A follow-up check found better compliance, but still, two outside monitors who had been paid $27.78 an hour had not turned in any forms at all.
Comparing 2012 MAP test results with those from previous years, auditors found what they called “significant fluctuations (increases or decreases) … in the percentage of students meeting established achievement levels at various schools.” They said a more formal process is needed to detect and prevent possible cheating.
“Timely follow-up of MAP test monitoring visits is necessary to ensure propriety of the testing process and investigation and/or correction of any irregularities noted,” the audit report said. “In addition, independent monitors should be required to submit documentation of monitoring visits performed to support their compensation.”
In response, the SAB said it does have a comprehensive, five-step process in place to detect and investigate unusual fluctuations in MAP scores. “The district’s efforts exceed all requirements of the state,” the SAB said.
-- The audit found that the city schools have many programs that “are not adequately evaluated to determine impact on student achievement. District, procedures and regulations regarding the evaluation of educational programs are not followed or are out-of-date.”
It noted that an outside consultant studied the system in 2010 and found central office was not even aware of some efforts being conducted in schools, and in general, “policies and plans were not being implemented, and a great many programs were not being evaluated for their impact on student achievement.”
The state audit noted that the size of the district’s accountability office had been cut to two people from eight, making it harder for the schools to keep track of programs and their effectiveness. Give the importance of these programs to improving how students perform, “the district should consider devoting more resources to program evaluation,” the audit said.
In response, the SAB made a distinction between districtwide programs and activities that may be limited to one or more individual schools. “There are a great many variables to student achievement,” it said, “and the likelihood that small initiatives have a significant and sustainable impact on achievement is small particularly if not district-wide or mandated.”
Still, it said it will evaluate programs that are succeeding with an eye to possibly expanding them throughout the district.
-- In terms of buying goods and services, the audit noted that the district generally requires sealed, competitive bids for any purchase of more than $5,000. But no such process has been followed since 2004 for bus transportation, the district’s largest outside contract totaling nearly $24 million a year, or for other purchases in the audit year of 2012.
For professional services, the audit said legal work, lobbying and grant writing had not been opened periodically to bidding. After passing its bond issue, the district received only one bid for each of several large construction projects that would be funded by the $155 million in proceeds from Proposition S.
“In addition to being required by district policy,” the audit said, “periodically soliciting proposals or bids for goods and services is a good business practice, helps provide a range of possible choices, and allows the district to make better informed decisions.”
In response, the SAB said it is revising the district’s purchasing policies and developing a database to help manage outside contracts and determine when they should be put up for bid.
It did say, though, that it felt that “adequate processes have been and are currently in place for Prop S projects to create a competitive environment.”
-- For other contracts and payments, the audit noted that the school district “has not performed a cost analysis to determine if it would be more economical to hire employees to provide legal services.” And it noted that in some cases, no signed agreements existed with outside firms that performed management tasks, possibly exposing the schools to needless risks.
It questioned whether former employees who were hired in 2012 as independent contractors for certain jobs – it specified chief of staff, a principal, the director of community education, and the manager of the St. Louis plan – should have been considered part of the district’s staff instead.
And it also pointed out that the vehicle reimbursement allowances to Adams and the district’s chief financial officer may have been out of line. For the CFO, it noted, the $300 monthly payment, figured at 55.5 cents a mile, would mean averaging more than 500 miles a month to justify the cost.
In response, the SAB said it had done a study and justified the cost of outside legal help, and it pledged to follow IRS rules for payment to former employees who are hired as independent contractors and for mileage reimbursement.
-- Finally, in terms of following the requirements of Missouri’s Sunshine Law, the audit report pointed out that the law allows closed-session of only a limited number of topics: legal matters, real estate and personnel.
But the SAB has discussed other topics in its closed sessions, the report said, including “approval of a licensing agreement and an easement, the district budget, and lobbying and legislative issues.” And after those discussions, the results of its votes have not been reported publicly as required.
“Unless the SAB publicly announces or releases results of votes taken in closed sessions within a reasonable time following the conclusion of the action as required,” the audit said, “the public cannot be aware that a decision has been made or that the related records are available.”
In response, the SAB pledged to follow the requirements of the Sunshine Law.