Missouri State Auditor Tom Schweich said Wednesday evening that Rockwood School District overpaid Glenn Construction company more than $1.2 million for change orders for work not contemplated in original contracts.
Several findings need immediate attention, he told the audience of approximately 100 Wednesday night at Lafayette High School in Wildwood. "Many of the findings were not serious or fraud, however. That’s the important factor."
Scheich said his staff collectively spent 2,000 hours on the Rockwood audit. "If we would have charged the district to conduct it, which we did not, it would have cost $70,000. We put our top team on it," he said.
"I wanted to have our best and most experienced professionals on this one, due to Rockwood's size."
He said the audit's intent was not to embarrass anyone, not to settle disputes, or not to get into politics.
Schweich also said the state's auditing team believed Rockwood board of education director Steve Smith represented a conflict of interest pertaining to his votes during board meetings regarding work change orders that benefited his employer, Glenn Construction Company. Smith became the lightning rod of controversy in 2011 over his dual role as board president and project coordinator for the construction company, which had overseen all of the Rockwood district's bond-related construction projects for the previous 14 years. Rockwood board of education directors said they did not agree, given the legal advice they were provided.
Rockwood Board Vice President Matt Doell and President Janet Strate said Wednesday evening they received legal advice from two different external lawyers, who both said Smith's factor was not an issue. In addition, board member Steve Banton also is a lawyer.
Schweich said double construction charges, along with a district bidding process that favors incumbents, such as Glenn Construction, are problematic. He recommended district representatives try to collect overpaid fees.
Some local media sources reported in the past that Rockwood had contracted with Glenn Construction management company for more than $15.6 million in work at the time Smith's conflict of interest was emphasized.
Rockwood Chief Communications Officer Kim Cranston confirmed with Patch on Wednesday that Glenn Construction has received $10,900,839 in management fees from Rockwood projects since 2003.
Glenn Construction employed Smith from 2004 until he left the company last June.
Schweich repeatedly said: "Competition reduces prices, and competition is required among public school districts."
Out of four audit "grading" options, Rockwood received a "fair" rating for its performance. The other state audit options are excellent, good and poor.
On behalf of fellow Rockwood board directors, Strate expressed appreciation to the state auditor's staff. "As you review Rockwood's responses to the auditor's recommendations, please note the auditor's report affirms some issues of which we were previously aware. In fact, for the past several months we have been working to take corrective steps to address those issues, and we are already in the process of implementing new processes and procedures. Those changes are noted in our response statements," she said.
"Additionally, we have new leadership in the finance and facilities' departments who have begun efforts to improve district operations."
Strate said they realized they have made some mistakes in the past. "We want to apologize to our community for those. We take responsibility for our actions and genuinely regret the problems caused by them. I assure you we are taking steps to improve our practices and procedures to ensure we do not make the same mistakes in the future."
Schweich said a follow-up team will return in 90 days to review the progress Rockwood has made.
- Patch coverage prior to the presentation
- Rockwood State Audit: Various Reactions
A citizens' summary of the report was provided as following by the Missouri State Auditor's staff.
Program Management Services, Change Orders, and Conflict of Interest:
The district has used the same program management company since the late 1990s. Although proposals are solicited for these services, the district said bidder qualifications and experience are the deciding factors, and fees are not negotiated until after the vendor is selected. It appears the district overpaid this program management company by paying a percentage fee of estimated costs, rather than actual costs, and by paying $1,203,178 in additional fees for change orders for work not contemplated in the original contract. The district often used change orders for substantial project changes or for new projects without soliciting bids and without documenting the reasons for using change orders rather than bidding. While still employed by the program management company, a school board member voted in favor of projects which increased the fees paid to the program management company. Such conflicts of interest violate district policy and state law. In addition, the district does not retain all bid proposals and related documents as required.
The district used the same provider to serve as both financial adviser and bond underwriter for several general obligation refunding bond issues, which causes an inherent conflict of interest. The district sold these bonds using negotiated sales, which is allowed by state law, but competitive sales would likely result in lower interest costs for the district.
The district had not adequately analyzed which staff need procurement cards or the number of cards needed, and the master credit card list is not accurate. The district requires users to obtain approval before exceeding transaction or monthly credit limits, but does not maintain documentation of such approvals.
The district frequently obtains professional services without benefit of a competitive selection process. The district has used the same law firm and auditing firm without soliciting proposals for either since 2005. The district hired two former colleagues of the superintendent as consultants without soliciting proposals, and the district has not solicited bids for vendor fuel card services since September 2007.
Most departments and/or programs do not issue receipt slips for monies received or issue receipt slips only for cash receipts, and receipt records do not always support the amounts deposited. Most departments make copies of checks and record cash amounts on receipt or deposit logs. Audit staff reviewed several deposits and found several missing copies of checks, making it difficult to account for all monies received. Various departments transmit monies to the finance department and the community education department for further processing and deposit, but employees do not document their acknowledgement of the transmitted monies. Audit staff found one deposit exceeded the transmitted amount by $650 with no explanation.
Capital Assets and Fuel Usage:
The district does not conduct an annual physical inventory of district property, and the district's capital assets procedures and records are not adequate. There were gaps in the numerical sequence of assigned identification numbers, a network server was mislabeled on the asset listing. The district does not document a reconciliation of diesel fuel pumped to fuel invoices, the district receives a monthly report of fuel card purchases but no review or approval is documented, and mileage/usage logs are not maintained for most vehicles.
The superintendent's contract for the 2012-2013 school year provides for $150,000 of life insurance, but a $500,000 life insurance policy has been provided since July 1, 2010.
Attendance Reporting Controls:
The district's attendance system allows changes to be made to student attendance records anytime during the current school year, and there is no review by district officials to ensure changes made to current year attendance records are appropriate.
The district does not require that computer passwords be periodically changed, and no security controls are in place to shut down computers after a certain period of inactivity or detect or prevent incorrect login attempts.