SPENDING MONEY ON EDUCATION??

James Sullivan, Inspector General for The Chicago Board of Education, released his 59-page 2010 annual report (July 1, 2009-June 30, 2010) earlier this week. The most disturbing sections had to do with the misuse of credit cards given to Board members, the escalation of complaints and the fact that the Office of the Inspector General (OIG) does not have enough staff to investigate all of the complaints!

So you won't have to waste your valuable time, I read all 59 pages of the report and I will start with the lack of sufficient staff to investigate all the complaints. The escalation of complaints is probably not because all of a sudden Board members and Chicago Public School (CPS) employees have turned a blind-eye to the law, but because the OIG installed an anonymous hot-line for reporting abuse. Since whistleblowers in Chicago are always treated with disdain, this unidentified reporting method has made it possible for the truth to be revealed. Unfortunately, the escalation has caused the OIG to not to be able to perform as it should. The report explains it this way:

LACK OF STAFF TO INVESTIGATE
“In FY 10, the OIG responded to 1479 complaints of waste, fraud, financial mismanagement and employee misconduct — the largest number of complaints it has ever received. Based on the current complaint volume, it is estimated that the total number of complaints in Fiscal Year 2011 will increase 11.5% from FY 10, and over 89% from FY 06. The rapid increase in complaint volume means that the OIG’s workload has effectively doubled in just five years, while staffing levels have remained the same. On top of the increased workload, many OIG investigations from previous fiscal years still require continued OIG involvement due to ongoing criminal investigations and prosecutions or pending administrative hearings and arbitrations. When the continuing manpower demands of previous investigations and the OIG’s stagnant budget and staffing levels are considered along with the drastically increased number of complaints, it becomes clear that the time and energy necessary to triage complaints and service older cases is detracting from the ability of the OIG to perform its primary statutorily-mandated function. In short, without additional funding and staff increases, the OIG faces the serious prospect that in the near future that it may no longer effectively serve as a deterrent for misconduct and a mechanism for identifying and remediating waste and financial mismanagement.”

This, of course, is good news for the bad guys! If the misappropriated money can be recovered by CPS then maybe it can be used to hire more investigators!

PROCUREMENT CARD (credit card) MISUSE

What makes this topic so appalling is that Board members were told their use of procurement cards were being monitored, yet there still were rampant charges on the cards! Section after section of misuse is listed, but the report does not name which specific Board members used the cards fraudulently, it just outlines the rules and mishandling.

For example, “P-Cards were used to purchase alcohol during dinner meetings and a CPS sponsored event contrary to the CPS Policy on Reimbursement for Work-Related Expenses and the CPS Procurement Card Program Cardholder Manual. The P-Card was used to pay for refreshments at Soldier Field skybox suites at the Chicago Football Classic.” The report also does not say what is being done to recover the money that was misspent.

(1) Board Office Expenditures – Procurement Card

“In 2008, the OIG issued a warning to CPS that it would be monitoring procurement card (a CPS issued credit card designed for business-related purchases) use following an Illinois Supreme Court decision which held that use of public funds for a personal purpose, however brief the benefit, could lead to criminal charges. Following this warning, CPS amended its Procurement Card Program Code of Conduct to include the following:
Use of P-Card – Only authorized Board of Education purchases for which sufficient budget funds are available may be completed with the P-Card. Any personal or non-CPS related purchases are strictly prohibited and can result in criminal charges and loss of pension.
 Authorization – Only the employee to whom the card is issued is authorized to use it. Delegating the use of the P-Card to another employee, even an employee with their own card, is strictly prohibited.


Documentation – All purchases using the P-Card program must be properly documented. Please retain all original receipts (both the itemized bill of sale and card signature receipt) as you are responsible for verifying the validity of all purchases. Any altered or forged documentation is grounds for termination.


In addition, the CPS Procurement Card Program Cardholder Manual, dated October 2008 and revised in June 2009, designates ―allowable‖ and ―prohibited‖ purchases with the P-Card. Section 3.4 of the manual lists Prohibited Purchase with the P-Card (examples only), which includes, in part, the following:


3.4.4 Personal purchases of goods and services


3.4.6 Alcohol purchases


3.4.7 Donations


3.4.12 Sales tax “


In August 2009, the OIG initiated a formal investigation of Board Office P-Card use after noticing significant expenditures, in number and amount, by the Board Office. The OIG reviewed P-Card use by the Board Office during the period from July 1, 2008 through November 18, 2009, a period of time in which three P-Cards were utilized by Board officials and Board staff. The OIG determined that from July 1, 2008 to November 18, 2009, the three credit cards issued to the Board office were utilized in 463 transactions and charged purchases totaling $134,221.82. “


(2) RAISING MONTHLY SPENDING LIMITS ON P-CARDS

It is almost unbelievable when reading the section on how one Board member got their monthly spending limit raised to $18,000 when, “A card holder routinely used his P-Card to charge CPS for in-town meals despite the fact that he received a $3,000.00 monthly expense allowance authorized by the Policy on Expense Reimbursement of Board Members, designed to cover all in-town expenses.”

The $3,000/month expense allowance is outrageous! Board members are provided with staff and supplies, so what kind of “in-town” expenses are justified at that amount?

“Specifically, the OIG learned during the course of the investigation that a lack of sufficient controls was evidenced by the fact that monthly spending limits on the P-Cards issued to Board officials and Board staff exceeded limits established by the CPS Procurement Card and Corporate Credit Card Policy. When other cards issued to CPS staff had a monthly limit of $5000 per month, Board office credit card limits were being increased well beyond that limit. The monthly spending limit on one card issued to the Board office was increased incrementally from $5000 per month to $18,000 per month.”

(3) MONITORING USE OF THE P- CARDS

So who was watching the Board members and monitoring their spending?
“As further evidence of a lack of controls, the Board placed subordinates in the untenable position of monitoring and questioning P-Card use by Board officials and Board staff. The OIG determined that a staff member should not be put in the position to question a supervisor, let alone Board officials and Board staff regarding the use of P-Cards. Due to the understandable reluctance of subordinate staff members to question the acts of a superior, the controls in place to review the P-Card expenditures become ineffective.”

I had to keep taking breaks while reading the report because I was sickened by what I was learning. People who were appointed to high levels of authority were taking advantage of the rules and nobody was doing anything. I think the OIG needs to reveal the name/names of who the Board member/members are because right now, they all are tainted.

The report also gave the results of some previous investigations. My favorite is below.

Conviction for Charter School Theft
"In FY 05, the OIG reported the results of an investigation that revealed that a charter school founder and principal charged more than $250,000 on the school’s credit card and used school funds to pay for questionable expenditures that included more than $32,000 of purchases from Lord & Taylor, Marshall Field’s, Louis Vuitton, Meystel’s Fashion, Coach, Bloomingdales, Saks Fifth Avenue, Elan Furs, Tommy Hilfiger and the Sky Mall Airline Catalog; more than $2,000 in hair care and cosmetic products; $5,800 for jewelry, $329 for appetite suppression pills; more than $18,000 in food and beverage expenses; $31,000 in expenditures for telephone and internet use; $71,000 in travel expenses; and hundreds of dollars in personal car repair expenses. The investigation also revealed that the principal commingled charter school funds with funds from another school in which she was involved, and the principal made large disbursements to family members. Following the OIG report, the charter school agreement between CPS and the charter school was terminated. In FY 09, the charter school principal was indicted and charged with the theft of charter school funds. In FY 10, following a jury trial in the United States District Court for the Northern District of Illinois, the charter school principal was found guilty of the theft of charter school funds and was sentenced to serve a term of three years of probation and ordered to pay $48,370 restitution.”

Once again, no name is revealed even though the person was convicted. Why is the OIG protecting the identity? Why was restitution only $48,370 when more than $250,000 was stolen? All of us would steal if we only had to pay back 20% of the ill-gotten gains and serve no time in jail!

So I guess the jury attended Chicago Public schools and didn’t know how to do the math!