Financial consultant decries blanket purchase orders

Bill Lenhart

In a “Focus on Finance” meeting hosted by the Beaumont Independent School District for the media on Monday, March 3, contracted financial consultant Bill Lenhart presented the district’s most recent fiscal plan to curb waste and inappropriate spending costing the school district millions of dollars.

“(BISD) had a situation of weak internal controls,” Lenhart started the meeting by stating. “(BISD) had a lot of things that weren’t being done, or weren’t being done correctly.”

Lenhart said it is his job to correct the deficiencies noted in the BISD finance department, and he has compiled a to-do list of changes that have been instituted in the way BISD conducts its financial business, with more changes to come. Among the areas Lenhart said were in dire need of restructuring were bank statement reconciliations, contract management, fixed asset inventory and valuation processes, and the collection and disbursement of student activity funds. Long gone are the days of open-ended charge accounts, checks being cut without multiple levels of verification, and “blanket purchase orders” that allow for certain administrators to have unrestricted access to tens of thousands of dollars without any district oversight.

“There were over 300 businesses and individuals with blanket purchase orders,” Lenhart said, adding that the problems with millions of dollars being spent via blanket purchase orders were, “lack of controls, no oversight, and lots of individualism or preferential treatment.”

According to Lenhart, although he is tasked with bringing BISD up to snuff fiscally, he is not delving into the school district’s finances to seek out or detect criminal activity.

“We’re not here reviewing the books,” Lenhart clarified. “We’re here making sure the books are up to date.” With that in mind, Lenhart further stated that, “To my knowledge, we have not identified any fraud that is not already known.”

On the same day as BISD’s Focus on Finance meeting, Fitch Ratings announced that it had downgraded BISD’s outstanding unlimited tax bonds rating to A from AA, also placing a Rating Watch Negative outlook on the school district due to “significant gaps in internal control and financial management practices uncovered by the ongoing FBI embezzlement investigation into the former finance director and comptroller. The downgrade further reflects the district’s projection for a weaker financial position in fiscal 2013 compared to previous estimates and Fitch’s expectations.”

According to information provided by Fitch, BISD’s rating could be in further jeopardy should a review of funding documentation not prove flattering to BISD’s fiscal outlook.

“Fitch will review available documents over the coming weeks,” a report from the institution stated. “If the financial position proves materially worse than indicated and/or sufficient documentation is not available, the rating will be downgraded and/or withdrawn.

“Fitch is concerned in the short-term over the fact that the district did not disclose the breadth of the TEA investigation during Fitch’s discussion with management. Fitch is also concerned over longer-term impacts on district resources if student attendance records are found inaccurate. Fitch believes the process will likely play out over several months and may include broadening of TEA’s participation in district operations. In the worst case, the district’s accreditation could be revoked and the district dissolved.”

Lenhart said that BISD’s current situation is not optimal, but that the woes facing the school district are relatively common.

“It’s not uncommon — many districts face criminal mischief,” he said. When challenged about the notion that the embezzlement of more than $4 million compounded by the millions of dollars more suspected misused by BISD leaders could be termed “mischief,” Lenhart clarified his words, admitting that in the case of BISD’s mischief meter, “The magnitude is obviously uncommon.”

 

Jennifer Johnson can be reached at (409) 832-1400, ext. 231, or by e-mail at jennifer [at] theexaminer [dot] com.

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