Financial scandals exposed in Michigan school districts

Recent investigations have revealed a rash of irregularities in public school financial audits, particularly in the Metro Detroit area. Many of the districts involved in financial scandals are cutting student programs, initiating staff layoffs, and increasing taxes.

"Maybe if the district watched its money a little closer, the children would have all the books they need," Gladys Sabbath, a grandmother of River Rouge School District students, told The Detroit News in regard to a recently-exposed incident.

The recent scandals demonstrate that the current system of financial accountability is leaving much room for abuse. State law requires school districts to operate with balanced budgets and hire outside parties to conduct annual audits. Districts facing deficits must submit a debt-reduction plan to the state, or risk being placed on a "watch list" for financially troubled schools.

Earlier this year, four River Rouge school officials were suspended after a district investigation found $1 million in potential financial irregularities. Yet, at the same time, district officials lamented state budget cuts and threatened to cut a school reading program due to budget constraints. In addition, the district showed above-average expenditures and below-average student performance when compared to peer districts.

The River Rouge scandal was reported in The Detroit News and Detroit Free Press. A report released by the district showed hundreds of thousands in funds spent without proper school board approval, most at the discretion of Superintendent Benjamin Benford II.

The findings, reported in the Detroit Free Press included:

During the same time period these questionable financial decisions were being made and carried out, River Rouge school officials were voicing concern over state education funding reductions and threatened to cut a district reading program for elementary students.

In 2001, River Rouge received $189,258 in state funds for an elementary reading program; the funds were added to nearly $50,000 in local money, according to a Free Press report.

When the state threatened to cut funding for the program due to a state budget crisis, district curriculum director Marie Miller told the Free Press that the program, which served 540 River Rouge children, would have to be scaled back due to budget constraints.

"We are struggling to improve student achievement, so [the program is] one more step to move us in that positive direction," she told the Free Press. "Without those funds, we'll have to cut the program by two-thirds."

According to Standard and Poor's (S&P) School Evaluation Services (www.ses.standardandpoors.com), a comprehensive analysis of Michigan public school achievement and finances, River Rouge spends significantly more than similar-sized school districts, while producing lower-than-average student performance on Michigan Educational Assessment Program (MEAP) tests.

"Relative to other K-12 school districts in Michigan, River Rouge School District generates exceptionally below-average student results with well above-average spending per student," the S&P analysis states. "The proportion of MEAP tests taken by students in River Rouge School District that meet or exceed state standards is 37.6 [percent]."

Hence, as River Rouge students suffered with threatened program cuts and lower-than-average test scores, school officials were allegedly stealing from district coffers.

Over the last two decades, audits of Detroit Public Schools have uncovered a myriad of irregularities, from misplaced receipts for school supplies to a complex bribery scheme involving a contractor who provided milk to district schools.

In 2001, the Michigan Supreme Court refused to hear an appeal by Detroit Public Schools, forcing the district to pay an $11.1-million judgment for a mid-1980s bribery scheme that sent a former school board president to prison, according to the Detroit Free Press.

In 2002, the Detroit Free Press reported that audits of Detroit schools showed over $305,000 in school money missing and hundreds of thousands of dollars more misspent and misappropriated.

S&P reports that, "Relative to other K-12 school districts in Michigan, Detroit Public Schools generates well below-average student results with well above-average spending per student."

While Detroit school officials were mismanaging school funds, the district was spending more than other districts and providing poorer education, scaling back teaching positions and cutting programs.

East Detroit Public Schools offers the most egregious example of district financial scandals.

Audits of the district in recent years uncovered a rash of misspent funds, including a complex bribery scheme involving several school officials, private contractors, and over $1 million spent on unfinished school construction projects, and over $6 million in cost overruns.

In 1996, East Detroit voters approved a $28-million bond for school construction and maintenance. Years later, audits showed millions of dollars were wasted and embezzled in a complex scheme between school officials and contractors working on district buildings. School officials received trips to Las Vegas and cash from contractors in return for obtaining district contracts for a construction company.

At the end of the 1999-2000 fiscal year, auditors condemned the district's financial practices and uncovered a $2.4-million deficit, according to the Detroit Free Press. The deficit led to the elimination 37 district jobs and the closure of school technology programs, in addition to unfinished school building projects.

School officials involved in the scandal face prison sentences for racketeering and other charges.

S&P reports East Detroit offers "average student results with higher per-student spending" than its peers.

Numerous other district financial scandals were uncovered in Free Press reports, involving a variety of misspent and missing funds. Yet some state official seem to take the scandals in stride, even given the severity of the situation.

"People will be people," T. J. Bucholz, spokesman for the state Department of Education, told the Detroit Free Press. "Sometimes they are very honest and sometimes they will be otherwise."