Where did the money go? DeSoto ISD approves investigation into travel expenses, credit cards, contracts

Outside investigators will review at least four years of spending in the DeSoto school district as officials try to determine if any laws were broken and whether any misspent money can be recouped.

The board on Thursday hired an accounting firm to conduct a forensic audit that will look into travel expenses, credit card use, vendor contracts, bond spending, irregular bookkeeping, grant spending and more.

DeSoto school officials continue to untangle the district’s finances after questionable spending and sloppy accounting by the previous administration contributed to financial woes that led to trustees laying off teachers, eliminating programs and closing a school.

Last school year, the district had to find more than $20 million in savings and repeatedly dipped into reserves and moved money around to cover expenses that would pop up, such as an $8.4 million bond payment.

And even as officials say DeSoto is starting to get on track, significant challenges remain. The district will likely be short about $5 million in state funding because DeSoto had an unexpected enrollment drop from last year of nearly 700 students. Representatives from the Internal Revenue Service have visited the district in recent weeks. And officials are reviewing possible Medicare overpayments that were made several years ago.

DeSoto officials say the forensic audit is needed to figure out once and for all what happened with the district’s finances in recent years. While the Texas Education Agency is still reviewing documentation, and law enforcement has asked for information, no criminal charges nor updates on pending investigations have been made public.

DeSoto trustees hired the accounting firm Weaver to conduct the forensic investigation. It could take the firm about six weeks to complete and cost the district around $127,210, a sum that could increase depending on whether the scope of the examination changes.

Weaver’s team includes former FBI agent William Brown, who as a consultant worked on major Texas school district investigations, including the El Paso cheating scandal and questionable bond spending in Beaumont.

“I don’t see that we have any recourse except to go forward,” trustee Kathy Goad said, noting that the cost is significant for the cash-strapped district. “But we need to find out what has happened in the past; we need to come to a conclusion to this problem; and we need to put it to rest.”

Trustee Aubrey Hooper, one of the longest-serving board members, abstained from the vote, saying it was a lot of money to spend on an investigation likely to find only incompetence. He worried that DeSoto would have to repay costly federal grants if the firm found that money was misspent.

“I think the unintended consequences are going to be severe to the district,” he said.

Brown said the firm’s goal is to look for fraudulent spending or wrongdoings and then provide the district with enough evidence to seek civil remedies or file criminal charges if merited. The team will also point out flaws in the district’s financial procedures and recommend fixes.

“We’re going to tell it like it is,” he said.

The team’s work will focus on five areas — excessive spending, procurement fraud, construction and bond funds, federal grants, and fraudulent book entries.

For example, Brown said, his team was alerted to at least one transaction in DeSoto where $60,000 appeared to have been charged to a bogus account one year, and the following year it was reversed. Such a maneuver would have made it possible to avoid scrutiny from within the district, Brown said.

Brown also noted that the team has already seen red flags from previous district spending that doesn’t seem to have anything to do with “the mission of the school district.” He did not elaborate.

In construction spending, the firm will look into costs at the Katherine Johnson Technology Magnet Academy campus, which opened in 2018. DeSoto officials were surprised last school year to learn that the district was still on the hook for $2.6 million in cost overruns for that project.

DeSoto officials started investigating the district’s finances in the spring of 2018 amid the resignation of several former administrators. The fallout from DeSoto’s finances led to a tense school board race in May, when the former board president lost reelection by eight votes.

DeSoto Superintendent D’Andre Weaver, who accepted the top job in September 2018, said the district has made great strides to get on the right track.

He said the district has fixed major financial deficiencies identified in the past year, particularly with the help of retired school finance officer Deborah Cabrera, who worked as interim CFO for the district. And although the district recently failed financial accountability ratings by the state based on 2017-18 data, the district’s annual independent audit released in November showed many improvements.

But at Thursday’s meeting, the board threw a wrench into transition plans for newly hired chief financial officer Kimberlyee Chappell. Trustees balked at the $48,000 Weaver asked for so Cabrera could work alongside Chappell part time until the summer.

“We’re not in the fire, but we’re not out of the woods yet,” said Weaver, noting that the proposal was the most important item he’s brought before the board. He added that he was not filling a principal supervisor position but taking on the duties himself in addition to his superintendent role in order to help fund the transition.

But the discussion grew heated as trustees pushed back against the cost, saying it was too much for work that should be under the purview of one CFO. Some noted that they previously asked for a detailed breakdown of what the transition duties would include and have yet to receive that information.

“Dr. Weaver, it’s not that we don’t support you … but you railroaded us into having a public conversation because, again, we have nothing to support what you’re asking for right now,” Trustee DeAndrea Fleming said.

The board asked Weaver to renegotiate the costs and details before bringing the request back to the board for consideration in February.