State Comptroller, Jason Mumpower called the findings of a partial forensic audit of Memphis Shelby County Schools, “the worst audit report I’ve seen.” State Senator Brent Taylor (R-Eads) said the district was “about as organized as a $5 bin at Walmart.” Speaker of the House, Cameron Sexton (R-Nashville) said, “It’s such a failure that at some point, do you need more information to understand what needs to happen?”
In a rush to justify legislation to take over the Memphis Shelby County School District before the legislative session concludes, top legislative leaders hosted a Capitol Hill press conference to release partial results of a $7.6 million forensic audit. There is little argument that the results are troubling and that reforms are essential, yet the political hyperbole and dramatic headlines have overshadowed some of the most important findings.
After spending most of the day reading the 329-page report, here are 7 truths to keep in mind.
1. No one is talking about the costs to implement changes
There are systemic failures throughout the audited departments. Internal control lapses, beyond sloppy recordkeeping and haphazard expenditure approvals that violate school district policies, are just some of the problems pervasive throughout the district. CLA, the forensic auditing firm, recommended literally hundreds of changes to be implemented.
A significant portion of the audit is dedicated to information technology, but the Comptroller requested that the bulk of the findings be redacted. The redaction was intended to prevent bad actors from exploiting MSCS’s security vulnerabilities.
As a reminder, MSCS has a $1.8 billion operating budget, employs 14,000 people, and serves 106,000 students across hundreds of facilities. It is a massive operation. The relevance is that many of the recommendations in the audit are system-wide and enormous undertakings.
For example, CLA recommended that “management design and implement a formal, organization-wide, succession planning program…” (Audit pg. 22) It is unlikely that any person in management or a team of managers has the capacity to review all administrative positions and responsibilities to develop this plan. The system may even lack internal expertise for this project. That means hiring outside consultants for thousands of dollars.
Based on the redactions to the IT section, it is also likely that there will be recommendations to replace equipment, update or replace software, and provide training on the new equipment and software. It won’t be cheap.
The number of outdated policies seems to be so extensive that it may require outside legal counsel to draft the policies and shepherd them through an approval process. That process will require various iterations of each policy, and with lawyers, time is money.
The bottom line is that the $7.6 million cost of the audit is just the beginning.
2. Firing of 1000 positions a significant factor in audit results
Auditors, who conducted 109 interviews, found that institutional knowledge had been “eroded” and specifically cited the appointment of 3 different superintendents during the audit period and the loss of 1000 positions during the short tenure of Dr. Marie Feagins. Interviewees consistently mentioned management team instability, abrupt changes to procurement, the elimination of over 1000 positions, and a lack of consistency and enforcement of document retention policies as the primary drivers behind the need for a forensic audit. (Audit pg.2)
3. Potential waste and abuse, but no fraud found (so far)
As has been widely reported and misreported, auditors have identified $1,112,750 that met the definition of “waste and abuse.” CLA also reported an additional $1,729,522 that did not rise to the level of waste and abuse but violated district policies. While this is nothing to celebrate, it is notable that so far, CLA has not found any examples of fraud. This is despite social media posts for Senator Marsha Blackburn and conservative commentator, Todd Starnes, that the audit uncovered fraud. Of course, it is important to remember that the audit is only 25% complete.
4. There are competent people within the MSCS finance staff
There has long been a narrative that the district office is bloated and filled with people unqualified to do their jobs. Like any organization of this size, it is probable that there is some “dead weight.” In the conclusion to the Internal Controls executive summary, auditors wrote,
“Overall, we thought individuals were very knowledgeable of the processes and procedures for which they are responsible and were able to provide the information needed to complete our internal controls assessment procedures in a timely and efficient manner.” (Audit pg.14)
5. Saying the waste and abuse found is less than 1% of the budget isn’t the whole story
For those arguing that roughly $2.8 million identified is an infinitesimal portion of the total budget, auditors do not review every document. They review a representative sample. Auditors may determine that, as a percentage, the amount is not material. However, it is likely that the total, if it can be determined, is substantially more than $2.8 million. Even if it is only $2.8 million, it is far more money than most of the families served by MSCS will ever see in a lifetime.
6. Audit is over budget
It is more than a bit ironic that state officials are scrutinizing the spending and accounting of MSCS with an audit costing more than $1.6 million over the original $6 million allocated. Of course, state officials blame it on MSCS.
7. The school takeover was always going to happen regardless of the findings
Finally, any assertion that a “clean” audit could have allowed MSCS to avoid a state takeover is gaslighting. The momentum and the votes have existed since the legislature adjourned last year. The audit was nothing more than a really expensive playground, “We told you so.”
What is also gaslighting is continuing to claim the legislation is an “intervention,” not a state takeover. While the 9-member board that will oversee the system must come from Shelby County, they are appointed by two guys who live in Nashville and another who lives in Oak Ridge. Two of those individuals, the Governor and the Lieutenant Governor, will not be in office after November (Governor is term-limited, Lt. Governor retiring), and have nothing at risk politically.