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Financial Transparency can no longer be taboo with DPS

By Michael D. Wynn, CFE

"The basis of our political system is the right of the people to make and to alter their constitutions of government." George Washington

Today, public school accountability still depends largely on financial transparency and compliance. In a Michigan Citizen, February 2007 article, I made a call to promote financial transparency.

Financial transparency still means a financial system that is transparent�although we are now finding out that $46 million in school funds may not be so transparent.

Public education funds exist to educate our children. The funds are mandated by law. However, it seems as if some people think public education funds are their own private company and they can do what they want with the dollars.

Apparently the DPS system of internal controls, or the lack there of, was tested. We see how weak they really are.

I am a former Detroit Public School Internal Auditor who was among the first to be terminated by former CEO Dr. Kenneth Burnley and his �process of elimination�. Burnley shut down the Office of Internal Audit during an era in which financial scandals involving Enron, Arthur Anderson, WorldCom, Tyco and others were on the rise.

At the same time, many schools were hit with the shocking news of lost or misappropriated funds by school administrations that had no regards for the education of children.

Like the Roslyn Union Free School District, just outside New York, where in October 2002, the Board of Education (Board) of the District was first informed that Pamela Gluckin, Assistant Superintendent for Business, stole $223,000 from the District. The Board allowed Gluckin to reimburse the District $250,000 ($223,000 plus accounting and legal fees), surrender her administrator�s license and retire, without the District pursuing criminal charges against her.

However, in early 2004, further allegations surfaced alleging that there was a substantial misappropriation of District funds over a period of several years. Gluckin was arrested and charged with stealing more than $1 million from the District.

Soon thereafter, Superintendent Frank Tassone and Account Clerk Deborah Rigano (Gluckin's niece) resigned and were ultimately arrested and charged with first and second-degree grand larceny, respectively. In response to numerous requests and concerns in the community, the State Comptroller initiated an audit of the District on June 1, 2004.

The audit that was completed in 2006 would later find that about 30 plus people were involved with the embezzlement and fraud of stolen or apparently misappropriated funds in the amount of $11,251,365 from the district, which included:

Personal credit cards
$5,902,544

Private Mortgages and Loans
1,137,939

Home Depot
609,000

Food
594,121

Salaries and Benefits
582,786

Gluckin-owned companies
255,537

Computers and Electronic Equip.
249,883

Private automobiles
206,798

Insurance premiums
160,171

Travel Expenses
133,619

Other Personal Expenses
112,983


Apparent Misuse of District Funds:

Related Party Consultants
1,074,547

Postage and Shipping
166,945

Other Questionable Expenditures
64,492

Total
$11,251,365

By the way, this school district did have some internal controls in place, however the problem was independence and paid outside vendors who were assigned to monitor the controls.

For example, two employees who could have identified the misappropriation, the Internal Claims Auditor (a vendor) and the Treasurer, were not doing their jobs to ensure that only appropriate and authorized payments were being made. The external auditor and contractor, a CPA firm that audited the District once a year, also had conflicts of interest and performed an audit below professional standards. The firm failed to identify the millions that were apparently misappropriated.

And other employees in the District, who may have been aware of the apparent misappropriation, benefited in different ways. Also there was loved ones such as Stephen Signorelli, who was sentenced in 2007 to serve one to three years in prison. Mr. Signorelli, 60, of Manhattan, was the domestic partner of Dr. Frank A. Tassone, Roslyn schools superintendent. Dr. Tassone has admitted to stealing more than $2 million during his tenure between 1994 and 2002.

The case papers on record and the prosecutors indicated that Dr. Tassone had been the schools chief for about five years, and had already begun embezzling funds, when he arranged to have Mr. Signorelli receive a no-bid contract to prepare and print computer teaching handbooks for the school district. Mr. Signorelli, a computer consultant, had no previous business with the school system.

This case may seem unusual, but as an Auditor, I know this sort of thing can easily go on in many school districts where there are weak or no internal controls. (To see the entire Roslyn Union Free School District Audit report and other school fraud cases go to: www.gotschoolmoney.com).

As far as DPS, I know that the parents and community will still call for a school system that efficiently spends tax dollars on a quality education for our children, and that this system will honestly and properly review the fiscal management operations of the district.

I did commend Mr. William Coleman III for his plan to hire an Inspector General and restore DPS Office of Internal Audit�which hasn�t happened to date. Mr. Coleman himself, now faces charges of bribery, conspiracy to commit bribery through a program receiving federal funds, and conspiracy to commit money laundering from a businessman whose company was awarded $39 million in technology contracts in 2002 and 2003, according to a federal indictment.

Yet, I feel refreshed, renewed and hopeful. I am glad to see the actions and efforts taken by the current DPS Superintendent Dr. Connie Calloway, in her attempts to get the district closer to financially fitness and ready to accept a system of financial transparency.

The school district should also considers the use of guidelines such as the American Competitiveness and Corporate Accountability Acts in which Congress made requirements for the governance and management of a company regulated by federal securities laws.

This corporate accountability act which is referred to as the Sarbanes-Oxley Act, applies only to such publicly traded companies but can provide certain provisions to nonprofit corporations and public bodies including public school districts.

I believe the effect of Sarbanes- Oxley Act has really been to redefine corporate responsibility.

So why not school officials? They also need to understand the climate of financial transparency and accountability when exercising their own financial oversight obligations.

Financial transparency is a must, even when it�s not legally required. A different approach to accountability and transparency can be envisioned, and planned to improve our school system. Yes, there is potential for DPS to succeed. Help is on the way!

Michael D. Wynn can be reach by email winwynn@coachwin.com.