LEADERSHIP 101!

Calloway: Schools' accounting is a crime

She wants prosecutor to see insurance, other areas

December 18, 2007

BY CHASTITY PRATT DAWSEY

FREE PRESS EDUCATION WRITER

Detroit Public Schools Superintendent Connie Calloway said Monday she has recommended that the district's lawyer and school board seek criminal charges in connection with its risk management office and perhaps two other areas she would not identify.

In an interview with the Free Press, Calloway said that she and her chief financial officer continue to be astounded daily by the level of what she considers fraudulent and messy accounting in the $1-billion budget.

Problems include contracts smeared with correction fluid, checks sent out without approval, and the lack of a system for evaluating the performance of the district's hundreds of contractors and vendors.

"Every day is a day of financial discovery," Calloway said.

The district already has asked the Wayne County Prosecutor's Office to review problems in its risk management office, which oversees issues such as insurance and workers compensation. Calloway said Monday that one or two other issues should be referred to the prosecutor, but she provided no other details.

Calloway said that when she arrived in Detroit last summer, she was aghast at the dysfunction within the school system and immediately decided that she would put some basic processes in place.

In a little more than five months on the job, she has hired new top-level executives, sought a new system for textbook orders and introduced a computer-based program for addressing student weaknesses on MEAP questions.

Calloway said she plans to be with the district five years at the most. In that time, she said, she aims to "change the climate, culture, condition and expectations" in an effort to improve the academic results.

But parents like Chris White want measurable results soon.

"Time out for the rhetoric. We need the basics, like safe schools and delivery of textbooks," said White, a coordinator for the Coalition to Restore Hope to DPS, which complained in October to the state about a lack of textbooks at some schools.

Calloway confirmed during Monday's interview that textbooks did not arrive at some schools in time for this school year. In fact, those books still have not arrived, she said.

Before Calloway began work, the district decided to close 33 school buildings last summer because of declining enrollment. Textbooks from those schools were supposed to be distributed to other schools where those students were assigned, but they are still sitting in a warehouse, Calloway said.

The vendor responsible for moving the books was let go, Calloway said. By the start of next school year, she said a new system would be in place and books delivered on time.

Calloway described how she held a meeting with top executives and went around the room, asking who was in charge of making sure books arrive in classrooms.

"They literally tell me, 'No one,' " she said. "It's incredulous to me."

Between financial crises and the 17 to 19 school board and board committee meetings she must attend each month, Calloway said she has had too little time to concentrate on academic improvements.

However, Calloway said, she has introduced an online program that she used in her former job in Normandy, Mo., that will allow teachers to look at each problem that their students answered on a standardized test. It is intended to help teachers pinpoint specific difficulties.

Other districts in metro Detroit are spending millions on such software with help from intermediate school districts. In Oakland County, at least 26 districts use programs that allow educators to compare multiple tests with the state standards, and 18 have programs that allow teachers to analyze their own classroom tests.

By the end of this school year, nearly all districts in Wayne County will be able to analyze performance data with a new real-time program purchased with help from the Wayne County Regional Educational Service Agency, said Judy Bonne, the agency's executive director for instruction.

The agency is spending $1.2 million on the program; districts eventually will pay a per-student user fee for its maintenance.

DPS has employed several performance analyzers in the past, teachers and officials said. The challenge is getting teachers to use them.

"I can't compel anyone" to use the data, Calloway said, adding that she can only "offer it and make it available."

Doug Carey, a math teacher at McMichael Technological Academy who has worked 11 years in the district, said what Calloway proposes "would be minimally useful."

Carey said he's no fan of standardized tests, but he found that this year's MEAP test had more questions germane to what students need to know to be prepared for high school.

"There are so many kids, their responses are so different on the tests and basic skills are lacking," he said.

Calloway said the district's biggest day-to-day challenge continues to be a basic one: making payroll. This year's budget includes at least $20 million in spending that was not accounted for during the budgeting process, she said.

The district has about 105,000 students and could face financial disaster if enrollment slips below 100,000. By law that would mean more charter schools could open, likely draining away more students and funding.

"This is such a critical time for Detroit," Calloway said. "Process determines product."

Contact CHASTITY PRATT DAWSEY at 313-223-4537 or cpratt@freepress.com.


Connie Calloway: 'Every day is a day of financial discovery'


December 18, 2007

Here are excerpts from an interview Monday with Detroit Public Schools Superintendent Dr. Connie Calloway. You can also hear Calloway at freep.com/opinion.

QUESTION: What's the most pressing thing on your agenda these days?

ANSWER: The most pressing issue is always making payroll. In a district of our size, with our budget, we should always have a $50-million balance on the books. That hasn't been the case since I was hired. When I came here in July, they were in a deficit mode, and we have juggled.

There are several high-ticket expenditures that should have been taken care of in last year's budget that were not. So they're in the 2007-08 budget. For example, it's estimated that the expenses related to the right-sizing program were somewhere in the neighborhood of $8 million, but they were not paid for in '06-07.

Q: You mean the cost of closing schools?

A: Our district calls it right-sizing. Yes.

Q: So just the expenses of shutting down?

A: Shutting down. Transporting furniture. Providing space in the warehouse. Hiring companies to conduct inventory. Securing the building --

all of that.

There is also a federal law that, by the year 2008, all employees have an FBI check in their file. Districts have known about this for several years, and Detroit, with nearly 16,000 employees, has not put that program in place. The expense is approximately $60 per employee, and the districts typically pay for that, or they set a policy that any new employee pays it. We will comply with that federal guideline, and that will be to the tune of approximately $1 million.

With the last-chance schools, in 2005-06, they were first advised that there would a $5.9-million penalty for not following guidelines, and the state granted them a grace year to straighten the program out. The Detroit schools increased their last-chance schools from four to 14 without implementing the guidelines. The window of opportunity had passed by the time I arrived, and there was a $5.9-million penalty for '06-07 that was not in the budget.

Q: What about the impact of declining enrollment?

A: Since the riots, attendance started to drop off sharply and declined approximately 10,000 students a year. According to the demographic report that we looked at, this was the first year that the drop was 7,000, as opposed to 10,000. There are other factors that contribute to declining enrollment: labor management issues, or a strike or the threat of a strike. Parents want stability.

So there's much that we need to do in terms of retaining our students, and a lot of that will happen through achievement, through safe environments, through highly professional and competent staff, through managing resources, and regaining confidence that we are careful stewards with the money and funds.

Q: How will you achieve that long-term?

A: When I agreed to accept this huge challenge, it was with an understanding that I was willing to commit for five years. In that time, I don't just want to put my program in place. I would like to institutionalize systems and accounting practices. We're not here just to fix it for the moment, but to put people and systems in place that will keep the district moving in a way that it should. Every day is a day of financial discovery. ...

(Here, the school district's chief financial officer, Joan McCray, continues.) Almost every transaction is questionable, up to and including payroll. There are contracts with advanced payments. There are employees who have been paid loans. ... There are contracts where the language is inappropriate for the contract. No original contracts, pages missing, contracts whited out. Fraudulent checks. ...

(Here Calloway continues.) The choice of the superintendent is to meet the public demand and get the job done, or hold the person accountable.

This is a large district. I can't do everyone's job. I have to hold people accountable. So if the job isn't done, then it's up to me to say: We need to find a competent, qualified, willing person. So my first test case was the community's response to me filling some high-profile positions. My responsibility is to put competent, knowledgeable individuals who are willing to look at new systems to move the district forward. Once we put people in places that are going to bring in systems of change, we begin to fix the system.

Q: Are you likely to take something to the Wayne County Prosecutor's Office?

A: When we find a questionable practice, we go right to general counsel. General counsel then advises us where we need to go. ... We have requested criminal investigation or involvement in at least two or three matters. It will be under advisement of the legal counsel and, of course, the board's approval, if we move forward with those matters.

Q: Is it right to say you're less concerned with holding people accountable for what's happened in the past than you are with getting the right people in place now?

A: I prefer to say that I've been forced to make a choice: I'm either loyal to people or to accountability. And I'm going to be loyal to accountability.

Q: Does that mean you're talking about making some rather wholesale changes in your administrative ranks?

A: They've been made, and they have been very difficult. I'm still suspect. I'm still the outsider.

We cannot be an employment agency. We have to be a school. So I have to make that choice, and the board has been fully supportive. It was a struggle initially, because they were very concerned about whom this new person was going to select. For me, people who are honest, ethical, loyal and competent -- those are the qualities I need. Thus far, I haven't had the opportunity to attend to our number one challenge -- achievement -- because every day is a day of financial discovery. Every day.


What the superintendent said ...

December 18, 2007

On systematic changes she plans

• "We're not just here to fix it for the moment."

On personnel decisions

• "I've been forced to make a choice -- either be loyal to people or to accountability, and I'm going to be loyal to accountability."

• "We cannot be an employment agency. We have to be a school."

• "The challenge is to find willing, qualified, competent, able people ... who are willing to put new systems in place ... someone who isn't going to cut a deal under the table."

On textbooks

• I am "astounded that a large system -- almost as big as a city government -- has not handled its most critical piece: textbooks."


Calloway points schools upward


December 18, 2007

History makes it hard to give too much credit too soon to Detroit school superintendents.

But a half-year into the job, Connie Calloway merits a measure of it, if only for her candor about the scope of DPS mismanagement and her commitment so far to establishing a process-driven administration that will be transparent about what it's doing and why.

"We cannot be an employment agency," Calloway said Monday in a meeting with the Free Press editorial board (see opposite page) in which she outlined some of the haphazard, inefficient and possibly criminal practices she has found while taking charge of Michigan's largest school district.

"Every day is a day of financial discovery," Calloway said.

But rather than dwelling on the mess in her lap, Calloway is trying to lead the district to higher ground. She has led a major shake-up of top management, and brought aboard a new general counsel, assistant superintendent, and facilities, procurement and contract chiefs. Calloway said the general counsel is reviewing three issues that could be referred to the Wayne County Prosecutor's Office. She also said she has had to put a process in place to make sure that school textbooks are moved out of warehouses and into classrooms.

In-between all of that and school board meetings, Calloway is implementing a district-wide data system that will allow teachers, staff and parents to track a student's progress and tailor instruction to needs. Similar systems have been implemented in other districts and even some entire states.

To make it work fully in Detroit, the Calloway administration needs a partner in the Detroit Federation of Teachers, in effect a better working relationship with the teachers' union than past superintendents have had. The two need not be adversaries if both are focused on helping children, improving the schools and stopping the hemorrhaging of students that is costing DPS millions of dollars in state aid that it cannot afford to lose.