DETROIT -- One of the two finalists to lead a state-mandated financial takeover of Detroit Public Schools is a principal in a Bingham Farms accounting firm that has an ongoing contract with the district, drawing allegations of a potential conflict of interest, should he be chosen for the job.
Jack Martin, chairman of Martin, Arrington, Desai & Meyers, P.C, said he believes his firm's contract for Medicaid reimbursement and billing, which netted more than $700,000 in fiscal year 2007-08, wouldn't harm his efforts to overhaul the ailing system.
The Detroit school board voted on Thursday to extend the contract through June 30.
The firm, formerly called Martin Arrington and Hasse, has worked with the district on the Medicaid billing for years and recently worked as a subcontractor on the district's annual audit, which is required by the state, Martin said. The firm has also worked on transportation and procurement with the district, he said.
If named to the post, the Bloomfield Hills resident said he would distance himself from work on the Medicaid billing contract.
"I would have to recuse myself from decision-making on that," he said, adding he hasn't yet accepted or been offered the spot.
Yet some board members say it's a problem that the man who could oversee all of the district's money is reaping big bucks from the struggling system.
"We should not have anyone in charge over the finances receiving money as a vendor for Detroit Public Schools," said board member Marie Thornton, who supported appealing the state's decision to take over the district's money. "How can that person be objective or unbiased in making decisions? I believe there should be someone who is truly independent."
State Superintendent of Public Instruction Mike Flanagan on Wednesday floated Martin's name and Robert C. Bobb of Washington, D.C., a senior management consultant for a consulting firm with offices across the nation, as nominees to serve as the district's emergency financial manager. The manager would have control over all fiscal decisions for at least a year, including budgeting and contract negotiations. Gov. Jennifer Granholm will make the final appointment.
Martin Ackley, spokesman for the Michigan Department of Education, said the state knew of Martin's work with the district before naming him as a finalist.
"We don't see any conflict of interest with the contract," Ackley said. "We assume the Detroit board makes decisions based on the quality of work to be done," he said. "If this company can do the job and do a good job, then we wouldn't see a conflict with that."
No law prohibits a contractor being named emergency fiscal manager, he said.
As part of the Medicaid billing contract, the firm seeks reimbursement for Medicaid services provided to the system's low-income students.
The firm gets a percentage of the recovered reimbursements, he said.
According to district documents, the firm reaped more than $727,000 for fiscal year 2007-08. The contract amount for the annual audit was unavailable.
Martin, who pledged complete transparency if selected, said he would bring extensive knowledge of the system.
"I certainly know the organization, the people and the problems," he said. "I have a pretty good handle on what happens down there."
He also cited his work in helping turn around the management in the U.S. Department of Education, which had the reputation as one of the worst-managed Cabinet agencies, he said. During his tenure as chief financial officer there, the department was a first-time recipient of the Association of Government Accountants' Certificate of Excellence in Accountability Reporting.
DPS board Vice President Joyce Hayes-Giles said Martin's work on the district's annual audit would be a conflict, if he were named fiscal manager, because auditors must be objective. But if the firm discontinued its work on the audit, his experience would be a bonus, she said.
"I could see that as an advantage as he is already pretty familiar with the district and knows the operation," she said.
Hayes-Giles said she doesn't believe the Medicaid billing contract would be a conflict as long as he filed disclosure statements.