Michigan audit faults EAA for poor budget controls

Shawn D. Lewis, and Jennifer Chambers

The state-created Education Achievement Authority suffered from a “consistent lack of controls” in information technology that resulted in poorly maintained budgets, vendors being paid without contracts and a lack of oversight in purchasing, a state audit concluded.

The 34-page audit, filed by the state on Jan. 10, 2014, is among the documents that EAA officials say led to an FBI investigation into the troubled school system created by Gov. Rick Snyder in 2011 to turn around failing schools in Detroit. The Detroit News obtained the audit through a Freedom of Information Act request.


“We have concluded that the EAA doesn’t appear to employ a comprehensive departmental budgeting, forecasting and spending tracking methodology,” the audit reads. “For example, until recently EAA finance was unclear as to how and when grant funds needed to be planned and used across EAA departments.”

“... Our observation found that multiple individuals within each school (are) performing their own purchasing function, and that the schools are not coordinating with each other for maximum potential savings through volume purchasing. We observed no process for standard checking, security checks or strategic sourcing prior to purchase ... Additionally, we have seen no information that provides for penalties/deterrents for deviating from the purchasing handbook.”

No civil or criminal charges have been filed as part of the federal investigation, but The News learned in October that the FBI and Justice Department subpoenaed personnel files and bank records or email account information for more than a dozen current and former EAA officials as part of a wide-ranging corruption investigation.

The subpoenas are part of an investigation into whether officials at the EAA and Detroit Public Schools received bribes or kickbacks from contractors.

In a statement Wednesday, EAA spokesman Robert Guttersohn said the audit covered a period when John Covington was chancellor of the state-run recovery district. Covington resigned in June 2014, five months after the audit was filed.

“The financial irregularities and loose controls noted in the state IT audit occurred under the leadership of a previous chancellor and his management team,” Guttersohn said. “The report led to the internal review of all contracts, which eventually uncovered the misuse of public funds intended for Detroit students.

“All suggested changes made in the IT audit have been addressed and resolved.”


Guttersohn added: “Veronica Conforme became interim chancellor of the EAA in June 2014 and was named chancellor in November 2014, after the financial irregularities came to light. Once on the job, she immediately instituted a series of tough financial reforms and procedures to fix the problems created by the previous administration and improve the procurement and contracting process in the district.”

The EAA spent $23 million on its IT budget in fiscal 2014, including a $16.6 million one-time upgrade. Its budget for 2015 is about $7.5 million, and for 2016 it’s projected at $7.7 million.

The EAA requested the state audit to help the district resolve technical issues in the classroom, make staffing recommendations and review contracts. Its students were having trouble with wireless access and the district was struggling with a large number of stolen or missing laptops.

David Behen, the state’s chief information officer, and Rod Davenport, the state’s chief technology officer, led the audit with a team of state investigators touring each EAA school and meeting with teachers and administrators in November 2013. They also met with all EAA IT suppliers and several staff involved with IT.

Audit investigators wrote in the audit: “One conclusion reached is that the current state IT environment and its evolution from the inception of EAA is an area of concern. Even after meeting with EAA staff and IT suppliers on multiple occasions, we struggled with and continue to struggle with the history, disposition and internal controls of IT products and service.”

In the area of contracts, the state audit team reviewed 20 current IT infrastructure and service contracts and found duplicate service offerings from a variety of contractors, some of the contracts appeared to have either not performed adequately or have not provided the required services, causing the EAA to contract for the services with other providers, the report states.

Agreements were a mix of blanket purchasing orders, contract task orders, emails and phone conversations, the auditors found.

The state recommended “software Lojack” to track laptops and upgrading the Ethernet switches in the schools to increase capacity.


“There were some concerns about potential problems that were identified by the state, which were presented to Chancellor Conforme, who took action,” Snyder spokesman Dave Murray said.

Bank records and other documents were subpoenaed for a number of former EAA officials , including Covington, chief of staff Tyrone Winfrey and former Mumford High School Principal Kenyetta “K.C.” Wilbourn, according to federal grand jury subpoenas.

Federal agents also were interested in contracts with vendors who supplied education materials, student-to-student conflict resolution coaching and sporting goods, according to documents obtained through the Freedom of Information Act.