A recent third-party audit of Houston ISD’s $1.89 billion bond controversy found that weak and non-existent budget policies by the school board, along with several other key factors, were in fact responsible for the district’s $211 million shortfall.
The scathing review by the outside auditors KPMG confirms many of the earlier findings by the HISD Office of Internal Audit in October 2015. The internal auditor, Richard Patton, previously stated:
“We agree that excessive supply and demand can create tight market conditions that cause higher than normal prices such as those experienced with other local school districts and Houston area construction projects, but other factors such as an ineffective CMAR process, cost creep from excessive architectural designs, inadequate project cost controls, and the overall effectiveness of bond program monitoring are critical components, the effects of which could be easily misinterpreted as inflation due to market conditions.”
Patton, who is regarded as a whistleblower on the issue, was later suspended by the school board in what he believes was an act of retribution after he raised concerns about questionable activities by some board members. After a suspension of several months, Patton was eventually reinstated, and is now suing the district for what he claims was retaliation and an attempt to silence him.
The district released a statement rejecting Patton’s claims, accusing him of, “waging a public relations campaign built on false claims against elected members of the Board of Education.” The statement continued, “The district looks forward to the opportunity in court to challenge each and every false claim that Mr. Patton and his personal advisers have made.”
The outside audit differed from Patton’s claim that inflation did not significantly contribute to the $211 million shortfall, stating that inflation was a key contributor. However, the district should have foreseen inflation as a factor and planned accordingly. The fact they did not further diminished their credibility as capable public stewards.
The $1.89 billion bond was passed in 2012 to fund the construction and renovation of 40 schools. Once the projects were underway, it became apparent the actual costs of construction were exceeding the original estimates. Blaming cost increases on rising prices in Houston’s humming construction market, the HISD board approved an additional $211 million to fund the program.
While the auditors did acknowledge the rise in construction costs and inflation were factors contributing to the shortfall, they also criticized several ways HISD management mishandled bond funds. The report listed “incomplete project assumptions”, “weak or nonexistent policies and procedures regarding budget development”, and “lack of conceptual planning” as some of the reasons why the district came up $211 million short.
These revelations of the district’s fiscal indiscretions come as HISD is asking voters for $162 million more in taxes to send to the state as part of the “Robin Hood” program. The proposition will be on the November 8th General Election ballot.