HISD may have skirted contract laws
Audit: District did end-run around spending caps, missed overcharges
Houston ISD overpaid contractors and may have violated state law by exceeding construction contract limits without required school board approval, according to a newly released audit.
The auditors found that the district appeared to skirt a $500,000 contracting cap multiple times by improperly submitting separate work orders tied to the same project. The auditors also noted that the district failed to catch inaccurate and inappropriate charges and at times asked the school board to sign off on work after it had been done.
“State law and district policies were at the very least ignored but more likely knowingly circumvented,” HISD trustee Anna Eastman, a member of the board’s audit committee, said Wednesday. “I’m not satisfied with the administrative response of ignorance and, ‘We’ll do it differently next time.’ Someone needs to be held accountable for this.”
In a written response, HISD’s construction and facilities department said the district will seek repayments from the contractors that appear to have been overpaid. One example cited shows the district is due $16,179, but auditors did not calculate the total amount due for other questionable invoices.
The construction de-
partment said that the approval process was skewed because the district was trying to complete projects over the summer. In one 2014 case, the department said, it attempted to comply with requirements “in a manner consistent with the time constraints of the project.”
The audit looked at so-called job-order contracts, a stateapproved system that allows governmental agencies to keep contractors on call for repair, renovation and minor construction work without having to competitively bid each project.
Job-order contracting, commonly called JOC, has been a trouble spot for HISD. District audits have found problems with the selection process for job-order contracts in 2008 and 2014. An ongoing civil lawsuit against former HISD trustee Larry Marshall, filed in 2010, alleged bribery influenced the selection process.
Demanding more audits
On a broader scope, HISD’s stewardship of public funds for major construction projects also has come into question recently. Juliet Stipeche, the HISD trustee who chairs the school board’s audit committee, called Sunday for internal and external audits of the district’s 2012 voter-approved bond program, which includes money to rebuild or renovate some 40 schools.
The latest audit focused on the most expensive job-order projects. Texas law says governmental bodies, such as school boards, must approve each job that exceeds $500,000. Auditors, however, found that the HISD administration did not always seek the required board approval.
For example, the audit said, HISD issued two job orders to the same contractor on the same day at North Forest High School in June 2013. Each was for up to $480,000. One was for asbestos abatement; the other was for demolition. Because the jobs were part of the same project, the audit said, the district should have sought school board approval for a $960,000 job. The audit noted that state law says districts should not make “separate” or “sequential” purchases to skirt a process that involves buying at once.
HISD’s construction department responded that the work resulted from an “immediate need” to repair North Forest facilities after the state ordered the district to take over the troubled school system that summer. The construction department added that it believed the district’s procurement department supported its approach, based on a memo issued later, in April 2014.
‘Paid for a guesstimate’
The audit also faulted HISD for not verifying the costs of several projects. For North Forest High School, the prices quoted to the district were “not to exceed” $480,000. The district ended up paying the maximum amount, the audit said, without checking the true cost.
“So we paid for a guesstimate,” HISD’s construction audit manager, John Gerwin, told the school board audit committee Tuesday, referring to numerous projects.
Auditors recommended that the district seek a final accounting for several projects and try to recoup funds if necessary.
In addition, auditors found a “lack of internal controls,” with contractors able to charge for extra line items that should have been covered by the standard contract deal.
HISD spokeswoman Holly Huffman said the district administration declined to comment further on the audit claims that state law was violated.
“Superintendent (Terry) Grier has seen the report and believes it’s a fair audit,” she said. “We’ll let it speak for itself.”
After the audit department released a report in March criticizing the selection process that the district used to choose some joborder contractors in 2014, the district suspended the use of JOCs.
The new audit said that HISD could benefit from job-order contracting, but it urged tighter monitoring and appointing a well-versed manager to oversee the program.