Chad Livengood

Detroit News Lansing Bureau

Lansing — The outgoing emergency manager of the Detroit Public Schools Community District said Tuesday an investigation by the district’s inspector general could produce more criminal charges in the district.

Retired Judge Steven Rhodes hired Inspector General Bernadette Kakooza last April amid a federal investigation of a $2.7 million kickback scheme with a contractor involving 13 administrators who are no longer employed at the Detroit school district.

Rhodes declined Tuesday to go into specifics about what potential wrongdoing there might be after testifying before a House committee on the district’s progress since lawmakers passed a $617 million financial rescue of the school system in June.

“She does have several matters under investigation at the present time that may result in further criminal investigations and charges,” Rhodes said of Kakooza.

In August, the DPSCD inspector general outlined new cases of fraud and theft in a report, including a payroll error resulting in an employee being overpaid by $50,000, fraudulent teaching credentials and missing equipment and money.

Rhodes would not say Tuesday whether Kakooza’s current investigation is related to her earlier findings.

The new debt-free Detroit school has developed “much stricter controls” on purchasing to try to prevent fraud, Rhodes said.

“Still, we understand that there are no financial controls that are foolproof against clever and smart criminals who are intent upon theft and fraud,” Rhodes said.

Rhodes, whose last day as emergency manager is Dec. 31, and the district’s interim superintendent, Alycia Meriweather, testified before the House’s School Aid appropriations subcommittee.

Rhodes also disclosed for the first time the school district has paid the state’s pension fund nearly $30 million that had been diverted from federal grants to the district’s general fund by his predecessors.

“We have repaid that money,” Rhodes told reporters after the hearing.

The Detroit school district’s past-due pension debt to the Michigan Public School Employee Retirement System stood at $132.6 million as of Nov. 11, down from $163 million on June 30, according to the state Office of Retirement Services.

Meriweather said the Legislature’s debt relief for the school system has helped educators turn their attention back to improving academic achievement. But she warned it could be years before lawmakers see progress in test scores and academic growth.

“It will take us eight to 10 years to get there,” she said. “We have a lot of work to do.”

Rhodes said he’s turning over reins of the district to a newly elected Detroit school board with a projected fund balance of between $40 million and $50 million for the current fiscal year.

“The school board is the new control for public education in the city of Detroit,” Rhodes told reporters.

As part of the state bailout of DPS, Detroit’s Financial Review Commission retains veto power over the school board’s spending plans once Rhodes leaves office.

Rhodes said the surplus will help the district with cash-flow next summer when there’s a gap in School Aid payments from the state.

Lawmakers continue to scrutinize the finances and operations of the state’s largest school system.

Rhodes urged them to give the district a chance to turn itself around after decades of decline and seven years of state-imposed emergency management.

“I think DPS just needs to be left alone for a little while to give this academic plan a chance, to give our fresh start a chance and to prove to our city, our region and our state that we can succeed,” Rhodes said.

clivengood@detroitnews.com

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Twitter: @ChadLivengood