From a press release:

“In four years spanning the Fenty and Gray administrations, the District’s school modernization program violated statutory requirements on transparency and funding, failed to assess and secure contingency savings, and spent more per square foot on five high school modernization than called for by the District’s Master Facilities Plan, according to a report today from the Office of the District of Columbia Auditor (ODCA).

[DGS Final Report (pdf)]

The audit, covering fiscal years 2010 through 2013, found that the Office of Public Education Facilities Modernization and its successor, the Department of General Services, failed to provide sound financial management, “creating the risk that the District has not obtained maximum value for taxpayer dollars and the potential for misuse of taxpayer funds.” The District spent $1.2 billion on school renovations during the four-year period.

“Across the city, public school students are benefiting from modern new facilities, and there is much to commend in the priority given to school construction,” said D.C. Auditor Kathy Patterson. “But District resources are finite. We owe it to taxpayers to see that modernization funds are spent well and prudently, to assure our ability to complete the task of upgrading all of our schools.”

The report includes a 16-page, June 29, 2015, letter described as a “preliminary response” from the Department of General Services, and the letter notes the Administration will respond more fully at a July 8th Council hearing on school modernization. The letter acknowledges “the need for immediate corrective action to improve the school modernization program.” The ODCA report was timed to provide information to the D.C. Council and the public in advance of the public oversight hearing.

The report notes that in 2007, the District contracted out project management for the massive school modernization program to a partnership created by McKissack & McKissack and Brailsford & Dunlavey, named D.C. Partners for the Revitalization of Education Projects, LLC (DC PEP). The firm received $37 million in the four years covered by the audit. The report recommends that the Mayor and Council periodically reassess that privatization and determine whether project management by government officials would provide better accountability.

Among the report’s other findings:

Information and analysis required to be included in the Capital Improvement Plan and Master Facilities Plan have not been consistently provided, including the rationale for selection of projects for funding.

In fiscal years 2010 and 2011, the use of sales tax revenue as “Pay-Go” funding, required by the 2006 School Modernization Financing Act, was ignored by the Mayor, Council and Chief Financial Officer.

A Modernization Advisory Committee, including community stakeholders, designed to provide oversight of the program and mandated in the 2006 law, was essentially disbanded in 2008 and has not been reappointed.

Contract terms requiring monthly reports and contingency “Buy Out” analyses, including a sharing of any savings between contractors and the District, have not been complied with and, based on a sample of projects reviewed, the District has not received any contingency savings payments.

A weak internal control environment at OPEFM and DGS indicates a risk that improper payments might have been made, and the report documents two “payment applications” that were altered when ODCA sought additional information.

The Auditor was not able to verify the approvals on 166 out of 458 budget transfer requests totaling $169 million.

Similarly, efforts to verify DGS payment application and invoices found a lack of documentation on 32 of 779 items selected in one instance, totaling $6 million, and for 76 of 752 payments made, totaling $32 million, in another instance. In the latter, the vendor invoices did not match the payments.

Documentation was also not available on a range of payments made by the project management firm, DC PEP. For example, 32 of 71 payments were missing certified payroll records, totaling $38 million, indicating an inability to prove compliance with prevailing wage law.

The report also acknowledges that one of the oversight mechanisms included in the School Modernization Financing Act of 2006 was an annual audit requirement. The four-year audit released today was only the second such audit that ODCA has produced. “I regret we have not fully done our part to promote sound oversight of school modernization spending,” Patterson said. “This office has ramped up our review of school modernization, including an upcoming look at the cost escalations at Duke Ellington School of the Arts.” That project, initially budgeted at $71 million in the fiscal year (FY) 2012 budget, has grown to $178 million in budget authority in the FY 16 proposed budget.

The report concludes with 21 recommendations for consideration by the Mayor, Council, and Department of General Services, and provides cost-per-school data for fiscal years 2010 through 2013.”