Office tackles waste, fraud in Detroit schools cites more than 700 investigations

The Office of Inspector General in the Detroit Public Schools Community School District – created in 2009 to root out waste, fraud and abuse – has investigated 772 complaints of everything from theft and ethics violations to vendor fraud and insurance fraud.

That was among the details provided during a Board of Education meeting Monday by Bernadette Kakooza, the district's inspector general, who gave board members an overview of her office, how it operates and its outcomes.

The Detroit district is among just eight in the nation with such an office that performs investigative and watchdog functions, Kakooza said Tuesday.

Kakooza said not all of the 772 investigations resulted in discipline or criminal prosecution, but many do. In some cases, there is no finding of wrongdoing. In others, no wrongdoing is found, but the office finds internal controls that need to be corrected.

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Among the statistics Kakooza provided the board - covering outcomes since 2009:

134 matters have been referred for disciplinary hearings

66 employees have been suspended or placed on administrative leave

64 employees have been fired and 14 employees resigned in advance of termination

4 administrators have been demoted; 44 received some other type of discipline

65 subpoenas have been served for testimony or records production

29 search warrants have been executed

15 vendors have been suspended or debarred; 3 have been barred from entering schools

Matters referred to local and federal law enforcement have resulted in 26 federal indictments, 32 arrests and 53 convictions

Investigations have resulted in $12 million in court-ordered restitution - about $2 million of which has been collected. They've also resulted in millions in loss prevention.

The OIG has referred a number of matters on to local and federal law enforcement and prosecutors, working with the Wayne County Prosecutor's Office, the Michigan Attorney General's office, the U.S. Attorney's office, the FBI and local police.

Much of that restitution came in the form of a $1.5 million check sent two weeks ago by Norman Shy, the wealthy businessman who was convicted and is serving five years in federal prison for his central role in a kickback scheme. The OIG was instrumental in that investigation.

Kakooza noted that no organization is immune from fraud, citing an annual report from the Association of Certified Fraud Examiners that found the typical organization loses at least 5% to 10% of its revenue to fraud.

"However, it can be controlled with the presence of strong anti-fraud controls in the district," as a deterrent, she said Tuesday.

She also reiterated something she told board members at the close of her report Monday: The tone at the top matters.

"If they set the tone, everybody else will fall into place," Kakooza said.

The district's newly developed strategic plan includes a set of core values. Integrity, which is about doing "the right thing, even when no one is looking," is one of them. At a news conference Oct. 26, Superintendent Nikolai Vitti said that particular core value would address "some of the malfeasance, some of the cronyism" that has existed in the district.

Meanwhile, the district's board of education, which took office in January, is working to develop a set of policies for the district. Among the first set of policies that received a first reading at a Nov. 14 meeting was one that covered whistleblower protections.

Contact Lori Higgins: 313-222-6651, lhiggins@freepress.com or @LoriAHiggins