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Published in Print: March 9, 2005, as State Vows to Fix Finances in New Orleans

State Vows to Fix Finances in New Orleans

La. Schools Chief Crafts Agreement to Address Audit of Title I Spending

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In the wake of a audit raising questions about the New Orleans school district’s spending of some $70 million in federal money, Louisiana’s top education official is considering putting outside consultants in charge of the district’s finances.

Cecil J. Picard, the state superintendent of education, warned last week that federal officials have told him they could withhold future Title I funding for the 70,000-student system unless its financial operations are overhauled. The step by the U.S. Department of Education apparently would be unprecedented.

“I got the message that we’ve got to address this problem, and we’ve got to do it much sooner rather than later,” Mr. Picard said in an interview last week.

Mr. Picard, who is scheduled to meet with officials from the federal Education Department on March 18, said he was crafting an agreement to put before the New Orleans school board. It would allow state officials to name a project manager who would have broad authority to overhaul the district’s finances.

A report last month from the federal department’s office of inspector general found that from July 2001 to December 2003, the New Orleans district failed to properly account for how it spent Title I money, which is supplemental funding to help educate students from low-income families. The report made no mention of possible fraud.

The high-level attention to the district’s finances raises the stakes for ongoing efforts, by many players, to untangle a budget system plagued by leadership turnover, mismanagement, and corruption.

Troubled History

A continuing FBI-led probe of the district has resulted in two dozen indictments. District leaders have hired an accounting firm to suggest improvements in the system’s budgeting practices. And the state legislative auditor has been involved in trying to sort out the books.

The Rev. Torin Sanders, the president of the school board in the Orleans Parish district, as the New Orleans system is formally known, said he was “shocked and grieved” by the news of the Title I money at issue.

“We recognize that the problems are systemic, and that it’s not one person or superintendent that caused them,” said Mr. Sanders, who is one of five members new to the seven-person board as of January. “The new board is determined to do everything within its power to address the problem.”

The federal report describes a financial operation in such disarray that the district was unable to show that staff time paid for with Title I dollars had been used for activities related to the program.

Steve J. Theriot, the Louisiana legislative auditor, who has reviewed the district’s accounting of state funds, said the federal findings jibed well with his own. A major problem, he said, is that New Orleans has had many former educators who lacked skills in accounting working in finance positions.

“The board was flying by the seat of their pants,” he said. “They had no sound, reliable financial information on which to make sound decisions relative to the instructional needs of the school district.”

Resolving the Title I issue falls to Mr. Picard because the state education department is responsible for disbursing the federal Title I money to local districts. Mr. Picard said Raymond J. Simon, the assistant U.S. secretary for elementary and secondary education, told him over the phone that the federal agency is ready to shut off the flow of Title I money for New Orleans if the problems aren’t corrected.

State’s Responsibility

Officials with the federal department would not comment last week, but they did confirm that the agency did not know of an instance when it had withheld Title I funds from a school district.

Mr. Picard’s plan is to create an oversight committee—led by the state chief himself and Mr. Theriot—that would hire someone to restructure the district’s financial practices. Mr. Picard said he was considering hiring a “corporate turnaround” firm experienced in reorganizing ailing companies.

Although New Orleans district leaders would retain control of academic issues, Mr. Picard stressed that his project manager must have wide latitude to make changes in financial practices.

“I want them to have absolute, full authority to go into that school system, to move people around, hiring and firing, so there is absolutely no obstacle in the way,” he said.

Because the Louisiana Constitution limits the state superintendent’s authority to order personnel changes in a local district, Mr. Picard said, he is drafting a memorandum of understanding on his plan to present to the New Orleans school board.

If the board rejects it, he said, he could use the legislature and the courts carry it out. “I’m going to satisfy the office of the inspector general one way or another,” he said.

School board members offered varied reactions to Mr. Picard’s idea, noting that district Superintendent Anthony S. Amato, who was hired in 2003, invited the FBI to set up shop in his central office to help root out corruption.

Mr. Amato also brought in Deloitte Consulting to recommend changes in the way the district handles fiscal matters.

“What the state superintendent is proposing is not substantially different from what we are doing,” said Mr. Sanders, the board president. “The difference is the issue of authority.”

Board member Jimmy Fahrenholtz said putting an outsider in charge might be just what the district needs to straighten out its finances once and for all.

In a sign of the district’s continuing struggles with fiscal management, the local teachers’ union held a protest in New Orleans last week to complain about several long-standing issues, including glitches in getting paychecks out to employees.

“We’ve had some entrenched bureaucrats who have for years seen Title I and the general money in our system as this trough that they could use,” Mr. Fahrenholtz said. “When you get that kind of culture of dishonesty, it’s almost impossible to break it from within.”

PHOTO: Members of United Teachers of New Orleans demonstrate their anger over payroll glitches and other management problems at a Feb. 28 board meeting.
—Ted Jackson/The Times-Picayune

Vol. 24, Issue 26, Pages 3,11

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