Attorney General Dustin McDaniel today released an accounting firm's report on spending of state-supplied desegregation funding to the Pulaski County and North Little Rock School Districts. A similar report is in the works on Little Rock, the third district awarded continuing money to promote desegregation in the settlement of the Pulaski County desegregation lawsuit.
The report concludes that a significant percentage of the desegregation money can only be identified as being spent on general district expenses, as opposed to specific desegregation efforts such as magnet schools. The accounting shortcoming is blamed not only on the districts but lack of oversight from the state Education Department.
The finding is, in a way, not surprising. School officials will readily admit that desegregation funding has been viewed from the start as general support, by both the state and the recipients. It's only the advent of a new state school accounting system several years ago that included coding for desegregation funding that provides a window to measure how the money is spent. The districts have been haphazard, at best, in accounting for how that money is spent.
UPDATE: Chris Heller, the Little Rock School District attorney, says the districts were never required to spend the money strictly on desegregation programs. The federal school settlement even specifically provided for bonus money for meeting majority-to-minority student transfer targets. He also challenged the notion that accounting has been done improperly. If the districts already were required to report desegregation spending by category, why, he asks, did McDaniel seek legislation in the last session to make that a legal requirement? Heller said he believes McDaniel is using the forensic accountant as unapproved court discovery — something a federal judge had halted in the ongoing litigation — to use at some future point to argue against further state spending. Heller said that when McDaniel's accountants, the Navigant firm, began raising questions, he said the district volunteered to immediately correct anything found that seemed amiss. He said no specific problems were forthcoming. He said McDaniel has criticized Little Rock in the press release because it has refused to make employees available for interviews on subjects that Heller says reach into the area in which federal Judge Brian Miller has halted discovery work.
McDaniel's summary news release doesn't mention more shocking findings in the review — scathing remarks about nepotism in hiring of employees and consultants in Pulaski County, with ties to the superintendent, school board members and high-ranking employees. See pages 10-12 of the report on Pulaski County linked below for an eye-popping recitation of suspicious relationships. Accounting procedures are faulted in virtually every area, including travel expenses, bus fuel purchases and more. Some of this mirrors earlier reports by the state auditors on faulty finances in Pulaski, but some of it represents a continuation of the same ill practices.
McDaniel said a review of five years' spending showed that of $105.6 million in desegregation funds sent to the Pulaski district since 2006, only $61.5 million could be shown to be spent on desegregation purposes. In North Little Rock, the accountant said it was impossible to determine what amount of the $45.1 million the district received went strictly to desegregation purposes.
It may or may not develop that the districts could further demonstrate that money commingled with general funds was spent on desegregation efforts. Or they might argue that the added payments were viewed as supplements to enhance the districts so as to reverse the negative effects of state-sanctioned segregation in Pulaski County. Indeed, North Little Rock's attorney told the forensic accountant that the money had always been viewed as an incentive to join in programs such as magnet schools and minority transfers. The state did not stipulate that the money had to be used for specific purposes, he said.
Legislation passed this year requires specific accounting of desegregation money spending. In time — sooner rather than later state officials such as McDaniel hope — desegregation funding will come to an end. Then, the extent to which that money has been used for general operating support will become abundantly — and potentially painfully — clear. However, the Pulaski districts argue that the state's commitment to magnet schools and majority-to-minority transfer programs is open-ended.
Here's the full report on Pulaski County.
Here's the full report on North Little Rock. While the report faults some North Little Rock fiscal procedures, it's nothing like the harsh recitation leveled against Pulaski County.