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School Reform News

Corruption in Public Schools Costs Taxpayers

$8 million in undocumented expenses

Lisa Snell
September 1, 2004

Ongoing news reports from across the country indicate incidents of corruption and mismanagement in the public schools occur frequently, often on a massive scale. Ignoring the scale of the problem not only costs taxpayers millions of dollars but also hinders school reform efforts, according to New York University law professor Lydia G. Segal.

In her recent book, Battling Corruption in America's Public Schools (Northwestern University Press, 2003), Segal argues, "one impediment to reform that no one is seriously studying in the debate over how to improve public schools is systematic fraud, waste, and abuse." Her careful documentation of the pervasive corruption and waste in the nation's three largest school districts—New York City, Chicago, and Los Angeles—leaves little doubt the problem merits serious study.

However, fraud, waste, and abuse are not limited to large urban school districts, as the following recent examples demonstrate.

$8 Million in Undocumented Expenses

In New York's affluent Roslyn School District on Long Island, former school superintendent Frank A. Tassone and senior administrator Pamela C. Gluckin were each charged recently with stealing more than $1 million from the district. Gluckin allegedly used the funds to finance four homes, a Lexus, and other luxury items. Tassone allegedly used his $1 million for airline travel, cruises, dermatology treatments, furniture, and jewelry, and to give his roommate's company more than $800,000 in no-bid contracts. Both Tassone and Gluckin pleaded not guilty.

The Roslyn school board is still reviewing more than $8 million in undocumented expenses. According to the New York Times, those expenses include:

Gluckin previously worked for Long Island's William Floyd District under former treasurer James Wright, according to Suffolk Life. In June, Wright was charged with stealing more than $750,000 from the William Floyd District simply by writing checks to himself.

$15.9 Million in Kickbacks

In Fort Worth, Texas, a school construction scandal ended in June with the former executive director of maintenance for the Fort Worth School District, Tommy Ingram, and contractor Ray Brooks being sentenced to eight years in prison each for a kickback scheme in which they defrauded the school district of an estimated $15.9 million.

Payroll Scam

In July, eight employees of the New Orleans school system pleaded guilty to stealing more than $70,000 in a scheme in which payroll clerk Louis Serrano wrote fraudulent checks to seven other employees in exchange for half of the face value of the checks. A ninth employee, payroll clerk Terri Smith Morant, admitted stealing $250,000 by printing checks to herself using her maiden name.

According to a recent report by the state legislative auditor of Louisiana, school system employees have cashed an estimated $3 million in paychecks that administrators sent out either in error or with criminal intent.

Fighting corruption in the school system is like "eating an elephant," New Orleans Police Superintendent Eddie Compass told The Times-Picayune. "We just took the first bite."

Mismanagement

In addition to losses from outright fraud, taxpayers also have lost millions due to mismanagement and incompetence.

For instance, in a June 2004 audit of California's Oakland Unified School District, state auditors could not determine if in 2002-03 the district had appropriately spent millions of dollars and properly complied with scores of state and federal mandates. As a result, the district could be forced to repay $163 million to the state and federal governments. In addition, district bonds worth $322 million are in jeopardy of losing their tax-exempt status because the funds have been inappropriately spent on general education rather than on specific projects.

According to the audit's findings, the district's shortcomings included:

Also in June in southern California, the Los Angeles School Board continued the saga of the most expensive high school ever built by voting to do further work on the Belmont Learning Complex. When completed, Belmont will have cost about $270 million—$175 million of which has already been spent to produce a school that currently is unusable.

In June in south Florida, auditors delivered 650 pages of backup documents to support the findings of an April 2004 forensic audit that charged the Miami-Dade school district with wasting more than $100 million in its school facilities program. The audit alleged there was massive disorganization and waste in the program as well as "probable malfeasance, misfeasance, and potential for fraud."

Exploiting a Loophole

Unethical behavior and taxpayer abuse by school employees is not always illegal. In June, thousands of teachers in Texas rushed to retire before a lucrative loophole in Social Security law closed. Although most Texas teachers participate in a state pension fund rather than paying into Social Security, the loophole allowed them to receive Social Security benefits if their last day of work before retirement was in a job covered by Social Security.

In 2002, one-fourth of all public school retirees in Texas--3,521 people--took advantage of the loophole, according to auditors. Congress moved to close the loophole in spring 2004 when auditors estimated leaving it open could cost the Social Security system $450 million.

School districts around the state helped retiring teachers meet the one-day requirement by hiring them to work janitorial or maintenance jobs on their last day of work. Teachers paid the districts a small fee for this privilege, generating substantial revenues for some districts. For example, the Lindale Independent School District made about $700,000 helping teachers beat the deadline, according to assistant superintendent for business Mike McSwain.

"We just couldn't look at our taxpayers and say we passed up this opportunity to get this kind of revenue into the district," McSwain told the Associated Press.


Additional Resources

The State Controller's June 2004 audit of the Oakland Unified School District for the year ended June 30, 2003, is available online here.

The April 28, 2004 report by Lewis B. Freeman & Partners, Inc., "Forensic Report Prepared for Miami-Dade School District Land Advisory and Facilities Maintenance Operations Board," is available online here.

The 650 pages of backup documents for the April 2004 forensic audit of the Miami-Dade School District are available online here.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.


Lisa Snell is Director of Education


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