Audit shows years of problems in District 5

A recently completed audit found years of lax oversight, misspending, policy violations and potential abuses in Lexington-Richland School District 5.

The report by national auditing firm Jaramillo Accounting Group cited instances of non-competitive procurement practices, unusual invoices, the overpaying of vendors and “red flags” for fraud.

Trustees sought the audit last year as part of a broader review of the district’s procurement and construction practices. It comes after the election of three new trustees in 2020 effectively shifted the balance of power on the board.

“This report confirms that there were major problems, and makes it clear that there was a concerted effort to silence attempts to bring them to light,” said board member Ken Loveless, who pushed for the audit and has been outspoken about problems related to the construction of Piney Woods Elementary School in Chapin.

“These are very serious issues that have very real, tangible consequences,” he said. “They set an extremely poor standard for our students. And they’re the symptom of years of resisting oversight and accountability.”

Here are a few items in the report.

– The controversial purchase of Amick’s Ferry Road property for Piney Woods Elementary School likely violated the law, the report says. In July 2017, the board voted 6-1 — with only Jan Hammond dissenting — to buy the property for $993,000. But the report says a purchase contract was signed January 17, 2017, months before the vote.

– At least twice, the report says, architectural contracts were awarded without the proper competitive procurement process. The architectural contract for a 2016 Chapin Middle School expansion was issued to Quackenbush Architects and Planners without bidding. That project was required to be competitively bid, the report says.

– The report says District 5 entered a 2015 contract with real estate broker The Peak Group that wasn’t approved by the board as necessary. Later campaign contributions from the broker to former board members Robert Gantt and Ed White were apparently illegal, the report says.

– The reported cited instances of questionable costs being paid to Contract Construction, the contractor for Piney Woods Elementary School, as well as insufficient record-keeping by the company that made due diligence difficult.

– The district paid a construction management fee to Contract Construction for $14,224 more than allowed in the contract, according to the report.

– The district paid “invented allowances” submitted by Contract Construction above what had been approved in the contract, the report says.

– Some invoices were approved the same day or within five days of being submitted, which is “a highly unusual phenomenon” in construction and raises questions about whether officials reviewed supporting documents and did due diligence, according to auditors.

– It doesn’t appear that all of the subcontractors used by Contract Construction were bonded, according to the report.

– There were numerous “red flags” for invoice fraud related to Owens Cleaning Services, a subcontractor on the Piney Woods Elementary project. According to auditors: Owens Cleaning Services was registered as a business just three months before the contract for Piney Woods Elementary was awarded. The company’s owner is a relative of two superintendents at Contract Construction. Its invoices weren’t from a billing system and were numerically sequential, without gaps for other work. It doesn’t have a website and its listed address is a residential address. Its invoices lacked documentation such as timesheets, it routinely billed for overtime, and the hours it billed didn’t always make sense given other work taking place at the site.

The school board voted September 19 to make the report public.