12/18/2024 - JEFFERSON CITY, Mo.
A new report released
today by State Auditor Scott Fitzpatrick gives parents and taxpayers in the
Francis Howell R-III School District the answers they deserve on how a new high
school projected to cost $86 million skyrocketed to a final cost of more than
$164 million. The audit report gives the school district the lowest possible
rating of "poor" and identifies several issues with the management of
projects financed by Proposition S, as well as other aspects of how the
district is run.
"We responded to
public calls for a state audit with the goal of giving taxpayers a better
understanding of what happened with the construction of the new high school and
with the goal of providing district officials recommendations to ensure these
types of mistakes aren't repeated," said Auditor Fitzpatrick. "What
we found was a lack of transparency, a failure to communicate, and a flawed
project manager selection process that led to the Board of Education and
taxpayers being shocked when the actual cost of the new school was revealed.
Because of these cost overruns, 71 originally-planned projects, totaling more
than $56 million, for schools across the district will not be completed. This
lack of transparency violated the trust of the people and created serious
doubts about the district's ability to manage projects of this scale in the
future. However, the district's new leadership is already working to address
the audit findings and put our recommendations into place as they try to restore
the public's confidence in the district."
In looking at the
process the district used to finance projects funded by Proposition S, the
audit found district officials were not transparent with the Board of Education
or the public about construction cost estimates for the new high school. The
report notes the marketing materials for Proposition S estimated the cost of
the new school at $86.35 million even though no one associated with the project
can explain the origin of this estimate. While estimated costs for the project
rose over the $100 million mark by February of 2021, these new estimates were
not presented to the Board until November of that year when a new cost estimate
of $164.7 million was provided. The district and its construction
manager attributed the higher than expected price to insufficient original
estimates that did not take into account annual inflationary increases,
increased square footage and project scope, and the unprecedented materials
cost increases associated with the COVID-19 pandemic. The audit compared the
costs of the new building to another school building project completed in 2022
and found the costs were within $30 per square foot.
The
audit also found that while district officials were not transparent with the
Board or the public, the Board failed to take steps to ensure cost updates on
projects were provided and, as a result, made decisions with insufficient
knowledge or understanding of their financial impact. Additionally, one Board
member was on the design teams for the Proposition S projects and was aware of
the updated cost estimates but did not provide that information to the rest of
the Board. This lack of awareness of the increased cost of the project also led
to the Board approving 4 bid packages for a total of $38 million prior to
knowing the total project cost. Because of the inaccurate cost estimates and
increased costs of the new high school and other projects, district officials
have now identified 71 originally-planned Proposition S projects, totaling at least
$56.18 million, that will not be completed. The district determined 49 of these
projects, including interior and exterior renovations at other schools to roof
replacements and heating, ventilation, and air conditioning updates, would
require additional funding or further evaluation.
Another
major finding in the report outlines how district officials failed to use a
competitive and transparent process to select key personnel for the planning
and oversight of the Proposition S projects. District officials insisted the
project management firm selected must hire a former district employee as
project manager. Originally, district officials recommended that the Board
select the highest scoring firm but, the day before the Board voted, the
recommendation document was altered to instead recommend the lowest scoring
firm with no additional information to explain why the firm was now a better
candidate. The audit notes the former employee the district wanted hired worked
for this firm and the firm was owned by his brother. At a minimum, the awarding
of this contract gives the appearance of bias towards a former employee and his
brother's firm and a potential conflict of interest. Additionally, the district
did not request qualifications for architectural services for the Proposition S
construction projects as required. As a result, there is no assurance the
district received the best candidate for the project.
In addition to the thorough
review of the decisions made regarding the Proposition S projects, the audit found
a number of other issues with the way the district is currently being managed.
The audit found the district failed to use a competitive sales process for
general obligation bonds and did not solicit proposals for underwriting
services. The audit also noted the district received financial advisory
services from the underwriter when Municipal Securities Rulemaking Board rules
indicate financial advisors cannot act as both the financial advisor and
underwriter on the same bond issue. The district's bond underwriter received
fees for the bond issuances totaling approximately $1.6 million.
Other
findings include a failure to perform safety drills in accordance with policy,
overstated student attendance that led to the district receiving $11,500 in
excess state funding, insufficient guidance to schools on how to handle
receipts and inconsistent cash handling procedures, lacking payroll controls
and procedures, and insufficient guidance to building officials on how to track
school property.
The complete report for the Francis Howell R-III School District can be
found here.
