Crosby ISD Audit finds false reports, cost over-runs, excesses

By Lewis Spearman

CROSBY – According to the Audit performed by Weaver and Tidwell, L.L.P., Crosby ISD got less money than it expected, spent far more on projects than anticipated, hired more than it could fund, played accounting games to hide financial problems, misrepresented funding, and did not report to T.E.A. adjustments to the ten month budget as required on a 12 month basis beginning in 2016.

Superintendent Davis found that $3.9 million was omitted from payroll. Fraud was committed by intentional omissions from the financial statement in June of 2017, $7.86 Million was omitted from reports.

Anyone that remembers the musical “Camelot” can think that the locals here are experiencing similar situations as the final act during the play or movie, when Lancelot has become a homeless person, and Arthur has been betrayed, lies dying on the field, and has given Percival Excaliber to throw in the lake.

The good news is, however, the audit indicates that the current administration has issued corrective action in the District’s finances. The bad news is, substantial reorganization must take place to not repeat the same situation.

Last year Crosby ISD had to make corrections to deal with taking in $1,941,100 less than expected. Expenditures were less than budget by $2,353,692 in total, because building outlay was reduced $1,100,000.

The current administration had to borrow from the bond to pay for moneys taken from the operations budget. Bond debt went up by $18,044,714 about 14% during the current period just to keep the school afloat. The District had a negative fund balance in the general fund of $2,516,449 in June of 2018.

“The increase of $3,919,142 to other financing sources (uses) in the final amended budget was to reimburse the general fund for capital asset costs and construction expenditures from the capital projects fund.” That is where the Board of Trustees filed for reorganization due to financial exigency.

Fundamentally, Crosby ISD as an organization was not and is yet not able to handle financial reporting accurately and completely. Superintendent Scott Davis had to restate the June 30, 2018 budget by less $3.9 million. The District failed to find certain payroll outlays. The District system of internal control is defective. “Although the level of risk of management override of controls will vary from entity to entity, the risk is, nevertheless, present in all entities.”

A previous administration is said to have made fraudulent financial reporting, failing to report the costs clearly in financial terms, and the costs went over available resources of the District. The system wasn’t prepared to handle misrepresentation by a Superintendent. “The District’s liabilities, expenditures, cash flow requirements, and overall financial condition were misrepresented.”

There are laws concerning how to handle change orders. In the 2013 bond, changes were made without following customary process or approval, i.e. $86 million approved became about $102.6 million or about $16.1 million over.

No one monitored to see if the District had money to pay the change orders. Legally, the changes should not have been permitted under the requirements of the Texas Education Code. When the District could not pay, the Superintendent in 2017 did not report the shortfall. So, a new $109.5 Million bond was to be put to the voters in Nov. of 2017 by the Board of Trustees with the idea of making new schools and fixing extant schools to new purposes.

One problem now: how much are the school’s bonds worth to sell? The disposal of certain lands for income, say directly on FM 2100 and the failed purchase of certain land on Foley Road, were not mentioned in the audit.