Richmond's school system has almost none of the controls it needs to catch waste or fraud -- or even the fact that it buys far more textbooks than it needs.
 
A scathing audit of Richmond Public Schools' purchasing and bill-paying operation said the system wastes millions of dollars, much as an earlier audit found for the city government.
 
City Auditor Umesh Dalal said he believes the school system could eventually save at least $6.7 million a year by implementing the dozens of suggestions he made.
 
The review, which Dalal released today, found:
 
• The school system buys more textbooks than it has students -- spending more than $1.2 million in the 2005-2006 and 2006-2007 school years to buy excess books, including 4,115 dictionaries for 2,603 kindergarten pupils and 3,053 Algebra I texts for the 2,177 students who took that course. In addition, the school system has no records of what it did with used textbooks -- who sold them and for how much.
 
• The schools used a construction firm owned by a relative of a purchasing officer in charge of construction, whilean immediate family member of a plant services department had a contract with the school system. The contracts were worth $357,000. The auditor plans further investigation.
 
• Two former School Board members charged $485 of gasoline purchases in the Richmond area on their school system credit cards, when they were supposed to fuel up at the city's own facility. Their credit-card charges included a $10 charge from inappropriate Web site and $175 for a West Union money order. They submitted no receipts for these charges, which they were supposed to do.
 
• School officials paid $18 million for purchase orders that were not authorized. Checks for more than $38.3 million were paid against invoices generated by school employees, rather than by the supplier, as is standard practice. Such "departmental invoices" can't be checked as easily to be sure they are for real goods and services.
 
• Of a sample of 52 competitively bid purchases, 96 percent did not comply with such requirements as documenting bids. The purchases were for more than $1 million.
 
• School officials awarded a $104,000 contract to a firm barred from doing business with the federal and state governments because of unethical business practices.
 
• School officials are unable to find two interactive, computerized classroom projection systems, worth a total of $7,000.
 
• School officials backdated contracts on at least two occasions, one time at the instruction of  its lawyer.
 
• Documentation such as performance bonds for contracts were not given purchasing officials until after was already performed.
 
• In some cases, bid specifications were altered after contracts were awarded.
 
• School officials issued 170 checks for $937,000 to replace earlier checks, but there are no records that the earlier checks were voided.
 
• Auditors found no evidence that supervisors had approved 52 percent of some 312 checks school system employees wrote for a total of about $2.6 million,
 
• School officials made duplicate payments on 59 invoices, totaling $121,073.

• Some 300 vendors’ names were duplicated on the school system’s database, opening up the possibility that they could be paid twice for the same work or that purchases to favored suppliers were being hidden.

• Most purchases were done with one price quote, since 90 percent were below the $5,000 threshold for getting more than one bid -- but some of those purchases were for one larger project and were split into small pieces, possibly to avoid competitive bidding. 

The audit suggested that using the state's electronic purchasing system could save at least $5.5 million year.

It also noted that it is wasteful to spend $300,000 to run two warehouses that handle $600,000 a year worth of inventory; the warehouses are valued at $9 million.

The audit said the School Board had given too much authority to the former assistant superintendent of finance and operations, including unlimited power to obligate the school system financially.

 The report found gross noncompliance with procurement policy and legal requirements, noting that violating the state procurement code is a class 1 misdemeanor. It said school officials may have misued the relaxed bidding rules that apply for emergency purchases and sole-source contracts.

In February, a similar audit of city government found many of the same kinds of problems. In that audit, Dalal said the city could save at least $5.6 million a year by tightening its procedures and using the state purchasing system. 

Contact David Ress at dress@timesdispatch.com <mailto:dress@timesdispatch.com>.
Contact Michael Martz at mmartz@timesdispatch.com <mailto:mmartz@timesdispatch.com>.