Auditors detail problems with Houston ISD procurement process

It is difficult to tell why certain vendors were chosen over others in the Houston school system’s contract-awarding process, an auditor told school trustees this morning.

“There are no specific bridges from procurement-committee recommendations (of vendors) to the school board for approval,” said Charles G. Yaple, a certified public accountant with Null-Lairson, a Houston accounting firm.

Sometimes that resulted in different vendors appearing before the Houston school board than district evaluators had suggested for selection.

Null-Lairson; MGT of America, a consulting firm based in Tallahassee, Fla.; and Mariga CPA in Houston completed a roughly four-month audit of the way Houston Independent School District officials purchase goods and services and award contracts.

School board members paid $87,500 for the audit.

“It’s obvious that this was necessary,” Trustee Anna Eastman told Texas Watchdog after the meeting. The board’s vice president specifically pointed to the gap between the list of vendors district evaluators recommended the board should see and the different list that sometimes appeared before trustees.

That happened with one contract board members approved for Westco Ventures LLC, a company owned by Trustee Paula Harris’ close friend, Nicole West, in January last year. Yaple told trustees Westco was originally not on the recommended list, but after Westco complained, the company was added.

Some trustees appeared not to know that chronology until Yaple described it to them.

Westco has done more than $1 million worth of business with HISD. Harris voted to approve at least four school-district contracts that included work for Westco. After Texas Watchdog and the Houston Chronicle repeatedly asked her about the practice, Harris said in August she would no longer vote on contracts involving Westco.

Harris was not present at this morning’s meeting. Superintendent Terry Grier also was not present.

Eastman was the first board member to call for an audit in August of HISD’s procurement practices due, in part, to questions raised by Texas Watchdog.

“It’s incredibly important that at all times these things are airtight, but particularly now because we’re in such difficult budget times,” Eastman said during the meeting. “It’s uncomfortable, but critical that we see this through.”

Neither the final Null-Lairson report, nor a draft of the report, was available for the public to view this morning. Yates said he would release the draft report after proofing it later today.

The audit found no improper influence by board members in HISD’s contract-awarding process, Yates told Trustee Harvin Moore during the meeting in answer to a question posed by Moore.

Null-Lairson also did not find any evidence of a systemic problem that corrupted contract awards, Yates told Moore.

Former HISD procurement chief Stephen Pottinger told Texas Watchdog last year that Harris’ request had prompted a meeting between Pottinger and West. And Texas Watchdog stories have also raised questions about contracts awarded to Southwest Wholesale Nursery, a Houston-based company, and Morganti Texas.

Null-Lairson also reviewed those two contract awards.

“Did HISD hold up its end of the bargain by providing all the data you requested?” board President Mike Lunceford asked Yates.

“Yes,” Yates replied.

In a PowerPoint presentation, Yates provided many recommendations to improve HISD’s procurement practices.

They included:

• Annual board-member training on conflict-of-interest issues
• Board members should communicate with the superintendent about potential contracts, and not district staff or vendors
• Developing a policy to cover all board travel, lodging and entertainment expenses
• Board members should disclose any financial relationships or governance responsibilities – such as sitting on boards – that exist with potential vendors, and abstain from voting on those respective contracts
• Adopting procedures to allow votes on contracts with vendors who have made campaign contributions to trustees.

Some of those policies might have enabled the public to learn earlier than it did about Trustee Larry Marshall’s two all-expense-paid trips to Costa Rica in 2010, arranged by Texas state Rep. Borris Miles, who also is an HISD vendor.

Marshall held a campaign fundraiser on one of those trips, Texas Watchdog reported last year.

Still, Null-Lairson’s audit conclusions appear to be gentler than those arrived at by the Washington-based nonprofit Council of the Great City Schools in its October report. Grier sits on the council’s executive committee.

Authors of that report concluded that the ways HISD does business “lead to a perception of manipulation of and distrust in the procurement process;” price often didn’t count enough in district purchasing of materials and services; and that “the majority of the district‘s purchasing… is awarded based on a number of weighted factors that are not always transparent or consistently applied.“

Null-Lairson analyzed 15 contracts, ranging from less than $50,000 to greater than $100,000, Yates said.

Auditors interviewed Grier, former HISD superintendents, and the school board’s nine trustees and examined district purchasing records to complete its report, Yates said.

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Contact Mike Cronin at mike@texaswatchdog.org or 713-228-2850. Follow him on Twitter at @michaelccronin or @texaswatchdog.

Photo by flickr user mtjmail (tiggy), used under a Creative Commons license.

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