Investigative report procurement violations by Amphitheater Unified School District No. 10

              Investigative
Report:
Procurement
Violations by
Amphitheater
Unified School
District No. 10
November
2000
Debra K. Davenport
Auditor General
2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553-0333 • FAX (602) 553-0051
DEBRA K. DAVENPORT, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
November 27, 2000
Members of the Arizona Legislature
Governing Board
Amphitheater Unified School District No. 10
The Honorable Janet Napolitano
Office of the Attorney General
The Honorable Lisa Graham Keegan
State Superintendent of Public Instruction
At the request of the Office of the Attorney General, we have conducted a limited
investigation of Amphitheater Unified School District No. 10 for the period March 1998
through June 2000. The purpose of our investigation was to determine whether there
were procurement violations and the amount of money, if any, misused during that
period and whether the District’s procurement practices were consistent with legal
requirements.
Our limited investigation consisted primarily of inquiries and examining selected
records and documents. Therefore, our investigation was substantially less in scope
than an audit conducted in accordance with generally accepted auditing standards.
Accordingly, we do not express an opinion on the adequacy of the financial records or
the internal controls of Amphitheater Unified School District No. 10. We also do not
ensure that all matters involving the District’s internal controls that might be material
weaknesses under standards established by the American Institute of Certified Public
Accountants or other conditions that may require correction or improvement have been
disclosed.
The accompanying Investigative Report describes our findings and recommendations
as a result of this special investigation.
After this report is distributed to the members of the Arizona State Legislature, the
Attorney General, and the State Superintendent of Public Instruction, it becomes public
record.
Debbie Davenport
Auditor General
Investigative Report:
Procurement Violations by
Amphitheater Unified
School District No. 10
November
2000
Table of Contents
Summary 1
Finding I:
The District Failed to Solicit Sealed Bids
for Security Guard Services 3
Finding II:
The District Failed to Solicit Sealed Bids
for Construction Services 4
Finding III:
The District Paid Unauthorized Charges
for Construction Services 6
Recommendations 8
Appendix 9
1
Summary
n 1994, Amphitheater Unified School District No. 10
purchased 73 acres of land in northwest Tucson for the
potential site of a future high school. In March 1998, the District
began construction at this site with the native plant salvaging
process. However, on March 13, 1998, the United States District
Court for the District of Arizona issued a temporary restraining
order that halted further construction at the site. This injunction
was the result of a Complaint for Declaratory and Injunctive Relief
filed against the District by the Defenders of Wildlife (a national
species and habitat conservation group), who cited that clearing the
land would harm the habitat of the cactus ferruginous pygmy owl,
an endangered species. Approximately 20 months later, on
December 2, 1999, the United States 9th Circuit Court of Appeals
lifted the injunction, thus permitting construction activity.
Immediately after being notified of the court’s ruling, the District’s
Associate Superintendent authorized two emergency procurements
to complete the native plant salvage and begin the clearing and
grubbing process (removal and disposal of all vegetation and
surface debris).
Our investigation revealed that from March 1998 through June
2000, District officials failed to solicit competitive sealed bids for
construction and security-related services totaling $528,036, an
amount significantly over the procurement threshold.
Consequently, the Associate Superintendent improperly authorized
construction services as emergencies and withheld relevant
information from the Governing Board. Further, the District
improperly paid construction vendors for unauthorized charges.
I
Investigation Highlights:
The District paid a total
of $290,994 for security
guard services without
obtaining sealed bids
The Associate Superintendent
improperly authorized two
emergency procurements totaling
$181,905
The District paid a total
of $55,137 of
unauthorized charges
2
Lastly, the District did not maintain adequate records of
procurement decisions and actions. Due to this departure from
sound procurement practices and procedures, District taxpayers
were denied the benefits of full and open competition.
Accordingly, the District may have paid more than market value
for these services as well as violated Arizona Revised Statutes,
school district procurement rules, and District policies. See the
Appendix, page 9, for a list of specific Arizona Revised Statutes
and school district procurement rules that relate to our findings.
Exhibit 1
Summary of Procurement Violations
March 1998 through June 2000
Source: Records of Amphitheater Unified School District, investigation reports.
$290,994 $181,905
$55,137
Security Guard Services
Construction Related Services
Unauthorized Charges
$290,994
$181,905
$ 55,137
Total Procurement Violations $528,036
3
Finding I
The District Failed to Solicit
Sealed Bids for
Security Guard Services
During the period March 1998 through December 1999, the
District paid $290,994 to a vendor providing security guard
services for this construction site, without obtaining the required
sealed bids. According to the District’s outside legal counsel, one
of the purposes for 24-hour, 7-day-a-week security at the barren
site was “To prevent illegal or improper tactics that might
wrongly suggest that a pygmy owl uses or inhabits the property,
i.e., placing evidence of such use on the property.”
At the time security services were initiated at this desolate site, a
former District official reportedly obtained two written price
quotations; however, the District was unable to provide such
documentation. Regardless, within three months, the District
paid more than $30,000 to the vendor and thus exceeded the
dollar limit prescribed by the State Board of Education that
requires a sealed bid.
School district procurement rules exist to help ensure that
districts receive the best possible value for the public money they
spend by prohibiting the restraint of free trade and the
unreasonable reduction of competition among vendors.
Accordingly, due to the District’s failure to solicit competitive
sealed bids for security services, full and open competition was
denied, and the District may have paid more than fair market
value for these services.
The District paid $290,994
for security guard services
at a desolate site without
obtaining sealed bids.
4
Finding II
The District Failed to Solicit
Sealed Bids for
Construction Services
On December 2, 1999, the Associate Superintendent, rather than
soliciting for competitive sealed bids, improperly authorized two
emergency procurements for construction services and failed to
adequately inform the Governing Board. Under verbally
negotiated agreements, the District paid $122,540 to a vendor
providing native plant salvage and $59,365 to a vendor providing
clearing and grubbing services, for a total of $181,905. Given
that there were no threats to public health, safety, or welfare, the
District could have used normal procurement methods for these
services; nonetheless, the Associate Superintendent failed to
solicit competitive sealed bids. Accordingly, the District did not
comply with procurement rules and regulations and may not
have received the best value for these services.
The Associate Superintendent withheld relevant information
from the Governing Board
The Associate Superintendent breached her fiduciary duty by
withholding relevant information about the emergency
procurements from the Governing Board. On December 7, 1999,
the Associate Superintendent presented written statements to the
Governing Board that she had prepared to document the basis for
the emergency procurements and for the selection of particular
vendors. These statements included a partial quote from the
Arizona Administrative Code relative to emergency procurement
for school districts [R7-2-1056(A)]; however, the document
omitted the last sentence that provided key information and
would have aided the Board’s interpretation of an emergency.
The Associate Superintendent inappropriately excluded the
portion of the procurement rule that identifies specific examples
of emergency conditions such as floods, epidemics, or other
natural disasters.
The Associate Superintendent
improperly authorized
construction services as
emergencies.
5
The Associate Superintendent failed to present
required information to the Governing Board
Although required by the procurement rules, the Associate
Superintendent did not include in her emergency procurement
statements an explanation of why it was impracticable to
convene a meeting of the Governing Board. In fact, the
Associate Superintendent negotiated verbal agreements with both
the plant salvage vendor and the clearing and grubbing vendor
merely four days before a regularly scheduled Governing Board
meeting. Clearing and grubbing of the site began only three days
before the meeting.
The Associate Superintendent misstated information
presented to the Governing Board
The Associate Superintendent misstated the basis for selecting
particular vendors in her emergency procurement statement. The
emergency procurement statement reported that the native plant
salvage vendor was chosen because it had an existing “valid
purchase order.” However, the purchase order was the result of
improper procurement practices. In March 1998, prior to the
court’s injunction halting construction, the District requested
written quotes to begin the native plant salvaging process.
However, the District failed to obtain three written price
quotations as required and did not award the contract to the
vendor with the lowest price. Further, the scopes of services
were disparate, ranging from 6 acres in March 1998 to 73 acres
in December 1999.
The emergency procurement statement also reported that the
clearing and grubbing vendor was chosen because the District
had an existing “valid contract” with that vendor. However, no
such valid contract existed.
The Associate Superintendent
misstated the basis for selecting
particular vendors.
Two emergency procurements
were authorized
only four days before a
Governing Board meeting.
6
Finding III
The District
Paid Unauthorized Charges
for Construction Services
The District paid a total of $55,137 to two construction vendors
for unauthorized charges during the period March 1998 through
June 2000. This total represents charges for services that were
not properly procured or for work not included in existing,
lawful contracts.
¨  As previously stated, a purchase order was issued to the
native plant salvage vendor as a result of improper
procurement practices. In March 1998, the District failed to
obtain three written price quotations and selected the vendor
with the highest price. As a result, the District improperly
paid $15,302 to this vendor.
¨  In December 1999, the District finally issued a contract to the
plant salvage vendor by improperly declaring an emergency.
Still, in February 2000, the Associate Superintendent
inappropriately authorized a $5,000 change order to the plant
salvage vendor for services she acknowledged were outside
the contract’s original scope.
¨  In May 1998, the District issued and published a sealed bid
for the clearing and grubbing services of 73 acres. However,
no clearing and grubbing was performed relating to this bid.
Yet, in June 1998, the District paid the vendor $22,260 for
one day of unauthorized standby time. This amount
represents the time spent mobilizing and demobilizing the
equipment on June 9, 1998, at the construction site, due to
the District’s inaccurate presumption that the Court’s
injunction would be lifted on that day.
The District paid for services
that were not properly procured
or were not included in
existing, lawful contracts.
7
¨  In December 1999, the District ultimately issued a contract to
the clearing and grubbing vendor although they improperly
declared emergency procurement. In addition, in January
2000, the District paid for additional work in the amount of
$3,572 that, according to the contract terms, required a
change order. The District failed to identify the basis for the
change and did not issue a change order.
¨  In March 2000, months after the emergency procurement
contract was completed, the District reopened the purchase
order and paid the clearing and grubbing vendor $9,003 for a
separate project that was outside the contract’s scope. At the
least, the District was required to obtain three oral quotes for
the work. However, the District failed to obtain any price
quotations.
8
Recommendations
The Amphitheater Unified School District No. 10, as a
governmental entity, is responsible to Arizona’s
taxpayers for the prudent use of public money and
resources. To help ensure proper control over the
District’s assets and to ensure compliance with the school
district procurement rules, applicable Arizona Revised
Statutes, and the Uniform System of Financial Records,
the District should more closely monitor the procurement
process. District administrators should apprise the
Governing Board of all pertinent information before
seeking approval for large expenditures. In addition, the
District should maintain adequate documentation of all
procurement actions and decisions. Finally, in deciding if
an emergency situation exists that does not fall within the
examples stated in the school district procurement rules,
the District should seek advice from legal counsel.
9
Appendix
Arizona Procurement Code
A.R.S. §41-2616(B) states, “A person who intentionally or
knowingly contracts for or purchases any material, services,
or construction pursuant to a scheme or artifice to avoid the
requirements of this chapter, rules adopted by the state board
of education pursuant to section 15-213 …is guilty of a class 4
felony.”
School District Procurement
A.A.C. R7-2-1056(A) states, “An emergency condition
creates an immediate and serious need for materials, services,
or construction that cannot be met through normal
procurement methods and seriously threatens the functioning
of the school district, the preservation or protection of
property or the public health, welfare or safety. Some
examples of emergency conditions are floods, epidemics, or
other natural disasters, riots, fire or equipment failures.”
A.A.C. R7-2-1056(B) states, “An emergency procurement
shall be limited to the materials, services, or construction
necessary to satisfy the emergency need.”
A.A.C. R7-2-1057(B) states, “The designated board member
or district official who makes an emergency procurement
shall, at the first scheduled governing board meeting
following the procurement, provide to the governing board a
report concerning the emergency procurement including the
following information:
1. The basis for the emergency which necessitated the
emergency procurement, and why it was impracticable to
convene a meeting of the governing board.
2. The basis for selection of the particular contractor,
including an explanation of how the procurement was
made with as much competition as was practicable under
the circumstances; and
3. Why the price was reasonable.”
Arizona Attorney General
Opinion I96-007
Emergency conditions require:
ia sudden, unexpected and
unforeseen event that
ijeopardizes the public’s health,
welfare, or safety, and
irenders the procurement
process impracticable,
unnecessary, or contrary
to the public interest.
OFFICE OF THE, SUPERINTENDENT
701 W. Wetmore Road
Tucson, Arizona, 85705
(520) 696-5205 FAX: (520) 696-5015
October 16, 2000
REVISED RESPONSE
Ms. Debra K. Davenport, CPA
Auditor General
State of Arizona
Office of The Auditor General
2910 North 44th Street, Suite 410
Phoenix, AZ 85018
RE: Amphitheater Unified School District No. 10 Response to Investigative Report:
Procurement Violations by Amphitheater Unified School District No. 10
Dear Ms. Davenport:
I am in receipt of the draft report dated October 3, 2000. The following information is provided as
context for the Amphitheater response to this report.
The Amphitheater School District has experienced some tumultuous times during the past several years.
On May 16, 2000, a recall election was held for three members of the Governing Board. As a result of
that election, a majority of the Board was removed from office. Three newly-elected board members, Dr.
Kent Barrabee, Mr. Mike Prout, and Ms. Mary Schuh, were sworn into office on Tuesday, May 23 and
joined the two continuing members, Dr. Ken Smith and Ms. Nancy Young Wright, who had both
previously been in the minority on most board actions. On that same night, the new Governing Board
unanimously appointed me as the incoming Superintendent to replace the retiring superintendent, Dr.
Robert Smith, as of Monday, June 12, 2000.
It has undoubtedly been difficult in recent years to focus community attention on the excellence Amphi
achieves because of the distractions of board conflicts and the lawsuits and controversy surrounding the
location of the new high school. With a new board composition and the construction of the new high
school well underway, we are doing everything in our power to move forward and focus all efforts on
ensuring a positive, quality education for our students.
I have reviewed this report. The following are responses on behalf of the District to each individual
finding. The District will follow all recommendations provided in this report.
Ms. Debra K. Davenport CPA
October 16, 2000
Page 2
Finding I: The District Failed to Solicit Sealed Bids for Security Guard Services
District Response:
During the time period covered in the report, Amphitheater had four associate superintendents. The use
of the title Associate Superintendent throughout the report does not properly identify the responsible
official and may inappropriately identify other employees who did not play a part in the facts delineated.
Other than the above, the District finds no reason to dispute the facts recited in your report.
Corrective Action:
The District will ensure that proper procedures are consistently followed and provide the
documentation required substantiating all procurement decisions. The District will monitor the
dollar limit thresholds and require sealed bids, as required by the procurement laws.
Finding II: The District Failed to Solicit Sealed Bids for Construction Services
Amphitheater Response:
During the time period covered in the report, Amphitheater had four associate superintendents. The use
of the title Associate Superintendent throughout the report does not properly identify the responsible
official and may inappropriately identify other employees who did not play a part in the facts delineated.
Insofar as the issue of emergency procurement is concerned, that issue requires legal analysis. Assuming
the legal correctness of your conclusion, the District would find no reason to dispute the facts recited in
your report.
Corrective Action:
The District will ensure that proper procedures are consistently followed and provide the documentation
required substantiating all procurement decisions. The District will monitor the dollar limit thresholds
and require sealed bids, as required by the procurement laws.
Finding III: The District Paid Unauthorized Charges for Construction Services
Amphitheater Response:
During the time period covered in the report, Amphitheater had four associate superintendents. The use
of the title Associate Superintendent throughout the report does not properly identify the responsible
official and may inappropriately identify other employees who did not play a part in
Ms. Debra K. Davenport, CPA
October 16, 2000
Page 3
I
the facts delineated. Insofar as the issue of emergency procurement is concerned, that issue
requires legal analysis. Assuming the legal correctness of your conclusion, the District would
find no reason to dispute the facts recited in your report.
Corrective Action:
The District will ensure that proper procedures are consistently followed and provide the documentation
required substantiating all procurement decisions. The District will monitor the dollar limit thresholds
and require sealed bids, as required by the procurement laws.
Sincerely,
Vicki Balentine, Ph.D.
Superintendent
xc: Dr. Kenneth J. Smith, President, Amphitheater Governing Board