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State’s 5th largest school district hid millions while cutting services to students?

DENVER — On a cold winter day students of the Adams 12 Five Star School District find themselves wandering home between a pair of old rusty train tracks.

Over the last three years, the District has cut its budget by more than $56 million, eliminated bus routes and cut more than 200 jobs and middle school sports.

But a three-month investigation by FOX31 Denver raises serious questions regarding the district’s finances, its budget process and whether all those cuts were really necessary.

“I think that if someone in good conscience knew they were deliberately presenting this [Executive Summary Financial Plan and Budget] they would have to question their ethics,” said Professor James Sorensen of the University of Denver, Daniels College of Business.

At the request of FOX31 Denver, Sorensen spent two months reviewing the Adams 12 Five Star School District’s finances, budget process and allegations that school officials are hiding tens of millions of dollars.

Sorensen describes the district’s financial process as “sloppy” and claims school officials have “deliberately overstated” their expenditures.  “There is no question.  When I look at the mechanics of how they put the budget together they injected those numbers.”

The district’s own records indicate the budget controls, a system of checks and balances, had been turned off.

“I’d say that sounds very dangerous to me,” Sorensen said.  “Any organization that turns off financial controls invites disaster.”

He says without controls there’s no accountability: “What you introduce is the possibility of fraud, the possibility of theft, the possibility of misstatements.”

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It’s not a possibility but a reality says the District’s former internal auditor Gina Holub.

“Funding was on the decline,” she said. “They were looking to make cuts and they were intentionally inflating the numbers to justify the cuts.”

Holub is blowing the whistle.

She’s accusing the Chief Financial Officer, Shelley Becker, of knowingly providing inaccurate information to elected members of the School Board.

“It’s a huge red flag,” Holub said. “Especially when the Chief Financial Officer and her consultant are the ones who created the artificial numbers.”

Holub was fired by the district after questioning the ethics of the Chief Financial Officer.  According to her termination letter, the school district claimed the relationship was no longer “of mutual benefit.” They accused her of personalizing the budget and attacking the “competency and ethics” of the CFO.

Professor Sorensen not only agrees with the former internal auditor’s decision to speak out, he also validates many of Holub’s concerns.

“The path that she took is the appropriate way that an internal auditor should operate,” Sorensen said. “If you find that something is not right you can’t just say well I’ll just overlook it. You have a professional responsibility to identify those and raise those with the appropriate authorities.”

Sorensen says the district’s salaries, benefits and purchased services were inflated by more than $20 million.

“My analysis suggests it is probably 25 to 28 million dollars of misstatement,” he said.

Sorensen believes the district’s own financial spreadsheet is evidence that school officials deliberately overstated their expenses.

“There’s no question,” Sorensen said. “When I look at the mechanics of how they put the budget together, they injected those numbers.”

The spreadsheet also indicates that the school officials were relying on some creative accounting. When you click on the individual cells you can see their calculations. Rather than adding up the numbers it appears they were backing into the equations.

“In other words,” Sorensen said, “they started with the answer and then said, ‘Given what I know, what do I need to make it balance.'”

When confronted with the results of our investigation, Superintendent Chris Gdowski claimed the school district had done nothing wrong.

“I can tell you that I am confident that the budget presented to the board of education was prepared accurately,” he said.

Gdowski said the district hired an outside consultant, Vody Herrmann, the former Colorado Assistant Commissioner for School Finance, “to look into allegations that there were illegal and or improper budgeting processes underway in our finance department.”

The Superintendent refused to comment about Hermann’s findings and the district is refusing to release a copy of her report, claiming it’s “a matter of attorney-client privilege.”

At the eleventh hour late Monday afternoon, the Superintendent released a letter to staff, parents and community members attacking our investigation. In the letter, Gdowski described Holub as a “disgruntled former employee” who “continues to allege the district has engaged in unethical and illegal budgeting practices.

“This is absolutely false,” the letter concludes.

The Superintendent’s letter to the entire district also contained a link to a statement signed by Vody Herrmann.

“There were no grounds to support the charges of unethical or illegal behavior,” Hermann wrote. “I found no merit to her allegations.”

Hermann goes on to state that she “made a number of recommendations to the district for ways that it could improve its long-standing budgeting practices” and “suggested the district obtain assistance in conducting an in-depth review of those past budgeting practices.”

She claims she “will have no further comment on this matter.”

As for the district’s Chief Financial Officer, Shelley Becker, she has declined FOX31 Denver’s repeated requests for an on-camera interview. She’s hired an attorney and the School District has surrounded her with security. Her lawyer has demanded that FOX31 Denver “desist from all further efforts to speak with Ms. Becker in person or by telephone.”

“I’m astounded. I’m astonished,” Adams 12 Five Star School Board member Fred Schaefer said of the allegations against his school district. “I want to see a review of this entire situation.”

District 12 Educators’ Association President Dorian DeLong echoed Schaefer’s concerns.

“I would certainly hope that the Adams County DA would take an interest in this,” DeLong said.  “Ultimately, this is being very unfair to the students of this district.”

LINK – Superintendent’s response