Dispelling DPS myths

**BankruptcyGuy** · February-22-16, 08:14 AM

A couple of points about DPS

1. First, the narrative that “DPS had a surplus until the state came in” is 100% false. School districts often report their “fund balance,” which is roughly equal to their cash on hand. What it doesn’t account for is how the cash got there. In DPS’s case, they borrowed money and spent most of it, leaving some on their balance sheet. That is not a “surplus.” DPS had annual operating deficits [[you spend more than you bring in, excluding financing items) for as far as anyone could remember. The operating deficits are why the state eventually took over.

2. As late as 2009-10, DPS was preparing their own financial statements. Anyone with any background in finance can identify that as a red flag for fraud, misrepresentation, etc. When Snyder [[a CPA) eventually required DPS to have their statements audited, the auditor found deficiencies and internal weaknesses in controls [[all technical terms) in reporting and compliance. The compliance ones are serious potential violations; DPS receives grants from the federal government for many programs, and you have to spend the money correctly. Failure to do so puts your participation in those programs at risk. Those programs include school lunches, before and after-care, special education, and career tech programs. Put differently, if DPS did not clean up their act, the feds would have pulled all of their funding from those program. Additionally, anyone in finance knows that private lenders would not lend to a company with such red flags from their auditors; they would run.

http://detroit.k12.mi.us/data/financ...dit_Report.pdf

3. Recall that in 2009, Robert Bobb pulled up the shades on fraud in DPS. There were 85 [[?!?!) active fraud investigations. Non-employees had been on the payroll for years, and when Bobb required them to show up in person to pick up their paychecks, many wisely stayed home. Or recall the car that DPS found they owned when they investigated what was in a closed school. Fraud was at a level that would have made even Kwame blush.

http://webcache.googleusercontent.co...&ct=clnk&gl=us

Please help dispel the notion that DPS was hunky-dory before emergency managers arrived.

[[This isn’t to say that DPS is being run well under the current EM. It’s not, but that’s a different story for a different day.)

**Scottathew** · February-22-16, 09:49 AM

Interesting information! I find it shocking how people can steal from these kids or turn a blind eye to people stealing.

**corktownyuppie** · February-22-16, 10:21 AM

Originally Posted by BankruptcyGuy

A couple of points about DPS

1. First, the narrative that “DPS had a surplus until the state came in” is 100% false. School districts often report their “fund balance,” which is roughly equal to their cash on hand. What it doesn’t account for is how the cash got there. In DPS’s case, they borrowed money and spent most of it, leaving some on their balance sheet. That is not a “surplus.” DPS had annual operating deficits [[you spend more than you bring in, excluding financing items) for as far as anyone could remember. The operating deficits are why the state eventually took over.

2. As late as 2009-10, DPS was preparing their own financial statements. Anyone with any background in finance can identify that as a red flag for fraud, misrepresentation, etc. When Snyder [[a CPA) eventually required DPS to have their statements audited, the auditor found deficiencies and internal weaknesses in controls [[all technical terms) in reporting and compliance. The compliance ones are serious potential violations; DPS receives grants from the federal government for many programs, and you have to spend the money correctly. Failure to do so puts your participation in those programs at risk. Those programs include school lunches, before and after-care, special education, and career tech programs. Put differently, if DPS did not clean up their act, the feds would have pulled all of their funding from those program. Additionally, anyone in finance knows that private lenders would not lend to a company with such red flags from their auditors; they would run.

http://detroit.k12.mi.us/data/financ...dit_Report.pdf

3. Recall that in 2009, Robert Bobb pulled up the shades on fraud in DPS. There were 85 [[?!?!) active fraud investigations. Non-employees had been on the payroll for years, and when Bobb required them to show up in person to pick up their paychecks, many wisely stayed home. Or recall the car that DPS found they owned when they investigated what was in a closed school. Fraud was at a level that would have made even Kwame blush.

http://webcache.googleusercontent.co...&ct=clnk&gl=us

Please help dispel the notion that DPS was hunky-dory before emergency managers arrived.

[[This isn’t to say that DPS is being run well under the current EM. It’s not, but that’s a different story for a different day.)

Agreed.

I am 100% with the opinion that the state and the state EM's have mismanaged this to all hell. And I'm even in favor of returning it to local control. But let's not pretend that things were hunky dory when the state stepped in. If the I'd give the state management an 'F' grade, then at best I would have given the local management a 'D-'. Both were unacceptable, and the fact that we are even arguing about which level of unacceptability was better for the children is a total joke.

The conversation needs to move away from 'Who' and move toward 'What' and -- most importantly -- 'How'.