Auditor Fitzpatrick gives the St. Louis Public Schools a "poor" rating in new audit report that scrutinizes the district's budgetary, hiring, and procurement practices

An audit that began as a review of the issues that emerged under the leadership of former St. Louis Public Schools Superintendent Dr. Keisha Scarlett has confirmed many of the alleged problems dealing with misuse of credit cards and unjustified pay increases, but has also found the district is on a perilous financial path because of a failure to perform sufficient long-term financial planning. The new report released today by Missouri State Auditor Scott Fitzpatrick gives the district the lowest possible rating of "poor" and cites the district for deficit spending that, if left unaddressed, will lead to the district having insufficient funds to complete the school year by fiscal year 2031.

"When we started this audit I made it clear our goal was to identify what is going wrong in the St. Louis Public School District and provide a set of recommendations that will allow the district to be managed more efficiently and effectively. The report we've released today sounds the alarm regarding the district's financial condition and will help the district improve operationally ," said Auditor Fitzpatrick. "Our report identifies a great deal of mismanagement in terms of the unreasonable purchases that were allowed, how salaries were increased without justification, how millions of dollars in unconstitutional incentives were paid out, and how vendors were selected in violation of district policy and state law. The report also details how the district faces a rapidly deteriorating financial condition because of the failure of the Board to plan appropriately for the long-term financial future of the district. Due to the number of concerns identified in the audit of the district, and in order to provide the district and the citizens of St. Louis as much information as possible before the start of the new school year, this report is the first of two that will be released for our audit of the St. Louis Public Schools. Our work to document concerns and provide recommendations to allow the students of the district to receive the free and appropriate education they are constitutionally entitled to continues, and I look forward to releasing our final report as soon as possible."

The report notes for fiscal year 2024, the district budgeted $465.8 million in revenues and $483.5 million in expenditures, resulting in projected deficit spending of $17.7 million. Additionally, the district budgeted deficits of $35.4 million and $33.4 million for the fiscal year 2025 and fiscal year 2026 budgets, respectively.  According to the audit, if the district continues deficit spending at the rate currently projected, the unassigned operating fund balances will fall below 30 percent of expenditures in fiscal year 2027 and below 20 percent in fiscal year 2028. In fiscal year 2030, if not addressed, the current rate of deficit spending will result in fund balances at or below 3 percent, which the Department of Elementary and Secondary Education defines as a financially stressed district. By fiscal year 2031, the district would not have sufficient funds to complete the fiscal year 2031 school year. The report recommends the Board of Education maintain a long-term financial plan that includes a strategy for reversing the district's practice of unstainable deficit spending, and also recommends the Board ensure budget information is sufficiently evaluated prior to passing the budget.

The report also documents the questionable and unreasonable purchases made by district personnel for items that did not have an educational benefit. A review of 27 transactions totaling $17,040 from the period June 6, 2023, through August 5, 2024, found 17 of the transactions (63 percent) totaling $12,436 that were questionable and/or unreasonable. Transactions included $3,888 for a Top Golf venue rental, $1,689 for a 4-night stay at Caesar's Palace, and $1,282 for an Airbnb rental paid for using the former superintendent's district-issued credit card. Additionally, the report documents how district credit cards were used for unreasonable travel upgrades including upgraded boarding, early flight check-in, in-flight Wi-Fi, and additional travel insurance. In total, there were 55 upgrade transactions totaling $1,747 from June 5, 2023, to August 5, 2024. The audit also found the district overpaid the former superintendent by $3,258 when reimbursing her for moving expenses and reimbursed the Interim Deputy Chief of Operations $15,000 in moving expenses even though there was no employment contract or agreement that allowed for the reimbursement of moving expenses. District personnel also failed to ensure credit card bills were paid timely, resulting in late fees of $1,106. 

The audit also found the district paid approximately $3.5 million in attendance incentives to employees in violation of the Missouri Constitution. The incentive payments to non-union employees were made without a formal agreement in advance between the district and employee and were not for additional duties. Therefore, they represent pay for past performance in violation of the Missouri Constitution. Also, the district payments to skilled trades employees prior to January 1, 2023, when a skilled trades agreement with the incentive added became effective, violated the Missouri Constitution. The report also notes the former superintendent approved cabinet member salaries in excess of the district salary schedule without Board approval, and gave pay raises to cabinet members with no support to justify the increase, some of which were retroactive. A review of 10 of the cabinet members identified 6 cabinet members to whom the former Superintendent offered and authorized salaries that exceeded the maximum salary allowed on Board-approved salary schedules. The salaries exceeded the maximum allowed by amounts ranging from $12,478 to $44,039. Additionally, a review of 30 employees' annual salaries found 22 (73 percent) did not agree with the Board-approved salary schedules. Of the 22 employees, 21 exceeded the salary schedule by $1,446 to $45,189. The report also highlights the fact district personnel files did not have records of some employee background checks and employment records for several employees were otherwise incomplete. 

Another finding in the report explains how district procurement procedures and practices did not comply with Board policy and state law. A review of 20 vendors found the district bypassed the required sealed bid process by classifying 3 purchases, totaling $266,780, as emergencies or sole source procurements when they did not qualify as such. Additionally, the district did not competitively select some vendors as required by district policies and state law. In one instance, the district used a non-RFP vendor instead of a preferred vendor for $133,295 in t-shirt purchases without being able to provide an explanation. The report also notes for 14 vendors reviewed, the district did not always retain adequate supporting documentation or obtain quotes, Board approval, and contracts when required. 

Other findings in the report include personnel records not being stored in a manner that ensures confidentiality and protection from environmental threats, including potential water or fire damage; district policies over travel that were inadequate with the Board not ensuring travel policies were followed; the district failing to monitor credit limits for district purchasing and monthly-cycle card limits that are excessive; and public district budget documents being inaccurate and some monthly financial statement information not being accessible to the public. 

This is the first of two audit reports that will be issued for the St. Louis Public Schools. The complete audit report is available here.