Originally Published by The Houston Chronicle
Houston’s school board removed its chief auditor after he reported potential violations of state law to police, shared information with the FBI and called out a board member for breaking competitive bidding rules, newly obtained documents and interviews show.
At one point last fall, after the auditor, Richard Patton, released an audit blaming cost overruns in the Houston Independent School District’s $2 billion construction program on insufficient competitive bidding and inadequate monitoring, he was castigated by the school district administration for recklessness and “flawed methodology.”
Patton fired back in an email, recently obtained by the Houston Chronicle: “I am going to say this only once – this district does not want the real dirt to be published. … What is the value in having a gunfight that you seem to desire?”
Three days before his March 10 suspension, Patton received an email from the district’s treasurer, asking him whether HISD had been the subject of any significant civil or criminal investigations in the last two years. The treasurer was seeking information that may need to be disclosed to potential investors as HISD prepared for a $757 million bond offering as part of its ongoing 2012 construction program.
Patton replied to the treasurer the same day that his audit department had “received inquiries and certain data requests from a federal agency in the past 24 months,” according to the email correspondence.
HISD, in a March 29 report to potential bond investors, did not disclose Patton’s comments about receiving questions from the FBI. HISD, however, filed a supplemental statement to the bond report dated April 8, a month after suspending its auditor. It said the district was investigating its chief auditor for alleged misconduct but that the allegation did not relate to old or current HISD audits, including any pertaining to the bond offering.
HISD spokesman Jason Spencer said school district officials are confident they followed the rules regarding disclosing risks to bond investors.
Higher costs of program
Patton’s attorney, David Feldman, formerly the city’s top lawyer, said his client thinks the HISD board suspended him in retaliation for blowing the whistle to law enforcement about suspected illegal activity involving the school district.
HISD board President Manuel Rodriguez Jr. said there’s no retribution involved. Feldman plans to file a grievance with HISD this month on the auditor’s behalf.
The HISD board has refused to explain publicly the reasons for suspending its chief auditor, while continuing to pay him his $186,920 annual salary. The suspension has left the nation’s seventh-largest school district without its top internal watchdog for two months and counting, raising questions about whether HISD can maintain taxpayers’ trust.
An April 13 “incident memorandum” from the school board president to Patton provided details for the first time surrounding his suspension. The memo focused on how Patton handled an October 2015 audit to determine whether the district needed to add more money to its $1.9 billion construction bond program approved by voters in 2012.
The memo questioned the accuracy of his audit and said he did not follow “acceptable audit practices” by publicly discussing a draft of his report. It also said the auditor overstepped his authority by criticizing employees he did not supervise and communicated in a “disrespectful, accusatory and threatening” tone.
Patton, in an April 22 rebuttal letter, said “the supposed deficiencies mentioned in the memo seem quite subjective and not based on evidence.”
The bond audit in question, signed by Patton and his construction audit manager, found that HISD’s insufficient bidding and inadequate oversight – not solely inflation – had contributed to higher costs in the 2012 bond program.
Former Superintendent Terry Grier’s administration responded at the time that the bond audit findings were “reckless,” based on “flawed methodology” and “a profound lack of understanding of the Houston economicclimate.”
Patton, expressing frustration with the administration’s response, sent an email on Oct. 16, 2015, to Leo Bobadilla, the district official over the bond program. “No sir Mr. Bobadilla, the facts in the report are not changing because I sleep good every night,” Patton wrote.
The board president’s April memo to Patton said the auditor’s email to Bobadilla was “intimidating” and called into question the accuracy of his audit.
The memo also said Patton should not have copied all of the HISD board members on the message. The memo did not clarify that Patton was replying to an email from Bobadilla, who had copied the board members first, according to a copy of the email chain.
Patton, in his rebuttal letter to Rodriguez, said the tone of his email to Bobadilla was not his “normal style.” Patton also defended the accuracy of his October 2015 bond audit, saying he included all the relevant facts.
Rodriguez’s memo said the chief auditor should not have released parts of the October 2015 audit about the district’s construction bond program while still in draft form. The memo did not mention that Patton was prompted by the chairwoman of the board’s audit committee.
Feldman called the timing of the board president’s April memo to Patton about concerns with his job performance “suspect,” because it was sent to him a month after his suspension. The attorney also downplayed an allegation the board made to Patton in March that he had personal documents scanned for him by an assistant at work. He said the scanning occurred over two years and involved fewer than 10 pages, tied to a closing on a property and a survey for a credit union. This scanning allegation was not included in either of the HISD memos sent to Patton and obtained by the Chronicle.
“It’s subterfuge,” Feldman said of the scanning allegation. “It’s common in any workplace, given the speed with which you can utilize technology, that someone might have a scan made.”
Patton, who has declined a reporter’s request to discuss his suspension, met on May 13 with an attorney from a local law firm HISD hired to investigate the matter. Rodriguez said he expects the investigation to be finished this month but declined to elaborate.
On Nov. 3, Patton told the board in a memothat he had given the school district’s police chief a copy of his September 2015 audit that found potential violations of state law regarding construction contracts with several companies that served as job-order contractors, on call to do repairs and minor construction.
The audit said HISD appeared to skirt the state’s $500,000 contracting cap by issuing separate work orders tied to the same project. HISD’s Spencer said the district’s police chief Robert Mock had received a copy of the audit, but the HISD spokesman declined to comment on what actions may have followed.
External auditors with Deloitte & Touche found a similar problem with the district’s job-order contracting process, and in a Nov. 12, 2015, memo to HISD noted a “significant deficiency” in its internal controls.
Concern raised about board
Patton’s department also raised concerns last fall about the HISD board, to whom he reported.
According to an internal HISD memo dated Oct. 9, 2015, Patton’s department concluded that board member Wanda Adams had violated the district’s mandatory silent period during the bidding and contract award process.
The memo from Debra “Debi” Fincher, the ethics and compliance officer who reported to Patton, said Adams had shared an early copy of the September 2015 board meeting agenda with a subcontractor for the losing vendor vying to provide atwo-way radio system for the HISD transportation department.
Adams, in an email to district staff on Sept. 3, 2015, said she did not favor one vendor over another, but she asked why the district was changing vendors and said she heard no references were checked. Adams said in a recent interview after Patton’s suspension that she did not know at the time that she was forwarding the preliminary meeting agenda to a subcontractor, whom she declined to name.
It’s clear that Patton thought his working relationship with the HISD board had become strained late last year. In November, he wrote the board members a memo asking that his audit department have the “continued freedom to conduct audits” of district business “without fear or threat.”
Told to improve department
Patton was hired in 2010 to ensure the state’s largest public school district complied with a settlement agreement, after the federal government alleged improper gift-giving between technology vendors and former district employees.
The school board promoted him to chief auditor in September 2014, directing him to improve the audit department, which had received a poor review from the national trade group, the Institute of Internal Auditors. The institute gave Patton’s department the highest rating in October 2015.
Five months later, the HISD board met privately with Patton on the day of his March suspension and gave him a letter saying he was being placed on paid leave based on “allegations of misconduct and other performance concerns.” In early April, the board released a copy of the letter confirming the chief auditor’s suspension in response to the Chronicle’s public records request.
HISD trustee Anna Eastman, the longest-serving member of the board’s audit committee, said last week that she hopes her colleagues appoint an interim chief auditor soon and that the Patton investigation is wrapped up quickly.
“We have a massive annual budget. We’re also in the middle of implementing a $2 billion bond program,” Eastman said. “It’s critical to the trust of the public and the taxpayers that we have a fully transparent internal audit function that reports independently to the board.”
