Adams 14 is withholding results from financial audit of company contracts

Students walk through the hall at Adams City High School between classes Monday, Feb. 4, 2019.
Students at Adams City High School in 2019. The school, and its Adams 14 district, are under state orders to be managed by MGT Consulting.

After raising concerns about mishandling of finances, the Adams 14 school board has completed a forensic audit of its spending on an external management company — but it isn’t releasing the results and the board has discussed it only behind closed doors.

Meanwhile, officials with MGT Consulting, the external manager, have their own concerns about how the audit was conducted, though they haven’t seen the results. In a written statement, Andre Wright, MGT’s manager for Adams 14, said a lawyer is investigating complaints that “central office administrators coerced a subordinate to lie if interviewed for the forensic audit.”

The audit findings — and the dispute over whether they are even valid — raise questions about whether the district and MGT can repair their relationship, as the State Board of Education has ordered, and whether district officials even want to do so. Depending on the results, the audit may also give Adams 14 leverage to end its contract with MGT, as Superintendent Karla Loria sought to do earlier this summer.

Colorado’s State Board of Education first ordered Adams 14 to hand over management of its district for at least four years in 2018. It took almost a year more to identify the manager and sign a contract.

The purpose of handing over management was to improve student achievement. The state did not raise concerns about how Adams 14 managed its finances, as has happened in outside takeovers of low-performing schools and districts in other states. 

When Loria took over this summer as the first superintendent since MGT’s work began, she raised concerns that MGT was getting the district to pay subcontractors to do work that MGT already is getting paid to do. MGT officials have denied wrongdoing, saying they’ve been good stewards of the district’s money. 

Adams 14 has paid MGT more than $7 million over two years — a sizable chunk, given that the district’s general fund budget is less than $100 million this fiscal year.

The contract signed in 2019, showed MGT’s costs were projected to go down each year, as the level of support they provided would decrease so the district slowly had more control. In the second year, the board approved an increase to MGT’s budget by $770,000, using federal COVID relief money to increase services to help students after the pandemic. That meant the second year’s costs were about the same as the first year’s costs. 

Loria asked the board to hire an auditor, Eide Bailly, to do an audit for a cost of more than $10,000. 

MGT officials say they were not interviewed for the forensic audit and have concerns that other key district employees weren’t either. They claim this fits a pattern of “reports being manipulated to fit a preconceived narrative,” an allegation they also made about a previous consultant’s report

In a  Nov. 19 email, Adams 14 said that the report was delivered to school board members during the previous week, but that the board had “deemed it prudent” to not publicly release the report until board members could read and analyze the contents.

The auditor’s contract says the report is to be used only for purposes of litigation or for internal use. “Such reports or other documents may not be published or used for any other purposes without our written consent,” the Eide Bailly contract states.

The district denied Chalkbeat’s request for the audit by saying it was “in transition with legal counsel” and a lawyer had not been able to review the audit. Nonetheless, the board met with a lawyer in closed session Tuesday.

Under Colorado law, there are a limited number of reasons for a public school district to withhold such information. Reports are usually public when they are produced and distributed to members of a public body for their use in a public meeting.

The school district’s announcement had said the board would consider “next steps” at Tuesday’s special meeting, but the board did not return to the public meeting to make any decisions. The stated purpose of the closed session was to receive legal advice related to accreditation.

The cost of the MGT contract has always been a concern for community members. But when community and district leaders were choosing an external manager, they purposefully did not consider costs. Each proposal was to have a cost estimate included, but in a sealed envelope that would only be opened if that manager were chosen.

The goal was to focus instead on who would provide the best services.

The district has used its rainy day fund, along with some state grants, to pay MGT Consulting. 

Loria has also raised concerns about a policy that MGT had the school board approve in 2020. It changed the standard for when a contract needed to be brought for board approval by excluding certain “professional services, instructional services or materials and private instructional placements required by law.” That could have allowed some contracts with consultants suggested by MGT to go through without board approval.

In recent public meetings, the school board has expressed disappointment and sadness with the allegations about MGT and has begun the process to reverse those contract policies. 

It’s not clear where this leaves MGT Consulting’s work in the district. Consultants with the company have been back in district classrooms after the State Board rejected the district’s attempts to block their work. However, State Board members said the district could ask for amendments and changes to their contract with MGT, if officials can show it’s necessary. 

A spokesperson for the state Department of Education said Friday there has been no request to date from the district for such a meeting.

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