in Houston, Texas
HISD’s $1 billion capital facilities program hampered by lack of planning, no annual budget, communication problems
Wednesday, Sep 15, 2010, 04:24PM CST
By Lynn Walsh

The Houston Independent School District’s $1 billion fund for major building projects has been operating with substantial financial errors and without annual budgets, standard contract forms and budget evaluations, according to a recent report by a national education nonprofit.

The district’s capital facilities program lacked an annual budget, had no set timelines for the completion of project and lacked standard guidelines as to how projects would be established, evaluated and completed, according to the July review by the Council of the Great City Schools requested by Superintendent Terry Grier. There was no tracking of amendments to projects that enlarges their scope and price tag, and district staff had “no understanding of the impact” of such changes on costs.

“We did not have a master plan. We did not have a master schedule,” said Issa Dadoush, who joined the district as general manager of construction and facilities in April.

The district’s process of buying services and goods also raised concerns for some district staff interviewed by the reviewers. There is a “need for greater transparency to ensure that the process is open, fair and equitable,” the report says.

The almost $1.1 billion capital facilities program includes the proceeds from an $808.6 million bond package that voters approved in 2007. It also consists of a $150 million pay-as-you-go district program and other capital funds.

Capitol

Dadoush said there are more than 20 current projects that are in the “early to late design phases that have a potential for exceeding proposed budgets.”

“There was no control in place on how the project budgets were set up,” Dadoush said. “Has the money been spent? No. But can we go back and look at how the money is to be spent? Yes. The question now is where will the excess money come from? If the money is not there then the projects will go back to the drawing board.”

The report describes an environment in which one hand didn’t know what the other was doing. For example, the district’s chief financial officer would often be unaware of financial estimates by lower-level capital program staff.

One HISD manager likened the district’s approach to scheduling projects to “‘all the horses were let go at once,’ resulting in a somewhat chaotic environment,” the report says.

Saavedra doubts shortfall

The report also describes substantial financial reporting errors in June and July status reports  presented to the district’s bond oversight committee.

In July, a $16 million project was estimated as being in the red by $15 million. District staff are trying to find a true figure.

A June quarterly report showed that the capital facilities program had a balance of $25.6 million, but another report dated June 22 showed the same capital facilities program was in the red $37 million. HISD was unable to determine if either figure was correct.

Former HISD Superintendent Abelardo Saavedra said he doubts there really is a shortfall.

“The bond program had adequate money and excess funding. It is hard for me to believe that this shortfall would exist unless something really went wrong in the last couple of months,” said Saavedra, who stepped down in 2009 and was responsible for outlining the funding process for the 2007 bond program.

“There are a lot of errors in the numbers, and we are working internally to fix the problem,” Dadoush said, adding that the council’s report is a draft. “We are recognizing we have a problem, and now we are doing a worksheet for every single project that we have so we can verify the budget for each project.”

Sen. Mario Gallegos, who has served on the Senate’s education committee, criticized Grier for not taking quicker action.

“The report shows what I have always known: that is there is lack of communication and planning,” Gallegos, D-Houston, said. “Why isn’t the bond program a part of the strategic plan? That is the first thing I would have done as a superintendent. These are things that should have already been done.”

Dadoush said budget details for each construction project will be presented to trustees Oct. 7. The next step, he said, is to create a “comprehensive five-year construction plan that is solid and accurate,” which would cover 2007 through 2013. The five-year plan would be approved by HISD trustees and updated annually.

As for current projects, Dadoush said they would continue even though there are some inefficiencies.

“We cannot do a complete shutdown,” he said. “If someone tells me there is something going on that is unethical, we will shut it down. But, if it is inefficient, it will continue. We will continue and just make changes as we move forward.”

The council also found that HISD had:

  • Failed to consistently prepare an annual report on the Facilities to Standards program.
  • No standard contract forms for vendors.
  • A clunky way of managing data in which three different systems were used but unable to “talk” to each other, creating inefficiency and greater potential for mistakes.
  • No evaluations of contractors for future reference.
  • No internal inspectors to evaluate construction projects.
  • No evaluation of budgets, cost projections or reporting mechanisms by the auditors working for HISD’s inspector general.

HISD is continuing to look at the recommendations from the Council of the Great City Schools and has partially implemented one of them by moving the bond office under Dadoush’s department and combining the construction department and the facilities department into one single department. The council also suggested moving employees who work with rental and real estate matters into this group.

“We are not there,” Dadoush said. “On a scale from of one to 10, we are not even at a five. We are going out at a two. Hopefully there will be continuous improvement.”

Contact Lynn Walsh at 713-228-2850 or lynn@texaswatchdog.org. On Twitter, @lwalsh. Follow the news from HISD on Twitter, #HISD.

Photo of a bulldozer by flickr user by flickr user bucklava, used via a Creative Commons license.

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