August 19, 2014

State review faults Missouri education department’s handling of CEE-Trust contract

The department stumbled several ways when it hired Indianapolis-based CEE-Trust a year ago to propose a complete overhaul of Kansas City Public Schools, a state auditor’s report says. Department emails and bidding documents showed how the foundation and Missouri Education Commissioner Chris Nicastro had been communicating for months in 2013 and had originally hoped that the department could hire CEE-Trust without a bid process.

Missouri’s education department stumbled several ways when it hired CEE-Trust a year ago to propose a complete overhaul of the Kansas City Public Schools, a state auditor’s report said Tuesday.

The state’s contract with reform-minded CEE-Trust of Indianapolis was plagued with potential bias and conflicts of interest involving the Ewing Marion Kauffman Foundation, which helped fund the $385,000 contract, the report said.

Department emails and bidding documents, reported by The Star in December, showed how the foundation and Missouri Education Commissioner Chris Nicastro had been communicating for months in 2013 and had originally hoped that the department could hire CEE-Trust without a bid process.

Nicastro and the foundation were eager to spur ideas from CEE-Trust, whose past work in education promoted dramatic system redesigns featuring a network of independent public schools in which those that are successful can operate autonomously.

The problem, Deputy State Auditor Harry Otto said Tuesday, was that when the state school board directed the department to go through a bidding process last summer, the way the department ultimately chose CEE-Trust did not properly guard against bias.

“We believe it was a flawed process,” Otto told The Star.

State officials who had been working with CEE-Trust and the Kauffman Foundation for months before the bidding process were involved in scoring the bids. The state awarded the contract to CEE-Trust even though a competing bidder with seemingly more industry experience offered to do the work at less than a third of the cost.

The state’s subjective scoring system did not adequately explain how CEE-Trust’s bid earned a significantly higher score for experience, reliability and expertise over the less expensive vendor, the report said.

There was a 56 percent difference in scoring of the subjective judgment criteria between CEE-Trust’s bid and the second-place bidder, the report said. The auditors reviewed nine other education service contracts the state awarded in 2013 and found that the differences in subjective criteria points between the top two bids ranged from 4 percent to 17 percent.

CEE-Trust’s bid also did not disclose that the Kauffman Foundation — which split the cost of the study with the Hall Family Foundation — was a member of CEE-Trust’s nationwide network of nonprofits and foundations working to improve education in their cities.

The bidding process, the auditors wrote, “raises questions regarding the independence and objectivity of the report’s findings.”

The department, in a written statement, said it was taking steps to implement recommendations from the auditors’ review, but it also pointed out the auditors opted for a review rather than a full audit, and that the report listed “no material findings,” meaning no significant weaknesses that would endanger public funds.

But Otto said the practices the department used in this case, if they were repeated, would present a significant risk.

“The fact that they awarded the contract the way they did — that would be material if you continually worked with bidders that way,” he said.

The Kauffman Foundation, in a prepared statement from Aaron North, its vice president of education, said it had entered the conversation about plans for Kansas City as part of its mission to help achieve the best possible academic and life outcomes for all students.

“Given the well-documented challenges facing urban districts across the nation,” North said, the foundation thought that the education department’s request for reform ideas “merited our support.”

The Kauffman Foundation was a founding member of CEE-Trust in 2010, he said, and it has maintained “an open and transparent relationship.”

The emails that raised the public concern were gathered through a Sunshine Law request by the Metropolitan Organization for Racial and Economic Equality last fall and shared with The Star.

MORE2 leaders issued a joint statement Tuesday calling the auditors’ report an affirmation of their fears.

When the education department “conducts a bid process like this, they potentially jeopardize state funding,” the statement said. “Given the already inequitable distribution of funding toward education, we cannot afford this type of action...”

After The Star’s account in December, several Democratic legislators and supporters of the district called for Nicastro to resign and asked for a moratorium on CEE-Trust’s work.

The state board backed Nicastro. It also allowed CEE-Trust to carry on with its work, though the department also accepted several other proposals it used in contemplating the future of the then-unaccredited Kansas City Public Schools. CEE-Trust presented its report in January.

The collaboration between the department, CEE-Trust and the Kauffman Foundation flared an ongoing rivalry in education between traditional public school systems and the advance of charter schools — public schools that operate independently with their own boards.

Kansas City also was drawing widespread support from neighboring superintendents in August 2013 who were urging the state to give the district provisional accreditation and remove it from potential state intervention.

Nicastro ultimately decided that the department would shift its focus, putting off developing a reform plan for Kansas City and instead developing a broader proposal on how the state should help struggling school districts.

Earlier this month, at Nicastro’s recommendation, the state board granted Kansas City provisional accreditation.

The school district, Superintendent Steve Green said in a written statement Tuesday, “has moved on and made tremendous progress from where things stood last year.”

The district is single-minded in its goal “to reach full accreditation,” he said. “Our sights are set on bigger and better things.”

The auditor’s review made recommendations:

The education department should ensure that future bid evaluation teams are fair and impartial and ensure that potential conflicts of interest are eliminated before accepting funds from an entity affiliated with a potential contractor.

The department also should ensure that evaluation teams provide adequate documentation to substantiate the bid scores.

The review was requested and carried out by Otto, the deputy auditor, rather than state Auditor Tom Schweich, who recused himself. Schweich has in the past received political campaign support from state school board president Peter Herschend.

To reach Joe Robertson, call 816-234-4789 or send email to jrobertson@kcstar.com.

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