1701 North Congress Ave. Austin, Texas 78701-1494 April 1, 2014 Timothy B. Chargois, Superintendent Mike Neil, Board Member Beaumont Independent School District Beaumont Independent School District 3395 Harrison Avenue 3395 Harrison Avenue Beaumont, TX 77706 Beaumont, TX 77706 Dear Dr. Chargois and Mr. Neit Re: TEA Special Accreditation Investigation #2013-08-005 Final Investigative Report The Texas Education Agency (TEA) Division of Financial Compliance, Investigation Section, has concluded its special accreditation investigation (SA) of Beaumont Independent Schoo! District {BISD). This letter serves to notify BISD of the TEA’s final investigative report and conclusions resulting from our investigation. This final investigative report includes the district's management responses to our preliminary investigative report findings, as well as the TEA's analysis of the district's response to each finding. All recommendations, corrective actions, and implementation deadlines detailed in this final investigative report represent the TEA's opinions and expectations for drastic improvement and change that must be immediately implemented by the district. As previously indicated, the results in this final investigative report do not address all the concerns raised before, during, and after our investigation, Addilional investigative work will be conducted to address additional concerns. Furthermore, other TEA divisions are currently investigating BISD or may be issuing other investigative reports regarding BISD. This report covers only the financial management concerns investigated by the Division of Financial Compliance, Investigation Section, to date. A separate SAI report will be issued from our division to address altendance concerns. In closing, BISD and any named educators will be notified of any actions concerning accreditation, sanctions, and additional investigations under separate letters from the respective TEA offices, as determined necessary. The TEA's final investigative report is enclosed, If you have any questions concerning this report, please contact Mr. Michael Richmond at (512) 475-3403, Sincgrety, David Marx, Director Division of Financial Compliance DMisbs EnclosureTEA Special Accreditation Investigation Final Investigative Report Beaumont Independent School District Executive Summary In the past five years, Beaumont Independent School District (BISD) has suffered a severe loss of public trust and has acquired a reputation in the community that is tainted by multiple incidents of fraud, waste, and abuse. The district has incurred high and increasing litigation costs fueled by poor management decisions that resulted in negative publicity and intense public scrutiny. Additionally, the district is the subject of multiple complaints to both federal and state law enforcement and regulatory agencies, which resulted in several investigations and audits. The commissioner of education authorized the Texas Education Agency (TEA) Division of Financial Compliance to conduct its special accreditation investigation (SAI) of BISD in response to several complaints received from concerned citizens, parents, educators, and stakeholders. Overall, the TEA has determined through various observations with BISD executive management that BISD still has severely deficient internal controls and does not have the capability to gain management control over its finances and operations. The district's management responses show clearly that the district failed to immediately implement changes to address findings presented to BISD by the Legislative Budget Board (LBB) during the LBB's first on-site visit in February 2013, Clear and thorough recommendations were presented to BISD executive management in the LBB audit report titled, "Beaumont Independent School District Management and Performance Review," dated August 2013. However, BISD executive management could not provide the TEA evidence to substantiate their assurances that drastic improvement is underway. The significance of the results in the investigative report is that the district has not implemented recommendations made by multiple agencies to immediately help improve, protect, and implement sufficient control over district finances, operations, and resources. Equally important are the district's continued denials and rejections of recommendations made by multiple agencies to immediately implement all internal control safeguards, such as employing an internal auditor who would help strengthen enforcement of internal controls by reporting problems affecting the district's finances and operations directly to the board. The district's response takes a position that dismisses the critical importance of this recommendation and disregards the recommendation as an assertion based on speculation, which is unacceptable. In aggregate, the district's responses do not facilitate the type of reformative action needed at BISD, For these reasons, recommendations and corrective actions within this report have associated implementation deadline dates. This will encourage transparency and allow the TEA to ensure that BISD's performance outputs can be tracked and that BISD’s efforts to reach desired results can be quickly assessed going forward, The seriousness of the findings from this investigation warrant additional interventions, Therefore, the TEA will forward to the commissioner of education recommendations for the appointment of a board of managers and the lowering of BISD's schoo! accreditation status. Beaumont Independent School District Page 1 of 21 Re: TEA SAI #2013-08-005 Final Investigative ReportIntroduction The Texas Education Agency (TEA) Division of Financial Compliance, Investigation Section, has conducted a special accreditation investigation (SAI) of the Beaumont Independent Schoo! District (BISD) in response to citizen complaints thal allege the following: a. BISD violated competitive procurement laws in executing purchasing and procurement activities. b. BISD violated conflict of interest and disclosure laws in executing purchasing and procurement activities. c. BISD had a discrepancy of $11 million in the general fund balance of the district's 2012 comprehensive annual financial report (CAFR). During the SAI, the TEA investigators also identified three other areas of concer’ a. BISD violated financial control and oversight laws in executing day-to-day financial activities. b, BISD violated document retention and management laws in executing document retention activities, c._ Investigators identified concerns with the BISD external auditor. The findings presented in this final investigative report are not all-inclusive and do not address all the complaints received by the TEA al this time because of the events listed below, which occurred during the on-site visit: a. TEA investigators were denied the opportunity to speak with key staff members in the BISD administrative business offices because these staff members took leave the day after investigators arrived on-site and remained absent throughout the period of the on- site vist. b. BISD executive management summoned BISD staff members who were to be interviewed by TEA investigators and interrogated them in a manner that inhibited ‘cooperation with investigators. ©. BISD financial records and information that were requested by investigators for the purposes of the SAI frequently and repeatedly were submitted to TEA investigators incomplete, past submission deadlines, and in a haphazard manner that hindered the investigators’ efforts to conduct the investigation The constraints listed above are not investigative findings. Therefore, the TEA will not be addressing the district’s response to the constraints that affected the investigation. However, because of the constraints described above and limited resources, this investigative report does not address all the complaints received by the TEA. The TEA may conduct further investigations related to these complaints and allegations in the future, Beaumont Independent School District Page 2 of 21, Re: TEA SAI #2013-08-005 Final investigative Report