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Wednesday, 30 August 2006 00:00

Former employee questions school spending in the aftermath of ‘04 floods

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Haywood County schools must pay back more than $300,000 in state flood repair grants after double-billing both the state and the Federal Emergency Management Agency for the same work.

The school system has not been accused of wrongdoing associated with the double-billing, whereby the school sent the same invoices to both the state and FEMA for reimbursement. The state sees the double-billing as a result of a novice navigating the bureaucratic ropes of flood relief. School officials claim they were doing whatever it took at the time to pay for the costly recovery, which nearly broke the school system.

Haywood County schools were hard hit in the back-to-back floods of 2004 following tropical storms Frances and Ivan. Floods along the Pigeon River did more than $3.3 million in damage to school facilities, according to FEMA estimates.

Two former employees are questioning the school system’s handling of flood repairs, including the double billing, however. Both employees, John McCracken, former assistant superintendent, and Ted Norman, former maintenance director, worked closely with flood repairs.

They say the school system overspent in the year following the floods as a result of poor, hasty decisions, which in turn will cost taxpayers and sacrifice spending in other areas. That overspending led the school system to knowingly double bill the state and FEMA for the same work, they said.

In addition, the school system knowingly billed the state and FEMA for work that wasn’t eligible for flood relief. Flood relief was intended to get the schools back to their pre-flood status, but the school system embarked on several improvements that went beyond that and attempted to get the state to pay for them. As a result, the school system exhausted its flood repair allowance before it finished making flood repairs, potentially leaving county taxpayers to make up the difference.

In other cases, the school system was lenient in how it spent flood repair grants. Money designated for one thing was spent on something else, sometimes for improvements that weren’t a part of flood repairs, according to Norman and a review of flood records.

School officials deny the accusations.

“There was a get ‘er done mentality,” Assistant Superintendent Bill Nolte said. “We wanted to get back in school and back on course as quickly as we reasonably could. There was a sense of urgency. But we don’t think that led to anything that was inappropriate.”

A review of school, state and FEMA flood records by the Smoky Mountain News verify some of Norman’s allegations. But they also reflect the tough times of a school system left in shambles and nearly broke during the throes of flood recovery.

In the furor to get students back in their own classrooms and on their home ball fields, the school system faced obstacles that at times seemed insurmountable. Arduous regulations imposed by state and FEMA guidelines didn’t help, but instead hamstrung the school system from getting things done.

 

Double billing

The school’s biggest challenge following the floods was paying for repairs. Under flood relief guidelines, the school system had to spend money up front, then file its invoices with the state and FEMA for reimbursement.

It turned out to be quite a tall order. The school system didn’t have that kind of cash on hand. Paying up front for flood repairs nearly wrecked the school system financially.

“We were in the negative big time,” said Larry Smith, school finance officer. “We had spent a lot of money that we had not been reimbursed for.”

At one point in the summer of 2005, the school had spent $923,000 on flood repairs but only recouped $80,000 — leaving a shortfall of $840,000.

“I remember looking at that number and thinking ‘Oh my goodness,’” Nolte said.

The school scraped up the money by borrowing from savings and its capital projects fund, with the intention of restoring the money when reimbursements came through. But reimbursements were slow in coming. The school got its first check from the state in August 2005 — nearly a year after the flood.

Meanwhile, the job the school system faced was massive. The list of supplies alone that had to be replaced seemed endless: popcorn makers and hotdog warmers for the Pisgah football concession stand; tether balls and jump ropes for the Central Haywood High gym; music stands for the Canton Middle school band room; name plates for each school board member at the Education Center; desks and textbooks for Central Haywood High.

Construction work was equally demanding. Aside from the big-ticket project of gutting Central Haywood High School, the time clock at the Pisgah football stadium had to be rewired. Concrete footers had to be poured for the goal posts. Soggy drywall in the Education Center needed replacing. The greenhouse beside Central Haywood needed a new driveway.

School officials said they were desperate to get their reimbursements, and in the process, sent some of the same invoices to both the state and FEMA for payment. School officials say it was a small side effect of a complex process.

“When we first met with them, we were very anxious about getting our projects started,” Superintendent Anne Garrett said of an initial meeting with flood officials. “We had lots of things that had to be done. They said ‘Don’t worry about it. Worry about building your facilities back, worry about getting your children back, and we will settle it all up at the end.’ We were told not to be concerned about it and to go ahead and get our buildings built.”

In late June of 2006, the school system wrote a letter to the state flood recovery office informing officials there that the school system may have double billed the state and FEMA for the same work. The school system acknowledged the error and offered to pay back whatever it owed. Nolte said it did not seem irregular for a project of this magnitude.

“They knew there could be the necessity to pay some back,” Nolte said.

 

A slightly different version

While some accounting missteps are expected in disaster recovery, the state was not a party to a double billing system to get desperately needed money rolling into Haywood County, according to Chris Crew, a state flood recovery coordinator.

“We never said it was OK to send us the same bill you send to FEMA. Nobody told them it was OK to send us more bills than you think were eligible,” Crew said.

At the same time, Crew does not think the school system was being deceitful.

“We are not mad at them if that is what you are asking,” Crew said. “No one is trying to play fast and loose with the money. They are trying to do the best they can to rebuild their schools. They are putting a tremendous effort into it. We are doing the best we can to help them.”

Since getting the school’s letter in early July, the state has completed a partial audit of the flood grants.

“Our project manager is in the process of comparing with FEMA what was paid so we can see if it was paid twice,” Crew said.

So far the state has found $280,000 the school system must return. The final number could be more.

Ted Norman, the former school maintenance director who was responsible for filing flood invoices up until his departure from the school system in December 2005, says the school system knowingly double billed the state and FEMA. Norman said he objected to the double billing. Garrett said to go ahead and file all reimbursements and “let them figure it out in Raleigh,” Norman said.

Norman said he took his message to anyone who would listen.

“I complained to Bill Nolte repeatedly. I complained to (school board chairman) Chuck Francis repeatedly. I complained to the building and grounds school board committee repeatedly,” Norman said. “They said ‘If we have to pay it back, we’ll pay it back.’ I told Anne Garrett in my opinion it amounted to fraud.”

Norman said he raised concerns over double billing for several months between the spring and fall of 2005, along with a host of other concerns regarding the school system’s handling of flood repairs. Norman acknowledges the extreme pressure of trying to get buildings and ball fields ready by the start of school while lacking the money to get it done.

“It was not a good situation for anybody,” Norman said. “But there is just a right way and wrong way to do things.”

Norman questioned why the school system wrote a letter acknowledging the double billing in June 2006, when the school officials have been aware they were doing so since July 2005.

 

Bridging the gap

If the school system double billed the state and FEMA by $280,000, where is that money now? It is not simply lying around in a reserve account somewhere, collecting interest and ready to be repaid.

The money is gone, all of it spent on flood repairs or improvements, say school officials. To date, the school system has spent $2.8 million on flood repairs and been reimbursed $2.77 million.

The money gained by double billing was used in several ways:

• Some flood repairs went over budget, simply costing more than the state or FEMA had estimated.

• Some repairs weren’t eligible for reimbursement. The school was required to buy future flood insurance on buildings in order to qualify for aid. For some buildings, flood insurance cost more than the schools would recoup in aid, so it wasn’t worth it. For those buildings, repairs were supposed to come out of the schools’ pocket. Thanks to double-billing, they haven’t so far.

• In some cases, the school system went above or beyond in making flood repairs and built things back bigger, better or different than before. Those improvements were supposed to come out of the schools’ pocket, too. But again, because of the double-billing, the school system has not had to dip into its own pocket yet.

When the school has to return money that was double-billed, however, various cost overruns could ultimately come out of taxpayers’ pockets after all.

It’s tough to know exactly how much local taxpayers will be asked to cover — if anything — because reimbursements are still coming in from the state and from FEMA.

School officials recognized that the flood would likely cost local taxpayers something and set aside $800,000 in a school bond passed last year to cover cost overruns and extras. So far, the school hasn’t needed that money, and hopes it won’t have to.

“It is kind of like a contingency,” Garrett said of the flood relief money in the local school bond.

Cost overruns happened for a variety of reasons — the first of which is hardly the school system’s fault. Following the floods, a FEMA assessor came to town and appraised the damages. FEMA estimated total school damages were $3.3 million, establishing the baseline for what the school would receive. Of that, FEMA would kick in $900,000 and the state would kick in $2.3 million.

The flaw was in the damage estimates calculated by the FEMA assessor. The FEMA formula used the going rate of contractors in West Palm Beach, Fla., to calculate the likely cost of repairs in Haywood County. When it came down to hiring a contractor, often no one could be found to do the work that cheaply.

 

No-bid contracts

One reason the school system couldn’t find contractors within the budget FEMA and the state allotted is because it didn’t try hard enough, according to Norman. On many of the flood repairs, the school did not follow normal procedures for soliciting work estimates from multiple contractors.

When Norman was maintenance director, before hiring a contractor he wrote up a detailed description of the work the school wanted. He circulated the bid requests among numerous contractors to get the lowest price and give every contractor a fair shot.

When it came to many of the flood repairs, the school system did not follow this method, however. Jim Griffin, the principal of Central Haywood High School, was promoted in June 2005 to the director of school facilities. Griffin was put in charge of flood repairs. (Griffin recently left the school system for a principal’s job in Greensboro.)

When Griffin wrote bid requests, they were often unclear and vague by most standards. So vague, in fact, contractors would have a difficult time determining exactly what the school wanted done, Norman said. As a result, few bids came in, Norman said.

Only one contractor, Brad Allen from Candler, consistently turned in bids — and was consistently awarded the work. The school system claims he was one of the few contractors who applied for the work, but Norman finds that odd.

“Why can you never get but one quote and it’s always from Brad Allen?” Norman asked.

For example, a bid for repairs to the Central Haywood High School gym read: “Replace/repair electrical and fixtures” and “Replace/repair plumbing and fixtures.”

Each contractor might have a different idea of what that means, Norman said.

“Appropriate bid specifications lay out everything, exact wire size and conduit size, voltage, number of outlets, etc,” Norman said.

Norman said he was shocked at how vague many of the project specifications were.

“It’s like saying ‘Go do whatever you think and give us the bill,’” Norman said. “It’s really unbelievable. They have been accepting bids without competition due to the lack of advertising and not having adequate specifications. I feel this administration is doing a disservice to the taxpayers.”

 

Waiting game

In the spring and summer of 2005, school administrators and school board members began getting antsy with the pace of flood repairs. The school system pledged to have Central Haywood High School and the Pisgah football stadium ready by August 2005. But with the new school year barreling down, it began looking less and less likely.

The biggest problem was money — or the lack of it. The school system had to pay for repairs upfront, then apply for reimbursement. But reimbursements were slow in coming.

“We finally reached a point where we didn’t have any more money to borrow from,” said John McCracken, a former assistant superintendent who served as a consultant in the months following the flood.

The grim financial news cast a cloud of desperation over the school board building and grounds committee, witnessed by conversation captured on audiotape from a meeting in March 2005, six months after the floods.

“We’re at the point right now where we are out of money. I don’t know anybody out there in the world that will work for nothing,” school board member Walt Leatherwood said at the meeting. “We either need funds to do what we are doing or quit work.”

Of course, that wasn’t truly an option.

“We just can’t slow up,” Norman told the committee. “I’ve got to continue with the pace we are doing. But I can’t pay the bills.”

The school board members at the meeting decided to appeal to the county commissioners for help.

“We need to sit down and talk business with them and tell them ‘People, this is what we got to do and we don’t have the money to do it.’ This is the way it is and that’s it,” Leatherwood said.

“It needs to be done immediately,” school board member Mike Sorrells said.

FEMA pegged repairs for Central Haywood High School at $517,000. Norman was using a combination of maintenance staff and flood workers provided by the Employment Security Commission to do as much of the work as possible and hiring subcontractors for work they couldn’t do in-house.

But the school board decided there were several things they would like to do at Central Haywood High School that wasn’t included in FEMA’s estimate — things that technically didn’t qualify as flood repairs. These extra improvements would have to come out of school coffers — only there wasn’t any money in school coffers.

Norman was expecting state flood reimbursements to start arriving in late April. But come June, the money still wasn’t available. The school board wanted to hire a general contractor to do the work, but Norman was uncomfortable with that.

“Everyone wanted me to put this work out to bid and let contracts without money to pay for it,” Norman said.

Norman said he recognized the urgency in getting Central Haywood High School ready for the school year.

“I had to look at the other side, which is how are we going to pay for it,” Norman said. “I told them this over and over.”

In June 2005, the job of flood repairs was taken away from Norman. The principal of Central Haywood High School, Jim Griffin, was promoted to school facilities director and took over the task of flood repairs. Under Griffin’s direction, the school system signed a $800,000 contract in the summer of 2005 for renovations to Central Haywood High. The project ultimately exceeded $1 million.

At the time the school system signed the contract, they had no money to pay for it.

“We really didn’t have the money to pay them up front for that project,” finance officer Larry Smith said.

But if the school system waited any longer, Central Haywood would not have been ready in time, at least not with the additional improvements the school board wanted. So they signed the contract and kept their fingers crossed reimbursements would come through in time to pay the bill. The same story held true with a $235,000 contract for the Pisgah football stadium.

McCracken, former school finance officer, said it was improper for the school system to sign contracts knowing they didn’t have the money to pay for it. Garrett said there was a contingency plan: ask the county commissioners for a bridge loan to cover the gap until reimbursements came through.

“If we ran out of money and hadn’t gotten state reimbursements and hadn’t gotten FEMA, then we would go to the commissioners. That was the contingency,” Garrett said.

In August 2005, the first check from the state for more than $900,000 came through just in time, refilling the schools’ coffers.

 

‘Turn them loose’

Norman disagreed with the school system over doing work in-house versus hiring contractors.

“You had to save dollars everywhere you could save dollars,” Norman said.

For example, Norman wanted to do the rewiring of the Pisgah football stadium buildings — namely the concession stands, restrooms and field house — with maintenance staff.

“Every bit of that could have been done in-house. There wasn’t much to do, change the lighting fixtures and outlets and pull new wire — nothing major,” Norman said.

Norman was working toward that end when Griffin convinced the school building and grounds committee to hire a contractor for all the Pisgah stadium repairs a meeting in early June. The following excerpts are from an videotape of the meeting:

“We would be better served to go with contractors,” Griffin told the building and grounds committee.

“I agree, if we had money to pay for it,” Norman replied.

Griffin said the school was running the risk the stadium wouldn’t be finished in time for football season.

“We’re to the point that, I know the money is not there yet, but if the money isn’t there and we hold up, the stadium might not get done,” Griffin said.

School Board Member Mike Sorrells agreed.

“We either get in there and do what we got to do or we go out there and tell everybody we aren’t going to make it,” Sorrells said. “Time is of essence.”

Danny Miller, the principal of Pisgah High School, was at the meeting as well and expressed similar concerns.

Griffin said he knew a contractor named Brad Allen who would be able to get the Pisgah Stadium done by August.

School Board Member Bruce Sutton reminded everyone they needed three bids.

“We’ve got to be very careful,” Sutton said. “If we don’t get three bids, we are not doing the taxpayers the best service.”

Garrett suggested getting two more bids in addition to Brad Allen and then hiring a contractor.

“What we are saying is to go ahead and get two more bids on turn-key work,” Garrett said.

Leatherwood agreed.

“We seem to be going around and around with stuff,” Leatherwood said. “We need to get three bids and turn them loose.”

Leatherwood asked how the school would pay for it.

“Let’s say they get the three bids and open them up and the lowest one is $300,000,” Leatherwood said. “Where is this $300,000 coming from?”

“When we run out and have no more, we’ll have to go to the county commissioners,” Garrett answered.

Norman piped up and reminded the committee that if the contractor did any work that went beyond the scope of flood repairs, it would come out of the schools’ pocket. But Norman was cut out of the process.

Miller, the Pisgah principal, was put in charge of writing up the work order and getting the bids in cooperation with Griffin.

“All we would do is open up the bids and go with the lowest one. That’s the name of the game. When you get your three bids, send us a copy of the one you’re going to go with,” Garrett told Miller. “And we’ll just find out about the money later.”

“With all the paperwork it’s amazing we’re getting this done,” Leatherwood said.

 

‘Let’s go for it’

Ultimately, only two bids were received for the stadium work. The lowest was Brad Allen at $235,000. The total project cost more than $330,000.

For Norman, it was like watching a runaway train. Norman said part of the stadium work — the wiring for the concession stands, bathrooms and field house at the very least — should have been done in-house.

For starters, some of the work would not be eligible for reimbursement. The school system had to buy future flood insurance on the buildings in order to qualify for assistance. For some of the stadium buildings, flood insurance cost more than the school would get back. As a result, work on those buildings would come out of the school system’s pocket, which Norman saw as all the more reason to do the work in-house.

“There were time constraints, but this is something that you weren’t going to get funding for,” Norman said. “Our guys in-house could have handled it with ease.”

At a building and grounds committee meeting in August 2005, it dawned on school board members they wouldn’t be fully reimbursed for the work at the Pisgah stadium.

“Out of $235,000 for Allen Construction at Pisgah stadium, how much of this is going to be reimbursed? Is this part of FEMA work?” Leatherwood asked.

“There’s a bunch of that that will receive no money from state or FEMA,” Norman answered.

“It’s flood related,” Sorrells said. “I thought if it didn’t come out of FEMA, it would come out of the state.”

Norman explained some of the repairs were not eligible since the school wasn’t buying insurance on the buildings.

“But it is work that’s already been done and it has to be completed,” Sorrells said. “Let’s go for it.”

Labor wasn’t the only area where Norman wanted to save money on the Pisgah stadium. Norman intended to save the porcelain toilets and sinks in the restrooms, which could be removed, sanitized and replaced.

“If I can save a dollar, I’m going to save a dollar,” Norman said.

It wasn’t just Norman being thrifty. FEMA’s assessor also stipulated that the toilets and sinks should be cleaned up and reused.

But the contractor hired to repair the restrooms bought new ones, according to flood records. The school filed for reimbursement from the state for the new toilets and sinks and got it. That’s more money that might have to be paid back as the audits into flood spending progress. At the least, it’s flood money the school used up and isn’t available to finish flood repairs that are still outstanding.

“The people suffering are the kids and the taxpayers,” Norman said. “They should put the kids first.”

Norman said a little more patience would have allowed the school to work within budget constraints. Patience, however, could have meant that the Pisgah stadium was not ready for football season in August 2005. During the 2004 football season, the Pisgah football team had to play on a field at Western Carolina University and desperately wanted to return to its own field. The school system was under great pressure from the community to get the stadium ready.

 

Above and beyond

Over the course of flood repairs, the school system spent several hundred thousand dollars building things back bigger, better or different than before the flood. Norman said he constantly reminded decision-makers — namely the school board building and grounds committee — that these projects weren’t eligible for flood money but instead would come out of the school’s own pocket.

“You could tell them over and over,” Norman said. “Each meeting they would say ‘We’re going to do so and so,’ and I had to tell them you didn’t have money to do it with.”

Norman said it was very clear what qualified as flood repairs and what didn’t. Following the flood, FEMA assessors toured destruction at the schools. They wrote reports on the damage and made a list of repairs that could be done.

“They told you exactly what would be covered,” Norman said. “You had to put back what you had. Nothing beyond that.”

But that’s not what happened. For example, the contractor for the Pisgah stadium installed electric heaters for $34,000 in the field house on the visitors side of the stadium that didn’t exist before the floods, according to FEMA records. The school filed for reimbursement with the state and got it, even though it was not technically a flood repair.

Norman raised objections over this.

“I saw lots of things in there that did not qualify as FEMA funds,” Norman said.

Norman agreed many of the improvements were a good idea, however.

“It made sense to do some of these improvements while you were at it because it would be cheaper in the long run,” Norman said.

For example, the school system decided to refinish some of the hardwood floors on the second-story of Central Haywood High School, even though the second-floor wasn’t flooded.

“Finishing the floors needed to be done before the computer labs were put in,” Norman said. “It just had to be done out of different funds. It had nothing to do with flood.”

School officials justified cost overruns for improvements that went beyond the strict definition of flood repairs. For example, adding air conditioning to the Central Haywood High School cafeteria made sense when the building was gutted and being rewired anyway, Garrett said.

“When you are doing those renovations, why not go ahead and add air conditioning?” Garrett said. “Even though we didn’t have it before, we were willing to take local funds to do it.”

These extra improvements cropped up often.

At an April meeting of the school building and grounds committee, Griffin told the school board members it would be wise to make the parking lot for the gym at Central Haywood High School larger than it was before.

“I see this as a grand opportunity,” Griffin said at the meeting. Griffin said it would solve parking problems for community youth leagues that use the gym. Griffin suggested using part of the money intended to replace a fence beside the gym toward the larger parking lot. But Norman explained the school could not use flood money intended for one purpose and apply it toward another. Anything extra the school wanted to do would come out of its own pocket, he said.

“Cutting that fence out in front of that building may not save us any money to spend somewhere else,” Norman said at the meeting.

School officials said ultimately the community sports league helped pay for the cost of the larger parking lot.

So far, the school system has not had to pay back any money for work that went beyond the scope of flood repairs. But the reviews are still ongoing.

“We have not closed out our project with them yet,” said Chris Crew, a state flood grant manager. “Prior to settling the final number that needs to come back to us or go to them as the case may be, we will look at each of the little sub-projects and make sure they match the scope of work we agreed to in the grant agreement process.”

 

The ultimate micromanager

FEMA’s rules were often cumbersome and could be considered micromanaging. It would have been much better if the state and FEMA simply gave the school system the money it was due and let local officials decide how best to spend it in the wake of the floods.

But that’s not how it works. If an overhead projector was destroyed at Central Haywood High School, a strict interpretation of the rules say the school must replace that projector. But an overhead projector is obsolete technology these days. What the school really needs is computer projectors to show Power Point presentations.

The school was hit with perhaps the biggest frustration over the flooded Canton Middle School band and chorus building. The band building was across the street from the school, requiring students to cross the street to get to band and chorus class. If the building had to be rebuilt, why not build it on the same side of the road as the school, school officials thought.

But this required buying land and building a whole new building. And if the school builds a new building, it has to meet modern building codes, such as wider hallways and bigger bathrooms. That means it will have to be larger than the old one.

“There were things that were appropriate to do to have a modern building,” Nolte said.

That could mean the school foots part of the bill. The school was allotted $384,000 to replace the band building.

“That won’t cover the building. It won’t even be close,” Nolte said.

The actual cost will be $600,000. The school has purchased land for the building, but has not yet built it.

 

Cash flow

Just about every flood repair could come with a wish list of something extra. The question is how were those decisions made and what, if anything, was sacrificed somewhere down the road.

“Are we going to spend more money on the band building than we are going to get reimbursed for and did that cause us not to do something else important?” Nolte asked.

That same question could be asked of any school expenditure, Nolte pointed out. Garrett said that flood repairs aren’t taking away from education.

“We haven’t had to cut anything that directly affects instructional services for children,” Garrett said.

If teachers have noticed a budget squeeze this year, it’s not due to unresolved flood issues, Garrett said. It’s due to the state handing out higher pay raises than expected. The state gave teachers an 8 percent raise this year instead of the usual 5 percent, and non-certified workers like janitors and office personnel got raises of 5 percent instead of the typical 3 percent.

Haywood County schools employs many teachers and workers who aren’t on the state payroll, but instead are paid with local funds. To ensure fairness, the county had to mirror the state’s pay raises for those employees. The school had to find $214,000 in the budget to cover the unexpected cost.

In the end, local coffers will be impacted by the flood. Some repairs haven’t been finished, and it is unclear just how much the school will have to pay back.

“We still don’t have lots of extra local money sitting around because we are still investing in flood repairs,” Nolte said. “There’s still a hardship in terms of cash flow.”

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