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Controversy Surrounds State Takeover of Detroit Public Schools
by Donna Gundle-Krieg January 12, 2009 Note: to comment on this and other education articles, go to Examiner.com
Detroit Public School Board members voted 5-5 to give up their fight against the state of Michigan's bid to take over the finances of the schools. The board's vote comes a day after Mike Flanagan, Michigan Superintendent of Public Instruction, announced two nominees under consideration to become the district's emergency financial manager.
One of the two finalists for this position, Jack Martin, has been surrounded by controversy as there have been allegations of conflict of interest. Martin works for an accounting firm which has an ongoing contract with the state.
According to the Detroit News, Martin Ackley, spokesman for the Michigan Department of Education, doesn’t see any conflict of interest and says that no laws will be broken. "We assume the Detroit board makes decisions based on the quality of work to be done," he said.
In September, Flanagan declared a state of emergency for the district due to the financial shape of the district, paving the way for the current state takeover.
Soon after, the school board terminated the superintendent, Connie Calloway. See "Detroit School Superintendent Appeals Her Termination."
Finalist to head DPS takeover is under fire
Critics say contract between district, Martin's firm would be conflict of interest if he's selected for job.
Jennifer Mrozowski / The Detroit News
DETROIT -- One of the two finalists to lead a state-mandated financial takeover of Detroit Public Schools is a principal in a Bingham Farms accounting firm that has an ongoing contract with the district, drawing allegations of a potential conflict of interest, should he be chosen for the job.
Jack Martin, chairman of Martin, Arrington, Desai & Meyers, P.C, said he believes his firm's contract for Medicaid reimbursement and billing, which netted more than $700,000 in fiscal year 2007-08, wouldn't harm his efforts to overhaul the ailing system.
The Detroit school board voted on Thursday to extend the contract through June 30.
The firm, formerly called Martin Arrington and Hasse, has worked with the district on the Medicaid billing for years and recently worked as a subcontractor on the district's annual audit, which is required by the state, Martin said. The firm has also worked on transportation and procurement with the district, he said.
If named to the post, the Bloomfield Hills resident said he would distance himself from work on the Medicaid billing contract.
"I would have to recuse myself from decision-making on that," he said, adding he hasn't yet accepted or been offered the spot.
Yet some board members say it's a problem that the man who could oversee all of the district's money is reaping big bucks from the struggling system.
"We should not have anyone in charge over the finances receiving money as a vendor for Detroit Public Schools," said board member Marie Thornton, who supported appealing the state's decision to take over the district's money. "How can that person be objective or unbiased in making decisions? I believe there should be someone who is truly independent."
State Superintendent of Public Instruction Mike Flanagan on Wednesday floated Martin's name and Robert C. Bobb of Washington, D.C., a senior management consultant for a consulting firm with offices across the nation, as nominees to serve as the district's emergency financial manager. The manager would have control over all fiscal decisions for at least a year, including budgeting and contract negotiations. Gov. Jennifer Granholm will make the final appointment.
Martin Ackley, spokesman for the Michigan Department of Education, said the state knew of Martin's work with the district before naming him as a finalist.
"We don't see any conflict of interest with the contract," Ackley said. "We assume the Detroit board makes decisions based on the quality of work to be done," he said. "If this company can do the job and do a good job, then we wouldn't see a conflict with that."
No law prohibits a contractor being named emergency fiscal manager, he said.
As part of the Medicaid billing contract, the firm seeks reimbursement for Medicaid services provided to the system's low-income students.
The firm gets a percentage of the recovered reimbursements, he said.
According to district documents, the firm reaped more than $727,000 for fiscal year 2007-08. The contract amount for the annual audit was unavailable.
Martin, who pledged complete transparency if selected, said he would bring extensive knowledge of the system.
"I certainly know the organization, the people and the problems," he said. "I have a pretty good handle on what happens down there."
He also cited his work in helping turn around the management in the U.S. Department of Education, which had the reputation as one of the worst-managed Cabinet agencies, he said. During his tenure as chief financial officer there, the department was a first-time recipient of the Association of Government Accountants' Certificate of Excellence in Accountability Reporting.
DPS board Vice President Joyce Hayes-Giles said Martin's work on the district's annual audit would be a conflict, if he were named fiscal manager, because auditors must be objective. But if the firm discontinued its work on the audit, his experience would be a bonus, she said.
"I could see that as an advantage as he is already pretty familiar with the district and knows the operation," she said.
Hayes-Giles said she doesn't believe the Medicaid billing contract would be a conflict as long as he filed disclosure statements.
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Detroit Public Schools' board drops fight against state takeover
Jennifer Mrozowski / The Detroit News
DETROIT -- Detroit Public Schools' board members on Thursday voted against going to court to fight the state's bid to take over the system's finances.
"We should be careful to take nary a dime from the schools, considering the condition some of the schools are in," said board President Carla Scott, who opposed the appeal.
The board voted 5-5 on the motion, introduced by board member Tyrone Winfrey. There was not a majority after board member Marvis Cofield -- who would have been a tie-breaker -- left the meeting.
Scott made reference to the shortage of supplies that schools are experiencing. The Detroit News on Thursday reported that one school made a public appeal to parents and the community for toilet paper because it was so short on supplies.
The board's vote comes a day after the state's top education official unveiled two nominees under consideration to serve as the district's emergency financial manager. The manager will have broad authority over all fiscal decisions in the district for at least a year, including budgeting and contract negotiations.
Mike Flanagan, State Superintendent of Public Instruction, in September determined that DPS finances were in such disarray that the district should be declared in financial emergency.
Under state law, the board could have appealed the decision to Wayne County Circuit Court.
Board Vice President Joyce Hayes-Giles also opposed appealing.
"We can spend a lot of time and a lot of money that this board does not have," she said. "We know we have a financial emergency. We all know that. We're fooling ourselves if we say we don't. We do."
Instead, she said, the board should work with the fiscal manager and partner on solutions.
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