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Legislative investigation: ABSS violated state laws and its own policies in no-bid mold contracts


The results of a legislative investigation into the Alamance-Burlington school system’s finances and policies – particularly as they pertained to no-bid contracts awarded late last summer to remediate mold in 32 schools and the Central Office – concludes that the school board and the ABSS administration violated multiple state laws, as well as its own policies.

Specifically, a report on the investigation cites several statutory and ABSS policy violations, including: several provisions within the state’s school budget control and fiscal act; failure to complete a mandatory preaudit certification prior to entering into the contracts for the mold remediation and related services; and a board policy that calls for service contracts to be awarded “under conditions” fostering competition and “after careful pricing.”

These failures may include exposing school board members to personal liability, the report warned.

The report also cited actions by board chairman Sandy Ellington-Graves who signed 12 contracts for mold remediation even before the board acted, a violation of the school system’s own policies.

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The report noted that school board chairman Sandy Ellington-Graves had signed 12 contracts before the school board had actually voted on them, a violation of the school system’s own policy.

The actions by the school system and school board took place while the school board and school system were “in a financially precarious situation,” as described by the report.

The Alamance News obtained a copy of the four-page report, dated yesterday, sent to Senator Amy Galey, who had requested the investigation by the Joint Legislative Commission on Governmental Operations (i.e., the “GovOps” commission) on February 5 of this year.

State senator Amy Galey

“It is absolutely critical that school boards ask lots of questions and make sure that laws, policies, and procedures are being appropriately followed, even in challenging times.  Solutions to operational challenges such as mold and budget shortfalls cannot get a rubber-stamp from the school board, which is elected to hold administrators accountable.”

– State senator Amy Galey, who had requested the investigation

Read the full text of the June 12, 2024 report to Senator Amy Galey HERE

Galey subsequently announced May 1 that she had agreed, at the request of ABSS interim superintendent Dr. Bill Harrison, to pause the investigation, pointing to the school system’s ongoing financial crises as the basis for her decision.

However, a report that GovOps sent Galey yesterday outlines the apparent findings of the review, but gives no indication when the investigation resumed.

The report, authored by Clark J. Chapin, senate majority staff director for GovOps, states that – contrary to the insistence by ABSS officials last fall that the “emergency nature” of the mold remediation exempted them from using an open bidding process to award the contracts – that was not the case.

Clark J. Chapin is the director of the N.C. General Assembly’s Joint Legislative Commission on Governmental Operations

Originally, the cost for mold remediation was estimated at $27.1 million, based on figures that the then-chief finance officer for ABSS had presented to school board members last fall.

However, the final tab – which included a subsequent invoice from Builder Services, dated January 22, 2024 and outlined in the report from GovOps – actually totaled $29.3 million, including mold removal, air quality sampling, and dehumidifier rentals and purchases.

Builder Services was awarded contracts to perform mold remediation at 31 ABSS facilities late last summer.  The first two contracts for mold remediation at Andrews and Newlin elementary schools were awarded to Sasser Companies in early August 2023, as was a subsequent $977,719 contract to purchase dehumidifiers in late September 2023.

While the report on the investigation makes no damning accusations of financial wrongdoing, it does note that the school board “likely failed” to comply with numerous state laws in managing its finances, and particularly with the no-bid process used to award nearly $30 million in contracts for mold remediation.  The report on the investigation also gives no indication that the failures to follow state law rise to the level of any potential criminal offense.

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Mold cleanup work at Andrews Elementary School, the first ABSS school identified as possibly having a mold problem in August 2023.

The investigation by GovOps centered on the mold contracts, as well as the school system’s management of federal, state, and county funds in the current and previous fiscal years, according to Chapin’s summary.  The commission gathered information that included: statutory requirements, auditor recommendations, and ABSS school board policies.  GovOps also examined information including “more than 50 shared texts and emails”; school board meeting videos and minutes; ABSS policies; a report from the school board’s auditor; information from the state Department of Public Instruction (DPI); and interviews with ABSS and DPI staff.

One of the key issues raised during the investigation was that ABSS had entered into “no-bid mold remediation contracts since the mold was considered an emergency,” and whether that was allowed under state law.

It was not, based on Chapin’s report.  “Nothing in Chapter 115C nor [a state law that outlines the process for awarding most government construction and repair contracts] removes the Board’s obligations to follow state statutes and board policies in the proper discharge of their duties in times of emergency,” Chapin writes.

“Completing the [mold remediation] work in a short timeframe was clearly a priority,” the report acknowledges. However, “No rationale was given for selecting those companies that performed the work other than they agreed to complete the work expeditiously.”

In doing so, the school board violated its own policy, and an underlying state law that governs the letting of public contracts, that require services to be purchased “in a manner consistent with the board’s purchasing goals” and “after careful pricing.” The report found “no evidence” that those standards were met.

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Chapin notes that the school board also “likely failed” to comply with the school budget and fiscal control act by not following a requirement to adopt a budget ordinance, or subsequent budget amendment, formally appropriating the funds associated with the mold remediation contracts.

“The result of these failures to abide by these requirements not only exposes the [school board] to scrutiny by the Local Government Commission and State Board of Education, but may even expose the [school board] to personal liability,” Chapin warns.

The investigation by GovOps also revealed that the school board chairman, Ellington-Graves, had actually signed the contracts prior to a vote of approval by the entire school board.

That action by the chairman, Chapin notes, also violated a separate ABSS policy which states, “Any contract involving expenditures in excess of $100,000 must be reviewed by the board attorney and approved in advance by the board unless provided otherwise in board policy.”

While most of the report focused on the mold remediation contracts, it also highlighted a shortcoming previously identified by the school system’s auditor for the fiscal year that ended June 30, 2023 – well before the mold outbreak.

GovOps found that ABSS had violated another provision in the school budget and fiscal control act by incurring $4.3 million in expenses that exceeded the amount of funds that had been appropriated within the general fund, “other special revenue fund,” and capital fund for the fiscal year that began July 1, 2022 and ended June 30, 2023, according to Chapin’s report.

The school system’s auditor, Dale Smith of the Anderson Smith Wike accounting firm, had warned the school board in November 2023 that the fund balance (“rainy-day savings”) had dipped well below recommended levels (to about $116,000), though Smith calculated that the unassigned fund balance available at June 30, 2023 was actually -$76,290.

The audit for the fiscal year ending June 30, 2023 also contained a finding that the school board had violated the school budget and fiscal control act by incurring expenses that exceeded revenues.

Moreover, the GovOps commission learned that a similar violation has since occurred, during the current fiscal year, “when ABSS entered into contractual obligations for mold remediation without sufficient funding in place,” Chapin writes.

“The primary issue here is the exposure to undue liability when, as discussed by the auditor and above, the [school board] and ABSS are in a financially precarious situation,” Chapin concludes.  “With the necessity to build reserves, ending of federal [stimulus] funding, and a multitude of capital projects, [school board members] cannot be negligent in their duty to follow the letter of law procedurally.

“Doing so may result,” he warns, “not only in state entity scrutiny, but in contractual obligations through rescission of contracts or restitution beyond a contract price due to reliance on an invalidly awarded contract.”

The report hints that the failures identified may subject the school system and school board to further scrutiny from the state.

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