GPS Fraud, Waste & Abuse Report #8: Illegal Gifts of Public Funds

GPS Superintendent Christina Kishimoto and CFO Tom WohlleberWe’ve shown that GPS payments to “consultants” appear to be designed to recharacterize salaries and reimbursements to evade employment taxes, among other fraudulent schemes. Would it surprise you to know that Christina Kishimoto profited handsomely in other strategies to enrich herself from the public purse? Kishimoto received about $25,000.00 that was gifted to her before she became superintendent. This seems to have run afoul of federal laws and IRS regulations in addition to flagrantly violating state laws and the Arizona Constitution. 

As a consultant, Christina Kishimoto was reimbursed for some hefty and unidentified travel expenses before she began her job as GPS superintendent. The Governing Board was aware that Kishimoto planned to travel between her home in Connecticut and her new job in Arizona; the board authorized up to five trips “without further approval by the Board” in her first employment contract. The Arizona Republic reported on April 11, 2014 that Kishimoto, her husband and their daughter visited Gilbert, Arizona on a house hunting trip: “The last thing I want is someone to say, ‘She’s coming in with preconceived notions about who we are,’ ” said Kishimoto, who met with principals during a house-hunting trip to Gilbert during the first week of April.”

The State of Arizona Accounting Manual and GAO policies to which GPS policies refer specifically prohibit reimbursement or payment for house hunting. Additionally, even though paying for travel of family members is prohibited, it appears Kishimoto may have been able to use some of the five trips with advance authorization in her consulting contract to benefit her family members. There is an appearance that an improper house hunting trip was disguised as consulting so that GPS would pay Kishimoto’s expenses in the amount  of $2,063.65 on Vouchers 4162-4172. This appears to be a gift of public funds for an illegal purpose that contributes to public distrust of GPS.

Inappropriate payments to Christina Kishimoto that were recharacterized as “per diem pay for contractual work” include $9,321.95 paid to Kishimoto before her contract as superintendent began on July 1, 2014; she had a separate contract for that work, signed at the same time as her superintendent employment contract. In her contract, Christina Kishimoto agreed to record the date of every day she performed work as a consultant and submit it to GPS within ten days of the completion of that work. Westie requested public records in May 2015, fully expecting that a complete record of Christina Kishimoto’s consulting services would be produced. It’s not surprising that GPS did not produce any such documentation, but determined the request was fulfilled by producing 141 pages listing contract labor payments to various *vendors,* with no supporting documentation for the services performed.

How GPS determined Kishimoto’s contracting work was worth $9,321.95 is a mystery. It appears that Kishimoto did not fulfill her responsibility to keep detailed records and submit them to GPS; she just asked for a check and received it. No taxes or other payments were withheld, although her consulting contract specified payment would be “minus any necessary withholdings.” Instead, GPS recharacterized wages paid to Kishimoto by treating $9,321.95 as a non-taxable reimbursement to an employee who had not incurred bona fide business expenses.

Kishimoto’s contract includes a $15,000.00 payment for moving expense, paragraph 2J.  This was not a reimbursement or payment to a vendor for services rendered as indicated on Vouchers 4200-4209-May 2014, it was a check to Kishimoto for $15,000.00, no accounting required. GPS reported this payment on an IRS Form 1099 and showed it on vouchers as a *vendor payment.* Therefore, GPS did not withhold state or federal taxes and did not make any payment into ASRS, among the many questionable choices the district made in this charade concocted to give unearned money to a public officer. Instead, GPS recharacterized wages paid to Kishimoto by treating $15,000.00 as a non-taxable reimbursement to an employee before she possibly could have incurred bona fide business expenses. Indicators of public corruption include that these payments recharacterized as reimbursements created a conflict of interest for Kishimoto, because payments were not reimbursements for actual and necessary expenses incurred in the performance of her official duties. Further, Kishimoto had a monetary interest in receiving gifts of public money that were not reported on IRS Forms W-2.

There are other indicators of potential fraud about this transaction; for example, the State of Arizona Accounting Manual prohibits advance payment of authorized moving expenses. Arizona caps reimbursements of moving expenses for newly hired employees at $5,000.00 (see page 7 of the linked pdf document):

Limit of Reimbursement. The limit of reimbursement for any one relocation—including the transport of household goods or mobile home hauling, travel, lodging and other costs— shall be the lowest of:

(1) The actual reimbursable relocation costs incurred, or
(2) The sum of the applicable limits by category expressly set forth below, or
(3) The applicable ceiling, which, in the case of:
(3a)Current employees is ten thousand dollars ($10,000).
(3b) Newly hired employees is five thousand dollars ($5,000)

Whether or not the $5,000.00 State of Arizona ceiling for moving expenses applies to this $15,000.00 payment of public monies, those funds were described in Kishimoto’s employment contract as “to defray expenses.” That payment should have been taxable income for both state and federal income tax purposes, since it was not reimbursement for expenses, whether reimbursing that travel was lawful or not. Kishimoto collected for her travel expenses in advance, which would obviate any need to file receipts for reimbursement in accordance with both state and federal law. In other words, GPS offered Kishimoto a specifically prohibited gift of public funds, which she accepted.

It appears GPS hired “consultants” to provide professional services without following procurement procedures. The Arizona Auditor General specifically advised school districts on requirements for retaining professional services: “The Rules are located in Title 7 Education, Chapter 2 State Board of Education, Articles 10 and 11, School District Procurement.” Uh oh, none of those consultants in FW&A Report #6 were on the list that exempts school districts from advertising for *consultants.*

5. Does a District need to advertise when procuring professional services?

Yes. A District must advertise the notice of the IFB/RFP if procuring services other than the following:

*  clergy
*  architect
*  certified public accountant
*  engineer
*  physician
*  land surveyor
*  dentist
*  assayer
*  legal counsel
*  geologist
*  landscape architect

Further, for all other goods, services, and construction procurements, if there are four or fewer bidders on the bidders list, then the notice of the IFB/RFP must be advertised. School District Procurement Rule R7-2-1022(A)12.

Any way you look at the state of fiscal affairs in Gilbert Public Schools, it’s apparent that there’s a lot of monkey business going on! Members of the governing board can continue the ostrich maneuver, i.e. hiding their heads in the sand so they don’t see what’s right in front of their faces.

But that could backfire when the inevitable confrontations come: what did you know about wrongdoing and when did you know it? And what did you do about it? The public also would like to know if you are adequately guarding their tax dollars.

The Fine Print: Westie’s Fraud, Waste & Abuse Reports chronicle deliberate misuse of authority and public funds, abuse of authority, gifts of public funds and intentional violations of Arizona statutes and administrative rules by Gilbert Public Schools top-level administrators at the behest of superintendent Christina Kishimoto. These  reports come directly from public records, many of which GPS slow-walked and stonewalled in attempts to keep perfidies hidden. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies. A genuinely impartial forensic audit is the only way to know the extent of wrongdoing in GPS.

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