GPS Fraud, Waste & Abuse Report #11: Gilbert Education Foundation Schemes

The relationships and concerted operations of public officers of Gilbert Public Schools (GPS) and the Gilbert Education Foundation (GEF), a 501(c)(3) tax-exempt organization, are rife with intentional lawbreaking that likely invalidates GEF’s tax-exempt status. It appears GEF does not meet the statutory requirements of being both organized and operated exclusively for exempt purposes. Instead, GEF appears to be another way to funnel taxpayer money as well as charitable donations to selected recipients within GPS and “friends” of the district without oversight.

For example, a Memorandum of Understanding with GPS shows that GEF operates under GPS control and uses GPS resources.  Through that MOU and intentional misdeeds that violate the public trust, top GPS leaders scorn best practices recommended in a September 2014 presentation by a team of  staff attorneys from the Arizona Attorney General and Auditor General, plus attorneys from Udall Shumway, a law firm that has represented the district for many years. In 2013, the Attorney General’s Office advised more than one Arizona school district that they had acted without statutory authority when creating and operating an education foundation, thereby misusing district supplies, equipment, and personnel to administer the foundation’s finances and assist with foundation fund raisers.

For example, GEF intentionally encouraged, planned, and sponsored an illegal fundraising event involving gambling, thus violating public policy and Arizona law. Only persons over the age of 21 may participate in the few categories of legal gambling in this state. The October 25, 2014 Gala, a first-ever event for the organization, was promoted and supported with taxpayer funds and resources by GPS Superintendent Christina Kishimoto and the GPS Governing Board. GEF posted photos online showing that GPS students actually ran the raffle and collected money. Since GPS is a K-12 school district, there is no way those students representing Campo Verde High School’s extracurricular club “PAWS for a Cause” were over 21.

The GEF photos also show that Gilbert High School students under the direction of art teacher Shalei Webb created table centerpieces and other decorations that were raffled. After the Gala was over and the money was counted, Shalei Webb was the lucky recipient of a pottery wheel as an award from GEF, which appears to be a quid pro quo for those student-created raffle prizes. The Campo Verde High School students from PAWS for a Cause appear to have gained a GEF award for their teacher, as well. Photographs also showed students performing at the Gala while alcohol was served, students with ticket money from the raffles and a GPS teacher winning a bicycle as a raffle prize.

Superintendent Christina Kishimoto, GPS Governing Board members and many GPS top administrators were present at the Gala. Each of them, individually and severally, knew or should have known that GPS was violating district policy and state law by allowing minor students to remain on the premises during the Gala, according to GPS Policy GBEC-E: Drug Free Workplace:

YOU ARE HEREBY NOTIFIED that it is a violation of Policy GBEC for any employee to violate the law or District policy… or use, on or in the workplace, of alcohol…

Workplace includes any place where work is performed, including…off school property during any school-sponsored or school approved activity, event, or function… where students are under the jurisdiction of the District.

It is clear that Christina Kishimoto and GEF violated GPS policies and fundraising guidelines, in addition to violating public policy and Arizona laws. GPS Fund Raising Guidelines specify exactly how a raffle should and should not be conducted, including that no STUDENTS or EMPLOYEES [capitalized in the original] are to sell any tickets, that the organization issue a donation check to the district to be deposited in the district donation account, and that the event may not be advertised on the district’s webpage.

A former GPS board member who later voted against the Memorandum of Understanding between GPS and GEF made a statement about the GEF gala she attended, where there were “minors handling alcohol and raffle tickets.” Board member Julie Smith singled out a fundraiser she attended, questioning if GPS was going to cover legal issues: “Like minors handling alcohol, the raffle tickets, stuff like that.” Christina Kishimoto responded that a 2016 event hosted by an organization other than GEF did not have student performances because alcohol was served. It was a masterful attempt at deflection, but Christina Kishimoto was trying to close the barn door after the horses had left.

Superintendent Christina Kishimoto and her Chief Financial Officer Tom Wohlleber explained to the Governing Board that one of the driving reasons behind this MOU was bringing GEF under the GPS insurance umbrella, as GPS does for parent support organizations such as PTSOs and booster clubs. Ooopsie, that violates the Arizona Gift Clause. See Slide #20 in the Best Practices Presentation: “The District cannot purchase liability insurance for the school support organization or extend its own insurance to such organizations (this would violate the Gift Clause).” The attorneys’ presentation warns school districts not to co-mingle private monies with public monies in district accounts (Slide #25). GPS processes expenditures for GEF using the GPS financial system. In the consolidated 2015 voucher report, GPS showed expenditures of more than $23,000.00 for GEF, itemizing expenses for I-Pads and Chromebooks, attendance at several conferences (including airfare and lodging in South Seas Resort), field trip transportation, books and much more.

New board members, you really should review the entire Best Practices presentation … you’ll be shocked at how many violations GPS racks up on a daily basis.

During the presentation at the work study session, Kishimoto told the board that “their” attorney had reviewed the MOU. New board members, this is why you MUST get legal advice on your own, not filtered through the superintendent who doesn’t tell the truth. Get that legal advice in writing so you can avoid the situation you have here: on information and belief, the legal advice Christina Kishimoto conveyed was that the cited MOU review was to determine whether or not the memorandum was a legally binding document. It’s very convenient for the attorney, Kishimoto and board president Tram, who devised the MOU, that the video archive for the September 27, 2016 board meeting at which the MOU was discussed and approved by a 3-2 vote was “corrupted” and not posted online. The written minutes of the meeting don’t describe any of the discussions; those minutes simply record the motion and the vote.

Hey, Gilbert Education Foundation Folks: don’t think that you’re in the clear because GPS policies don’t apply to you and your companies. Our next FW&A report will outline the ways GEF follows the GPS lead: “Laws are for little people, not local celebrities like us.” Au contraire! A 501(c)(3) tax-exempt organization has some special laws to obey.

When an organization intentionally encourages, induces, plans, and sponsors an event that is contrary to public policy as the 2014 GEF Gala was, it is not a charitable organization for purposes of 501(c)(3). Directors of charities are required by law to carry out their responsibilities as directors “in good faith, in a manner such director believes to be in the best interests of the corporation and with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances.”

Bottom line: Christina Kishimoto and the two GPS board members who served as liaisons to GEF during 2014 and 2015 (Tram and Humpherys), as well as other GEF Directors,  could be held personally and professionally accountable for violating state gambling laws and restrictions on activities of this tax-exempt organization, including personal liability for taxes and penalties that accrue to GEF as a result of those violations of laws. GEF could lose its tax-exempt status as a result of organizational wrongdoing. Nothing less would restore community trust.

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. Participating in those schemes could result in serious consequences for those who put themselves and their organizations at risk of losing their tax exempt status. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

GPS Fraud, Waste & Abuse Report #10: More Tax Evasion Schemes

Gilbert Public Schools has been spending like the district has money to burn, after voters approved a tax override and a new bond issue. Beyond the blatant failure to protect public funds that you would expect from a Governing Board of elected officials, GPS has engaged in financial schemes large and small that run afoul of federal and state tax laws. The end result is that GPS and individual employees who profited from these schemes are at risk of back taxes, penalties, interest and other expenses that occur when the IRS goes after scofflaws. GPS employees, you’re the one left holding the bag when you don’t report taxable income from the fringe benefits you receive

Private citizens know that you must meet the requirements for tax deductions and expense write offs. GPS spent more than a million dollars on the software they seem to override in order to perpetuate some of these financial games. Any wonder why GPS can’t figure out how to pay employees properly? It might be because the folks in the Finance Office are *protecting* those who direct the payroll and tax scams described in these Fraud, Waste and Abuse Reports.

Many GPS tax evasion schemes revolve around questionable payments to consultants and apparently illegal gifts of public funds to *special* employees. Some of these schemes are meant to look like simple *mistakes* … making it really, really suspicious that superintendent Christina Kishimoto’s current contract says can’t be fired for *mistakes in judgment.*  So what we have to do here is show that the mistakes are actually well-thought out schemes that have been perpetrated over a long, long time for the specific purpose of enriching certain special someones at taxpayer expense. Westie’s up to the challenge!

It appears that GPS does not report to the IRS such things as working condition fringe benefits–that is, property and services provided to an employee so that the employee can perform his or her job. For example, it’s impossible to track donations and expenditures for GPS events such as the GPS Education Technology Summer Institutes of 2015 and 2016. Christina Kishimoto’s May 15, 2015 board brief indicates there was $60,000 in donations for the 2015 GPS event. Some donated funds were used for meals, gift bags and snacks for attendees, who were GPS employees whether they were on the clock or off. Sixty thousand dollars buys a lot of meals, gifts and snacks! But what’s $60 grand, when GPS has what’s essentially seven-figure slush funds from a tax override and bond issue?

The question of whether or not the things that GPS deems to be *de minimis fringe benefits* (and therefore not taxable) is complicated. Free lunches are provided to the same employees regularly, justified by the fact that GPS inserted a provision into employment contracts that meets Arizona Attorney General guidelines to avoid gifts of public funds to employees a few years ago. The result was that GPS has created an entirely new fringe benefit that mostly accrues to top level administrators: free lunches at virtually every meeting they attend. GPS vouchers show district maintenance and operations funds (taxpayer money) and district donation funds have been spent on catered meals for staff and lavish events, which have cost thousands upon thousands of dollars. In fact, it appears that just about every staff meeting or administrative training session is catered. Every monthly policy committee meeting of the GPS board, as a Committee of the Whole, is catered using taxpayer funds. Similar to the GPS travel junkets, these free meals tend to accrue to the same employees time and again.

In general, the IRS does not consider meals that are furnished regularly to a select group of employees to be *de minimis.* GPS staunchly defends these taxpayer funded meals as “morale” expenditures. To say otherwise would run afoul of the Arizona Constitution prohibition of gifts of public funds that GPS addressed through the provision inserted into employment contracts for limited permission for expenditures authorized by Attorney General Opinion I10-003. But it will get GPS in trouble with the IRS, who expects a business connection, at a minimum, while GPS is jumping through hoops to avoid violating the Arizona Constitution’s gifts of public funds prohibitions. Then there are the taxpayers, who are mightily p*$$ed at spending a hundred thousand dollars each year on free lunches for the highest paid admins and their buddies on the governing board.

GPS seems to believe there is only a rule limiting the cost of each meal provided to employees under this burgeoning program to “foster good working relations.” As a result, some administrators hold routine staff meetings in restaurants on some occasions and have meetings catered on campus by restaurants on other occasions. Some administrators take employees to restaurants for small group meetings; other times employees purchase refreshments using GPS vouchers. The superintendent and governing board routinely have their meetings catered by GPS Food Services.

Think of all the meals that GPS top level administrators gobble down … they want you, the taxpayer to believe that they’re using money that doesn’t come from your taxes, like donations. But public funds include all money that GPS holds. There’s a difference, again, between IRS rules and the Arizona Constitution prohibition on gifts of public funds, but GPS generally manages to violate one when admins try to *fix* the other. It’s a mess, and it most likely will be very expensive to taxpayers when accountability comes knocking. But GPS coffers are full with a tax override and a bond issue, so what’s the problem?

Apparently, GPS has used a number of subterfuges to provide meals to employees without reporting them to the IRS. A small, but inappropriate gift of public funds and unreported income was the practice of giving free lunches to select employees in GPS high schools that GPS abruptly terminated during the summer of 2016. The email below shows GPS admins are fully aware their schemes are prohibited by the IRS:

GPS does not report clothing as income to the employees who receive those items, nor does GPS withhold or remit taxes on those taxable fringe benefits. GPS policy simply identifies which funds can be used for shirt purchases in Policy DKC-R. Photos of staff (including Christina Kishimoto) wearing polo shirts sporting the GPS logo at conferences and other events, show that GPS does not meet IRS requirements for making a clothing a non-taxable fringe benefit. A good explanation of taxable fringe benefits for a school district can be reviewed here. GPS admins know what they’re doing. But why would they risk angering the IRS over the hundreds of tee shirts the district buys for employees each year, seemingly for any old event? Hey, GPS teachers, if you were important, you would be getting free polo shirts instead.

A related scheme to give GPS employees gifts of public funds comes through buying gift cards at various stores.  Entries appear for three gift cards from Fry’s grocery store lumped in with expenses annotated as staff appreciation, retirement and parent meetings in Vouchers 5222-5253 June 2015. The same scheme was used at Basha’s grocery store to buy seventy gift cards for teacher appreciation and two gift cards for retirements. At Sam’s Club, public funds were used to buy twenty eight gift cards for an undocumented purpose; gift cards for “admin appreciation” were purchased from Fry’s. Public funds also paid $3,350.00 for teacher appreciation gifts and $2,080.00 for gift cards for teachers. A gift card was folded into purchases for student organizations candy and dance gifts purchased at Target; eight gift cards for $100.00 were purchased at Basha’s for $847.60.

The IRS is adamant that when the employer knows of *gifts* to employees, the employer must withhold, remit and report taxes on those payments. Although others may have paid for these gifts to teachers and administrators, GPS was well aware of that unreported income to employees and responsible for all applicable payroll taxes and withholding, because GPS bank accounts were used to pay the vouchers. Yes, we all know the dots connect to the Gilbert Education Foundation, and we’ll reveal plenty of evidence about the hinkiness of that slush fund operation in future FW&A reports.

GPS also solicits gifts to be raffled to employees attending GPS sponsored events, such as the 2017 Employee Benefit Fair. For that event advertised by email to all GPS employees, the GPS Talent Office bragged they would distribute gifts valued over $10,000.00 to the subset of all GPS employees who attended this event. Whether or not this raffle complies with Arizona gambling statutes is a related and serious issue that GPS routinely ignores in conjunction with the uncounted and largely unregulated fundraisers that proliferate across the schools … including for PTSOs, booster clubs, student organizations and teacher appreciation events. Oopsie! New board members, this is happening  on your watch! BTW, a favorite *gift* to GPS employees is their own personal Chromebook. Guess how those are bought…

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. Word of warning to those who might consider the business-as-usual tricks employed by GPS admins in the past: it won’t help to lose files, forge signatures or *create documentation* after the fact. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

GPS Fraud, Waste & Abuse Report #9: Don’t Mess with the IRS

Unreported income is pervasive in Gilbert Public Schools. Gifts of public funds to GPS employees funnel unreported income to select employees. Favored employees, however they are selected, enjoy special privileges and monetary benefits (meaning untaxed cash bonuses) associated with their employment. But apparently, you have to be really *special* to qualify. 

This pattern and practice of unequal benefits again raises questions of whether the GPS Business Office is properly reporting all taxable income, let alone withholding and remitting taxes. Many of those GPS employees are the level administrators whose contracts said nothing about Professional Development, which often is the vehicle for said gifts of public funds. Some lower-level employees have had professional dues paid by the district, in addition to registration and travel expenses for employees attending various conferences, all without statutorily required board approval. As with the case of Robyn Conrad-Hansen, employees contracted through SmartSchools also can receive benefits of illegal gifts of public funds from GPS without reporting those payments as income.

There’s a “Professional Growth Stipend Benefit” that is a lump sum that should have been included as taxable income during the years that GPS paid this benefit. The problem is that the GPS Employee Handbooks state that such payments have been suspended for the past many years, according to page 35 of the GPS Employee Handbooks from 2013 through 2016. GPS *helpfully* removed those handbooks from their website, but Westie archived them and provided them to state and federal elected officials and enforcement agencies, along with records of exact payments over the years that prove which employees received these gifts of public funds that enriched their pocketbooks with public funds. Hint: it’s often the same folks, year after year.

The GPS Employee Handbook contained other gifts of public funds each year to selected employees. For example, the so-called transportation benefit routinely was provided to some 100 administrators as a nice check for $350.00 at the end of each school year. One hundred GPS administrators received annual checks of $350.00 in 2014; they didn’t have to travel, and they didn’t have to keep records unless they wanted to claim additional reimbursement for travel over 750 miles. Interim Superintendent Jim Rice received a check from GPS for his travel between home and work, something that is so fundamentally wrong, there’s no way GPS can explain that, or the perhaps double payment that occurred.

There’s no doubt that these gifts of public funds were purposeful, because GPS answered an inquiry about these payments with an email from the GPS Director of Finance explaining that GPS decided 100 administrators would be deemed *vendors* so they could cut sweet little tax-free bonus checks for them: 

Every year administrators are required to sign a form that states that they will accept this amount in lieu of submitting additional miles for reimbursement. The expectation is that in the course of doing business throughout the year Administrators generally travel during work hours. And over the course of the year the miles that would be claimed would be in excess of the $350.00. Those that do not sign that form do not receive this money and they would have to collect and submit miles for every trip taken during the year. I would not necessarily categorize these as stipends. This is an arrangement to minimize the administration of mass submissions of mileage reimbursements.

That self-incriminating explanation was written to Suzy Horvath, who was absolutely livid when Westie first wrote about these GPS illegal gifts of public funds in 2014; more Westie posts on the subject appear here and then again here, verified by Vouchers 4218-4226 June 2014.  “But it’s District Policy,” she proclaimed, among some other stuff that passes for smack talk or worse in her constricted community. Thanks so much for getting this verification of tax evasion made into a public record, Suzy Horvath!

As Director of Finance, Teddy Dumlao knew that he was in the group of employees that would be improperly compensated; the group also included Budget and Procurement Coordinator Crystal Korpan, whose role was essential in recharacterizing payments to these employees as so-called vendors. GPS gave the same gifts of $350.00 again in 2015 in Vouchers 5222-5253 June 2015. This time, the payments to GPS administrators were listed as “Admin Travel Stipend.” In GPS, stipends are paid for *additional work* and other salary related reasons; those payments appear to be administered within the Talent Office rather than the Finance Office. Board members really should cut the ostrich act and look into these illegal payments and so-called stipends, but who is going to make them do that?

It appears that GPS not only failed to report the payments as taxable income, GPS also failed to properly withhold taxes and other deductions from employees. Do you believe that GPS filed IRS Forms 1099 for these payments to and/or on behalf of employees? They certainly were not included in the very few 1099s Westie received from public records requests.

GPS Director of Finance Teddy Dumlao, who regularly attends professional development and business administration conferences at GPS expense, also had his college tuition reimbursed. It appears that he is the sole GPS employee who received tuition reimbursement for college courses, which were shown in *Vouchers through April 2016* in the amount of $3,400.00. In this case, GPS recharacterized income to the Director of Finance, apparently as a reward for making possible financial schemes of various tax-evading strategies that were operating out of the GPS Business Services offices.

Teddy Dumlao readily admits he does not have a college degree that one would assume is essential for his position in GPS or any other school district. Also attracting critical scrutiny, GPS does not have a policy or practice of reimbursing college tuition for the several thousand teachers who work for GPS and who take classes to maintain their certifications. How sweet it is to be Teddy Dumlao, the same guy who shamelessly made possible the apparently illegal gifts of public funds discussed in this post!

Another top level GPS employee who enjoys the superintendent’s favor is Communications Director Irene Mahoney-Paige, whose tuition for a Chamber of Commerce program was paid directly to the Chamber by GPS. That $800.00 payment appeared in *Vouchers through August 2016.* The program seeks “to expose promising leaders to issues that affect our communities, businesses, and the public … to be better able to contribute their resources to making a difference in many ways.” Again, this appears to be a sweet reward to a selected employee.

A big question is whether Irene Mahoney-Paige has been paid as if she were on duty at GPS for the time she spends on the Chamber of Commerce program. That would allow her to collect a salary as a public employee while at the same time accumulating benefits such as paid time off, when she’s really partying with the Chamber of Commerce. Thanks for *making a difference* at taxpayer expense, Irene!

In addition to tax irregularities resulting from GPS paying the Gilbert Chamber of Commerce for a program to advance “promising leader” Irene Mahoney-Paige, these expenditures are gifts of public funds and an abuse of Kishimoto’s authority. So what did the GPS governing board know, when did they know, and what did they do about it?

Keyboard: Don’t ask the questions if you can’t stand the answers.
Westie: But taxpayers want to know!
Keyboard: So does the IRS.

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. Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters. It’s not nice to mess with the IRS! Penalties, interest, back taxes and more come to mind…

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.

GPS Fraud, Waste & Abuse Report #7: Illegal Payments and Tax Evasion

As every forensic accountant knows, reimbursements to employees for expenses incurred in performing their duties is ripe for fraud, waste and abuse, particularly in government entities. In GPS, it appears to have become an art form: recharacterizing expense reimbursements as a cover for paying illegal expenses from the public purse. Let’s explore some obvious GPS financial shenanigans like *consulting* that isn’t really consulting; overpaying consulting invoices to boost payments to privileged persons; forgiving a contractual obligation to pay *liquidated damages* for breaking an employment contract; paying an allowance (taxable income) and also *reimbursing* expenses incurred for the same purpose; and finally, *reimbursing* future expenses. However you look at it, GPS plays fast and loose in hocus-pocus transactions that create a financial windfall for selected employees. You won’t be surprised to see that GPS superintendent Christina Kishimoto’s name is linked to those transactions. 

It appears that GPS recharacterized a “consulting” payment because travel reimbursement was prohibited when Christina Kishimoto interviewed an out-of-state applicant for a vacant position. After Christina Kishimoto’s top choices for two leadership positions in GPS were rejected by the Governing Board on May 27, 2014, Mark Gabrylczyk’s name appeared on Vouchers 5040-5062, Sep-Oct 2014, for “Consulting Expenses” in the amount of $750.00. Superintendent Mark Gabrylczyk had been fired resigned in June 2015 from his position in Idaho; media reports showed he was looking for positions in districts around the country during the summer and fall months.

The subject of payment of travel expenses for candidates had been addressed by the Governing Board. During the superintendent search leading to Kishimoto being hired earlier in 2014, the firm conducting the search paid those expenses for all candidates who interviewed with the GPS Governing Board. Payments in amounts shown on the contract of the firm Ray and Associates appeared on GPS vouchers; travel expenses for candidates did not appear. The Arizona Attorney General public service orientation guidance is instructive: “State officials recruiting others to State service should know that the Legislature has forbidden expending any appropriations for transportation or other travel expenses, for moving expenses, or for bringing any person who is not an Arizona resident to interview for prospective employment unless such monies are appropriated for such specific purposes. A.R.S. § 35-196.01(A).” Appropriations require a vote of the governing board in a public meeting … BEFORE the funds are spent.

Kishimoto’s recharacterization of this payment to Mark Gabrylczyk as “consulting expenses” indicates a purposeful fraudulent scheme that most likely was concealed from the board. Apparently, Kishimoto charged expenses for hiring a consultant without revealing that she had interviewed an out of state applicant who certainly did not have a sterling work history (which a Google search would have revealed immediately in great detail). Of course, there was no way of assuring the Governing Board that the benefits to be realized from payment for a candidate’s transportation or other travel expenses substantially and demonstrably exceeded the costs GPS incurred (a consideration required because of the Gifts of Public Funds clause in the Arizona Constitution) when it was absolutely prohibited to pay those costs in the first place. Sounds like a repetition of how the GPS governing board did not approve GPS employee travel, doesn’t it?

In the case of former Interim Superintendent Jim Rice, the amount of the invoice and the amount of the check he was issued for *consulting services* he provided after his employment contract ended were vastly different. Kishimoto’s administrative assistant performed the only oversight noted in the public records GPS produced about this matter, including records where Rice invoiced $1,562.50 but was paid $5,687.50. GPS also produced a consolidated report of payments to vendors for 2013-2015; Rice had received $6,198.10. The difference between the check issued to Rice and the amount shown on the consolidated report is $510.60.

Oh, lookie here: Jim Rice also was “reimbursed” for $255.30 for traveling between his office and his home, an amount that should have been reported on an IRS Form 1099 for 2014 in addition to an IRS Form W-2 for Rice’s GPS employment. Reimbursement for that particular travel violates state and federal laws. And gee whillikers, if you double pay for that *travel,* the amount is exactly $510.60, just like the discrepancy that appeared on the consolidated vendor payment report! What a coincidence!!

The public records GPS produced in response to requests for payment information were incomplete, but nonetheless were filled with inconsistencies indicating fraud. In November 2016, the GPS Administrator newsletter acknowledged GPS had been misclassifying independent contractors. The belated attempt to clean up the mess doesn’t excuse the deliberate misuse of authority and public funds, let alone the fraudulent schemes to enrich select “consultants” and GPS employees.

When GPS instituted *hostage fees* in employment contracts, Christina Kishimoto was desperate to keep employees from jumping ship in the middle of the year. Later, we learned that although the contracts specified that the board could forgive the hostage fees upon individual consideration of departing employees, Christina Kishimoto and her minions took over that job and made their own decisions about who paid the hostage fee and who did not. Perhaps they were unaware that the IRS considers a debt that is forgiven as income to the recipient. Yep, propelled by arrogance and ignorance, Christina Kishimoto waded into yet another pit of quicksand in employment law. New board members, she’s trying to pull you in, too!

According to the IRS, if a debt is canceled, forgiven or discharged, you must include the canceled amount in your gross income, and pay taxes on that “income.” Do you think GPS filed required IRS Forms 1099-C when hostage fees were forgiven? Certainly, when Westie requested IRS forms as public records from GPS, no IRS Forms 1099-C were produced. Like so many of the boneheaded maneuvers GPS financial folks pulled in recent years, this stunt could backfire spectacularly on former GPS employees who did not report that additional income. GPS could be on the hook for back taxes as well for penalties and interest for screwing up so many basic payroll functions in the past several years. Let’s hope the IRS doesn’t go after those employees who were not aware they were receiving taxable income due to GPS duplicity.

In terms of Kishimoto’s total compensation, it appears that allowances (taxable income) and reimbursements of accountable plan expenses are duplicative. It’s pretty much impossible to determine which of Kishimoto’s fringe benefits over and above her base salary are paid as allowances as opposed to reimbursements; that’s by design, as are many of the GPS shenanigans. Some of the payments shown in vouchers appear to be reimbursements for expenses that are itemized in allowances described in Kishimoto’s contract. That could allow Kishimoto to collect the allowance as part of her salary and also collect reimbursements of expenses that should have been covered by the allowance.

One such allowance appears to be prohibited by Arizona statute, as discussed in an Attorney General Opinion. That allowance is described in Kishimoto’s employment contract as an annual “Civic Responsibility Expense” payment of $3,000.00, paragraph 2I. There should be no question that such payments violate the Gift Clause and Arizona law, but the allowance is in Kishimoto’s contract and GPS also pays expenses for civic activities, as shown by vouchers.

Kishimoto’s self-serving expenditures of public funds, as well as her reimbursements for expenditures that violate state law are prohibited. From Arizona’s Attorney General:

The Legislature has not authorized school districts to pay dues for district employees and board members to join private civic organizations… The only mention of membership dues in the statutes governing schools is the authorization for districts to pay dues “for membership in an association of school districts within this state.”  A.R.S. § 15-342(8).

Although not expressly authorized by statute, dues for organizations that directly concern education or aspects of managing a public school district may be justified to the extent they enhance the district’s ability to fulfill its statutory responsibilities.  However, the connection  between  membership dues for private civic organizations with a more general purpose (such as the Chamber of Commerce, Kiwanis, and Rotary Clubs you identified in your opinion request) and a district’s statutory responsibilities for educating children is too attenuated to conclude the Legislature impliedly authorized those expenditures. Thus, there is no express or implied statutory authority for school districts to pay for dues to private civic organizations.

It appears Kishimoto also submitted for reimbursement of future expenses. “This will be used for Dr. Kishimoto’s expenses per the superintendent’s contract” appears on vouchers from at least September 2015 through the present. It sure looks like someone is drawing down the amount specified as an allowance in Christina Kishimoto’s contract; what do you think the chances are that she collects the allowance AND files for reimbursements? Do you think there’s any chance Christina Kishimoto’s reported taxable income includes that allowance? You never know with the way GPS ping-pongs salaries and reimbursements between the Talent Office and the Business Office. What a deal!

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. Word of warning to those who might consider the business-as-usual tricks employed by GPS admins in the past: it won’t help to lose files, forge signatures or *create documentation* after the fact. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

GPS Fraud, Waste & Abuse Report #6: Consultant Fraud

Superintendent Christina M. Kishimoto, Ed.D.Gilbert Public Schools has hired a lot of *consultants* since Christina Kishimoto has been superintendent. This FW&A Report examines the hinkiness of GPS consultant contracts against the indisputable requirements of Arizona state laws and the Procurement Code, as widely disseminated by The Arizona Auditor General. In other words, Christina Kishimoto and her enablers either knew or should have known better. Then there’s the IRS, which certainly is not pleased with employers who try to evade federal tax laws by recharacterizing payments to *consultants.* The public is being fleeced. Elected officials allowed these conditions to manifest, multiply and mutate into a flagrant scheme of self-enrichment. 

The GPS Governing Board’s disinclination to oversee the superintendent’s financial management of district funds back in 2014 furthered this fraudulent scheme of hiring *consultants.* GPS didn’t even go through the motions of procurement regulations for work purportedly done by consultants. Kishimoto has paid a number of consultants without having contracts, statements of work or other documentation to verify and justify payments for work done by these consultants. As long as a name appeared on the vouchers, GPS paid the tab and sometimes issued IRS Forms 1099.

It appears that Kishimoto hired consultants to do the jobs of regular employees to circumvent the bureaucratic burden of “real” employment. In some cases, this allowed Kishimoto to report to the Governing Board that key positions were unfilled, and therefore administrative costs were low, although the work was getting done. The IRS has issued clear guidance about employing independent contractors, whether they’re called consultants or another name, but GPS seems to flout all the rules.

A big red flag for the IRS is when employers pay consultants on a regular basis, such as bi-weekly or monthly, instead of when a consulting project is completed. Another is paying departing employees as consultants shortly after they leave; those payments have the appearance of being improper parting gifts or rewards. GPS hits all those marks, and more, in what appears to be a pattern and practice of funneling public money to selected recipients, including the superintendent herself, which has the appearance of a prohibited act under A.R.S. §38-504. Such contracts should be voided as described in A.R.S. §38-506, and also be subject to the penalties of A.R.S. §38-510.

According to documents produced by GPS in response to public records requests for consulting contracts, they never existed. GPS produced only a few invoices in response to public records requests. There were no contracts describing duties or rates of payment for consultants, nor any documentation describing the scope of work or any deliverables associated with consultants’ work. In fact, on August 1, 2014 at 8:23 AM, GPS responded to Westie’s email inquiry: “Follow up: Jeff Gadd is classified as a vendor, no contract. Carole Bartholomeaux is classified as a vendor, no contract.”

Jeff Gadd’s consulting invoices consist of dates and numbers of hours, with nothing more to indicate what was the “financial consulting” he did for GPS during selected periods from May through July 2014. It’s significant that GPS did not produce a purchase order along with Gadd’s invoices and copies of checks. Gadd’s consulting payments were not included in the consolidated report of payments to vendors for 2013-2015 that GPS produced, but GPS issued checks to him in the amounts of $6,937.50 on May 21, 2014; $9,250.00 on June 16, 2014; and $4,750.00 on July 8, 2014 for a total of $20,937.50. To all appearances, Gadd was a GPS employee, not a consultant. Hmmmm … GPS had a highly-paid Assistant Superintendent for Business Services, Clyde Dangerfield, Esquire, at the same time they were paying Jeff Gadd to *consult* about finances.

Jeff Gadd transferred from being a vendor, or consultant, depending on which GPS report you use, to a lucrative six-figure executive job as the GPS Chief Financial Officer for a one year term on September 2, 2014The GPS Governing Board approved his employment, as noted in the minutes of the August 26, 2014 board meeting. As Chief Financial Officer, Jeff Gadd’s salary was $102,320.00 plus fringe benefits available to other administrative employees, including 18.66 vacation days, a $3,000.00 automobile allowance, health insurance in the amount of $7,091.00 and an annual physical examination reimbursement of $800.00, with an additional 1% annual salary contribution in a tax sheltered annuity. Gadd also was paid by GPS according to the February 2016 vouchers for “financial consulting” at $125.00 per hour, totaling $1,281.25.

In the case of Carole Bartholomeaux, there were several invoices and receiving reports that indicate she performed “public relations” consulting and other services, billed in what appears to be increments of 20 hours, over the period of July and August 2014. To all appearances, Barthololmeaux was a GPS employee, not a consultant. Invoices were paid for $800.00 on July 16, 2014; $4,480.00 on July 30, 2014; $4,480.00 on August 5, 2014; and $6,720.00 (consolidated payment) on August 15, 2014 for a total of $16,480.00. The purchase order was for $20,000.00. A GPS consolidated report of payments to vendors for 2013-2015 showed prior year payments to Bartholomeaux for $26,880.00 and $16,480.00 for 2014. Of particular concern is the note on Barthololmeaux’s invoice for August 19, 2014 that her services including “Researching information for GEF Gala event.” We’ll circle back to that in a future FW&A post.

Another GPS employee received payment for finance consulting after she left the district in 2015. Payments to Crystal Korpan, former GPS Coordinator of Budget and Procurement, were listed in GPS vouchers. Those payments also appeared in the consolidated report of payments to vendors in the amounts of $720.00 on May 1, 2015; $600.00 on May 19, 2015; and $240.00 on June 23, 2015 for a total of $1,560.00. A public policy question: did Korpan collect her salary from the Queen Creek School District, where she is now Chief Financial Officer, for the same time that she collected payments from GPS as a consultant?

Provisions of A.R.S.§35-211 should be applicable in this situation, requiring public employees return any unauthorized payments plus legal interest:

A.R.S.§35-211 When any person who is obligated to approve, audit, allow or pay claims or demands upon the state, approves, audits, allows or pays, or consents to, or connives at, approving, auditing, allowing or paying a claim or demand against the state not authorized by law, such person, and the person in whose favor the claim or demand was made, shall be liable for any funds procured in such manner, plus twenty per cent of such amount and legal interest upon the amount paid from date of payment.

Bottom line: GPS payments to “consultants” included serious anomalies and appear to be designed to recharacterize salaries to evade employment taxes. This should require that any contract be voided even if it were fair; GPS should recover payments whether or not there was actual fraud or dishonesty, because public officers and employees have accrued benefits far beyond what would normally accrue to them as part of their official duties.

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. Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters.

GPS Fraud, Waste & Abuse Report #5: Accountability for Fraudulent Schemes

Fraud, Waste & Abuse in Gilbert Public SchoolsFor the past three years, Christina Kishimoto’s GPS superintendency has been marked by willful ignorance and intentional blindness in terms of oversight. One reason Westie is presenting this series of Fraud, Waste & Abuse reports is so the public will know what historically has been hidden from view in Gilbert Public Schools. Another reason is that these posts are transmitted to individual GPS board members, making a public record, which increases the difficulty for GPS top-level administrators to collude in concocting a Get Out of Jail Free card. It’s time to bring information into the sunlight for public scrutiny, and to hold perpetrators of fraudulent schemes accountable. 

Members of the GPS governing board will be making severe cuts to GPS educational programs in coming months. Before making a public spectacle of hypocrisy with budget cuts, perhaps they will decide to examine and end wasteful expenditures by a superintendent who seems to flout laws just because she can. Actually, the two remaining members of the former Rubber Stamp board will most likely be searching for some CYA assistance, since they’re in so deep, as these FW&A reports show.

There has been no functional process for reporting FW&A internally. The GPS governing board refused to accept complaints about the superintendent during Lily Tram’s tenure as president of the board. When voices were heard, GPS typically assigned a pet attorney paid by The Trust to get rid of the problem via a CYA report cloaked in attorney-client privilege. How many times during Christina Kishimoto’s tenure has the “Internal Auditor” position been eliminated? [rhetorical question] In her January 27, 2017 Board Brief, Christina Kishimoto made short shrift of a short-term incumbent by promoting Patricia Donohue to a director position in Business Services. Note that Patricia Donohue is a Certified Public Accountant; that means she has a CPA license to protect, so it made perfect sense that Christina Kishimoto wanted the Internal Auditor position vacant again!

There might be some light at the end of the Fraud, Waste & Abuse tunnel: in the GPS Uniform System of Financial Records Compliance Questionnaire For Fiscal Year Ended June 30, 2015, there is this nugget about FW&A allegations:

For Governing Board/Management Procedures question 4, the audit firm should confirm management’s appropriate action to resolve all allegations of theft, fraud, or misuse of district monies or assets by either examining copies of the incident reports or communicating with the agency involved in investigating the allegation.

*  If the audit firm determines that district management was aware of allegations but did not appropriately resolve them in a timely manner (e.g., no action was taken, actions were not documented, actions were delayed, inadequate, or inappropriate to the circumstances), the audit firm should answer the question “No.” This includes instances where an external investigation is underway for allegations, but district management did not request the investigation, was not fully cooperating with the investigators, or was not otherwise attempting to resolve the allegations.

*  If the audit firm determines that district management was not aware of any allegations (based on inquiry, review of Governing Board minutes, search of local media coverage, and results of audit test work), the question should be answered “N/A.”

*  If the audit firm finds evidence of theft, fraud, or misuse of district assets but does not find evidence that district management was aware of the possible theft, fraud, or misuse, the audit firm should appropriately investigate and report the theft, fraud, or misuse to the Office of the Auditor General, but this question would be answered “N/A.”

* A “Yes” answer indicates that the audit firm has determined that the District is in compliance with the USFR on that question and a “No” answer indicates the District does not comply. However, the final determination of compliance on each question, as well as overall compliance with the USFR, is made by the Office of the Auditor General based on the evidence presented in the questionnaire, audit reports, the audit documentation, and any other sources of information available.

That’s the kind of research that sparked Westie’s FW&A Reports, along with a professional lifetime of adhering to the highest standards of conduct in protecting the public trust: careers in the U.S. Air Force. Our top leaders put it bluntly to youngsters: USAF members could be forgiven for almost anything other than messing with Uncle Sam’s money. A favorite admonition, often related to lethargy for paperwork completion: “If it feels like a shortcut, DON’T DO IT.” We had strict enforcement of ethics standards under Inspectors General, which position also exists in every federal agency. They’re independent and powerful.

Westie has long advocated for the GPS governing board to hire their own Inspector General who would answer ONLY to the board. Now that the one-year-only Chief of Staff position is being vacated after three years (another Kishimoto hoodwink), maybe the board will reconsider the suggestion. Or set up a Citizen Audit Committee that answers only to the board. There are many ways to skin this cat, but doing so will require an act of political will on the part of at least three members of the governing board to implement a solution:

Stop School District Fraud: A Simple Solution.  Many school districts still lack necessary and fundamental oversight of their financial operations. School leaders often forego an indispensable resource designed to protect their reputations and reduce the risk that their district’s malfeasance will dominate local media reports and newspaper headlines. The solution is an internal watchdog like an inspector general or internal auditor. Legal bills, compliance with law enforcement investigations, civil recovery actions, even qui tam claims can drain resources and distract district administration and staff from their core function.  Having systems in place designed to identify high-risk areas, ensure effective controls are in place and, if necessary, respond when controls are circumvented, sets the tone that misconduct will not be tolerated and will be swiftly detected and punished.

In these FW&A Reports, we’ll see that GPS is involved up to its eyeballs in many of the examples of fraud listed in a presentation titled, “Fraud: How to Get Your District Free Publicity.” We all know how Christina Kishimoto craves publicity as she quests for her *national reputation.*

Government and public administration is in the top three most victimized industries for fraud.  Regular audits are not designed to detect fraud – they are to render an opinion on the District’s financial statements. Disbursement schemes are the most common; travel and expense reimbursements also are a common target for such fraud.

• Fictitious vendor or invoice schemes
• Consulting invoices
• Mischaracterized expense reimbursements
• Overstated expense reimbursements
• Fictitious expense reimbursements
• Multiple reimbursements
• Lack of cash receipts or inventory records (Catering events)

The Arizona Attorney General made the case for GPS governing board members to discharge their responsibilities to the public that elected them:

School districts are legislative creations, and school boards must exercise authority within the limits established by statute. Tucson Unified Sch. Dist. No. 1 v. Tucson Educ. Ass’n, 155 Ariz. 441, 442-43, 747 P.2d 602, 603-04 (App. 1987). In addition, the Arizona Supreme Court has held that school districts owe trust obligations to the public.

School districts are created by the state for the sole purpose of promoting the education of the youth of the state. All their powers are given them and all the property which they own is held by them in trust for the same purpose, and any contract of any nature which they may enter into, which shows on its face that it is not meant for the educational advancement of the youth of the district but for some other purpose, no matter how worthy in its nature, is ultra vires and void.
Prescott Community Hosp. Comm’n v. Prescott Sch. Dist. No. 1, 57 Ariz. 492, 494, 115 P.2d 160, 161 (1941)

Westie has repeated endlessly regarding Gilbert Public Schools: Follow the Law!

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. Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters. We suggest a forensic audit include travel and other *reimbursements* to GPS employees, federal funds and grants to schools, and payments to friendly GPS vendors for myriad purposes. There’s fire behind all that smoke!

GPS Fraud, Waste & Abuse Report #4: Sweetheart Promotions and Stealth Raises

This FW&A Report shows what happens when the GPS governing board does not personally review individual employment contracts, as GPS did prior to Christina Kishimoto’s arrival. Board members formerly reviewed and signed each employment contract. With today’s electronic employment contracts, there is no meaningful oversight of who Christina Kishimoto hires or what she pays each employee. Lists prepared by the GPS Talent Office, approved by the governing board each month, do not show the full extent  … like GPS ghost employee Robyn Conrad-Hansen, star of FW&A Report #3. New board members, you’ve already been played.

Games GPS administrators play with electronic employment contracts are done in a manner that usurps the board’s authority to determine the pay of employees under A.R.S. § 15-502A:

The governing board at any time may employ and fix the salaries and benefits of employees necessary for the succeeding year. The contracts of all certificated employees shall be in writing, and all employees shall be employed subject to section 38-481. The governing board may transmit and receive contracts of certificated employees in an electronic format and may accept electronic signatures on those contracts.

There’s a cautionary tale in the story behind an Arizona school district superintendent’s sudden resignation on February 28, 2017.The Tucson school district experienced a turnover in the makeup of the governing board, analogous to what happened in Gilbert Public Schools during the same election. Superintendent H. T. Sanchez lost his rubber stamp board majority and faced questions about his management of Tucson schools that had been swept under the carpet for the past three years. It was reported that the TUSD board was considering a Performance Improvement Plan for their employee. Later reports indicated that the attorneys were discussing a statement of charges against Superintendent H. T. Sanchez:

Sanchez misled the Board as to compensation in contracts, gave pay raises to senior administrators without Board approval, and gave separating employees additional months of health insurance after separation. In June 2014, just before the end of the fiscal year, three administrators received a $10,000 payment, coded as a “bonus.”

The groundwork for Sanchez’s firing had been laid by a TUSD board member who was not part of the former Rubber Stamp Board:

For months, board member Mark Stegeman has been compiling a case against Sanchez, one that could potentially be used to fire him for cause — meaning that he would not be owed the rest of his rich contract. There were reasons to end the relationship with Sanchez. He seems to have lied to the school board when he told them administrators were not getting raises back in 2014, at a time when he was packing $10,000 bonuses into some contracts. And he allowed Prop. 301 money to accumulate in TUSD coffers at a time when teachers could have used the money. Instead, some of those millions were used to balance the district’s accounts.

You’ll find many similarities between the performance shortfalls of H.T. Sanchez and Christina Kishimoto. His base salary had been $240,000 with benefits that brought the total value of his contract to nearly a half a million dollars. His contract was renewed early by his Rubber Stamp Board. He is not an educator, nor is he certified by the State of Arizona. Ditto for Kishimoto. As for holding back money the public expected would be used to increase teacher pay, well, it’s a GPS tradition now.

Connecting the dots to GPS: remember former Executive Director of Technology Steve Smith, the subordinate with whom Christina Kishimoto was involved in an *alleged* improper relationship?  His quasi-board-approved contracts were for “Director of Technology,” but his title was elevated and so was his pay, apparently without board approval. Ditto for former Executive Director of Curriculum, Beth Nickle, who was similarly elevated, according to the same 2015-2016 GPS organizational chart. FWIW, Beth Nickle now occupies a coordinator position in academic services, but she’s leaving the district at the end of her contract this year.

Public records available online confirmed that Steve Smith was hired on June 10, 2014 as Director of Technology. The board approved a reorganization of Technology Services on January 27, 2015; Smith’s position remained Director of Technology. Smith’s online resume at LinkedIn, however, indicates he had been Executive Director of Technology since June 2014 when he was hired as a “cabinet member.” The Governing Board did not approve that cabinet position or that title for Smith, according to minutes of board meetings online.

GPS produced public record copies of the Smith’s contracts for 2014 and 2015. Both contracts show he held the position of Director of Technology. The two contracts indicate a raise. GPS employees were given a 2% raise between 2014 and 2015; Smith’s raise appears to be in that range. Although Smith’s salary was increased for 2015, the number of days he was required to work decreased (237 contract days in 2015 versus 247 work days for 2014). Those extra ten days not worked raise suspicions of fraud: the same pay, plus a raise over the prior year’s salary, in return for fewer days of work could easily have been an under the table raise for Steve Smith, as well as for other GPS administrative employees.

Following revelation of Steve Smith and Christina Kishimoto having an *alleged* inappropriate relationship, Steve Smith’s resignation was formally accepted by the Governing Board on January 26, 2016. Significantly, Smith’s title on the consent agenda reverted back to Director of Technology, not the Executive Director title GPS had been using in reference to him. Steve Smith’s replacement was designated Interim Director of Technology; she suddenly got to go to a conference in Los Angeles with Christina Kishimoto, a trip that had not been approved by the governing board. That makes you wonder if the Los Angeles getaway had been planned for Christina Kishimoto’s inappropriate relationship, but we digress. Hope you had fun, Nan! The announcement for officially filling the technology position was titled Executive Director of Technology; the first responsibility listed was serving on the Superintendent’s Cabinet. Showing how some things never change, the dude who was hired to replace the guy who resigned when his *alleged* inappropriate relationship with his boss became public knowledge in 2016 *might* be called Chief Technology Officer for the 2017-2018 school year. That makes you wonder … no, never mind, being promoted like this is no longer unusual for guys in GPS.

The GPS governing board has the duty to investigate matters involving the Superintendent that come to their attention by any means. One of the complaints about superintendent Christina Kishimoto’s *alleged* inappropriate relationship with her subordinate was made in a public meeting, archived in the video minutes of the January 26, 2016 board meeting and at the link on Westie’s blog (above), for your convenience. But of course, nothing happened except that Silly Jilly Humpherys said she didn’t like *small town* morals. Sheeeeesh. This mess was never about morals, it was always about abuse of power, conflict of interest and the hostile working environment for GPS employees who were not engaged in *alleged* inappropriate relationships with their bosses.

At a minimum, Kishimoto’s alleged inappropriate relationship would be a conflict of interest, especially if her subordinate was indeed promoted and received a salary increase without board knowledge and approval. A subordinate’s promotion and salary increase, as well as any intangible benefits emanating from this *alleged* inappropriate relationship also would have been a misuse of Kishimoto’s authority, among other affronts to public policy, whether it involved Steve Smith’s *promotion* or Robyn Conrad-Hansen’s *ghost* position with GPS. Would it surprise you to know that GPS is STILL protecting the *alleged* recipient of a $10,000.00 raise that *allegedly was not approved by a previous governing board by refusing to produce public records requested long, long ago?

There’s a reason GPS marks public records requests “closed” and ignores requestors who say the file should not be closed because the requested public records have not been provided. Maybe someone on the GPS governing board should be concerned that public records requests go unfilled for a year or more … but that would be asking for *someone* to get their heads out the sand. Sigh. BTW, don’t believe that public records log that’s posted on the GPS website. There’s hinkiness there, too. We’ll explain in a future FW&A report.

The Arizona Agency Handbook, Sect. 8.2.1 states the Arizona Conflict of Interest statutes serve to prevent the financial interests of public officers and employees from conflicting with the “unbiased performance of their public duties because one cannot serve two masters with conflicting interests.’” Maucher v. City of Eloy, 145 Ariz. 335, 338, 701 P.2d 593, 596 (App. 1985). Further: “Government Auditing Standards indicate that abuse involves behavior that is deficient or improper when compared with behavior that a prudent person would consider reasonable and necessary business practice given the facts and circumstances. Abuse also includes misuse of authority or position for personal financial interests or those of an immediate or close family member or business associate.

The question is, will GPS board members seize the initiative and begin to right the wrongs that have proliferated throughout GPS under superintendent Christina Kishimoto? Public trust can be restored only through an impartial forensic audit by someone who doesn’t have a stake in these matters. That means the usual GPS pet lawyers and accountants are not acceptable investigators … their interests lie with whoever signs their checks.

There are more indicators of public corruption concerning Christina Kishimoto’s *sweetheart* gifts of public funds to her nearest and dearest … those will be subjects of future FW&A Reports.

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.

GPS Fraud, Waste & Abuse Report #3: The $100,000+ Ghost Employee

Dr. Robyn Conrad-Hansen, GPS ghost employeeThe administration of Gilbert Public Schools flagrantly violates public policy, federal law, state laws and its own district policies as a few six-figure income public employees *live large* at taxpayer expense. Today’s Fraud, Waste & Abuse report is about a ghost employee at the highest level of GPS management for 2015-2016, Dr. Robyn Conrad-Hansen. In addition to her salary, which appears to be a Gift of Public Funds prohibited by the Arizona Constitution, Robyn Conrad-Hansen’s travels were extensive and expensive. Today’s report is just the tip of an iceberg that Westie will reveal in upcoming FW&A reports. Man the lifeboats!

Christina Kishimoto’s generosity seems to have no limits when it comes to matters of her inner circle at the GPS White Castle. For instance, in her Board Report dated April 3, 2015, Christina Kishimoto reported that Robyn Conrad-Hansen was leaving her position as principal of Playa del Rey Elementary School and would be on leave: “Dr. Robyn Conrad, is on Smart Schools, and will be on leave to serve as President of the national Principals Association [sic].” It appears Christina Kishimoto’s statement was never true. Instead, Robyn Conrad-Hansen was continuously employed by GPS as a Smart Schools Plus contractor, while another person was hired for her former position as a school principal at Playa del Rey.

Christina Kishimoto undeniably reported to the Governing Board that Conrad-Hansen was on leave as president of NAESP, but it turned out that *someone* created a position for Conrad-Hansen at the GPS district offices. It appears that the Governing Board did not approve this position, yet Conrad-Hansen collected a handsome paycheck for whatever it was that she did as a ghost employee in a position that did not exist, according to GPS organizational charts. This was an abuse of Christina Kishimoto’s authority, a conflict of interest, a violation of the Arizona Constitution, and an abomination against public policy. Whew!

Christina Kishimoto once urged the governing board to *suspend* district policy when it suited her plans; this time, it appears Christina Kishimoto brazenly violated district policies on her own volition. The employee GPS employee handbook for 2014-2015 was in effect for the 2015-2016 school year, which included this policy for administrators who serve in state or national offices, appearing on page 34:

If an administrator is elected to a state or national office or an office in a professional education association, the employee may be granted an unpaid leave for the term of said office. Employees may apply for additional leaves if reelected or elected to an additional office. Administrators returning from such leave shall return to their same or equivalent position as determined by the District.

It appears Kishimoto willfully and knowingly took action to hire Robyn Conrad-Hansen for a term of employment and at a compensation Kishimoto was not authorized to approve,  usurping the board’s authority to determine the pay of employees under A.R.S. § 15-502A. This appears to have been done with the intent to benefit Robyn Conrad-Hansen, the recipient of an illegitimate contract, and it appears that Christina Kishimoto did so knowingly and dishonestly for a wrongful purpose. This scheme could succeed only with collusion and collaboration of other top-level administrators in GPS … the Chief Talent Officer and the Chief Financial Officer immediately come to mind, but others also are implicated.

Robyn Conrad-Hansen moved to a position identified as “District” and “District/NAESP” in various Voucher Reports. GPS paid expenses of membership in the national organization of which Robyn Conrad-Hansen was president. That alone violates A.R.S. 15-342(8) Discretionary powers: “Annually budget and expend funds for membership in an association of school districts within this state.” In Vouchers 5254-5285, June 2015, Robyn Conrad-Hansen was paid $8,123.94 as principal of Playa del Rey and membership dues for Arizona School Administrators and National Association of Elementary School Principals were paid in the amount of $530.00.

In the February 2016 Voucher Report, there is this entry: “Robin Hansen (Conrad) – District – NAESP  $7,370.00.” It’s a slick trick, but GPS employs many means to defeat public records inquiries, such as using different names for one and the same employee. Robyn Conrad-Hansen, and her many alternative names, was paid for the 2015-2016 school year as a Smart Schools Plus contractor. Don’t forget that Smart Schools Plus was paid a nifty fee to put retired former GPS employees back on the Gravy Train.

As a favored GPS employee, Conrad-Hansen traveled in and out of state, always without board approval as required by Arizona statute. For 2015-2016, the NAESP annual conference was held in Long Beach, California shortly before Arizona School Administrators met in Tucson; Conrad-Hansen’s ASA membership and conference attendance were paid by GPS. The two organizations, NAESP and ASA, appear to have a close relationship; the ASA website congratulates Conrad-Hansen for her presidency of NAESP. Robyn Conrad-Hansen was reimbursed $1,628.95, as shown on Vouchers 5254-5285, June 2015: $216.85 for “Reimbursement ASA Conference Tucson” and $1,412.10 for “Reimbursement of flights, meals, parking.”

It appears there was some co-mingling of Robyn Conrad-Hansen’s expenses for the conferences in Long Beach and Tucson, which perhaps could have totaled $1,412.10, but airfare from Phoenix to Tucson would not.  Robyn Conrad-Hansen’s reimbursement is particularly glaring when compared to reimbursements to Christina Kishimoto ($247.42 Vouchers 5254-5285, June 2015) and Steve Smith ($264.14 for mileage, meals and hotel, Vouchers for July-August 2015). Other GPS employees who attended the Tucson conference were reimbursed amounts similar to what Kishimoto and Smith received, except for Campo Verde principal Mike De La Torre, who was reimbursed $957.17 for “Per diem travel expenses for ASA.”

Another reimbursement to Robyn Conrad in the amount of $3,219.00 looks strange, as shown on the 2015 Consolidated Vouchers that GPS provided to Westie: “And rental van for the Teach to Lead* ($150); Reimbursement ASA Conference Tucson, AZ* ($217); Reimbursement of flights, meals, parking* ($2,852).” There’s an annotation in the same spreadsheet showing a $516.00 reimbursement to Robyn Conrad for “ASA Fall Principals” and a $23.00 reimbursement for “travel expenses.”

Notice that Robyn Conrad-Hansen was reimbursed for her travels; like her pal Christina Kishimoto, she made her travel arrangements herself rather than use the GPS vendor, Sinclair Travel. Hmmmm. Whenever the double-MBA GPS board clerk looks at GPS vouchers, remember that matching expenditures to the exact vouchers approved by the board at a monthly business meeting will be necessary, even though the *consolidated vouchers* so readily produced by GPS sycophants might seem to be easier to review. A real auditor knows that, BTW. A real auditor will triple-scrutinize travel arrangements that were made personally, bypassing the district’s vendor. There’s a reason GPS has left the Internal Auditor position vacant for so long… starting back when former Assistant Superintendent Clyde Dangerfield did not like the Internal Auditor’s advice about the infamous contract he signed with CrossPointe. Sheeeeesh.

None of this GPS employee travel was approved by the board as required by A.R.S 15-342(5); see Fraud, Waste & Abuse Report #1 and Fraud, Waste & Abuse Report #2.

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.

GPS Fraud, Waste & Abuse Report #2: Red Flags of Fraud in Employee Travel

Employee travel in Gilbert Public Schools appears to be a massive six figure expenditure every year. We say “appears to be,” because tracking all the GPS employee travel is pretty much impossible … by design. The biggest clue that this mismanagement and abuse of public funds is intentional is that other public school districts in Arizona formally approve all employee travel in public meetings. Other districts also predict and then track all expenditures for individual trips, as well as annual costs for all travel. GPS hides those expenses in a multitude of line items on the monthly GPS Voucher Reports. 

The GPS governing board historically has been remarkably incurious about massive expenditures of public money for travel by GPS employees. This is an indicator of potential fraud on its own, because the board president for several different years was Lily Tram, the Director of Financial Services at Arizona State University, who deals with both accounts payable and travel for an even larger public entity.

Lily Tram also was on the board while this was happening in GPS:

GPS budgeted $28,782.59, but spent $186,911 for conferences and training FOR ADMINISTRATORS … Additional costs for ADMINISTRATORS to attend the trainings and conferences listed above [in the linked blog post]: GPS budgeted $30,500 but spent $161,643.

Tram originally boasted of her financial expertise when she ran for election to the board in 2008 and most recently in her official 2016 campaign statement:

My work experience includes over 27 years in accounting and budgeting in higher education. This background gives me an ability to weigh fiscal responsibility and budgetary constraints, alongside the needs of our students and their education.

Tram resisted oversight of the GPS administration, especially in regard to finances. That’s diametrically opposed to Tram’s work at ASU. As board clerk, Jill Humpherys played a key role in blocking inquiries about GPS expenditures; board member Charles Santa Cruz apparently couldn’t be bothered to even look at questionable spending.That creates an environment in which fraudulent schemes can proliferate.

Red flags of fraud fly high on travel by GPS employees because there is a question as to whether the GPS Governing Board has the authority to pay for membership in any national organization, the hosts of these boondoggles in exotic resort locations. Relevant Arizona state law addresses only paying for membership (not including attending conferences) in state-wide organizations. See AZ AG Opinion I00-022: “The only mention of membership dues in the statutes governing schools is the authorization for districts to pay dues “for membership in an association of school districts within this state.”  A.R.S. § 15-342(8).” In the travel noted below, GPS paid for memberships of several employees in national organizations in addition to paying for expenses of the their travel to network.

Keyboard: Maybe someone can explain why *networking* is a valid reason to pay thousands upon thousands of dollars for GPS employee travel. Maybe the board should meet behind closed doors to discuss this matter.
Westie: Oh, I get it, you mean another executive session to discuss the superintendent’s performance!

Worse, Kishimoto’s improper travel payments and reimbursements appear fraudulent. Here’s how one category of travel morphed into what appears to be a scam. When Kishimoto first became superintendent, she reported to the governing board on July 11, 2014 that the Association of Latino Administrators and Superintendents, ALAS, was paying her hotel and flight expenses because she was an ALAS board member. Kishimoto alluded to some private agreement with GPS board members reached during her “selection process” as GPS superintendent. Christina Kishimoto remained on the ALAS board, in fact she was president the next year, through 2016. You would think ALAS would cover her travel expenses during that time. You would be wrong. GPS paid through the nose.

Kishimoto reported another trip to the GPS governing board on September 19, 2014, making no mention of who would pay her expenses for the ALAS event. Public records show that GPS reimbursed Kishimoto for this conference; apparently with a GPS issued check to Kishimoto for $1,576.92.

Vouchers 5063-5078, paid through November 6, 2014, show a $2,060.92 travel reimbursement to Christina Kishimoto. Westie filed a public records request for the reimbursement records. Lo and behold, GPS did not produce records for a $545.40 blanket purchase order within the request, although other documentation for the voucher line item was produced.

This reimbursement raises a red flag of fraud on its own: the same airline expense and an almost the same hotel expense had been reimbursed to Kishimoto on the previous voucher, three weeks earlier, with no indication of the purpose for the travel. It is significant that Kishimoto made her own travel arrangements and submitted for reimbursements rather than use the district’s contracted travel agency. GPS paid different amounts directly to Kishimoto on a different voucher report: $962.20 for airline tickets and $524.70 for hotel expenses (Vouchers 5040-5062-Sep-Oct 2014, paid through October 16, 2014). 

Kishimoto informed the GPS Governing Board on October 9, 2015 that she would be attending an ALAS conference in Albuquerque, New Mexico in October 2015. Kishimoto pointedly did not request the board’s approval. It would have been futile to request board approval in accordance with A.R.S §15-342(5), because there was no board meeting scheduled between Kishimoto’s board brief and the dates of her travel, even though this travel had been arranged and expensed to the district months earlier, in July or August 2015.

Following the ALAS conference, Kishimoto reported to the board on October 23, 2015 that she had taken a “team” along with her to the ALAS conference. Some of the travel expenditures for GPS employees to the October 2015 ALAS conference were spread out over several months’ worth of vouchers. Some expenses don’t give an employee name.

Kishimoto again made her own arrangements rather than use the travel agency that has a vendor contract with the district. As a result, Kishimoto’s self-purchased airline tickets ($522.00) were far more expensive than Steve Smith’s airline tickets ($236.01) that were procured through the GPS travel agency on the October 2015 vouchers. Kishimoto posted on her Twitter account that GPS Principal Sam Valles presented at the conference, but Westie hasn’t found expenditures or reimbursements reported for Sam Valles for the October 2015 ALAS conference.

Fees and expenses for the ALAS conference varied greatly. GPS paid conference fees for Steve Smith ($450.00), who was Executive Director of Technology at the time, and significantly more for GPS Principal Mike De La Torre ($595.00). Airline tickets for Mike De La Torre were purchased through the district’s vendor, Sinclair Travel. GPS also paid for Christina Kishimoto’s registration fee ($450.00) as well as her “dues and fees” ($350.00) for membership in the national organization.

Key in on the name Steve Smith, aka Charles Stevin Smith: did you notice that in months just after Christina Kishimoto’s divorce became final, she was traveling with the same subordinate with whom she had been reported to have an *alleged* inappropriate relationship? As vouchers show, Steve Smith’s attendance at the ALAS conference was planned early. Christina Kishimoto’s attendance was arranged at the same time, in the July-August 2015 timeframe. A motive for spreading expense payments and reimbursements over several months would have the effect of concealing Christina Kishimoto’s and Steve Smith’s alleged inappropriate relationship and travel together after Christina Kishimoto’s divorce in July 2015.

Steve Smith also traveled to a Arizona Association of School Business Officials event in Tucson at the same time of Kishimoto’s travels, although Steve Smith was not in a school business position in GPS.  Steve Smith was reimbursed for travel expenses to the AASBO Conference Tucson, AZ  July 17-18, 2015 (July-August 2015 Vouchers). Steve Smith’s mileage, meals and hotel amounted to $264.14. Christina Kishimoto’s expenses were $247.42 (Vouchers 5254-5285,  June 2015).

None of this travel was approved by the GPS governing board in accordance with A.R.S 15-342(5)GPS didn’t have an internal auditor at the time; the board clerk was charged with reviewing expenditures for the board. With reimbursements to various GPS employees spread out over several months, and no board approval before those employees attended the conference, oversight was all but impossible.

Here’s an example of how a school district governing board in Arizona SHOULD go about authorizing out of state travel: 

Out of state travel – Cartwright School District April 2015 – Approval of Out of State Travel for Superintendent and Governing Board to attend the National Association of Latino Elected Officials 32nd Annual Conference in Las Vegas, NV, June 17-19, 2015 (see page 6, item #7)

It appears that Lily Tram provided cover for any suspected fraudulent activities by refusing to accept complaints about the superintendent unless a citizen filed a Notice of Claim against the district. GPS doesn’t have an Inspector General, or even a conduit for whistle blower complaints. But Arizona State University does!

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. Word of warning to those who might consider the business-as-usual tricks employed by GPS admins in the past: it won’t help to lose files, forge signatures or *create documentation* after the fact. Everything in the FW&A Reports has already been reported to state and federal elected officials and enforcement agencies.

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