Kansas City district finds missing letter, saving $6 million

Friday, December 24, 2010 | 10:26 a.m. CST

KANSAS CITY — Shana Long is the Kansas City School District's $6 million woman.

That's how much she probably saved the district when she found a letter deep in a cardboard box in a bundle of old papers labeled by sticky note to be thrown away.

She'd actually given up finding the critical letter, said Long, an attorney who is the school district's E-rate contract and compliance officer.

E-rate is the massive federal program that funnels millions of dollars to high-poverty school districts to help wire schools for high technology. A history of shoddy recordkeeping had put Kansas City in hot water with the feds. And it seemed that the past was still biting at a new administration trying to clean up old messes.

In an audit earlier this year, federal regulators determined they could not find a signed contract for a districtwide wiring project with Siemens Corp. in 2003 that had used some $6 million in federal funds. Without it, the district would have to pay the money back.

It was a daunting prospect for a district that had already closed 24 schools and laid off teachers and staff to balance its shrinking budget.

After searching in every file she could think of, Long said, she instead began searching for audits from 2003 that might at least show that no one at the time was concerned about that contract.

It seemed like a doomed, desperate attempt for a plea for mercy.

" 'The dog ate it' is never the argument you want to make," she said.

The district's problems with E-rate exploded in 2006 after a whistle-blower's complaint about potential bid-rigging led to a civil judgment from the U.S. Justice Department. Three district officers were barred from working in the E-rate program, as was a St. Louis company that had served as a consultant to the district.

The district turned over management of its E-rate program to the Husch Blackwell law firm while it was subjected to intense scrutiny over the next several years.

When Superintendent John Covington brought David Dude on as chief technology officer a year ago, one of his charges was to finish cleaning up the E-rate program and bring it back in-house, Dude said.

The end is in sight, Dude told board members at the December meeting.

The federal regulators this month told the district that it is not going to require payback of past federal funds while the district continues to pull together requested records, he said.

The district also will likely be in a position in 2011 to receive pending E-rate fund requests that would bring $2 million to $4 million.

And he told them the story of Long's discovery of the missing letter — a letter of intent signed by representatives of the district and Siemens.

"We were very lucky," Long said later.

She wasn't sure, when she first spied the letter, that it was what she thought it was. The date was right, but the amount on the line was for $11.3 million. A search of school board records found that the board had approved a collection of projects with Siemens, including the $6 million project.

The district's practice at the time was to include contractual details in the bidding process, then have a signed letter of intent serve as the official agreement. Records were scattered among differing departments.

"There was no umbrella making sure it was all coordinated," Dude said.

The district had set aside about $1.5 million to help budget against potential E-rate problems with auditors, Chief Financial Officer Rebecca Lee-Gwin said. To be able to divert that back to the operating budget would help cushion the district in a difficult economy, she said.

"We're so tight right now that if anything were to happen it would hit our fund balance," she said. "We have a balanced budget and we want to keep it."

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