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OIG Investigation Found that BPS Wasted Public Funds

In a report issued today, Inspector General Jeffrey S. Shapiro called on Boston Public Schools (BPS) officials to pause payments on vendor contracts for non-essential goods and services in certain departments for 10 business days and perform an internal review after separate Office of the Inspector General (OIG) investigations found that the BPS Division of Operations wasted significant public funds by failing to follow the requirements of procurement law and BPS procedures.

In response to multiple complaints, the OIG investigated some of the contracting and procurement practices of the BPS Division of Operations. The initial complaints concerned the use of invoice payments funneled through existing but unrelated contracts to compensate unpaid vendors. Another complaint involved excessive shipping charges on a sole source contract for books. The OIG also found evidence that BPS employees subverted the city of Boston’s residency requirement for a former BPS engineer through false subcontracting relationships.

During its investigations, the OIG found that BPS failed to act when alerted of some of this conduct by the Boston Finance Commission, an independent watchdog agency for the city of Boston. Interviews with BPS officials and the OIG’s review of internal BPS files revealed that little to no action was taken in response to these reports.

“The failure by the Boston Public Schools’ Division of Operations to practice basic procurement and business operations is unacceptable,” Inspector General Jeffrey S. Shapiro said. “Every school district in this Commonwealth must abide by the same rules when purchasing goods and services. Those rules help ensure fairness and transparency in the expenditure of the public’s money. The fact that a district with the staffing and budget of Boston could not perform basic procurement functions is astonishing.”

IG Shapiro added, “I am disheartened by BPS’s blatant disregard of previous reports of this conduct brought to their attention by an outside independent oversight entity.”

Specifically, the OIG found that the current BPS procurement, contract administration, invoicing, and payment approval processes are winding and convoluted, causing significant delays and prompting many in the departments to find workarounds. For instance, the approval process for vendor invoices created extended delays in payment or sometimes a complete failure to pay vendors at all, leading BPS staff to repeatedly and brazenly cut corners in order to pay vendors or avoid conducting procurements. These workarounds resulted in inappropriate administrative markups from passthrough vendors, some as high as 19%, on necessary goods and services. BPS incurring nearly $78,000 in extra costs due to these wasteful markups. It is troubling that BPS staff repeated these improper actions for so long without an internal control or reconciliation identifying the issue.

The OIG found that BPS violated the Uniform Procurement Act, Chapter 30B of the Massachusetts General Laws (Chapter 30B), in multiple ways, including:

  • failure to solicit price quotes or issue invitations for bids for supplies or services valued at $10,000 or more;
  • failure to enter into written contracts for certain supplies or services as required;
  • violation of the sole source procurement exemption by purchasing books from a vendor through a no-bid contract when those books were widely available elsewhere; and
  • subversion of the competitive procurement process by steering a spurious water quality testing procurement to a vendor in order to pay that vendor’s outstanding invoices.

In total, the OIG’s investigations found BPS spent $857,261 of public funds either improperly or in violation of Chapter 30B within the BPS Division of Operations.

“Given that the OIG’s investigation was confined to the handful of BPS contracts identified through complaints, it is apparent that this conduct is more widespread and represents a serious risk to BPS funds,” IG Shapiro said. “All public officials and employees have a duty to protect the public’s resources from fraud, waste, and abuse. The people of Boston and the Boston Public School community deserve nothing less.”

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