DALLAS, Texas — The Dallas Independent School District’s chief auditor defended himself in front of school board trustees Tuesday after his job came under review following two audits that show the district overpaid more than $300,000 on construction projects.
Two audits by Dallas ISD Internal Chief Auditor Steven Martin recently raised concerns that the school district potentially overpaid more than $330,000 for $1.2 million in construction contracts.
His office is reviewing another nine contracts, which could show about $1.7 million in potential overpayments, Martin said Tuesday.
One of the audits called for the district to refer the potential overpayments to the Dallas District Attorney’s Office for criminal prosecution.
Martin has been an accountant for 35 years, including 19 years as a supervisor for the Drug Enforcement Administration. He spoke Tuesday during public comment at an audit committee board briefing where a peer review was on the agenda. The review could end with a recommendation to fire him.
Martin, who oversaw and submitted those two audits last year, told trustees that he was caught off-guard by the scheduled peer review and said he expected the review in December 2021.
“What concerns me is the reason for an early peer-review and who will do it,” Martin told those in attendance Tuesday. “As a federal investigator for 24 years, I understand when a case against a defendant is airtight, defense attorneys investigate the investigator. I feel this is happening now.”
Martin’s decision as a top DISD employee to speak during public comment is unprecedented.
'Cover up the violations'
Last month, Martin raised concerns about a Dallas ISD proposal to limit the ability of his office to review smaller construction contracts, according to an email obtained by WFAA.
“I believe the (DISD) administration is trying to cover up the violations of law and policy,” Martin said in the email, responding to a query.
The chief auditor said he was concerned the district may have tens of millions of dollars in potential overpayments for more than 400 similar contracts from 2015 to 2018. He said he was concerned it may be due to a failure to follow pricing restrictions and guidelines.
“If the average overpayment of the 447 contracts is $150,000, the total loss to the District would be over $67 million,” Martin wrote in a Jan. 10 email to Nancy Rodriguez, a Dallas school board trustee candidate.
In his statements Tuesday, Martin indicated that the timing of the review was suspicious. He said district management wanted third parties to review his previous five construction audits.
“Why is the audit committee and management both bringing in third parties to review our audit reports at this time? And why did the administration try to change policy preventing internal audit from investigating vendors?” Martin said.
Martin then appeared to ask trustees to let him do his job.
“Internal audit has been highly effective,” Martin said. “However, we cannot continue to be without your support. Calling for a peer review two years early demonstrates management and the district’s vendors a lack of confidence in internal audit.”
“Nobody has demonstrated that we got any audit reports wrong,” Martin said. “If we did, we would fix them.”
Trustees met for nearly three hours in closed session to discuss Martin’s employment but returned and didn’t make any announcements.
“The administration works closely with the Board to ensure audits are reviewed and actions are taken to ensure compliance with all applicable laws and Board policies," district officials said late Monday.
'No longer are employed'
Officials said the maintenance department that was the subject of the two recent audits has been disbanded and “many of the individuals cited in the audits no longer are employed by the district.”
In a written statement, district officials said a Procurement Compliance Committee — established last year following several WFAA stories of contract irregularities — has made “referrals to law enforcement.”
WFAA reported last year that several individuals involved in the questionable transactions from 2015-2018 were no longer employed by Dallas ISD. But Dallas ISD had not previously said if any of the cases were referred for prosecution.
Martin was hired a year ago after WFAA reported allegations by whistleblowers that Dallas ISD staff had deliberately split bids to evade the need for competitive bids and school board oversight.
By avoiding public bids through “sequential purchasing,” the whistleblowers claimed they feared taxpayers were not getting “the biggest bang for their buck.”
They found DISD officials would award in-house job order contractors and vendors by separating the projects into two or more smaller projects. Because each project was under a $500,000 cap, it did not trigger competitive bids and board approval.
Both whistleblowers — Zach Manning, a Dallas ISD contract manager, and Andrea Whelan, a top Dallas ISD audit investigator — claim they faced reprisals from the district.
The timing of the Dallas ISD audit committee reviews is troubling to school district trustee Joyce Foreman.
“Instead of talking about getting rid of the internal auditor, I would give the internal auditor more room to do his job and be able to go after the bad guys,” Foreman told WFAA. “If you go after the bad guys, then the other guys will know you can’t come here with things that don’t make sense and you can’t cheat the public.”
The review also comes while Dallas ISD has asked taxpayers for the largest single bond in state history, from a total of $2.7 billion to $3.7 billion.
“Sometimes you’re not a good fit, and I get that,” Foreman said. “But I want to understand why some of the trustees feel like he’s not a good fit.”
School board trustee candidate Nancy Rodriguez told WFAA she spoke out at a January committee hearing against a motion to enact greater limitations on the Dallas ISD internal audit team.
“Any fraud that was under $250,000 would not be considered significant and that it would not go to the audit department, (rather) it would go to the office of professional standards,” Rodriguez said. “I thought that was a bad move, so I went to the board briefing and spoke out against that policy.”
Martin spoke with Rodriguez when she left and thanked her.
“He said that everything I said was on point and that he had the same concerns,” Rodriguez recalled.
She said she contacted Martin a few days later and received an email from him further detailing his concerns.
“I was blindsided, I was really surprised,” Rodriguez recalled upon receiving the email.