A month after bombshell letter, what we know about how a crisis quietly spiraled at MPS

Marva Herndon was at her granddaughter's graduation in Texas on May 24 when she learned the news that would change the course of Milwaukee Public Schools, the district where she grew up, where she raised her kids, and where she is president of the school board.

State officials were preparing to cut off funding to MPS because the district's financial reports were in such disarray, she and other board members learned from a letter from state officials. Even though funding would be restored when the reports were in order, MPS could get less than expected in the fall because of a previous overpayment tied to its accounting errors.

Herndon was also surprised to read that MPS administrators had been meeting daily with state officials about the problem without telling board members.

"My initial reaction was, 'How could something like this be happening?'" Herndon said. "Just unbelievable.”

Since that day, three MPS officials have left the district: Superintendent Keith Posley, Chief Financial Officer Martha Kreitzman, and Comptroller Alfredo Balmaseda. Further consequences could be yet to come as it becomes more clear where things went wrong.

Some blame Milwaukee School Board members for not asking more questions about red flags they had seen in the district’s finance office, including vacancies in key positions. Half the board is targeted with recall petitions.

Some question state officials at the Department of Public Instruction, who could have told board members earlier about problems they saw in the district’s financial reporting.

At the same time, residents and outsiders are debating the deeper meaning of the crisis at MPS. There are questions from the governor about how wide the problems might run beyond the district's finance office, and where they are rooted.

In the months to come, with board members calling for greater transparency and welcoming additional audits from the governor, the district's shortcomings will be untangled in the public sphere. That could make the district vulnerable to threats from politicians who want to dissolve it or turn over control to the mayor. But the transparency could also allow for more meaningful input from communities MPS serves.

Board member Marcela "Xela" Garcia said she has become more sensitive to outside perceptions of Milwaukee, and defensive of the city, since serving as the board's representative on a state association of school boards. She has felt the impulse to dispel people's fears about Milwaukee by emphasizing the city's strengths. But she said MPS will ultimately come out stronger if officials are willing to expose problems, too.

"There's such a villainizing of Milwaukee that it had become like a mechanism for protection to kind of keep our problems to ourselves, right? But we're seeing there's a need to be more open with it," Garcia said.

Board members have started making plans for stronger oversight and more information sharing between administrators, the board and public. They could be racing a clock, depending on the outcome of recall efforts and considerations by state leaders about the future governance model of the district.

"I feel like we're turning a corner where we're going to start repairing any harm that was done over the years in keeping a tight grip on information," board member Missy Zombor said. "Let's not be afraid of the questions. I think that's what needs to happen, and I hope that we can get there before someone else does something to us to undo it all."

There were red flags, and there was reassurance

At her first finance committee meeting after being elected to the board last spring, Zombor was concerned by the results of the district's financial audit, which was completed several months late. The district’s finance office was short staffed and was using abnormal accounting practices, auditing firm Baker Tilly noted.

Zombor asked administrators to return with an update on their progress resolving issues raised by that audit and completing the district's next audit. Kreitzman, the district's CFO, shared that update at a meeting Dec. 19, four days after MPS was supposed to submit its next audit to DPI. She didn't mention the district missed that deadline.

Focusing on the problems found in the previous audit, Kreitzman acknowledged the finance office had struggled with staffing but said MPS had worked with employment agency Robert Half to hire staff and enlisted help from Protiviti financial consultants to address other problems.

When Matt Chason, senior director of MPS' Office of Accountability and Efficiency, asked her about the current audit, Kreitzman said MPS had met "most of all of our deadlines" and there was "vast improvement" from the prior year.

But at that point, MPS had missed DPI deadlines in September and December for four key reports including the audit. It would turn out that the information MPS provided to its auditor was not totally accurate, causing more delays. The short-staffed office was struggling with an error-prone accounting system that reportedly used messy spreadsheets to fill in gaps in the staff's capabilities with the district's accounting software.

“They painted a picture that on the outside looked like there was improvement being made," Zombor said. "You believe them, because they're the experts." Now, Zombor said, she's frustrated that the picture they painted seems to be "very different from what was happening in reality."

In January, Chason said he was temporarily blocked from accessing the district's financial information. That happened shortly after the publication of a recorded conversation between Chason and former school board member Aisha Carr, in which Chason explained how he felt administrators had made questionable budget maneuvers. Chason said he hadn't consented to being recorded.

In March, after Chason regained access to information, he sent school board members a memo about ongoing problems in the finance office: staff had failed to submit information that Baker Tilly needed for the latest audit, and the district had therefore missed deadlines with DPI.

In response, Posley told board members March 22 that MPS had updated DPI about the audit and was solving problems. He didn’t mention that at that point, DPI was having weekly meetings with MPS staff about the late reports.

It's unclear whether Posley knew then that the district could be receiving less state aid because of accounting errors. DPI spokesman Chris Bucher said DPI and MPS discussed a possible "impact to aid" in late March but he couldn't confirm an exact date.

If Herndon could go back, she said she would have asked administrators to present more updates to the board about its financial reporting process. “We should have pressed harder,” she said.

“We were always assured that, ‘We’re late, but we’ll have it straightened out; we’ve hired contractors to come in and assist us.’ All of that sounds reasonable,” Herndon said. “For it to end up like it did, that was shocking. But that’s a lesson learned.”

Posley’s March response was the last information given to the board until DPI’s letter on May 24, Chason said.

Chason and board members were surprised to learn from the letter that DPI had escalated to daily meetings with MPS. According to Balmaseda, the former comptroller, he and Kreitzman were meeting with DPI every morning from mid-April through May.

Balmaseda later said staff in the finance office, including Kreitzman, were working long nights and weekends to get the district's financial reports in order.

During that time, MPS denied the Journal Sentinel interviews with Kreitzman or any officials who could discuss the district's budget plan on the heels of a massive referendum narrowly approved by voters.

Herndon said she wished DPI had reached out directly to the board earlier. Bucher said the department doesn’t have a “standard practice” for when to notify board members when a school district’s financial reports are late, and he hasn’t answered questions about any previous instances of such notifications.

Board members want closer look at all departments, more oversight

In the days after the May 24 letter from DPI, Herndon avoided reporters while the board’s vice president, Jilly Gokalgandhi, fielded media requests. In a recent interview, Herndon said she wasn't sure at the time what to tell reporters, some of whom showed up with cameras at her home.

"The first week, two weeks, was a nightmare, you know, it's just that simple," Herndon said. "There was so much I needed to know, wanted to know. We were still in the dark."

In a calamitous press conference June 5, Herndon and Gokalgandhi took just two questions from the press while board members Henry Leonard and Erika Siemsen stood behind them, before Communications Director Nicole Armendariz ended the conference. The board members then exited a side door, leaving TV reporters yelling for more answers.

Leonard, who has been pointedly open with the media, said the press conference was the worst moment of his board career. Afterward he did an interview outside in the parking lot.

Since then, the board members, who are only paid part-time and often work other full-time jobs, have been more open as they’ve peeled back the failures at MPS. They're now talking about this moment in MPS history as an opportunity to unearth issues across the district and bring them to light.

While the district's finance office is now under the microscope for failures that have been largely attributed to staff vacancies and turnover, the office is far from the only team at MPS suffering from short-staffing.

MPS now has a financial consultant and a corrective action plan to improve oversight of the finance office, including the possible creation of a "chief auditor." But with the consequences of vacancies coming to light in the finance office, it raises questions about the impacts of vacancies in other areas.

"It makes you worry, if this is happening here, is it happening anywhere else? It makes me question a lot of the things we've been told," Zombor said.

MPS hasn't provided the Journal Sentinel with updated vacancy numbers since March 25, when it reported about 200 teacher vacancies. In February, the district reported to the Wisconsin Policy Forum that it had about 600 vacant positions, about half of which were teaching positions. The district has not filled a request to provide vacancy numbers for each school and department.

The district has been balancing its budget, amid inflation and stagnant state aid, by banking on hundreds of staff positions going unfilled. The budget plan for the next school year includes an expected savings of about $48 million from vacancies, down from $65 million last year, thanks to the referendum.

Board members have said they want to start receiving more detailed information about the work of every department in the district and ensure communication with the board about any problems those departments are facing. That includes a detailed list of vacancies, Zombor said.

Board members are drafting plans for better onboarding procedures for new board members, as they describe a steep learning curve after being elected to the board. They want to make it easier for board members to get information from district leaders and have more honest conversations in board meetings.

Zombor said she has noticed a "culture in MPS where things in board meetings are very scripted." She said she sees that changing: "People want to be able to have conversations on the board floor that are not scripted or sanitized. We want to be able to talk about the problems so that we can find the solutions."

Recall supporters demand more from the school board

Four school board members — Gokalgandhi, Herndon, Siemsen and Zombor — are the subject of a recall effort.

One of the leaders of that effort, Tamika Johnson, said last week that her coalition had already collected 15,000 signatures from residents across the city, with many of those coming from the city's Juneteenth event. Johnson said she has heard from signers that they've been discouraged by a "lack of transparency" and regretted supporting the district's referendum.

The coalition will need over 40,000 signatures in order to trigger a recall election for Zombor's seat, the only seat elected citywide. For other seats, which represent specific sections of the district, they will need between 5,000 and 8,000 signatures from residents in those areas.

Angela Harris, a second-grade teacher and chair of the local Black Educators Caucus, has been paying close attention to board meetings since 2016. She's used to being one of the only people speaking during the opportunities for public comments.

In recent weeks, board meetings have looked very different. Residents, including those now supporting the recall, have lined up outside the door to the board room to get a seat inside. With Harris as a key organizer of protests at the meetings, residents have brought signs, gone live on Facebook, shared hours of testimony about the changes they want to see, and drowned out school board members' discussions with chanting.

Harris — along with an Equity Coalition that includes the Black Educators Caucus, Aspiring Anti-Racist White Educators and Milwaukee Inner-City Congregations Allied for Hope (MICAH) — has called for an equity audit of the district. She said the audit would give MPS a clearer picture of what resources are needed at schools with the highest academic needs and behavior challenges, to inform future budgets.

Harris, who supports the recall effort, said she has long been frustrated that school board members have not pushed administrators for more information and progress, especially on improving equity in the district.

"So many years of watching this board be more of a rubber stamp of administration than a lever of accountability is what led us to this place," Harris said.

Board members learn 'pushing harder is not a bad thing'

In some ways, Harris already sees the public's attention waning.

"We saw a point where board meetings were really sexy," Harris said. "There was a lot happening with the superintendent and potentially money being withheld, and all of that was really interesting and intriguing for people. And now we're getting into the part that's not going to be as interesting or intriguing because we're going to be talking about a lot of really intricate things like, what does equity look like in this district?"

Harris said there's a need now for more education of the public about how MPS operates, so people feel empowered to continue engaging with the school board.

Garcia said she thinks the board should consider the Equity Coalition's ideas and make it easier for all residents to bring ideas to the board. She and other board members, along with Chason, want to examine how MPS can share more detailed and understandable information about the district's budget plans so that community members can provide more feedback.

"There’s a lot of opportunity to rethink the way that we are structuring things so people can feel more included," Garcia said.

At a board meeting last Thursday, administrators presented board members with their "end-of-year report" on equity. Both Harris and board members were disappointed by the contents of that report. It listed numbers of students who participated in various programs but didn't analyze the results.

Gokalgandhi was direct: "This report left much to be desired," she said. She read aloud a note from a constituent who called the report "another piece of fluff that amounts to nothing more than presenters patting each other on the back rather than doing the real and difficult work that creates change."

"I would agree, because what we just saw was like an hour of reading from a PowerPoint that told me nothing but how many students were doing things," Gokalgandhi said.

Gokalgandhi said it was hard to tell from the report whether there are students or schools who are not being reached by the programs, a key question for judging whether services are equitable across the district. She said she was reaching her "wit's end" with the way presentations are given to the board.

"They are boring, they are uninformative, and frankly, sometimes I walk away being like, 'I am more confused than when I read the PowerPoint,'" Gokalgandhi said.

Board member Megan O'Halloran asked the presenters to return in October with benchmarks for how they will measure the progress of their work.

Reached after the meeting, Gokalgandhi said she has always asked presenters for more specific metrics, but she said the recent revelations about the district's finance office have caused her to push harder.

"What I've learned from this last month is that pushing harder is not a bad thing," she said. "We would be remiss if we didn't learn anything from the last month and change the way that we show up."

This article originally appeared on Milwaukee Journal Sentinel: What we know about what went wrong at MPS after financial audit letter