Auditor Finds Financial Mismanagement at Sussex Tech

A state report found evidence of widespread financial impropriety at Sussex Technical School District, in which a local developer has appeared to profit.

After receiving an anonymous complaint about the district's financial practices, state Auditor Tom Wagner launched an investigation. His office found that a local businessman was able to sell a piece of property to the district for nearly twice what he bought it for just two weeks earlier. Then, his construction business was awarded nearly $4 million in district contracts without state approval.

District administrators did not
return calls seeking comment.

The district needed a specific parcel of land to complete a $205,699 high school bus entrance project, according to a report on the investigation. Sussex Tech had made that fact known to the public several years ago.

Michael Horsey, who owns Common Sense Solutions, or CSS, bought the property in 2012 – after the district made its intentions for it known – for $110,000. Two weeks later he sold it to Sussex Tech for $200,000, the report said.

Wagner said the district did not perform a fair market appraisal of the land before agreeing to the deal.

"Which is troubling," he said. "Because it goes against the grain of how a government entity should buy property."

Months later, Horsey was awarded a contract to redevelop the same property and construct the new bus entrance.

During the auditor's review, it was found Sussex Tech then awarded CSS additional contracts for other projects by way of "piggybacking" on the bus entrance contract, which isn't strictly allowed.

"You can piggyback off another contract — if they are related," Wagner said, making it plain that the projects were not.

Two additional projects — renovations at the high school and heating, ventilation and air conditioning work — were both more expensive than the bus entrance. The school district got a legal opinion stating the renovations and HVAC work were in the same vein as the bus entrance, but Wagner said documents provided to the attorney were not the ones used when the project was put out to bid.

"You have to ask, was the attorney's decision based on fraudulent info?" he said.

In the end, CSS was paid a total of $3.87 million between July 1, 2011, and Nov. 4, 2016, without actually bidding on any additional projects.


In fact, the expenses appeared to be split up so the district wouldn't have to submit them to the state for approval, according to the audit.

If below $5,000, expenses do not need to go before the Division of Accounting for sign-off. The state reviews expenses because it pays for 60 percent of school construction projects.

"The School Board entrusted Sussex Tech administration to make decisions regarding the construction projects with the School Board's involvement which created a lack of accountability," according to the auditor's report.

One district employee now works for Horsey's company, according to the auditor's report.

The school's former director of facilities retired from Sussex Tech in July 2015 and now works at CSS as the project coordinator and liaison for Sussex Tech projects.

The projects are the same contracts he awarded to the contractor and managed while employed by the school, according to the auditor's report.

"I don't even have to tell you what's wrong with that," Wagner said.

Emails show the former director instructed several vendors to split up invoices so they were less than $5,000 and did not need state approval, according to the auditor's report. He was also part of a three-person evaluation committee that selected CSS for the bus entrance project.

"In auditing, we call that a big red flag," Wagner said.

The former facilities director is not named in the auditor's report, and since his retirement from the district, CSS invoices have been approved by Assistant Superintendent Curt Bunting, according to the auditor's report.

As of the auditor's report, CSS was still performing work for the district. In response to the report, Wagner said the district informed his office the contract with CSS ended June 30.

"Sussex Technical School District is currently attempting to improve both process and procedure as it applies to the appropriate scrutiny of transactions and enforcement of fiscal policies," the district's response to the Auditor's Office said. "Decreases in personnel over the years has led to many individuals wearing various hats and/or splitting job duties, this has presented challenges as all were learning and continue to learn their role and responsibilities."

"All input will be synthesized and assist with our efforts moving forward. As of June 30, 2017, the contract with Common Sense Solutions will come to an end. There are no further plans to utilize CSS's construction management services beyond that point."

Horsey did not immediately respond to calls for comment, but several legislators from the House Minority Caucus released a statement on the audit urging the state Attorney General's Office to further investigate Sussex Tech and pursue action if any criminal wrongdoing is found.

"The report released by the State Auditor of Accounts raises some troubling questions about Sussex Tech," the statement said. "It calls into question how key operational and strategic decisions are being made at the school; how tax dollars are being spent; and if sufficient oversight is being exercised."

Wagner said legal action in such cases is rare, in part because Delaware does not have clear-cut penalties for financial violations such as these.

"The tough part of things of this nature is in cases like these, there's a whole lot of violations, but not a whole lot of good penalties," he said. "I've found out over the years that cases that would be prosecuted in other states aren't always prosecuted in Delaware."

Auditor finds financial mismanagement at Sussex Tech originally published in The News Journal.