The former chief financial officer of the Scottsdale Unified School District violated state laws regarding conflicts of interest along with district policy, according to the findings and legal opinion of an attorney hired by the district to investigate the case.
The attorney presented a public summary of her findings Tuesday evening after the SUSD Governing Board voted to accept the resignation of CFO Laura Smith.
While serving as CFO, Smith signed off on thousands of dollars in payments to a consulting company owned by her sister. Smith never identified her sister on conflict-of-interest disclosure forms and has failed to provide evidence showing she no longer has a financial stake in the company herself, according to attorney Susan Segal.
Segal said she submitted her findings to the Arizona Attorney General’s Office, which has launched investigations into the district. The district’s hiring of an unlicensed architect who was previously convicted of stealing public funds has also drawn scrutiny.
Smith submitted a letter of resignation Friday in which she acknowledged “mistakenly” signing off on two payment-related documents to her former company, Professional Group Public Consulting (PGPC). Smith said she also “inadvertently erred” by failing to disclose that the principal of PGPC is her sister, Caroline Brackley.
However, public records show Smith signed off on several other change orders that she did not acknowledge in her resignation letter. Smith personally signed a total of five change orders that boosted payments to PGPC by $16,072, Segal said.
Smith's computer-generated approval also appears on six purchase orders to PGPC totaling an additional $43,766, Segal said.
She said Smith began working as Scottsdale’s CFO on Feb. 15, 2017. In the resignation letter, Smith said PGPC “accepted [her] request” to buy out her interest in the company at the end of May.
“She has not provided evidence that the stock was actually sold or how much of her stock was sold” despite repeated requests, Segal said.
In the letter of resignation, Smith wrote that she “did not intentionally act to reward the Professional Group while serving as the district's chief financial officer."
She added, “My career has been devoted to helping school districts maximize financial resources to help our students. My single, honest mistake and two inadvertent errors are now being unfairly extrapolated into something sinister. It is not sinister nor dishonest.”
The Scottsdale Unified School District Governing Board unanimously accepted the resignation. They also received the preliminary report from Segal, identifying the findings of her investigation, and authorized Segal to share her report in the open meeting.
Segal confirmed a conflict of interest existed with Smith, in violation of state statute. Per an outside expert, Segal confirmed that Dr. Birdwell would not have been aware of Smith's actions, nor was she directly involved.
In addition, Segal certified that Dr. Birdwell had cautioned against and instructed Smith not to approve change orders or payments to the company with which she was financially affiliated.
Scottsdale Unified School District Governing Board President Barbara Perleberg released the following statement regarding the actions of Smith and the conclusion of the investigation.A year ago, the Board identified the need to fix our broken systems in order to change the status quo. Those systems have plagued SUSD for decades. We chose to focus on the classroom and academic achievement first. While there have been strong gains in those areas, this investigation highlights the needs that exist in our back-office systems, as well. We will continue to strive to meet the challenges of serving the 23,000 students of SUSD with integrity and accountability each and every day.As of Jan. 24, all open purchase orders involving PGPC have been closed at the direction of superintendent Dr. Denise Birdwell, said Segal.
Dr. Birdwell said that Smith will not receive a severance package as part of her resignation. In a statement, SUSD said the superintendent and governing board regret the distraction and distruct this event may have created and look forward to moving forward in a positive and transparent manner.
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