Last Night's 🔥 D65 Board Meeting

"To the best of your knowledge, is it illegal?"

Shout out to the Illinois State Board of Education (ISBE) for giving District 65 an award in 2023 for the the most “high quality equitable budget.” It seems like getting an award from the ISBE is like being on the cover of Madden - it’s a sure sign that trouble lies ahead.

From Dr. Horton’s Resume - he even got a trip to Denver

This came up in last night’s board meeting, during a discussion regarding the budget. Board Member Donna Su commented;

I know that it is our responsibility, both as the board, you know, to be fiscal stewards, and it is a tremendous amount. And I'm just feeling very, I don't know, betrayed. I think that's the best word I can think of. I feel like, you know, we were told balanced budget. We even won an award for, you know, our finances last year.

And then just hearing what happened with last year, last fiscal year, and the year before, and it just makes me wonder, how much deeper are we going to be digging in? And what else is going to uncover?

You can watch the meeting at the link or read a transcription I had made of the conversation.¹ If you find any issues in the transcription, let me know.

The meeting started of with some questions from Board Member Hailpern to the District’s financial consultant, Dr. Grossi.

Joey Hailpern: My first question is, you shared in your memo that you learned about accounting practices that misstated the data that we reviewed. And I'm curious, I'd like if you could share some examples of what data was misstated that you found?

The answer from Dr. Grossi;

Dr. Grossi: Two things, on the expenditure side .. On the expenditure side, there were expenses that seem to be pushed back into the subsequent fiscal year so they weren't recorded on the current fiscal year, which would make the fiscal year that just completed have a better ending balance.

Joey Hailpern: We would spend money in last year and pay for it in the next year? 

Dr. Grossi: Right. Incurred the expenditure, so there is always going to be bills—Like if you get a bill in June after the Board meeting, you know, that’s going to be paid in July and August. But there were bills that were received in sufficient time to be approved in, before June, and be paid before June 30^th that were not paid until the following fiscal year of a pretty significant amount, on the expenditure side. 

Joey Hailpern: Can you define significant amount? Multiple million?

Dr. Grossi: Multiple million, yes. 

Grossi stated that something similar happened on the revenue side, back-dating grants to make the previous year look better than it actually was.

Dr. Grossi: And then on the revenue side, some grant revenue, so for example, with this fiscal year ’25 budget, there were a couple of million dollars worth of federal grants that more than likely would have been received in July and August of this year, which would have helped this coming budget. But instead were seen to be pushed into the ‘24 fiscal year, so which made ‘24 even though is a very large deficit, look like an even larger deficit. But that also has a negative impact on this year's budget.

Joey Hailpern: So, about how many millions of dollars have been shifted in this manner to skew budgets from the year over year look of the budget

Dr. Grossi: Ms. Mitchell, can you help me on that one? What would you say? 

Tamara Mitchell: I can only speak to FY ’24. I believe it was about $3.5-million of expenditures that should have been paid in FY ’23 that was pushed to FY ’24. 

The conversation continued, and D65’s new CFO Tamara Mitchell summed up what a lot us have been thinking;

Tamara Mitchell: … When I first started working on the tentative budget, along with Illuminate, I think my first response honesty was, yikes

At one point in the discussion, Mr. Hailpern asks;

Joey Hailpern: To the best of your knowledge, is it illegal? 

Dr. Grossi: No, I don’t believe so.

The conversation continued some time with discussions about audits, whether Dr. Grossi had seen this before (he hadn’t), and some new processes in place. You can read the raw (unedited) transcript here.

I think some of the new processes are an improvement and you can read one of the changes made in this meeting: processes for the board to approve bills before they are paid. Prior to this, the District would pay bills and the Board wouldn’t see documentation until two or three months later. I know this, because I digitize the monthly list of bills, and in the past, especially during the summer, it can be many months behind. There was least one month (January 2023), where the list didn’t even make it in front of the board.

On Foster School

The new school came up towards the end of the discussion and the large $3.25 million annual mortgage payment on the new school;

Dr. Grossi: That’s a part of this budget. Part of the reason this budget is going to jump is this is the first full payment of the lease, the district has to pay $3.3-million. You paid interest only last year. Now the first principle payment comes due. Now every year for the next 20 years, 19 years or whatever, you will have to pay $3.3-million out of this budget, that you didn’t have to do prior to that. But you also have to fix buildings too, and that's something that we'll have to focus on at the same time.

Mr. Hailpern continued his line of questioning, I believe referencing my post from the other day regarding securities fraud.

Joey Hailpern: I guess, to Omar’s point, about accountability. There's a gap between information that was shared years ago about the bus savings that you said was overstated. Like, at some point, a half a million dollars savings turned into $3 million by Raymond James, Elizabeth Hennessy, and we need to know where that changed? Because that changed, that changed on company time. I’m guessing that it wasn’t Raymond James that changed it. I think we need to figure out where that change happened and make sure that those people don’t work here anymore, they don’t work here anymore if they do. Those are serious financial issues.

That’s not shifting money we were going to get back a few months to pay, that’s a 20-year commitment that we made. And you suggest if we had the right information at the time, we might have made a different decision or changed the scope of the project, which is a really big suggestion. And I don’t want to dig into that too much, but that means it is a really big problem, right? And we can go into closed session and talk about how we go about that.

I’d like to be a fly on the wall for that closed session meeting. I’m not a lawyer but I will say, if the Horton Administration deliberately falsified numbers, with the intent of receiving financing that they otherwise would not have received in order to advance their personal careers, that’s fraud. If that’s the case the Board should seriously consider referral to the state prosecutor’s office.

Furthermore, Dr. Grossi indicated that the financial games played around budget season are not illegal per se. However, I do think that having honest budgets may have changed the Board’s thinking around things such as Dr. Horton awarding contracts his former business partners. This seems like a pretty clear case where Dr. Horton personally benefited from the Board believing things were rosier than they actually were.²

I’ll leave it at that but you can read the transcript to discuss other topics such as the plan to continue retaining Dr. Grossi and other financial topics.

1. Your donations go towards things like this - it cost $100 to get this transcription made. If you’d like to donate, you can do at this link!

2. Recall that Dr. Horton also received $10k in consulting revenue from Hyde Park Academy. The Principal of HPA at the time, was a former business partner of Dr. Horton and had a six figure consulting contract with District 65. He was subsequently fired by CPS.