Waste of the Day: Potential Fraud in Memphis
An independent audit of the Memphis, Tennessee school district uncovered $54.2 million in spending that showed evidence of potential fraud, and issued an astonishing 133 recommendations for the district to improve its fiscal responsibility.
Key facts: A $48.4 million contract with the custodial company ServiceMaster Clean accounted for most of the potential fraud.
According to the audit, a school board committee recommended in 2022 that the Memphis-Shelby County Schools hire four different custodial companies to service its 160 schools. Then-Chief of Business Operations Genard Phillips ignored that recommendation and hired only ServiceMaster Clean.
The school board initially refused to approve the contract that Phillips prepared, voting it down at a May 31, 2022 meeting. But six days later, the board held a “special meeting” and approved the contract unanimously.
ServiceMaster Clean was fired one year later for poor job performance following complaints from parents and staff about dirty schools.
A school employee later alleged that the cost of the custodial contract had been inflated by up to $4 million in order to give kickbacks to an unnamed senior district official. The independent auditors were unable to confirm or disprove such an arrangement.
When the district tried to ask Phillips about the allegations, he resigned from his job. They then tried to question the operation sourcing manager who led the procurement process, but she also resigned.
The district referred the matter to the Federal Bureau of Investigation.
Phillips was making a salary of nearly $170,000 at the time of his resignation.
The audit also uncovered a potential conflict of interest between the construction company Mid-South Renovations and former Director of Facilities Charles White.
Mid-South Renovations hired a private company owned by White for $68,00 worth of unspecified work. White later awarded district contracts to Mid-South Renovations.
The company was allowed to skip some background checks and was hired over other, cheaper vendors. It was also paid $250,000 for work that was never completed, the audit found.
White — who reported directly to Phillips — was fired in 2022 for “gross misconduct.” He was making $103,000 at the time.
Summary: Memphis taxpayers deserve far greater transparency into how their children's school district hires its vendors.
The #WasteOfTheDay is brought to you by the forensic auditors at Open the Books. Search all federal, state and local salaries and vendor spending with the world’s largest government spending database at OpenTheBooks.com.
