Superintendent briefs board on interim forensic audit that flags $2.88 million for review; administration says no fraud yet

Superintendent Rod Richmond told the Shelby County Board of Education on April 21 that an interim forensic audit by CliftonLarsonAllen (CLA), requested by the Tennessee Comptroller, identified $2,875,432.78 in transactions that warrant further review.

"The CLA interim forensic audit summary identified transactions requiring further review across potential waste, abuse and policy non-compliance categories," Richmond said. He provided the same figures to the committee: $1,145,909.97 flagged as potential waste or abuse and $1,729,522.81 flagged as potential policy non-compliance, for a grand total of $2,875,432.78.

Why it matters: the interim report will inform the district's remediation priorities and corrective actions. Richmond stressed that the document is an interim, investigative view rather than a final audit finding: "I repeat, non-evidence of fraud at this point," he said, adding that management has not yet had an opportunity to formally respond to the interim observations.

What CLA identified: district staff summarized several recurring issues cited as observations and recommendations, including procurement and vendor-management lapses (bypassed procurement controls, duplicate invoices, advance payments and insufficient documentation), apparent instances of excessive or unsupported payments, duplicate payroll, and gaps in internal controls. The audit also flagged record-retention weaknesses and fragmented data platforms that hinder evidence production.

Operational risks and HR issues: Richmond told the board that the auditors noted HR and compliance concerns, including that roughly 40% of sampled employees were missing I-9 forms in the sample and that insecure storage practices were observed; the district says it has relocated I-9s to a secured area. The presentation warned of potential federal penalty exposure if recordkeeping problems are not remedied.

Whitehaven STEM donation and restricted funds: the interim summary raised questions about the Whitehaven Herbert STEM Center project and $885,000 in unspent donor-restricted funds "outside of the district's control." Richmond said the district accepted the donated STEM building under policy 2019 and now plans to execute an MOU with Whitehaven STEM Inc. to account for restricted gift purposes and to determine allowable uses of the remaining funds. He said the deed to the STEM building is in the district's possession and that the building is insured.

Follow-up and remediation: the superintendent described an operational modernization plan and an audit-remediation steering committee with named pillar leads for procurement, HR, digital transformation and compliance. The board and superintendent must jointly identify three to five priority audit issues within the resolution timeline; Richmond said staff would propose recommended priorities for board consideration.

Board questions and context: board members pressed staff about cooperation with auditors and missing documentation. Richmond said district staff have been cooperative but noted turnover and confidentiality constraints during a forensic investigation can slow document retrieval. He also said staff located a purchase order (PO) later in the review that materially reduced the unexplained portion of one $1.3 million item related to after-school services.

Next steps: the administration will publish a public dashboard and landing page summarizing the interim observations and remediation actions and will bring priority recommendations back to the board for review within the resolution's timeframe.