Bessemer City Schools officials underpaid employees and violated several financial procedures in the months leading up to a threat of state takeover, a recent audit found.

A special report was published by the Alabama Department of Examiners of Public Accounts on July 26. State Superintendent Eric Mackey requested the report after months of monitoring the small Birmingham metro school district.

“The special report draws attention to the ongoing issues in Bessemer that have risen to the level of my recommendation for state intervention,” Mackey told AL.com in a statement Tuesday.

Bessemer City enrolls about 3,000 students and employs just under 240 staff members.

According to the report, the district failed to approve a 2024 budget, capital plan and salary schedule by the required deadline. The district also failed to comply with state bid laws and did not provide required contracts to at least two of its principals.

The 12-page report was based on two years of board activities and financial data that spanned from Oct. 1, 2022 to March 31, 2024. Auditors met with Superintendent Dana Arreola, current board members and the district’s former Chief School Financial Officer Patricia Stewart to discuss the findings.

On July 3, after receiving the report, Mackey sent a letter to board members outlining several issues of “major concern” and threatening state takeover if they didn’t fix key finance and governance problems.

Bessemer board members voted to agree to intervention on July 22. If a takeover is approved by the state school board, work would start as soon as Aug. 9 – the first week of classes for Bessemer City.

In a statement to AL.com, Arreola, who was hired in 2023, noted that the findings mirror the concerns outlined by Mackey in his letter.

The board’s vote to accept the takeover, she said, “gives us the opportunity to remedy this matter permanently as we work to improve outcomes for students.”

The auditors’ findings

School systems must submit an annual budget, capital plan and salary schedule to the state education department by late September in order to get their allotted state funding.

Bessemer’s board did not approve the system’s budget and capital plan until an Oct. 17 board meeting, and did not approve a new salary schedule, according to the report. At the time of the audit, employees were still being paid their 2022-2023 rates, auditors found.

“Adequate policies and procedures were not in place to ensure that the budget, including the salary schedule, and capital plan were approved and submitted in accordance with Alabama Department of Education deadlines,” the report states. “As a result, the Board did not meet all requirements to share in the appointment of the Foundation Program Fund.”

Mackey said the department has not withheld any state funds from the district, “as that would have left children in Bessemer without any educational options.”

As of July 30, the board had yet to approve an up-to-date salary schedule. Members, however, are meeting this week to discuss the district’s budget for the new fiscal year.

Erika Hughes, president of the central Alabama chapter of the American Federation of Teachers, said problems with pay have been ongoing and stretch beyond the school board. The organization has filed multiple grievances concerning late, missing or incorrect employee payments in recent years, she said.

“We’re paying certified employees on classified, and classified employees on certified salary schedules that haven’t been approved in two years,” she told reporters recently. “Who’s holding them accountable?”

The report also found several instances where board members failed to follow state law when contracting services.

School systems must open up a bid when seeking outside services or supplies that cost more than $40,000. State public works law also requires school repairs and construction projects costing more than $100,000 to be split into contracts of smaller amounts.

The board failed to submit bids for a number of items, including janitorial services, trash disposal, pest control, furniture and fuel, auditors found. Several of the district’s construction projects also failed to follow state bid and public works requirements.

Recently, board members voted to stall key construction projects due to a disagreement over bid protocol. Arreola told AL.com last week that HVAC and roofing projects are now in progress, but it’s unlikely those repairs will be ready in time for the start of school.

If a takeover is approved, Mackey said he will immediately appoint a chief academic officer and a few other ALSDE staff to help with financial matters. It is also likely that the department will have input on the district’s current search for a new chief school financial officer.

Officials have said that no other personnel changes are planned at this time.

“I am confident that working together with the Bessemer officials, ALSDE will be able to clear up all the financial issues over time,” Mackey said. “It will not be an overnight fix, but we will get there in due time.”