Ramona Tyson's report on the 2004 Ernst & Young audit and plans for a new audit

(Transcribed from the Monday, May 9 board business meeting.)



"A high level of events have occurred regarding the 2003 audit. Documents were provided on March 14. Goal is always to remain transparent and open. Although I had been led to believe that the staff had reviewed all of the documents collected related to the E&Y study in advance of that meeting, in fact, it was found that staff had only reviewed roughly 60% of the documents in our possession before I made the presentation. After learning that there were documents in our possession that were related to the study that had not been reviewed, and therefore I asked general counsel Sutherland, Asbill and Brennan to review all of the documents related to the study. In addition, upon my request, I also asked Sutherland to contact Ernst & Young direct, as representatives of the board of education and ask them to provide copies of documents related to the engagement that would have been amongst the documents provided to the school system during the course of the engagement. Ernestine (sic) and Young has provided the school system with a limited number of responsive documents in it’s possession. It is true that none of the 12 members from the study’s guidance team back in 2003-2005 are still employed by the district. Therefore, without any first-hand witnesses, what we know about the study remains limited to what we can determine from the documents, the emails and the other correspondence we have assembled. But we do now have a fuller picture of what transpired. The full set of documents shows the following series of events:



The district advertised an RFP for a compensation and classification study in the summer of 2003 and on September 8th, 2003, the board selected Ernst & Young to perform a study at a cost of $341,000. The initial scope of work for the project called for Ernst & Young to review the district’s entire employee compensation and classification system to develop a more streamlined and efficient classification system and to compare the district’s compensation levels to those of surrounding districts. E&Y commenced the work on the study and you have been provided with various reports the board received showing E&Y’s progress. We have identified additional status reports which are included in the revised chronology. It appears that in April, 2004, E&Y provided a preliminary estimate of cost of implementing E&Y’s recommendation. This preliminary estimate indicates that the district may have been overpaying more than 2,000 positions by more than $14 million and underpaying other positions. However, a cursory review indicates that E&Y’s assumptions were not compliant to the salary administration guidelines as required by the Georgia Department of Education for some positions, ie; teachers and media specialists.



DCSS now has possession of back up documentation for the estimate, as well as various summaries and breakdowns of the estimate. The information is being provided to the press. It is worth noting that Jim Landry, who was heading up the project for E&Y is quoting (sic) as describing the estimate as incorrect and very misleading because it was too early and preliminary to give an accurate report. In addition, the DCSS staff (unintelligible) stated that the estimate was a scattershot, and that it was not uncommon for the estimates to be revised more than a dozen times during the course of study such as the one undertaken by E&Y. This preliminary estimate appears to have been the source of most of the speculation in the press that E&Y made a final report showing the difference between the district’s actual compensation and what E&Y recommended that compensation should be. The preliminary report estimated that the district was paying some of it’s staff in excess of E&Y’s proposed salary ranges, but it also estimated that the district was paying others below the proposed ranges. Albeit not to the same extent. E&Y made several refinements to this cost estimate, but as I’ll discuss, it appears that no final cost and analysis was ever completed.



By spring of 2005, E&Y had largely completed it’s proposed redesign of the district’s classification system and was apparently still working on the other phase of the project. In other words, E&Y was still trying to determine how the district’s compensation levels compared to those in surrounding districts. But rather than completing that second phase of the project, it appears that the district and E&Y negotiated a reduced scope of work. Although several emails around this time period referred to there being a reduced scope of work, we do not have any documents showing exactly what changes were made. What we do know is that E&Y proceeded to finalize it’s proposed design of the employee classification system and it provided it’s final deliverables in August or September of 2005. Those deliverables included a documentation manual describing the methodology and the results of the study. As I reported in March, March 14, 2011, the documentation manual does not contain an analysis comparing the district’s compensation to the compensation of surrounding districts. And as far as we can determine, no such analysis was ever completed. We infer, that the reduced scope of work eliminated this phase of the study from E&Y’s project requirements. Therefore it appears that E&Y never created a final version of the preliminary estimate that has been the focus of the media’s investigation.



In September, 2005, the board was presented with and approved the classification system recommended by E&Y. By this time, district staff had confirmed that E&Y had completed all of this work under the reduced scope of work and on January 12, 2006, the district authorized payment of E&Y’s final invoice. From the review of the information, again the compensation analysis was never completed.



Now today, as a part of the transitional plan, the next steps are to complete the following over the next 6-9 months with a direct focus on central office positions and administration salaries:

• By May 30, 2011, we will develop a request for proposal to conduct a compensation study partnering either with a college or university or a company that specializes in organizational structure/compensation study.
• By June, 2011, I will transition this plan to the new superintendent and I will include the documents that were found under the E&Y study for full disclosure and receipt to the new superintendent.
• By the end of June we will ask the legal team to review the RFP.
• By July of 2011, a public advertisement of the RFP will occur.
• By August of 2011, the RFP will be acknowledged with vendors that will reply to that RFP.
• By September of 2011, the RVP evaluation and vendor selection will occur.
• And by October, board approval and award to such vendor.

All of this is subject to change dependent on the new superintendent, but I did want to give the board the complete commitment to follow through on the charge of seeing that the study is begun."



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It was revealed in the Q&A that there will be four file boxes on the study in the board office for the board to review.