Arkansas School Boards Seemingly Engage in Self-Dealing
Where's the accountability? Did presidential contender and former Arkansas Gov. Asa Hutchinson turn a blind eye to school board members' self-dealing? What will Gov. Sarah Sanders do about it?
Arkansas legislators have made it clear that self dealing in school districts is prohibited.
Under current Arkansas law 6-24-101 through 6-24-119, school board members, administrators such as superintendents, and employees are prohibited from conducting business with the districts they serve.
In 6-24-101, the law states:
(c) “It is the specific intent of this chapter to prohibit self-dealing in transactions between public educational entities and board members, administrators, or employees”
Under former Governor Mike Huckabee, Arkansas passed Act 1599 of 2001 to address an obvious need to prevent school boards and administrators from profiteering from the district's they serve.
That’s right.
Arkansas leaders actually once took a hard stance against corruption in the state's public schools.
Taxpayers should be proud that action was taken to protect tax money and to ensure that schools operated without “let’s make a deal” influenced contracts.
The purpose of a school is to educate children, not create a years-long get-rich Ponzi scheme at the taxpayers' expense for board members and administrators.
South Arkansas Reckoning has repeatedly reported that public schools in Arkansas are usually the largest employer and, in most cases, the largest business especially in rural areas.
Under Governor Mike Beebe, school administrators and board members were held accountable.
Numerous charges were filed over ethical violations under ACA 6-24-101 and Act 1599 of 2001.
According to a February 2008 Arkansas Democrat-Gazette article, state auditors “cited about two dozen school districts over the past several years for failing to obtain the state Department of Education's approval, as required under state law, for transactions involving possible conflicts of interest.”
Act 1599 was solid in 2008. It plainly stated what was required of board members and administrators in order to conduct business with the school they serve.
That’s right. The law provides a mechanism for deal swingers to lawfully do business with the school.
To keep it simple, Act 1599 provides a legal mechanism for board members, administrators and employees to do business with the school district they serve if they have a “direct or indirect” interest under “unusual and limited circumstances.”
To do so, though, they must disclose through a process their financial interest to the Arkansas Department of Education and seek approval of the transaction based upon those “unusual and limited” circumstances or face criminal felony charges.
For example, a board member sells cars as a salesperson for a dealership. The district wants to buy a vehicle from that dealership. The board member is required to disclose in writing the conflict of interest to the Arkansas Department of Education if the purchase price or contract is more than $10,000 in a fiscal year and seek approval of the purchase from the commissioner.
The same applies to school board members currently serving that own or work for construction companies or sell construction supplies that could be used on a campus where they serve. Disclose it to the state, get approval and everything is legit.
Back to the heart of this story
Former Arkansas Education Commissioner Johnny Key took over the Department of Education in 2015 under former Governor Asa Hutchinson, who is now running for president.
Someone changed the rules but the law didn’t change.
But under the law, specifically ACA 6-24-119, the state's Department of Education was tasked with creating rules for public schools to follow that apparently would keep the local prosecuting attorney from having to handcuff the good ol’ boys and girls at schools for self-dealing.
Here's 6-24-119: “In order to administer the provisions of this chapter, the state board of Education shall adopt rules consistent with the provisions and intent of this chapter.”
In the Department of Education rules from 2005, when board members were catching criminal charges, the rules were:
To save you the headache, here’s what is most relevant to this story.
Look at the July 2005 version above of the Arkansas Department of Education’s rules and regulations governing ethical guidelines:
2.00 Purpose
Rule 2.01: The purpose of these rules is to set forth certain ethical guidelines and prohibitions for educational administrators, employees, board members and other parties which involve contracts, transactions or agreements with Arkansas public school districts, charter schools, educational cooperatives or any publicly supported entity having supervision over public educational entities excluding institutions of higher education.
Rule 3.07: “Contract" means any transaction or agreement for the purchase, lease, transfer, or use of real property or personal property and personal and professional services, including but not limited to, motor vehicles, equipment, commodities, materials, services, computers, or other electronics, construction, capital improvements, deposits, and investments.
Rule 3.11: “Directly” or “directly interested” means receiving compensation or other benefits personally or to a business or other entity in which the individual has a financial interest.
Remember this next rule, it’s important.
Rule 3.16
“Financial interest” in a business or other entity means:
a.) Ownership of more than a five percent (5) interest; or
b.) Holding a position as an officer, director, trustee, partner, or other top level management; or
c.) Being an employee, agent independent contractor, or other arrangement where individuals compensation is based in whole or in part on transactions with the public educational entity; or
d.) Financial interest does not mean the ownership of stock or other equity holdings in any publicly held company or
e.) Financial interest does not mean clerical or other similar hourly compensated employees.
What the hell happened in 2016? A lot.
We could stop right here and go on a tangent about Donald Trump beating Hillary Clinton in the presidential election.
We could talk about endless investigations into Russian collusion and constant media babbling on issues that don't make a bit of difference here and now, but this story does.
No one was watching the Arkansas education hen house but everyone including media was paying a heck a lot of attention to Washington drama.
The 2016 rules matter, especially in rural towns currently under the LEARNS Act and with Education Secretary Jacob Oliva overseeing schools in Arkansas.
The Arkansas Department of Education under Key changed the rules, according to the March 2016 version of the Rules and Regulations Governing Ethical Guidelines and Prohibitions.
The Purpose as noted above in Rule 2.00 didn’t change, and 2.01 remained unchanged.
But rule 3.07 sure did change, and it opened up the flood gates for transactions to start flowing.
Rule 3.07: “Compensation or other benefits” means any monetary or non-monetary gain including without limitation, salary, fringe benefits, gratuities and bonuses received by owners, officers, directors, trustees, partners, managerial employees, or other executive level employees.”
Check this out: Rule 3.07.1
The definition does not include compensation or other benefits received by the following individuals:
3.07.1.1 Non-managerial or non-executive level employees
3.07.1.2 Clerical or other similarly hourly compensated employees
3.07.1.3 Individuals who own five percent (5%) or less interest in a company or entity; and
3.07.1.4 Individuals who own stock or other equity holdings in any publicly held company
Can you see what happened here? Did these rule changes allow for board members, administrators or employees to start doing business with the schools they serve?
Researching Arkansas law is complicated, but hours of investigating by South Arkansas Reckoning have yet to produce a change in the law that supports the rule changes of 2016 through Key's Department of Education.
According to our research the days of accountability for self dealing appears to have ended when Gov. Beebe left office.
South Arkansas Reckoning has investigated numerous school districts and board members over the last several months for possible conflicts of interest. We have found them. We have turned over these investigation files to the proper authorities. So far, we've yet to see any action taken.
It's unclear if Arkansas law is actually enforceable, or if the state is controlled by bureaucrats and their rules, allowing Arkansas laws to be ignored.