Recent DPS audits, financial reviews save the district nearly $20 million

Contact: Steven Wasko at 313-873-4542 or
Jennifer Mrozowski at 313-873-8401

Detroit Public Schools’ ongoing departmental audits and other financial reviews over the past six months mean millions of dollars in cost savings, including in the areas of healthcare, transportation and overdue vendor payments.

Those include:
* $5.2 million in projected savings after an audit of healthcare eligibility
* $3.6 million in projected savings from reduced taxi cab routes
* $4 million in projected savings by reorganizing and eliminating some traditional yellow bus routes
* $6.3 million in savings from reductions in amounts due to vendors
* $404,490 in reimbursements from Blue Cross Blue Shield of MI after discovery of miscalculated late fees

The audits of healthcare eligibility, the analysis of taxi cab service and other departmental reviews are part of a series of operational audits that Emergency Financial Manager Robert Bobb ordered to be conducted throughout Detroit Public Schools’ departments to streamline the district’s finances and uncover misspending and wrongdoing.

“Finding cost savings is a critical part of our mission to improve the finances of Detroit Public Schools,” Bobb said. “We cannot afford to lose one cent that should be devoted to the classroom.”

An audit to determine eligibility of healthcare dependents initially showed 411 ineligible people on the rolls, including some who were deceased. The number of ineligible dependents dropped from the rolls has since increased to 1,545. The annual savings is estimated at $5.2 million.

The school system is significantly reducing transportation costs, particularly in the area of taxi cab service for some students, resulting in a projected annual savings of about $3.6 million.

Bobb and his team undertook a review of transportation in the spring of this year looking for improvements in both effectiveness and efficiency.

In the school year 2008-09, the district used taxi cab service along 447 cab routes and serviced 1,155 students at a cost of $4.6 million. In the school year 2009-10, the district is using cab service along 106 routes, servicing 162 students at an estimated cost of $1 million.

Taxi rides are primarily for Special Education students. Many students live in difficult locations for regular buses to reach without requiring a lengthy bus ride to a student’s assigned school. But recognizing it is preferable that Special Education students ride with regular education students on a yellow bus, where possible, the district conducted an analysis of bus routes and was able to accommodate more students on traditional routes.

Additionally, through negotiations, Bobb worked with the four taxi companies that have serviced DPS this summer to reduce the daily rate per taxi ride from $60 to $50.

The district is also reducing transportation costs by increasing the bus tiers from one run to two or three runs. This means one bus runs three trips per morning and per afternoon, driving down the cost per student. The district transportation office estimates a reduction of approximately $4 million in yellow bus costs. That is in addition to savings in taxi costs.

Other financial reviews also have meant large cost savings.

After a recent review of late fees, Blue Cross Blue Shield of MI (BCBSM) earlier this year agreed to credit Detroit Public Schools about $404,490 after it was discovered that late fees were miscalculated on healthcare costs.

That amount equals the difference between a 2 percent charge for late fees that was previously assessed versus a 1 percent charge that should’ve been assessed for late fees in some cases since July 1, 2007, based on a new contract.

The error was found through a contract review by DPS’ benefits consulting firm, Southfield-based Aon Consulting. The consulting firm also pointed out that DPS paid about $700,000 in late fees in the past year, an amount Bobb called “unacceptable.” The district is developing new processes to ensure bills are paid on time, he said.

Meanwhile, the district’s accounts payable balances, or past due payment to vendors, have been reduced from $76.7 million to $35.9 million during this six-month period since Bobb came on board.

The Finance Division is still aggressively negotiating discounts with a number of large vendors. Those have resulted in $6.3 million in saving to date.

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