MILWAUKEE — It’s been two weeks since Milwaukee Public Schools (MPS) announced it’s working with the state’s Department of Public Instruction (DPI) to submit key financial data that DPI claimed is more than eight months late.
It led to a whirlwind of ridicule from Milwaukee taxpayers, who narrowly passed a $252 million referendum for the district in the April election.
It also led to DPI withholding the district’s June special education aid payment of more than $16 million, pending the approval of MPS’s Corrective Action Plan (CAP).
The resignation of now former superintendent Keith Posley came Tuesday, June 4 — the same day now former comptroller Alfredo Balmaseda said he got fired.
“If anything, I’m concerned for the school district because I’m not there to keep fixing the problem,” Balmaseda said. “I was pretty close to getting it finalized; maybe a week away.”
Balmaseda cited his 25 years in accounting before explaining an accounting system that even he had trouble figuring out at MPS.
“The person who’s responsible for setting up that system would be the person that should consider themselves responsible for this whole thing,” he said.
He called it “not efficient at all.” He also said it was not GAAP compliant, which stands for generally accepted accounting principles.
He said he began noticing red flags shortly after he took the job in Aug. 2023, at the recommendation of Posley.
“You have a lot of things coming from the previous year and that’s where the problems came from,” he said. “This isn’t about 2023’s accounting. This is about finding a needle in a haystack of $400 million — $1.5 to $2 million.”
Auditor Baker Tilly laid out those problems in a 2022 audit presented to the MPS School Board on May 18, 2023. The auditors found the following issues:
“Our evaluation of the internal controls over financial reporting has identified control deficiencies that are considered material weakness surrounding the preparation of financial statements and footnotes including the schedule of expenditures of federal and state awards, adjusting journal entries identified by the auditors, and an independent review of financial reports.
“Management has not prepared financial statements that are in conformity with generally accepted accounting principles or the schedule of expenditures of federal and state awards that is in conformance with the applicable federal or state requirements. In addition, material misstatements in the general ledger were identified during the financial audit and subsequently corrected upon being questioned as part of the audit process.
“In previous audits, it was also noted that inaccurate employee payroll deductions were being made. Reports received from the payroll department showed participants with amounts owed that have no deductions set up or employees that currently had payroll deductions but were not included in any HR records as being enrolled in MPSU or through a partner university or college program.”
The former superintendent’s update to those findings were presented to the board on Dec. 19, 2023.
Balmaseda said there’s a possibility the issue goes back even further.
“This could not just be 2022,” he said. “This could be 2021, 2020, 2019 as well that’s causing the problem.”
Balmaseda also cited severe understaffing at both his department and the auditor’s.
“They were understaffed, and we were understaffed,” he said. “I didn’t have a financial reporting manager and there hadn’t been one. There wasn’t a comptroller before me to inherit anything from and this is a huge organization.”
Without certification from the auditors, Balmaseda said DPI will not accept any of these financial reports. He said as far as he knows, there is no timeline for when that certification will happen.
“As soon as we had a new update, we were putting it on the DPI website and I know DPI needs a certification from the auditors,” he said. “DPI says, ‘I don’t know if your numbers are right until the auditors say they’re right.’”
He said an agreement could not be reached with the auditors on a path forward.
“In a $400 million grants universe, we’re talking about $1.5 to $2 million that we were off,” he said. “We could never come to an agreement, and we had the auditors completely stop working with us from February through the middle of April.”
Spectrum News 1 reached out to auditor Tilly and received the following statement:
“Baker Tilly’s policy is not to comment on matters involving our clients.”
Gov. Tony Evers called for instructional and operational audits of MPS as well.
“I’m not concerned for any mismanagement from the district and certainly not from me,” Balmaseda said. “The money is totally all there. We just don’t know what bucket to put it in.”