Improper spending cost Des Moines schools $200,000, auditor finds

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Des Moines Public Schools reimbursed $200,000 worth of improper expenses for two maintenance workers over seven years, including for purchases of snacks, cigarettes and ammunition, according to a state audit released Wednesday morning.

William Joseph Hinrichs, a 12-year employee, received payments from the district for tools and construction materials that were “not necessary or reasonable” for his work, Iowa State Auditor Rob Sand wrote in the report. He added that the credit card statements showed Hinrichs, 48, charged the district for personal items that included Carhartt stonewashed jeans, Under Armour T-shirts, Crocs shoes, Sentry wireless earbuds, paintballs, Airsoft pellets, shotgun ammunition, Marlboro cigarettes, diet Mountain Dew and Little Debbie Oatmeal Cream Pies.

The audit said Hinrichs declined to speak with investigators. The auditors reported they also could not reach Kevin Kurth, 37, a contractor with Ja-Ra Enterprises accused of charging the district for tools and personal items like sunglasses and a Yeti tumbler.

Iowa Auditor Rob Sand explains results of an audit his agency conducted of the Iowa Medicaid Home Health Services program during a news conference at the Iowa Capitol, Thursday, Jan. 9, 2020. Standing behind him are Deputy Auditor Annette Campbell, left, and Senior Auditor Melissa Finestead. Sand criticized the Iowa Department of Human Services for providing data he claimed was so flawed he couldn’t test it. (Photo: David Pitt/AP)

Hinrichs and Kurth did not immediately return voicemails left at their listed phone numbers on Wednesday. 

The school district, in a response, outlined a series of steps it says it has taken to improve oversight over purchases. They include requiring that “all invoices submitted to the school district should include detailed itemized receipts prior to any approval by supervisor,” stepping up reviews and making sure that people approving reimbursements aren’t the people making the charges.

The investigation began in late 2019, after an unnamed source told district officials that a contractor bought tools, charged the school system for the expenses and then sold the items for personal gain. A school system employee reviewed the invoices, leading district officials to believe that Hinrichs made “improper” purchases, according to the audit.

The investigation centers on a Ja-Ra Enterprises credit card. A general labor contractor for the district since 2006, Ja-Ra Enterprises assigned two employees to work full-time for the district and report to Hinrichs. The company billed the school district for hours worked by those employees.

Ja-Ra Enterprises owner Craig Smith referred the Des Moines Register to his attorney Wednesday when contacted for comment about the investigation. But before he did, Smith said that problems in the case occurred around 2013, when the school district changed its policy regarding purchases of building materials. 

He said the district previously purchased all building materials for its projects. But seven years ago, he said, Hinrichs told Kurth that Ja-Ra Enterprises would need to buy the building supplies and that the district would later reimburse the company. Smith said Hinrichs recommended the company take out a credit card for the project.

Smith’s attorney did not immediately respond to a request for comment Wednesday morning.

According to the audit, Hinrichs was responsible for approving the invoices from Ja-Ra Enterprises. The report does not make clear whether other district employees also reviewed the invoices. A district spokesperson did not immediately answer questions from the Register on Wednesday.

Most of the unapproved spending was for building materials or supplies, according to the report. But in some cases, the auditors concluded that the spending didn’t make sense.

At South Union Elementary School, for example, Ja-Ra Enterprises billed the district $9,000 for materials to caulk the walls, repair the driveway and work on some of the building’s bricks — “an unusually large cost for materials,” Sand wrote. Tied to the invoice, receipts allegedly show that Hinrichs used Ja-Ra Enterprises’ credit card to buy a modulating boiler, which was not part of the project, Sand wrote.

In December 2015, the workers installed shelves, replaced door frames and hung doors at the district’s central campus. But, Sand wrote, Ja-Ra Enterprises also charged $1,800 for concrete and anchors not related to the project.

In total, the auditors concluded that Hinrichs billed the district for $125,000 in improper spending, while Kurth billed the district for $80,000 in improper spending. Sand wrote that workers may have billed the district for more improper payments, but “sufficient documentation wasn’t consistently available.”

In December 2019, according to the audit, Hinrichs asked Ja-Ra Enterprises staff to “falsify receipts so that they did not include tool purchases.”

According to the audit, Hinrichs told district employees during a February 2020 meeting that he did not use a Ja-Ra Enterprises credit card, despite his name being on some of the receipts tied to the purchases. He skipped two scheduled follow-up meetings with the district, and his attorney later informed Hinrichs’ bosses that he was resigning, the report said.

Smith, the Ja-Ra Enterprises owner, said Ja-Ra has not performed work for the district since the investigation began. He said Kurth also quit around the same time.

In addition to his work for the school district, Hinrichs also operated Ridgetop Horse Ranch, a horse barn in Milo. A Facebook post on the barn’s page in September 2019 indicated that the operation was shutting down.

In his report, Sand recommended that the school district improve its internal controls, including requiring that all invoices include detailed documents. In its response, the district said staffers have been reviewing invoices in more detail since the investigation. 

Sand said he has presented the audit to the Des Moines Police Department, the Iowa Division of Criminal Investigation, the Polk County Attorney’s Office and the Iowa Attorney General’s Office. 

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.

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