CHICAGO -The roots of the Joplin School District's current fiscal struggles lie in the Missouri district's post-2011 tornado recovery, according to a state audit that took the district to task for using the same firm as advisor and underwriter on its borrowings.

The district has relied on borrowing from a voter-approved $62 million referendum, insurance reimbursements, donations, and state and federal aid to rebuild and repair its buildings. A total of 10 schools were damaged or destroyed by the Category F-5 tornado that struck in May 2011, killing 161.

The audit released March 3 found that the financial condition of the district's general fund has dwindled to $4.6 million from $16 million in July 2011 and its capital projects fund has fallen to $5 million from $29 million in 2011.

"The declining fund balances are due in large part to the impact of the May 22, 2011, tornado and atypical disaster related expenditures," the audit reported. "Decreased property values and a tax increment financing agreement entered into between the city, master developer, and the district has also affected local funding."

The decline in the projects fund will require additional financing to pay for construction expenditures until the district receives final federal and state disaster funding, the report said.

The audit criticized the district used the same firm to serve as both financial advisor and bond underwriter - George K. Baum & Co. -- for all bond and lease participation certificate sales.

"Using the same provider to act in the dual capacity of underwriter and financial advisor for a bond issue creates an inherent conflict of interest," the report said.

The audit also reported on the district's preference for a negotiated sale rather than a competitive bid process. The auditor in past general audits has found local governments paid higher rates through negotiated sales than if they competitively bid their transactions.

The audit criticized district employees on some record keeping, purchasing, and accounting issues. The audit gave a rating of "fair" to the district which indicates "the audit results indicate this entity needs to improve operations in several areas."

The auditor also found the district and its board of education didn't fully comply with the state's open-meetings and open-records laws.

The district responded to the audit saying it had expected reserves to decline due to its rebuilding program and has established a plan to build up reserves in the coming years. Officials said they would consider competitive sales in the future.

Voters in 2012 approved the borrowing to help cover a $185 million rebuilding program. The district provides K-12 education across a 70-mile area in southwestern part of the state, including the 61,000-population city of Joplin and several neighboring communities.

In addition to the district's damage, more than 8,000 homes and businesses were destroyed, along with St. John's Regional Medical Center. It was one of the deadliest tornados on record.

As the district crafted its rebuilding program, dubbed Operation Rising Eagle, it also decided to undertake other building projects on the drawing board that were unrelated to the damage.

The district carries an A level rating from Standard & Poor's despite the strain on its finances thanks to the district's healthy balance levels at the time of the tornado. It was able to tap those funds to manage cash flow as it awaited aid and insurance reimbursement.

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