D65 Forensic Audit Published

Buried in the news from Tuesday’s Board meeting — District 65 completed the forensic audit of the Horton era. You can read the audit here, and the Board’s statement. Most of the Horton-related stories are already known and the nearly a million dollars in stipends are shocking. However, the forensic audit does get us closer to a big question - one that I posed in this story from 2024: Is this Securities Fraud?

First a little context, since this is an older story.

In Illinois, in order to build a new school, you have two options:

Hold a Referendum: This is the most common method to fund school construction. In 2024, for instance, there were 20 referendums on the ballot in Illinois. The voters approve the funding, it’s added onto the tax levy separately and the school is constructed.
Finance with a lease certificate: This is an option available because of the Local Government Debt Reform Act. There’s a catch, which is that you have to use existing budget space to pay the lease — you can’t expand the tax levy for this — it has to come from money budgeted in advance and put aside.

Back in 2012, District 65 held a referendum to fund construction of the Foster School. That referendum failed 45-55. After the failure, it was the 2019-2021 Board’s general belief that any Foster School referendum would fail, so they wanted a non-referendum option, the lease certificate. To do that, they needed to find $3.25M in the budget to set aside for payments in order to get $40 million for construction (which was not even enough money at the time) [1].

The lease certificate explains where that money will come from:

The new school building will place most students within walking distance of a neighborhood school, resulting in significant transportation cost savings. The District estimates savings of approximately $3,250,000 in each fiscal year. The District currently intends to use the transportation savings to pay the Certificates.

The District claimed they will save the $3.25M from no longer busing fifth ward kids. The problem is that this is absolutely false. In October 2023, Dr. Turner revealed that the savings are actually around $750k.

Today, here in 2026, District 65 is now trying to find $3.25M annually to make these payments, searching for TIF money or using state funds. The annual lease cost is actually more than the proposed savings from closing both Dewey and Lincolnwood presented on Tuesday ($2.9M).

The big unknown: where did that $3.25M number come from? Did it come out of thin air? Who was aware that the District was making a clearly false statement on the lease certificate?

Bus Savings: From $500k → $2.3M

The forensic audit finally gives us a timeline of how we got to $3.25 million in savings and who knew what:

November 6, 2020: An email from the D65 Department of Transportation (DoT) estimated the elimination of 10 to 15 routes and potential annual transportation savings of $500,000 to $800,000.
July 22, 2021: Another email from the DoT to the District’s Communications Specialist, which was subsequently forwarded to Cordogan Clark, the District’s architect. The email provided similar information, estimating potential savings of approximately $500,000 to $800,000 based on route elimination.

But then, a week later, the number jumped:

July 29, 2021: At the Board meeting, Raymond James (the District’s financial consultants) presented annual operational savings of approximately $2.3 million. Here’s the slide from the deck:

How did the estimate go from $500,000 to $800,000 → $2,300,000? The forensic auditors weren’t able to find out because nobody had records.

The District was unable to provide documentation reconciling the 875-student assumption to the DoT’s estimate of approximately 550 to 600 riders. The District also did not locate support explaining how the projected transportation savings increased from the DoT’s route-based estimate of approximately $500,000 to $800,000 to the $2 million amount presented by Raymond James to the Board.

But this was only the first time the estimate jumped.

Numbers Jump Again: $2.3M → $3.25M→$5.0M

Internally within the District, the numbers discussed still were much lower. According to the auditors, in February 2022, the DoT reiterated estimates to the head of student assignment (SAP) that the savings were $500,000 to $800,000.

Yet only a few days later, the District’s business manager issued a memo stating the savings were $3 million annually. The auditors wrote;

Six days after the February 22, 2022 email, the former Business Manager/CSBO issued a memorandum outlining that the District could save more than $3 million annually in transportation costs beginning in FY2025.
…
The District was unable to provide documentation supporting the memorandum or the underlying calculations used to derive the $3 million estimate.

The auditor discussed whether there was supporting evidence to back up this increase in savings and again, found none.

Taken together, the records made available to Crowe did not substantiate the increase in projected annual transportation savings from approximately $500,000 to $800,000 in the DoT’s route-based estimates to the $3 million presented in the March 2022 financing materials. The available documentation also did not support the calculation of the additional $250,000 attributed to budgetary priority realignment or the resulting estimate of approximately $3.25 million in total annual operational savings identified as the budgetary justification for the lease payments.

These are the numbers that ended up in the lease certificate, finalized a few months later in May 2022. But according to the auditors, this estimate was completely unsupported — a pretty clear violation of the spirit and the text of the laws around school funding.

Who was aware of the lower (true) estimates? According to the forensic audit, the following people had knowledge:

District’s Department of Transportation, who issued the $500,000 - $800,000 estimates.
Former CFO Raphael Obafemi, who was on the Nov 2020 email.
The District’s Communications Specialist, who was notified in 2021 and forwarded the email to the architects.
Cordogan Clark, the architects eventually responsible for the school’s design and construction, awarded the work without competitive bidding. [2]
Head of Student Assignment and Planning (SAP), notified in February 2022, only months before the lease certificate was signed.

Yet, according to the auditor, none of these people notified the Board or slowed the process. You could argue that perhaps the left hand wasn’t talking to the right hand — but the former CFO was aware of the lower estimates as far back as 2020 and would’ve been deeply involved in the lease certificate process.

The estimate would climb yet again. In December 2022, the State Board of Education (ISBE) gave awards to the District 65 finance team for this work. In Board President Sergio Hernandez’s nomination letter, he notes savings of approximately $5 million a year and thanks the team for their “creative funding.”

This would create a savings of approximately $5 million a year in transportation costs.
…
The finance team was relentless and meticulous in pursuing options and ensuring that the lease certificate process was successful. They understood that this work was the foundation of a bigger picture, and that without creative funding it would not be a reality.

The source of that number is not known either but it is the same as the FY2022 budget for transportation, $4,932,479.

Raymond James: District’s Financial Consultant

I wrote about Raymond James back in 2023, complaining that their presentation to the Board included misleading information. For instance, they presented the Board with a list of Districts that used lease certificates.

However, 3/8 of those Districts didn’t use lease certificates. They also didn’t disclose that one of their examples, Wheaton District 200, attempted to use a lease certificate but was sued and settled.

It was in this same March 2022 meeting that Raymond James presented the final (and false) savings estimate to the Board:

It’s not clear whether Raymond James was aware these estimates were wrong or were just echoing what the District told them (the addition of “Source: D65 Business Office” to the slide is itself interesting). Either way, both the CFO and Raymond James refused to be interviewed by the forensic auditor:

The former CFO and the District’s former municipal advisor may have had knowledge of how the projections were developed and did not agree to interviews with Crowe. For the purposes of this report, Crowe provides that the escalation is undocumented in the records available and does not draw any conclusion as to whether the estimates were developed in good faith.

But Raymond James was right about one thing — in the March 2022 meeting, the Representative noted the cash-flow risk if the transportation savings were not realized:

But for these savings in transportation you would not have the cash flow necessary to issue $40 million in lease certificates to build the new school. I just wanted to make that clear.

[1] Note that $40M wasn’t even enough at the time. An April 2022 Cordogan Clark estimate showed the cost at $55,892,034 or $46,522,603 depending on size. Recall, the Foster School was originally going to be a K-8 school, with Bessie Rhodes TWI contained in the building. After the District failed to start construction for 18 months, the project had to be scaled down to a K-5 school and Bessie Rhodes was removed. As we debate which schools to close today, it would’ve been nice to have a big K-8 school in the District.

[2] District 65’s records show Cordogan Clark got the Foster school work after the District published an RFQ in Summer 2022. That RFQ was “not an invitation to bid”. 15 firms responded and D65 staff selected Cordogan Clark in private. This is another example of D65 awarding no-bid contracts and likely overpaying. Illinois School Code has very specific rules about open contracts and bidding which were not followed here. 105 ILCS 5/10-20.21