Employment at troubled school tech nonprofit TIES was a family affair

The former head of a publicly funded school technology organization had her son and daughter on the payroll, and allowed her niece to hold her wedding reception at its event center without paying a rental fee.

TIES, which is headquartered in Falcon Heights and supported by 49 school districts, has come under increasing scrutiny since an auditor found it has misspent millions and fallen into financial danger. Among other problems, the audit faulted the hiring of employees' relatives, and highlighted sloppy record-keeping and questionable pay practices with its State Fair parking, an annual revenue generator. The children of TIES former executive director Betty Schweizer were involved in managing that parking for years, according to their online résumés.

The forensic audit, which the TIES board ordered, was completed at the end of October, about six weeks after Schweizer retired with severance pay of $61,332. Schweizer was well known among educators who tap the organization for technology training, equipment and services, and her departure came as a surprise to many of them.

Reached at her St. Paul home this week, Schweizer declined to comment. Her Summit Hill house has been on the market and has a "Sold" sign on it.

Minnesota Legislative Auditor Jim Nobles said last week that the report raised "serious concerns" that the state will look into.

Dan Luth, head of the TIES executive committee, has said he didn't think any of the irregularities rose to the level of criminal offenses and that it's addressing all of the financial matters addressed in the report. Luth said Wednesday via e-mail that Samantha Schulte and Alan Schulte worked part-time at TIES "on and off" for seven and 10 years respectively. They are Schweizer's daughter and son. Otherwise, he couldn't comment on their hiring because it was a private personnel matter.

Formed in 1967 as a joint powers board, TIES has an operating budget of about $31 million, most of which comes from its member districts around the Twin Cities. It's also registered with the state as a nonprofit.

Samantha Schulte's résumé describes her working at TIES in "human resources, confidential records" from 2009 to 2012. In that role she "aided in attaining information for the year-end audit." It shows she also worked as a "special events parking supervisor" for the Minnesota State Fair for TIES, supervising a team of six people who "generated between $35,000 and $50,000 in cash."

The audit noted that TIES employees working on State Fair parking were paid directly out of cash proceeds, received bonuses of $500 and $1,000, took bags of cash home or stashed them under desks, and failed to receive proper tax forms, called 1099s. In 2011, the proceeds weren't deposited until a month after the fair ended.

Samantha Schulte could not be reached for comment. Alan Schulte, reached at his job in Illinois, said he couldn't discuss the matter while at work.

The forensic audit of TIES noted that several employees had family members as co-workers, and criticized the organization for lacking policies on hiring relatives. The report also chastised TIES for missing out on revenue by routinely allowing free use of its events center. The fee schedule indicated it could have charged rent of $5,460 for an event.

The wedding reception for Abby Felitto, Schweizer's niece who lives in the Twin Cities, was held at the TIES Event Center in August 2013. Felitto told the Star Tribune that she "did pay for the space," but not with cash.

Felitto said she could not recall if there was a set dollar value for the goods or a written contract. It was the first wedding event held in the newly renovated space, she said.

"It was my understanding at the time that part of TIES' business plan was to hold a few practice or soft opening events to work out the kinks and make sure they were ready for prime time," she said.

Remodeling its Event Center was part of a major capital improvement project that TIES completed in April 2013. The group paid for it by issuing $5.3 million in notes, or IOUs, backed by a $600,000-a-year levy on its members for 10 years. Records indicate the tax totaled about $2.50 per student in those districts.

The audit revealed that the renovations swelled from $318,267 to more than $3.1 million, and that change orders for the work couldn't be located.

The recent forensic report is not the first warning to TIES that there were problems with financial controls.

The Baker Tilly Virchow Krause firm eventually became TIES' auditor. The Star Tribune reviewed the organization's audited financial statements back to fiscal 2009. Every year Baker Tilly found at least one "significant deficiency," one of which always involved the organization's bank account and ledgers not being properly reviewed and maintained. Last year, the lack of control over the year-end bookkeeping was cited as a "material weakness," the most serious level of accounting deficiency.

Every year TIES management told its auditor that it was working to fix the problem, records show.