Claypool cuts back on CPS consultants — but not 3 he has ties to

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Chicago Public Schools CEO Forrest Claypool says he has cut spending on outside consultants by $18 million a year — but at the same time CPS has sharply boosted payments to three consulting firms with close ties to Claypool, records obtained by the Chicago Sun-Times show.

Mayor Rahm Emanuel elevated Claypool in July 2015 from mayoral chief of staff to the chief executive of the nation’s cash-strapped third-largest school system.

Since then, even as Claypool says he has clamped down on spending on consultants, CPS’ billings sharply went up for three firms linked to the $250,000-a-year schools chief, according to hundreds of invoices and other documents the school system released in response to a public records request.

They are Crowe Horwath LLP, KPMG LLP and UCG Associates.

CPS paid Crowe Horwath $20,000 in 2015, records show. That figure has ballooned under Claypool. For the budget year that ended June 30, CPS paid Crowe Horwath $5.3 million for work that included analyzing budgets and facilities, looking at ways to try to bring the school system more money from Medicaid and providing audit staff.

KPMG — another big firm — went from zero CPS business in that time to yearly billings of more than $4 million for work that included designing “cost savings initiatives” and selecting “new support services operating model for 9,362 people,” evaluating the roles of assistant principals, school clerks and classroom aides.

UCG Associates — a smaller, minority-owned subcontractor — saw its billings, also zero in 2015, rise to $765,000 in 2017. It provides CPS with $65- to $190-an-hour staffers, in part to handle work in central office departments hit by staff cuts.

Though Claypool says he has cut back on overall spending on consultants, CPS officials declined to provide data to show how.

Records show that during the 2016-17 school year, when individual Chicago schools had millions in discretionary money taken back to pay district bills, CPS paid a total of about $20 million to consultants approved under a deal the Chicago Board of Education OKed in October 2015. That was more than twice the $8.9 million it paid them the year before.

Paul Stepusin (left) and Paul Toback talk in the overflow room during a Chicago Board of Education meeting last month. | Max Herman / Sun-Times

Chicago-based Crowe Horwath employs three Claypool associates who moved in to offices at CPS headquarters, 42 W. Madison: John Filan, Paul Stepusin and Paul Toback.

Filan is a former Illinois state budget director who worked under Claypool when the schools chief headed the Chicago Park District in the 1990s. Stepusin is a former Crowe Partner and city lobbyist. Toback is a former Bally’s Total Fitness chief executive officer who worked for then-Mayor Richard M. Daley when Claypool was his chief of staff.

All three had no-bid contracts with the CTA when Claypool ran the agency. And all have contributed to Claypool’s past runs for elected office — a total of $20,900 since 2002.

Their hours were all billed to CPS via Crowe Horwath as employees of Stepusin’s company, Public Services PS Inc., which had more than $2 million in CTA contracts under Claypool.

Last year, after CPS cut school budgets because it didn’t get the state funding it was counting on, Crowe gave itself a raise, increasing its top rate from $300 an hour to $350.

The Board of Education caps what it pays outside law firms at an hourly rate of $295. But that doesn’t apply to management consultants, several of whom were paid more than $300 an hour — twice what Claypool would cost CPS, including benefits, if he were paid hourly.

An ongoing, yearlong “Organizational Cost Savings” initiative that CPS started in November anticipates paying Filan, Stepusin and Toback a total of $777,000.

John Filan, seen in 2006. | AP

Invoices show Filan, at $225 an hour, headed a budgeting committee to reconsider how to dole out per-pupil funding.

Toback started at CPS in October 2015 on a $75,000, no-bid contract paying him $120 an hour. By March, when he hit the maximum, Crowe bills listed him at $195 an hour. He was the lone consultant on a $234,000, 40-week project for “financial transformation of Diverse Learning Initiatives, contingency planning, design of cost savings initiatives, implementation strategies of cost savings and revenue enhancing initiatives.”

Stepusin, at $250 an hour, was CPS’ “project lead” for another of the consulting firms, KPMG, where he formerly worked. Together, they worked on a “shared services” project to centralize school payroll functions — an effort that has principals worried they will lose school clerks.

CPS’ chief auditor Andrell Holloway — who signed off on the bulk of the consulting work — and outgoing chief administrative officer Jose Alfonso Hoyos y Acosta both worked for KPMG before joining Claypool when he ran the CTA.

Billing upwards of $300 an hour for several staffers and $55 for interns, KPMG also expensed $155,000 for flights and per diem costs for out-of-town workers while advising CPS on how to streamline the work of school clerks. CPS says it couldn’t find such expertise locally.

Some of UCG Associates’ work was managed by Ronald DeNard, CPS’ finance chief, who previously worked for Claypool at the CTA and the Chicago Park District. On Facebook, DeNard has called UCG’s principal / chief financial officer, Gregory Chappell, a friend who’s “definitely ride or die.”

UCG briefly employed Stepusin’s son, Paul Stepusin Jr., but CPS put an end to that once officials realized the connection. Timesheets show the younger Stepusin was paid about $15,000 during July 2016, at $140 per hour.

Claypool asked the Board of Education in October 2015 to approve spending up to $14 million on consultants for three years of professional services work on audits, information technology and “organization and management consulting.” A year later, he had the ceiling raised to $25.5 million.

Claypool says he needed help from “skilled experts” to tackle CPS’ $1.1 billion deficit.

“Having presided over two widely documented turnarounds of similarly troubled governments, the park district and CTA, I turned once again to some of my same partners to help,” Claypool says in a written statement. “And help they have.”

He says improved cash-management systems have been put in place, data is now available to track the progress of special education students, and CPS has been able to find “structural savings” that so far have amounted to $73 million.

“None of this would be possible without the help of these skilled experts, who have proven their value year after year, in one tough assignment after another,” Claypool says.

READ MORE: City to kick in additional $269 million for Chicago schools budget

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