AUSTIN — The state auditor found cronyism in the awarding of lucrative consulting contracts by the Texas Education Agency but said there was insufficient evidence to present to a prosecutor.

The auditor's office began its investigation in June after an internal TEA review pointed to several contracts that were awarded to friends of top agency officials and a newly retired agency employee.

Auditor John Keel said in his report that those contracts were done without competitive bids and "resulted in the appearance of less than arm's-length-transactions." Keel recommended that the Legislature consider requiring competitive bidding for all consulting and professional services contracts that exceed $25,000.

Additionally, the education agency and 20 regional Education Service Centers that award education contracts should be required to fully disclose professional or personal relationships that may create a conflict of interest.

"The results of our investigation indicate there is a need to strengthen controls over contracting and subcontracting at both TEA and ESCs," Keel said. 

Changes promised

"I look forward to working with the Legislature to implement the recommendations of this report and will implement any recommendations that can be done administratively as soon as possible," he said.

The June report by the agency's inspector general created a stir because it was publicly released the same week that Education Commissioner Shirley Neeley was leaving. Gov. Rick Perry didn't reappoint her.

The internal report implicated Scott, who was then serving as chief deputy commissioner and a candidate to replace Neeley. Perry named Scott commissioner last month.

Scott denied any wrongdoing and criticized the inspector general for not fully interviewing him about the transactions. He said that he was mistaken for another individual of the same name who works at a regional education service center in Waco. 

Two $100,000 contracts

"However, ESC XII-Waco management did not contact the former TEA commissioner or TEA chief deputy commissioner to discuss the recommendation," the audit report said.

In another instance, the same consultant recommended his ex-wife and several individuals to work on a $1.5 million project to improve college readiness. They were hired.

Another $130,000 contract was given to a recently retired TEA employee on the request from TEA Chief Operating Officer Adam Jones. (Jones now is acting deputy commissioner for finance and operations.) The auditor said the Austin education service center did not follow its procurement policies when it entered into that contract.