DPS alleges school principal engaged in financial misconduct, $175,000 in taxpayer dollars called into question

A CBS News Investigation has learned the former principal of a Denver Public School, Kimberly Grayson, resigned in August in the midst of two internal investigations into her conduct. In one of the probes, DPS investigators say they found evidence Grayson engaged in "financial misconduct" over the course of several years, likely used taxpayer funds for "personal use," steered school funds toward close associates,  and as much as $175,000 in school funds can no longer be accounted for. 

Grayson told CBS News Colorado, "I have done nothing wrong."

She was the principal of the Dr. Martin Luther King Jr. Early College school for nine years. The school serves grades 6 through 12.

Edwin Hudson, Denver Public Schools Chief Talent Officer, told CBS News Colorado he believed, "There was misappropriation of funds, financial misconduct. At this point, we're talking about possibly $175,000 of things that were misappropriated." 

The HR administrator said many of the questions surround Grayson's use of a district Purchasing card or P-card, which is similar to a corporate credit card.

But the investigation into Grayson's spending also raises broader questions about DPS oversight of school spending, as the alleged financial abuses went on for at least a year before the school district was tipped off by an anonymous call in early 2021 to its fraud hotline.

"'I'm not going to tell you all the safeguards and guardrails worked for us," said Hudson, adding, "We would have loved to have caught it earlier. We didn't, and we regret that, yes."

CBS News Colorado has additionally learned that prosecutors with the Denver District attorney's office are investigating how Grayson and other staff members at the school managed public dollars.

Grayson was at times acclaimed for her leadership and innovation.

But she resigned from her job last summer with little discussion about the underlying reasons for her departure. 

"I never got a chance to say goodbye to my staff after being there for nine years," said Grayson during an interview with CBS News Colorado. "And I did not get a chance to say goodbye to my students."

CBS News Colorado has now learned one of the major factors in Grayson's departure: internal DPS reviews of Grayson's spending in 2020 and 2021 raised significant concerns that vast sums of taxpayer dollars might have been spent inappropriately. 

Investigators concluded that they believed some purchases Grayson made on her district credit card were for personal use.

Among the expenditures flagged by school investigators as questionable:

• Spent $140 for women's size 9 Ugg boots that were delivered to her home address. "Those were for a student in the foster home process. We talked to her about an incentive and that's what she wanted," said Grayson, who added the boots were not for her as she wears a size 8 shoe. She acknowledged the student left the program and the boots were never given to the student. Grayson said she had items sent directly to her home during the pandemic.
• A $140 Michael Kors designer bag which Grayson said was given to an unknown student in a raffle
• In 2021, Grayson used her district credit card to buy decorations and party supplies for her niece's sweet 16 birthday party which was held at the school gym on April 5.  Additionally, school investigators alleged she allowed 10 school employees to be paid with school funds for setting up for the party, attending it and cleaning up when it was over.  DPS estimated the cost was $1,100. Hudson told CBS News Colorado, "There are a lot of things wrong with that. It's not a good use of our facilities, not a proper use of the money." Grayson denied any impropriety with the party and said employees who helped with the party "were already there. It was a school day." She maintained there was nothing wrong with staff members assisting with the event. 
• Investigators also found  Grayson spent nearly $3,000 on Barbie dolls for an art display at the school. Some of the dolls were collector edition dolls costing more than $300. But DPS said roughly two dozen of the dolls never made it into the display. The district believed the Barbies were purchased for Grayson's personal use. Grayson said any Barbie dolls not found at her school were given to another DPS school to put on display. "What would I do with 17 dolls?" asked Grayson.

But the questionable spending extended well beyond P-card charges according to DPS sources.

Grayson allegedly steered more than $25,000 in extra pay to a close associate at the school for working Saturdays and Sundays. But DPS sources said he never worked those weekend days.

Grayson told CBS News Colorado, "If he worked extra time, longer than his eight-hour shift, then that's how they told the secretary to code it, on Saturdays and Sundays."

Grayson admitted to CBS News Colorado that she had allowed other school employees to use her district  P-card. "They held me accountable for being a school leader and letting people use the credit card and not checking line item by line item the receipts for each transaction. I handed over my card to let other people use it," she said.

In one case, another school staff member used Grayson's  P-card to pay $149 in airfare charges for her son. "She did buy an airplane ticket for her son. She reimbursed the school the money for that airline ticket," said Grayson. But DPS sources indicated they could never confirm the staff member reimbursed the money. "There were some things on my card," said Grayson, "I said 'I don't know what that's for.'" 

DPS believes the alleged financial problems extended beyond Grayson to her staff. DPS concluded two staff members were unable to provide any business purposes for two dozen financial transactions that totaled more than $20,000 on their P cards.

Grayson blamed subordinates for using her P-card and DPS administrators for failing to work more closely with her on her school's spending. "I was not aware that was a policy that we could not let other people use it (P-card) within our school building. I think everyone does it."

Public records show Grayson has filed for personal bankruptcy on multiple occasions. Most recently, she filed for Chapter 7 bankruptcy protection in April 2021. 

Hudson, the DPS human resources director, said the probe of Grayson's spending was continuing. He said as a result of what investigators believe happened at MLK Jr. Early College, the district is looking more closely at school spending, has expanded its auditing and oversight and has instituted more training for school administrators with P-cards. 

"This is a one-off situation," said Hudson, "It's regrettable, we fixed it and we're hopeful this will not occur again."