(Newberg, OR) -- An outside investigation into the Newberg-Dundee School District's 13-million-dollar budget shortfall finds the previous superintendent allowed the district to spend money without controls. The report says Steve Phillips didn't use a budget blocking tool that would have prevented overspending. The report also accuses Phillips of making racist and derogatory remarks about students. Phillips went on medical leave last June and when the district didn't renew his contract a month later, he filed a multi-million-dollar lawsuit. The district was forced to make massive cuts to make up for the budget gap.