Top takeaways from blistering state audit of Alum Rock School District

Another chapter in the long history of mismanagement and financial woes in the Alum Rock Union Elementary School District was written this week in the form of an audit from state officials. The story was a familiar one for those following the troubled East San Jose district: ARUSD officials’ mismanagement of contracts cost the district millions.

The root of many of the scandals that rocked the district began with the board’s dealings with Del Terra, a construction contractor, and its decision to hire the company in both program management and construction management roles. This led to Del Terra overseeing its own work, which run afoul with best practices and legal standards.

The report, completed by California State Auditor Elaine Howle, at the request of state lawmakers Assemblyman Ash Kalra and Sen. Jim Beall, found the embattled school district’s “operational and financial practices” did not comply with state law and poor governance led to violations and “diminished the board’s transparency.”

These are our top takeaways from the state auditor’s report.

Money misspent on contracts dwarfs current salary cuts

The biggest takeaway from the scathing audit is that the financial mismanagement of past school boards continues to haunt the school district today.

In April, the district laid off 50 employees, including all of its librarians, to patch up shortfalls in its budget. Declining enrollment was cited as a factor in the decision by ARUSD board vice president Ernesto Bejarano. According to the audit, state officials were particularly concerned with a $600,000 fee increase ARUSD paid Del Terra.

That money could have paid for another year of library employee salaries: library staff salaries and benefits weighed in at just over $455,000 in 2017, according to Transparent California.

There is a vast lack of oversight and documentation

Teachers in Alum Rock and other districts are subject to regular evaluations to ensure that they’re meeting district and state standards.

Contractors in Alum Rock, on the other hand, have no such oversight. The district currently has no formal procedures for monitoring or evaluating contractor performance, though Assistant Superintendent of Business Services Kolvira Chheng told state officials that he’s working on developing them.

Even more concerning: If district officials wanted to more closely monitor contractors, there is no clear way of doing so. The state auditor’s report found that the district “was unable to show that it monitored contractor performance for any of the 10 contracts we reviewed because it did not ensure that staff maintained documentation of their monitoring efforts, such as records of the work they performed to ensure contractors fulfilled their requirements.”

No records and no standards led to no accountability, the report said.

Lack of disclosure and transparency continues

While district employees are required to report conflicts of interest, contractors who performed similar duties were not always held to this standard.

The state auditor found that Alum Rock had “been inconsistent in requiring contracted personnel to submit a statement of economic interests — known as a Form 700 — that the Fair Political Practices Commission publishes.”

CEO Luis Rojas and other key employees of Del Terra were among the people who didn’t file disclosures of their interests during the period that Del Terra’s contracted with ARUSD.

And this troubling lack of disclosure didn’t stop at contractors.

In 2017, former assistant superintendent of human resources Marco Baeza did not disclose his interests, even though he was legally required to do so as a district employee. It was believed that Baeza was a contractor and that such disclosure was at the board and superintendent’s discretion, according to the audit.

The audit also uncovered a repeated lack of disclosure by school board members. This included incidents such as a trustee not recusing himself from an Oct. 2017 board vote on hirings and promotions that included his child to a Sept. 2017 meeting where a board member was recused from a facilities vote, but failed to reveal that they had a financial stake in the matter.

The district still doesn’t have policies to keep corruption at bay

Finally, while the board terminated its construction management contracts with Del Terra, the root of the problem remains.

Per the state auditor’s report, “even though the district terminated those contracts, it has not yet implemented a policy to prohibit future instances of contracting with the same contractor for both program management and construction management services.” The reason given by the board for terminating the contract? Legal concerns — not any specific policy.

In addition, attempts by the board to right the wrongs have long been delayed. The last meeting scheduled to set district goals was in May 2015, but it was canceled. Superintendent Hilaria Bauer told state officials that she meant to lead a discussion with the board about district goal-setting in March 2019, but the meeting was canceled the following month.

This excerpt from the report on the district’s goals might be the most telling of all.

“Moreover, neither the board president nor the superintendent were able to provide us with the board’s vision. When we requested it, the superintendent and board president were only able to provide us with the board’s goals from the 2005–06 academic year. Until the board establishes a vision and current goals, it cannot ensure that it provides sufficient direction to the superintendent and district staff about the district’s priorities and the appropriate use of district resources to achieve those priorities for the benefit of students and the community.”

ARUSD issued a response to the audit addressing the fixes that need to be made.

Among other steps, the district’s vision and goals should be set by Nov. 2019, along with a self-evaluation. Other November goals the ARUSD has set in response to the audit include developing procedures to better organize documentation of contractors and to assess whether contracted personnel should be classified as “consultants” subject to required disclosures.

By August, the district also promises to enact a policy prohibiting the same contractor from providing construction management and program management services, reflecting a shift from the defiance shown by past trustees toward outside audits.

Contact Elizabeth Barcelos at ebarcelossj@gmail.com or follow @ebarcelossj on Twitter.

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