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- The District’s Operational and Financial Practices Did Not Always Comply With State Law or Align With Best Practices
- Poor Governance Has Led to Violations of State Law and Diminished the Board’s Transparency
- The Board’s Operational Practices Did Not Always Comply With District Policy and Other Requirements
- Other Areas We Reviewed
The District’s Operational and Financial Practices Did Not Always Comply With State Law or Align With Best Practices
Key Points
- The district did not comply with state law and district policy when it contracted with architectural services and construction management firms without evaluating their qualifications to demonstrate that it had selected the most qualified firms at fair and reasonable prices. The district also contracted with the same firm for both program management and construction management services even though it meant that the firm would oversee its own work, which put quality control in question.
- The district has not followed best practices in monitoring its contractors and maintaining contract documentation. In particular, it has not established policies and procedures for ensuring that contractors adhere to the terms of their contracts before it pays for their services. The district also has not provided sufficient information to the board about its payments to contractors, limiting the board’s ability to assess the reasonableness of those expenditures.
- The district did not require some of its contracted personnel to disclose their financial interests; thus, it cannot determine whether those individuals had conflicts of interest when performing services for the district.
The District Did Not Comply with State Law or District Policy When It Solicited and Awarded Architectural Services and Construction Management Contracts
The district failed to establish and follow a structured process to select the most qualified contractor when awarding three contracts from 2014 through 2016 to architectural services and construction management firms. State law requires public entities, such as school districts, to select contractors for these types of services on the basis of the firms’ demonstrated competence and professional qualifications at fair and reasonable prices. However, for the three architectural services and construction management services contracts we reviewed, the district selected firms it had previously contracted with rather than also evaluating the qualifications of other firms. As a result, it could not demonstrate that it had selected the most qualified firms at fair and reasonable prices. According to the district’s records, it paid these contractors more than $6.4 million from fiscal years 2013–14 through 2017–18. Further, the district awarded one of these contracts to Del Terra, despite the firm’s past history of providing some deliverables late and not completing several district projects. A former assistant superintendent of business services expressed these concerns about Del Terra to the board before the district awarded it a contract in November 2016, but the board still approved the contract.
District policy directs the superintendent to recommend specific firms for architectural services and engineering services, which includes construction management, to the board based on the firms’ demonstrated competence and professional qualifications. The board is then responsible for selecting the most qualified contractor whose prices are fair and reasonable, although the district’s policy does not require the board to choose the lowest responsible bidder. However, in two instances, the district recommended firms—which the board then approved—without considering other firms' demonstrated competence and professional qualifications. In the first instance, a former assistant superintendent of business services advocated for awarding a construction management contract in May 2014 to Del Terra by asserting that Del Terra had proven expertise and experience as the district’s program manager. However, without considering other firms, this rationale was not sufficient to justify that Del Terra was the most qualified contractor. Similiarly, in the second instance, district staff contacted only one architectural firm in June 2016 to seek interest in developing drawings and specifications for upgrades to a building the district had recently acquired, even though it had three other firms in its pool of board-approved architects. When we asked the district’s director of facilities, bonds, and leases (director of facilities) why the district did not contact any of the other firms, he said that a former assistant superintendent of business services had directed him to work only with that architect on the project.
In the third instance, district staff attempted to comply with state law and the district’s requirement to use a structured process to select the most qualified firm at a fair and reasonable price, but the board did not follow the staff’s recommendation. During a board meeting in October 2016, district staff recommended this process to select a firm to serve as the district’s construction manager. However, at the following meeting in November 2016, the board disregarded the staff’s recommendation and awarded the contract to Del Terra—the same firm it had contracted with in May 2014 for construction management services. By not following state law and its own policy, the board did not ensure that it selected the most qualified firm at a fair and reasonable price.
We also question the district’s decision to contract with Del Terra—the contractor for two of the three contracts discussed here—for both program management and construction management services. The district first contracted with Del Terra for program management services in May 2013, with a five-year contract for up to $2.4 million. The district subsequently contracted with Del Terra in May 2014 for construction management services, with a contract term extending to September 2015 for payments up to $3.2 million. Because a key duty of the program manager is to oversee the construction manager, this contracting arrangement allowed Del Terra to oversee its own work. However, having different companies serve in these roles promotes a system of quality control, as one company—the program manager—will review the work of another company—the construction manager. Instead, by serving in both roles, Del Terra as the construction manager had no accountability for performing its duties, including coordinating the work of the district’s program contractors and ensuring that construction at the project sites was completed within budget and according to specifications. As program manager, Del Terra was unlikely to require the necessary corrective actions if it determined that it was not adhering to its construction management responsibilities.
Other oversight entities who examined the district’s contracting practices expressed similar concerns about having the same contractor perform both program management and construction management services. Based on our interviews with the fiscal experts and the fiscal advisor that the county office appointed, as well as our reviews of the FCMAT report and the grand jury report, we found general consensus that the district should not have contracted with the same contractor for both program management and construction management services because having a contractor oversee its own work is not a best practice. When we asked board members why the district used Del Terra for both services, certain members expressed concern about this practice. However, others asserted that they understood the practice to be typical among smaller school districts or that they believed that efficiencies resulted from the dual role. Nevertheless, we believe that any advantages from having a single company in the program management and construction management roles are far outweighed by the risks we describe.
In addition to those concerns, the district’s contracts with Del Terra included a fee structure that did not align with ensuring the fiscal responsibilities of construction and program managers. According to the district’s contracts with Del Terra, construction and program managers serve as the district’s advocates in minimizing construction costs and ensuring that construction adheres to schedule. However, Del Terra’s contracts stipulated that the district would pay it 6 percent of overall construction costs for construction management services and 4 percent of the total value of the bond funds available for capital projects for program management services. The Construction Management Association of America discourages the practice of basing compensation on a percentage of construction costs because this form of payment is arbitrary and not related to the effort that may be required. Perhaps more importantly, because both contracts included a percentage-based payment structure, Del Terra had no financial incentive to seek cost savings in managing either the program or the individual construction projects because it benefitted from higher project costs.
According to the district’s records, the district’s payments to Del Terra totaled $4.6 million from the beginning of fiscal year 2013–14 through November 2017. In December 2017, the county office stopped the district’s payments to Del Terra because the county office was concerned about the legality of these contracts because of a potential conflict of interest.1 The board voted to terminate the program management contracts with Del Terra in May 2018, and after a change in board members resulting from the November 2018 election, the board decided to terminate the construction management contracts with Del Terra in December 2018. The board did not publicly explain its rationale for terminating the construction management contracts; rather, it cited only legal concerns. However, 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 District’s Poor Contracting Practices and Expenditure Reporting Have Hindered Its Ability to Adequately Monitor Its Contractors
Based on our review of district contracts, the district’s contracting practices have not always aligned with best practices, resulting in insufficient district oversight of its contractors. We identified several best practices for overseeing contractors, including establishing clear performance requirements, developing procedures for monitoring and evaluating contractor performance, ensuring that district staff maintain adequate records of their monitoring efforts, and defining roles and responsibilities for staff regarding the collection and retention of contract documentation. Although the district established clear performance requirements in the scopes of work for the contracts we reviewed, it did not develop procedures to consistently oversee its contractors’ performance, document its monitoring efforts to gain assurance that its contractors had met their obligations to the district before it paid them, or define roles and responsibilities for staff regarding the collection and retention of contract documentation.
We found that the district does not have formal procedures for monitoring and evaluating the performance of its contractors, which raises concerns about its ability to ensure that those contractors are adhering to their contract terms and provisions. Although the current assistant superintendent of business services acknowledged the value of formal monitoring procedures and informed us that he is working on developing them, he explained that the district’s efforts have been delayed because of the external reviews discussed in the Introduction. He also attributed the lack of procedures to staff vacancies and turnover in the business services department. For example, he indicated that the district had vacancies in key staff positions during the past several years, which resulted in a loss of institutional knowledge and the need to train new staff. Further, the district has had several different individuals serve as the assistant superintendent of business services since 2013. Nevertheless, the high staff turnover emphasizes the need for creating procedures and documentation requirements to ensure that new staff can monitor contracts in a manner that is consistent with their more experienced peers.
Additionally, the district has not demonstrated that it has sufficiently monitored its contracts. We 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 that contractors fulfilled their requirements. For instance, the district did not maintain any documentation of its monitoring efforts over its program management contracts with Del Terra, so it is unclear how it concluded that Del Terra’s performance met its expectations. In particular, we question the board’s approval of a fee increase of more than $600,000 for one of these program management contracts, given its inability to justify the district’s satisfaction with Del Terra’s past performance.
Moreover, the district has not defined responsibilities for its staff to collect and retain contract documentation, leading to inefficiencies. The district’s procurement manager acknowledged that the district’s documentation of its contracts is scattered among six different locations. The district also does not have a formal policy for assigning specific staff with the responsibility for overseeing the retention of specific contract documents. In fact, the procurement manager conveyed to us that tracking specific contract files has been an ongoing challenge, indicating it occasionally takes considerable time to locate requested documents. She acknowledged that establishing procedures for document management and storage, including defining staff roles and responsibilities, would help district staff with saving and accessing important documents.
In addition to the weaknesses we found related to the district’s contracting practices, we also noted that the district’s financial system cannot distinguish among specific contract payment authorization documents, meaning that the district is not able to efficiently monitor contract adjustments or the total costs of a given contract over time. The FCMAT report also identified this issue and recommended that the district develop and implement a new financial system that would allow for numbering and identifying those documents to distinguish them from each other, but the district had not fully implemented that recommendation as of February 2019. Although the district is currently working with the Santa Clara County Office of Education (county office) to transition to a new financial system that can assign unique numbers to the documents, the county office will need to modify the system to activate that functionality.
Finally, we determined that the financial information the district provides the board does not include sufficient detail on expenditures. The board bases its oversight of certain district expenditures on the limited information it receives from district staff, which prevents it from assessing the reasonableness of that spending. According to district policy, the board has a responsibility to oversee the prudent use of district funds. Further, district policy requires that the board approve all warrants—payments that the district issues to its contractors and other entities—at its regular board meetings. However, from fiscal years 2013–14 through 2017–18, the expenditure information on warrant lists that district staff provided to the board did not contain sufficient detail on the payments the district made to external entities to allow the board to make informed decisions. Instead, the warrant lists contained only aggregate amounts of payments the district made from each of its funds, such as its general fund or its building fund, instead of summarizing the amounts it paid to each contractor and identifying the purpose of those payments.
The lack of specific information on the warrant lists makes it unlikely that the board has been able to use them to oversee the reasonableness of the district’s expenditures. For example, in September 2017, the district paid a contractor more than $1.7 million for construction work. However, the warrant list for September 2017 did not identify the contractor, the amount of the payment, or the purpose of the payment. The assistant superintendent of business services indicated that the district has presented warrant information to the board in this summarized format since before he began working for the district in October 2015, so he was not aware of the rationale for doing so. However, he agreed that it would be helpful to the board’s oversight for it to receive information at the regular monthly board meetings on how much the district has paid to each contractor.
The District Did Not Require Some Contracted Personnel to Disclose Their Financial Interests
The district did not require some individuals who performed services for the district through contracts to disclose their financial interests, even though these individuals, whom we refer to as contracted personnel, served in roles similar to those of district employees who must disclose their interests. In accordance with state law, the district adopted and implemented a conflict-of-interest code (code) identifying those employees who are responsible for making—or participating in making—decisions that may have a material effect on their own financial interests. Additionally, the district’s code requires long-term contracted personnel who perform the same duties as certain employees to disclose their financial interests. When adopted by a school district’s board and approved by the county board of supervisors, a code has the force and effect of law concerning those individuals who must disclose their financial interests.
Disclosure Requirements for the
District’s Consultants
- Interests in real property within or near the district’s boundaries.
- Investments in, business positions in, and income—including gifts, loans, and travel payments—from the following:
- - Sources that are engaged in buying or selling real property within the district.
- - Contractors or subcontractors that have engaged in work or services in the past two years of the type used by the district.
- - Sources that manufacture or sell supplies, books, machinery, or equipment of the type used by the district.
Source: District's code.
State law requires certain public officials and persons designated in an agency’s conflict-of-interest code to file a statement of economic interests. The district’s code also stipulates that certain individuals, such as contracted personnel who serve in a staff capacity and who make or participate in making governmental decisions in that capacity, meet the code’s definition of a consultant and therefore must disclose their financial interests pursuant to the most extensive disclosure category in the code. That category requires full disclosure of specific interests as the text box shows. However, the code gives the superintendent discretion, through a written determination, to decide whether a particular consultant needs to disclose only certain types of financial interests, based on the scope of the individual’s duties. The code states that the district is to retain its written determination for public inspection and that the determination is to include a description of the individual’s duties and a statement of the modified disclosure requirements based on that description.
The district has been inconsistent in requiring contracted personnel to submit a statement of economic interests form—known as a Form 700—that the Fair Political Practices Commission publishes. Similar to district staff, designated consultants must submit Forms 700 when they initially assume their positions and generally every year thereafter. However, the district has not required Forms 700 from some contracted personnel who have served in similar positions to district employees but who are not designated consultants. Specifically, both district employees and contracted personnel have filled some district positions, such as the assistant superintendent of business services, at different times, depending on turnover and the availability of candidates. However, the district did not require its contracted personnel to file Forms 700 or otherwise disclose their financial interests, even though it required its permanent employees who served in the same positions to do so.
The district’s code did not require these individuals to report their economic interests because they did not meet the legal definition of a consultant, either because of their limited tenure with the district or their limited scope of duties. Nevertheless, state law gives the district discretion to require such individuals to disclose their interests. However, the district informed us that it has not implemented a process to determine whether these individuals should file Forms 700. We believe that it is appropriate for the district to require contracted personnel serving in the role of assistant superintendent of business services, for example, to disclose their economic interests because they could have conflicts of interest that would allow them to personally benefit from their influence. By not requiring these individuals to submit Forms 700, the district cannot determine whether they have potential conflicts of interest.
Further, the district did not ensure that its current assistant superintendent of human resources disclosed his financial interests. The district’s code requires the assistant superintendent of human resources to disclose financial interests pursuant to the code’s most extensive disclosure category. However, the district’s filing officer confirmed that the district did not ensure that this individual disclosed his financial interests in 2017. The district’s filing officer initially believed that this individual was a contractor, so she assumed that the board and superintendent had the discretion to determine whether he should file. However, the individual’s employment contract clearly states that he is an employee of the district. The filing officer subsequently informed us in April 2019 that the superintendent and assistant superintendent of business services informed her that the individual should report his financial interests.
We also noted that the district did not require the chief executive officer and key employees of Del Terra to file Forms 700 during the period of Del Terra’s contracts with the district. Given the significant responsibilities of program and construction managers—which we discuss previously—the district should have determined whether the code’s definition of a consultant applied to Del Terra’s chief executive officer and its key employees working at the district. However, even if the district determined that these individuals did not meet this legal definition, Del Terra was involved in decisions about how to spend the district’s bond funds, such as providing recommendations to district staff about whether to enter into construction contracts. This level of involvement leads us to question whether the district should have required key Del Terra officials to disclose their economic interests.
The FCMAT report also identified concerns with the district’s failure to ensure the disclosure of financial interests by its contracted personnel, and it recommended that the district develop a process for evaluating whether these individuals should be required to file Forms 700. The district had not implemented such a process as of April 2019, although the superintendent informed us that it had been contemplating doing so. The assistant superintendent of business services expected the district to address this issue after it selects a law firm to serve as its new general counsel.
Recommendations
Board
To ensure that it selects the most qualified firms at fair and reasonable prices to perform its contracted architectural services and construction management services, the board should follow the requirements of state law and its own policies in such selections.
To preclude a situation where a contractor oversees its own work, the board should enact a policy by August 2019 to prohibit contracting with the same entity for construction management and program management services.
To strengthen its ability to oversee district expenditures, the board should require the district by August 2019 to prepare monthly summaries that report the total amounts it paid to each of its contractors, along with descriptions of the purpose of those payments, and to include the summaries with the monthly warrant lists it provides to the board.
District
To ensure proper oversight of construction costs, the district should stop using payment terms for construction management and program management services that base fees on a percentage of construction costs or bonds issued.
To ensure that its contractors fulfill their performance requirements, the district should take the following actions by November 2019:
- Develop contract monitoring procedures with defined staff roles and responsibilities, including retaining evidence of monitoring efforts. The district should also train its staff to follow these procedures.
- Develop procedures specifying a designated location for staff to retain contracts and related documentation and identifying those staff who are responsible for ensuring that these documents are stored appropriately. The district should also train staff to follow these procedures.
- Work with the county office to ensure that its new financial system includes unique identifiers for contract payment authorization documents.
To identify its contracted personnel’s potential conflicts of interest, the district should do the following:
- Develop and implement a process by November 2019 to assess whether contracted personnel should be classified as consultants and are therefore subject to the district’s code for disclosing financial interests.
- Immediately follow its conflict-of-interest code to ensure that all required individuals file Forms 700.
Poor Governance Has Led to Violations of State Law and Diminished the Board’s Transparency
Key Points
- Board members have not consistently attended board meetings in recent years, raising concerns about the board’s effectiveness in governing the district and potentially delaying decisions. Moreover, the district violated state law by paying stipends to board members for the meetings they missed.
- One board member violated state law by not recusing himself during a key board decision, while a second board member did not provide critical information when she recused herself from a board vote. The two board members’ actions limited the board’s transparency and accountability to the public.
- The district violated state law in some instances by not posting meeting agendas in a timely manner and by not providing sufficient detail to the public regarding its closed session agenda items, again limiting the transparency of its operations to the public and potentially limiting public involvement.
Board Member Attendance Practices Have Raised Concerns About Governance
The inconsistent attendance of board members at monthly meetings during fiscal years 2015–16 through 2017–18 has caused concerns about the board’s effectiveness in governing. Table 1 summarizes 38 instances when board members were absent either for an entire meeting or for more than half of a meeting's duration. For example, one board member either did not attend or attended less than half of a meeting's duration for six of the 22 meetings in fiscal year 2017–18. Three of the other four board members also had attendance problems: each of these three members either missed or attended less than half of a meeting's duration on multiple occasions in one of three fiscal years from 2015–16 through 2017–18.
Because board members make decisions that affect the strategic direction of the district, it is important that they attend meetings to provide their individual insights and input regarding the district’s future. Further, even if the minimum number of board members required for a quorum—three of the five members—is present at a board meeting, the absence of the other board members can delay important decisions. For example, the board had to delay a vote during two consecutive monthly meetings in November and December 2016 to approve a contract to fix leaking roofs at two school sites because one of the three members present at both meetings had to recuse herself. This member had a conflict of interest because she was employed by a charter school organization that used one of the sites needing the repairs. Consequently, the board did not have a quorum in those instances and could not take action on the contract at either meeting. We question how effectively the board performed its governance functions when its members had such inconsistent attendance.
Table 1
Inconsistent Board Member Attendance May Have Limited the Effectiveness of the Board’s Governance
| ABSENCES (FISCAL YEAR) | TOTAL ABSENCES | ||||||
|---|---|---|---|---|---|---|---|
| 2015–16 | 2016–17 | 2017–18 | |||||
| Total board meetings | 19 | 17 | 22 | ||||
| Board Member 1 | |||||||
| Absent for more than half of a meeting | 0 | 0 | 0 | 6 | |||
| Absent the entire meeting | 4 | 1 | 1 | ||||
| Total absences | 4 | 1 | 1 | ||||
| Percentage of meetings missed | 21% | 6% | 5% | ||||
| Board Member 2 | |||||||
| Absent for more than half of a meeting | 0 | 0 | 1 | 9 | |||
| Absent the entire meeting | 1 | 3 | 4 | ||||
| Total absences | 1 | 3 | 5 | ||||
| Percentage of meetings missed | 5% | 18% | 23% | ||||
| Board Member 3 | |||||||
| Absent for more than half of a meeting | 0 | 0 | 1 | 9 | |||
| Absent the entire meeting | 3 | 4 | 1 | ||||
| Total absences | 3 | 4 | 2 | ||||
| Percentage of meetings missed | 16% | 24% | 9% | ||||
| Board Member 4 | |||||||
| Absent for more than half of a meeting | 0 | 3 | 2 | 9 | |||
| Absent the entire meeting | 0 | 0 | 4 | ||||
| Total absences | 0 | 3 | 6 | ||||
| Percentage of meetings missed | 0% | 18% | 27% | ||||
| Board Member 5 | |||||||
| Absent for more than half of a meeting | 0 | 1 | 0 | 5 | |||
| Absent the entire meeting | 1 | 1 | 2 | ||||
| Total absences | 1 | 2 | 2 | ||||
| Percentage of meetings missed | 5% | 12% | 9% | ||||
Source: Analysis of board meeting minutes from fiscal years 2015–16 through 2017–18.
Additionally, the district violated state law by paying full stipends to board members who did not meet attendance requirements. State law allows board members of school districts the size of Alum Rock to receive up to $400 per month, with limited annual increases, as compensation for their service. Current district policy establishes the compensation for members at a monthly maximum of $400 each. However, state law also stipulates that board members who do not attend all meetings held during a month may only receive compensation equivalent to their attendance. For instance, a board member who attended one of two board meetings during a month would only be entitled to $200—half of the monthly compensation. The district established an additional policy clarifying that to receive credit for attending a meeting, a board member must be present for at least half of the meeting’s duration. However, because the district failed to enforce these requirements, it overpaid a total of $9,733 to five board members who missed board meetings during fiscal years 2015–16 through 2017–18.
The assistant superintendent of business services acknowledged that the district can reduce the amount of a board member’s stipend for not attending meetings but said that district staff have not done so because of past concerns about potential retaliation by board members. Given the changed composition of the board, he believes that the district is now more open to enforcing these requirements. He also stated that reducing stipends would help the district reinforce attendance expectations for board members. Full attendance of board members could improve public perceptions of its governance.
The Board Violated State Laws at Some Board Meetings
The board’s actions at some meetings may have raised concerns from the public about the transparency of its governance. Specifically, we identified two separate instances in which individual board members violated state law by either not recusing themselves from voting on actions during board meetings or by not following the appropriate requirement when recusing themselves. State law requires that a member of a school district’s governing board abstain from voting on personnel matters that uniquely affect the member’s relatives or that affect the member’s financial interests. However, in one instance, a board member did not recuse himself from a board vote in October 2017 to approve a group of hires and promotions that included his son. In addition, another board member did not follow the appropriate disclosure requirement when recusing herself from a September 2017 board vote on a facility agreement between the district and another entity in which she had a potential conflicting interest.
Although the board member in the second instance did recuse herself from the board decision, which related to a charter school organization that employed her, neither she nor the board president acknowledged before her recusal that she had a financial interest with the organization. The Political Reform Act of 1974 requires that before recusing themselves from a decision in which they have a financial interest, certain public officials, such as school board members who manage public investments, must publicly disclose that financial interest in sufficient detail so as to be understood by the public. Because neither the board member nor the board clearly stated the reason for her potential conflict of interest, the board did not properly disclose the information in a public forum as the law requires.
We also identified an instance when the board violated Brown Act quorum requirements that specify that if a meeting is conducted by teleconference, a quorum of board members must be present within the district’s geographical boundaries. Of the 58 meetings that the board scheduled from fiscal years 2015–16 through 2017–18, a majority of the board—at least three of the five board members—was not present in three instances. Although the board acknowledged its lack of a quorum at two of these meetings and did not vote on any actions, it did not recognize its lack of quorum at the third meeting. At this May 2017 meeting, only two members were physically present within the district, while a third participated by teleconference from another country. Nonetheless, the board made several decisions, including authorizing district staff to issue up to $35 million in bonds and approving eight contracts each valued at $100,000 or more, including a contract valued at more than $6 million. Because the third board member was outside of the district’s boundaries, members of the public could have challenged these decisions. Although Brown Act violations do not specifically invalidate decisions on bond issuances, certain contracts, and other items, the board’s failure to recognize its lack of a quorum raises concerns about its ability to ensure compliance with transparency and public stewardship requirements.
The District and Board Violated State Law Pertaining to Board Meeting Agendas, Notices, and Announcements
The district also violated the Brown Act when its staff did not post meeting agendas to its website in a timely manner. The Brown Act requires that the district post the agendas for regular board meetings on the district’s website and in a location that is freely accessible to members of the public at least 72 hours before the meeting. It places similar requirements on the district for the board’s special meetings: the district must post in similar locations notices specifying the time, place, and the business to be transacted or discussed at least 24 hours before each special meeting. As Table 2 shows, when we reviewed 20 regular meetings from fiscal years 2013–14 through 2017–18, we found that the district posted 25 percent of the agendas on its website less than 72 hours before the meetings. In addition, when we reviewed 10 special meetings from fiscal years 2015–16 through 2017–18, we found that the district posted 30 percent of the meeting notices less than 24 hours before the meetings. It was an average of an hour late in posting the agendas for regular meetings and 2.5 hours late in posting the notices of special meetings. Although these delays may seem minor, their frequency may raise concerns among the public about the district’s awareness of and adherence to state law.
Table 2
The District Posted Some Agendas Late Because Staff Were Unfamiliar With Posting Requirements
| TYPE OF BOARD MEETING | AGENDAS REVIEWED | AGENDAS POSTED LATE | PERCENTAGE OF AGENDAS POSTED LATE |
|---|---|---|---|
| Regular board meetings | 20 | 5 | 25% |
| Special board meetings | 10 | 3 | 30% |
Source: Analysis of a selection of the district’s meeting agendas and website postings.
Note: We reviewed a selection of regular board meetings that occurred from fiscal years 2013–14 through 2017–18 and a selection of special board meetings that occurred from fiscal years 2015–16 through 2017–18.
In fact, when we inquired about the reasons for the late postings, the superintendent’s assistants, who are responsible for posting the agendas, stated that they were unaware of the time requirements for posting agendas on the district’s website. They also informed us that board members have sometimes wanted to add new items to the agenda on the day the agenda was required to be publicly distributed. For example, we found one revised agenda for a regular meeting in April 2017 that the district posted on its website about one hour after the deadline; on this agenda, the board changed the location of teleconference participation for one board member and added an item for discussion that a second board member submitted.
We also identified several other Brown Act violations in which the board failed to properly announce in public meetings the agenda items related to real property transactions before it discussed them in closed session. Specifically, the Brown Act requires local public agencies to announce the identities of its negotiators, the real properties that the negotiations may concern, and the persons with whom its negotiators may negotiate. However, at five board meetings—three in fiscal year 2013–14, one in fiscal year 2014–15, and one in fiscal year 2016–17—the board failed to announce the people with whom its negotiators may negotiate before entering closed sessions. The district also failed to identify on the related agendas all parties participating in the negotiations at these meetings—either its own negotiators or the negotiators for the other party—as indicated by the Brown Act. According to an opinion that California's Attorney General issued in 1990, the intent of the requirement to announce real estate negotiators is to provide members of the public with an opportunity to comment or take a position on a particular item. According to the superintendent, the district relies on advice from its general counsel to comply with Brown Act requirements for how to announce closed-session items at board meetings. Nevertheless, any form of a Brown Act violation—such as posting agendas late or not publicly identifying real estate negotiators—limits the transparency of the board’s operations to the public and potentially limits public involvement.
Recommendations
Board
To ensure compliance with the requirements of the Brown Act for quorums, the board should declare publicly at future board meetings whether a quorum of board members is present before it takes any action.
To ensure compliance with government transparency laws, the board should request training in and adhere to Brown Act requirements and other state law by August 2019. It should also ensure that the district’s general counsel is sufficiently knowledgeable to properly advise the board about these requirements.
To ensure compliance with government transparency laws in future meetings, the board should ensure that it publicly identifies all parties involved in real estate negotiations prior to entering closed sessions.
District
To increase board member accountability at future meetings, the district should adhere to state law and its policies by reducing board member stipends when members fail to attend board meetings.
To ensure compliance with government transparency laws, the district should train staff by August 2019 on the timing requirements of the Brown Act pertaining to publicizing board meeting agendas.
The Board’s Operational Practices Did Not Always Comply With District Policy and Other Requirements
Key Points:
- The board violated district policy through several of its actions at board meetings. Although some of those actions raise concerns about ethical behavior, the board is not currently subject to a state law that requires government officials to receive periodic ethics training.
- The board has not adhered to requirements in the superintendent’s contract on the format and timely delivery of her annual performance evaluations. In particular, the board failed to provide two evaluations to the superintendent and provided two other evaluations late.
- Although the board agreed with nearly all of the recommendations in FCMAT’s report on its audit of the district, it has not ensured that the district implemented many of these recommendations.
- The board has not provided adequate support to its bond oversight committee, limiting the effectiveness of that committee’s review of the district’s bond programs.
The Board Violated District Policy Through Its Actions at Several Board Meetings
The board failed to consistently adhere to district policies during board meetings. The board conducts its business through board actions; in other words, the board votes or reaches consensus to take action on specific agenda items. We reviewed 50 actions the board took from fiscal years 2013–14 through 2017–18 and identified 11 that violated district policy, as we summarize in Table 3. In these cases, the board either failed to take actions that policy required or it took actions that directly violated policy. According to the district’s policies, the board members are to govern responsibly and hold themselves to the highest standards of ethical conduct to maximize board effectiveness and ensure public confidence in the district’s leadership. However, by failing to adhere to operational practices in district policy, the board has limited its transparency and effectiveness, as well as eroded the public’s confidence in its leadership.
Table 3
Certain Board Actions Violated District Policy
| MEETING DATE | BOARD ACTION |
|---|---|
| May 2014 | The board extended a meeting's duration more times than the single instance allowed per meeting. |
| May 2015 | The board failed to establish districtwide goals. |
| May 2016 | The board extended a meeting's duration more times than the single instance allowed per meeting. |
| July 2016 | The board approved a reimbursement to a board member for out-of-state travel for a conference not directly related to education or board governance. |
| August 2017 | The board removed and appointed a new president at a meeting that was not designated as the annual meeting for electing the president. |
| October 2017 | A board member voted to hire his son as a district employee.* |
| November 2017 | The board removed and appointed a new president a second time at a meeting that was not designated as the annual meeting for electing the president. |
| January 2018 | The board appointed an attorney from a law firm to serve as the district's general counsel without evaluating any proposals from other law firms. |
| February 2018 | The board approved a legal services contract with the firm of its general counsel without evaluating any proposals from other law firms. |
| February 2018 | The board failed to conduct a required annual self-evaluation. |
| April 2018 | The board president unilaterally directed the district's general counsel to take a specific action without board approval. |
Source: Analysis of district policy and board actions from fiscal years 2013–14 through 2017–18.
* We discuss this action here because it violated both state law and district policy.
In early 2018, the board violated district policy when it failed to evaluate the proposals it received for general counsel services, which limited its ability to demonstrate that the law firm it selected was the best choice for the district’s needs. District policy requires that staff issue a request for proposals when seeking most types of legal services. In addition, the board and the superintendent are required to jointly evaluate law firms for consideration based on various criteria, such as a firm’s background, experience, and reputation in education law; its experience advising or representing school districts in the State; and the appropriateness of its fees. However, the board and the superintendent failed to conduct such an evaluation before the board selected one of the six firms that had submitted proposals to serve as the district’s general counsel.
When the board directed staff to begin the search process in a September 2017 board meeting, the board president stated that the board would choose the general counsel and indicated that he was unaware of district policy governing the selection process. In a November 2017 board meeting, district staff requested that the board identify the evaluation criteria for the proposals, but the board did not provide that information. Ultimately, the superintendent communicated at a January 2018 board meeting that district staff had provided board members with six proposals to review but that district staff had not received any direction from the board about the process for selecting a firm. At the same meeting, one board member commented that she was unclear about the process for making the selection and that she preferred a public interview of the firms at a board meeting to facilitate transparency. Another board member said that he had assumed there would be a selection process to follow and that it would be ideal for staff and board members to form a committee to evaluate the firms against specific criteria. Although multiple members of the public also commented that they were not aware of the process the board was using or that they believed the board should use specific evaluation criteria, the assistant superintendent of business services confirmed that the board did not conduct such an evaluation.
Instead, at the same meeting, the board approved the appointment of a specific attorney as the district’s general counsel through a 3-2 vote without conducting any form of comparative evaluation with staff. It approved a contract with that attorney’s firm a month later. By failing to adhere to the district’s policy for selecting legal counsel, the board committed the district to a contract that it cannot demonstrate to the public was the best choice. If the board had teamed with district staff to conduct an evaluation as district policy requires, it could have presented a summary of the evaluation process at a public meeting and demonstrated the basis for its decision.
The board also failed to develop goals for the district in accordance with another district policy. This policy directs the board to establish a long-range vision for the district and adopt long-term goals that focus on the achievement and needs of district students. District policy further requires that these goals align with the district’s vision, mission, philosophy, and priorities, and that they are limited in number so the district can achieve them within established time frames. Although the board most recently worked on developing district goals in 2015, it cancelled the meeting that it had scheduled in May 2015 to complete them, and it did not hold any meetings after 2015 for that purpose. The superintendent confirmed that the board did not subsequently establish goals for the district. She told us she intended to lead discussions about district goal setting in March 2019, after the newly elected board members received training in ethics and board responsibilities; however, in April 2019, the board subsequently postponed those discussions.
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.
The board has also failed to conduct annual evaluations of its own performance. District policy requires that the board evaluate itself each year to demonstrate accountability to the community and to ensure that district governance is effectively supporting student achievement and the attainment of the district’s long-term vision and goals. This district policy further stipulates that the evaluation address any area of board responsibility, including finance, community relations, relationships among board members, board meeting operations, and communication skills, among others. Although the board publicly discussed in February 2018 the need to hold a meeting at which it could conduct a board evaluation, the superintendent informed us that the board has not conducted such an evaluation since at least 2014. Further, as we discuss previously, the board has not established a vision and goals against which it can evaluate its performance. By not conducting an evaluation for more than four years, the board has neglected to identify ways that it could improve the effectiveness of its governance, including aligning its performance with any goals it may have established for the district. The absence of this evaluation has also hindered the board from demonstrating its accountability to the community, given that the board must conduct any discussion of its evaluation at a public meeting.
The board also violated district policy and potentially misused district resources when it approved two travel reimbursements for board members. District policy acknowledges the need for board members to obtain training and allows them to attend conferences for board development in topics related to their board responsibilities. It also allows the district to reimburse board members for their travel expenses with advance authorization from the board. However, in July 2016, the board approved a travel reimbursement of $1,900 for one of its members to attend an information security conference in Las Vegas even though the description of the conference did not align with board development. We also question the appropriateness of using district funds to pay for this conference, given that this individual’s full-time profession appears to be in the information security and information technology industry. In another instance, we noted that the board approved a travel reimbursement of $350 in February 2016 to cover a portion of a second board member’s costs to attend a conference in Colorado related to energy and environmental policy. The topics of this conference also appeared to be unrelated to the topics referenced in district policy.
The superintendent informed us that board members may select conferences to attend and formally seek reimbursement of conference costs and travel expenses, which they did in these two cases. However, district staff are not involved in selecting or approving conferences that board members wish to attend. These two instances raise questions about the appropriate use of district resources because neither conference appeared related to board development, prudent governance, or district issues.
The board took other actions that may cast doubt about its stability and forthrightness. For example, it violated district policy by replacing its board president twice during the same calendar year—once in August 2017 and again in November 2017. The superintendent explained that one board member submitted agenda items to remove the board presidents in both instances but did not provide reasons for those items, yet the board proceeded with replacement of both presidents. District policy requires that the board elect a president only once a year, at its annual organizational meeting, which occurred in December 2016 and December 2017. By removing and appointing a president twice in the same year outside of the annual organizational meeting, the board may have raised concerns in the community about the stability and dedication of district leadership, as well as questions about its integrity in adhering to district policy. The current board president—who did not serve on the board in 2017—hypothesized that no one wanted to be in charge of the district at the time, so the presidency moved among multiple board members throughout that year.
Finally, Table 3 shows several other minor violations of district policy. For example, district policy allows the board to extend the ending time of a meeting once per meeting, yet we identified two instances in which the board extended the ending times of meetings twice. Extending meetings multiple times beyond the parameters that district policy defines may erode public confidence in the board’s ability to effectively govern, as it raises concerns about how the board can foster community participation in meetings that extend for several hours and go late into the evening. Additionally, the board president directed the general counsel to draft an appeal document without board approval, which district policy requires. Unilateral actions of this nature may further erode the public’s confidence in the board’s ability to govern effectively and may sow distrust among board members.
Ultimately, the policy violations we identified raise concerns about ethical behavior of the board members. After we began our audit, all members of the current board received ethics training in February 2019 on topics including government transparency, conflicts of interest, prohibitions against the use of public resources for personal or political purposes, and general ethical principles relating to public service. However, the district could find records supporting the completion of ethics training by board members in only one other instance, which was in February 2013—six years earlier. Several board members informed us that they had received ethics training at different times from external sources, but the district was unable to substantiate those claims or determine that the training covered topics applicable to the responsibilities of board members.
School districts, including Alum Rock, are currently not subject to a state law that requires local agency officials who receive compensation for their service to receive at least two hours of biennial training in general ethics principles and ethics laws relevant to their service. However, the California School Boards Association encourages school board members to review ethics training materials. Given the situations we note in this report when the board violated its policy or state law, it would seem prudent for the district to ensure that board members receive periodic ethics training in areas such as conflict-of-interest laws, government transparency laws, and procurement requirements for public contracts. Moreover, FCMAT has previously reported on other California school districts that have experienced similar concerns with their school boards, and FCMAT has recommended that those boards receive training in the kind of subjects that would be covered in an ethics training course compliant with state law.
The Board Has Failed to Evaluate the Superintendent According to the Terms of Her Contract
The board has continuously not adhered to requirements in the superintendent’s employment contract regarding evaluations of her performance. Although the superintendent’s contract requires the board to conduct annual performance evaluations of her, the board did not complete these evaluations by June 30 of each year, the deadline in the contract. As Figure 2 shows, during the past four years, the board completed two annual evaluations after the deadline. It did not provide two other annual evaluations to the superintendent at all: one due by June 2015 and another due by June 2018, which the board still had not completed as of March 2019. The superintendent believes she did not receive the most recent evaluation because the board was focused on other matters, notably issues with Del Terra.
Figure 2
The Board Has Failed to Provide the Superintendent With Timely Evaluations
Source: Analysis of the superintendent’s contract, evaluation documents received by the superintendent, and interviews with the superintendent.
* The superintendent’s initial contract stipulated that her first evaluation was due November 30, 2014, five months after her appointment in July 2014. The contract stipulated that subsequent evaluations were due on June 30 of each succeeding year.
† Evaluation 3 is undated and the superintendent cannot recall when she received it. For purposes of determining whether the board completed its evaluation according to the terms of the superintendent’s contract, we used September 2016, the month the board approved the evaluation template form, as the earliest possible date that the superintendent could have received the evaluation.
‡ Evaluation 4 is undated, but the superintendent acknowledged receiving it in August 2017.
Although the current board president joined the board in December 2018, she believes that the board completed a portion of the superintendent’s evaluation due in June 2018 but never finished it. She also said she was aware of the evaluation deadline in the superintendent’s contract, and she intends for the board to complete the superintendent’s next evaluation by its due date of June 2019. Nevertheless, the board’s failure to provide timely evaluations to the superintendent limits her ability to respond effectively to the board’s feedback on her performance and impedes the board’s ability to verify that she is overseeing the district’s operations in a manner consistent with its expectations. Moreover, without timely evaluations, the public does not have sufficient assurance that the board is monitoring the superintendent’s performance.
The superintendent’s contract additionally requires that the board and the superintendent mutually agree on the format of her evaluations. Although the superintendent and the board president agreed on a format for the evaluation she was to receive in 2017, the board used a different format instead. Specifically, the superintendent and board president agreed that board members would provide narrative comments without numerical scores to the board president, who would consolidate those comments into a single document. However, our review of individual board members’ comments and the consolidated document found that the final evaluation document included numerical scores and did not appear to reflect the positive narrative comments of one board member.
According to best practices for effective school board governance from the California School Boards Association, one of the most important accountability tools for a school board is the evaluation of its superintendent. The evaluation process allows the board to work with the superintendent to establish performance targets, monitor performance periodically, and identify ways to improve performance. In addition, the board’s accountability to the public can be achieved through monitoring organizational performance and reporting the results to stakeholders. Therefore, it is critical that the superintendent’s evaluations accurately reflect the input and perspectives of all board members to ensure that the board is able to oversee whether her performance aligns with its expectations.
Moreover, the district did not retain copies of those evaluations that the board did perform. Although the superintendent’s contract specifies that copies of her evaluations are to be maintained in her personnel file, we determined that this file did not contain any such documents. Instead, the superintendent provided us with copies of her evaluations that she had personally retained. The interim assistant superintendent of human resources could not explain the absence of these evaluations in her personnel file but agreed that they should be retained.
The Board Has Not Implemented Key FCMAT Recommendations
FCMAT's Mission and Function
- FCMAT helps the State’s local educational agencies fulfill their financial and management responsibilities by providing fiscal advice, management assistance, training, and other related school business services.
- FCMAT responds directly to requests from school districts and county offices of education that seek advice to improve management practices, business policies and procedures, or organizational structure.
Source: FCMAT's website.
Although the board fully or partially agreed with nearly all of the 52 recommendations in the June 2017 FCMAT audit report, the district had fully implemented only nine of these recommendations as of March 2019. As the FCMAT report states, the recommendations are intended to promote sound financial practices and help create efficient organizational operations—elements that are consistent with FCMAT’s mission and function, as the text box describes. The board indicated in its July 2017 response to the audit that it was committed to addressing all of the recommendations. However, we identified 21 recommendations, as we summarize in Appendix B, that remain outstanding. For example, FCMAT recommended that the district develop a process to evaluate whether its consultants and independent contractors should be required to disclose their economic interests. As we discuss previously, the district has not yet taken such action. If it had done so, it would have had greater assurance that its contractors did not have conflicts of interest.
In addition, we identified 21 other recommendations pertaining to the district’s program and construction management contracts with Del Terra that are not currently applicable because the board terminated those contracts.2 Even though the board terminated the two contracts in May and December 2018, respectively, we believe that the district should follow through with addressing many of these recommendations so that it can ensure that its subsequent program managers and construction managers adhere to the terms of their contracts. For example, the district should implement procedures to enforce the terms of its future contracts to ensure that its program managers and construction managers adhere to their scopes of work and produce required program and project reports. We believe that the district should use this opportunity to strengthen its management over these roles before selecting new firms to take over Del Terra’s responsibilities.
The district’s delay in implementing the FCMAT recommendations can be partially attributed to the board, which has not directed district staff to formally track and document implementation efforts. Although staff provided the board with limited updates on certain recommendations, such as their efforts to recover missing construction management documents from a contractor, neither staff nor the board have systematically monitored the district’s actions toward implementing the recommendations. According to the assistant superintendent of business services, the board did not direct staff to prioritize monitoring the district’s implementation efforts, and staff did not believe they had the authority to implement most of the recommendations without board approval. Although the board will likely need to be directly involved with implementing certain recommendations, such as updating board policies to ensure that they reflect the latest statutory requirements, we believe that staff could have taken more initiative in implementing others. Further, we expected the board to have assumed responsibility for ensuring that staff tracked the implementation efforts because it committed in its formal response letter to addressing all recommendations.
When we asked each of the board members whether the board had required district staff to monitor the status of implementation efforts, none asserted that the board had done so. The new board president said she did not know why the previous board did not require staff to track the district’s implementation status. If the board began tracking the status of outstanding recommendations, it could monitor the district’s progress toward promptly resolving them. According to the new board president, the board intends to address the outstanding FCMAT recommendations, although she was unsure how long their implementation would take. By prioritizing the implementation of the remaining recommendations, the board can demonstrate to the community its ongoing commitment to improve its governance over district operations.
The Board and District Have Not Provided Adequate Support to the Citizens’ Bond Oversight Committee
By not consistently providing the district’s citizens’ bond oversight committee (bond committee) with timely support, the board has hindered the committee’s ability to inform the public about the spending of bond funds and to ensure that bond funds are used only for allowable purposes. State law requires the board to provide the bond committee with technical and administrative assistance in furtherance of the committee’s purpose and with sufficient resources to publicize its conclusions. Because the nature of this assistance involves the responsibilities of district staff, we would expect the board to hold the district accountable for responding to the bond committee’s requests. However, the district’s lack of responsiveness to many such requests leads us to conclude that the board did not do so.
We reviewed a selection of bond committee meeting minutes from fiscal years 2013–14 through 2017–18 and found that committee members frequently requested technical assistance and support from the district and its program manager, Del Terra. However, the district could not provide evidence that it provided specific assistance pertaining to eight of 12 requests we reviewed. For example, the bond committee asked district staff during a meeting in February 2018 to provide a bond expenditures report comparing projected and actual costs for the 2016–17 academic year. However, according to the bond committee’s chair at that time, neither Del Terra nor district staff provided the bond committee with the requested report. District policy does not require the district staff to maintain records of the assistance or support they provide to the bond committee. Further, the assistant superintendent of business services informed us that although he provided committee members with general technical support, he did not consistently maintain records describing the technical support the district provided in response to the committee’s requests. Consequently, the district cannot demonstrate that it provided adequate support to the bond committee.
State law requires the district to conduct annual independent performance and financial audits of its Measure J school bond funds to ensure that it uses those funds only for legitimate purposes. The law also authorizes the bond committee to review those audit reports as part of its oversight role and requires that the district provide copies of the reports to the bond committee by March 31 of the year following the fiscal year of the audit. Further, the bond committee is required to issue a report on the results of its oversight activities at least once a year, and this report may also include the committee’s response to the audits. Although the district provided the audit reports for fiscal years 2014–15 and 2015–16 to the bond committee within the required deadline, it did not meet the deadline for the fiscal year 2016–17 reports.
The district provided a draft version of those reports in time for the bond committee’s May 2018 meeting, but it had not submitted final versions to the bond committee as of April 2019 because the board never approved these audits. The bond committee noted in its 2017 annual report to the board that it was only able to provide a provisional response to the audits and that its response could change if there are revisions to the audit reports, such as additional disclosures about the district’s use of bond funds. The bond committee’s note demonstrates that it needs to receive the final audit reports in a timely manner to ensure that it has sufficient information to conduct its oversight.
In addition, the district does not maintain sufficient records to determine whether the bond committee members meet the statutory requirements for membership composition. As we discuss in the Introduction, state law requires the bond committee to include representatives from different groups, including a member from a senior citizens’ organization and a member of a taxpayers’ organization. We reviewed a selection of applications from individuals who served on the committee from fiscal years 2013–14 through 2017–18 and found that the district did not maintain supporting evidence to demonstrate how it determined that particular individuals met the qualifications for representing those two groups. For example, an applicant in 2017 did not identify on his application that he was a member of a taxpayer organization, despite his being designated as the bond committee’s taxpayer organization representative. The district was unable to provide us with evidence to support this designation. As a result, the district does not have assurance that the committee represents all the required constituencies.
Recommendations
Legislature
To ensure that school district boards are knowledgeable about the ethical principles and laws that public officials must follow, the Legislature should amend state law to require members of school district boards who are compensated for their services to receive ethics training once every two years.
Board
To comply with district policy and improve transparency, the board should work with district staff to evaluate law firm proposals against criteria when it next contracts for a general counsel. Further, the board should publicly report the results of its evaluation.
To ensure that it provides a clear strategic direction for the district, the board should develop a vision and establish goals for the district by November 2019 and regularly monitor progress toward achieving these goals, as district policy requires.
To provide additional transparency and ensure that its performance is meeting the needs of the district, the board should conduct an annual self-evaluation by November 2019 and publicize the results.
To increase the board’s accountability and ensure the prudent spending of district funds, the board should implement procedures by August 2019 requiring that its members document on their requests for reimbursement how their travel complies with district policy.
To improve organizational stability and increase transparency, the board should comply with district policy pertaining to other operational practices, including appointing a new board president only during its annual organizational meeting unless otherwise required to do so by policy, and limiting extensions of board meeting ending times to the single instance allowed per meeting.
To assess whether the superintendent’s performance aligns with the board’s expectations, the board should provide timely annual performance evaluations in an appropriate format. Further, the district’s human resources department should maintain copies of these evaluations.
To demonstrate its commitment to improving its governance over the district’s operations, the board should immediately direct district staff to track and prioritize the implementation of the remaining outstanding recommendations from the FCMAT audit report. The board should also direct staff to analyze the recommendations relating to its terminated contracts with Del Terra, identify those recommendations that will continue to be relevant after the appointment of a new construction manager and a new program manager, and implement policies to strengthen the district’s monitoring of those contractors. The board should then monitor the status of the recommendations to ensure their implementation.
To ensure that the bond committee receives the assistance it requests from the district to perform its oversight duties, the board should create a policy by August 2019 requiring district staff to document the assistance they provide to the bond committee and to regularly report to the board on the nature and frequency of this assistance.
District
To reinforce the ethical principles, laws, and policies that the board must follow, the district should establish a policy by July 2019 to provide biennial training to board members on ethics, applicable government transparency, conflict-of-interest requirements, and district policies.
To ensure that the bond committee receives timely and accurate information from the annual audits of the district’s bond funds, the district should immediately begin to monitor the progress of the audits and prioritize their completion within nine months after the end of each fiscal year.
To ensure that the bond committee includes representatives from all required constituencies, the district should verify and document representation of the committee members that the board appoints.
Other Areas We Reviewed
To address the audit objectives approved by the Audit Committee, we also reviewed the subject areas detailed in Table 4. The table indicates the results of our work in these areas and any associated recommendations that do not appear in the other sections of this report.
Table 4
Other Areas Reviewed as Part of This Audit
| Bond Issuance Costs |
|
The district violated state law and its own policy when it failed to publicly disclose cost information after issuing general obligation bonds to finance the improvement of its schools, thereby limiting transparency to the public. A general obligation bond is a voter-approved debt instrument the district can issue; it is payable from the proceeds of taxes levied on property within the district’s boundaries. State law requires the board to present the district’s actual cost for a sale of these bonds at its next scheduled public meeting following the sale—a requirement also stipulated in district policy. The district’s actual costs for issuing bonds include the fees it pays to its bond disclosure counsel, its financial advisor and consultants, the bond underwriter’s counsel, and the rating agency. For one of three general obligation bonds the district issued from fiscal years 2013–14 through 2017–18, the district’s financial advisor appropriately presented at the required board meeting the actual costs of $239,000 for the bond issuance of $32.4 million. However, the board did not present information on actual costs at the meetings following the other two bond issuances, which totaled $21.1 million. When we asked why the board did not disclose the actual cost information for those two bond issuances, the assistant superintendent of business services said he was unaware of the legal requirement to do so, even though district policy clearly states this requirement. Although he said that the district relied on its bond counsel and financial advisor to meet all bond-related requirements, we determined that this particular requirement was not explicitly stated in the district's contract with its financial advisor. He further noted that he works with the advisor when the district issues bonds, and he reviews the district’s contract with the advisor to determine what information the advisor should provide to the district. However, even without knowledge of the relevant legal requirements, district staff should have been familiar with district policy and ensured that either the advisor or the board disclosed the cost information. Recommendation |
| Emergency Repair Contracts |
|
The board approved a resolution giving district staff authority to enter into contracts to conduct emergency repairs after a fire at a district school site in February 2016. State law allows the board to delegate the responsibility of awarding emergency contracts to district staff, and at a special board meeting in March 2016, all five members of the board approved a resolution declaring emergency conditions at that school and authorizing the district to award a contract for repairs without requiring bids from multiple companies. District staff used this authority to enter into a contract with HARBRO of Northern California, Inc. (HARBRO), a company specializing in emergency services and property restoration. However, the district later acknowledged that the contract had terms that were potentially unfavorable to the district. The district’s director of maintenance awarded the contract of $525,000 on behalf of the district to HARBRO, with whom he had been employed before he came to work at the district. Although he acknowledged the connection and the superintendent was aware of this contract, this situation still creates the appearance of possible favoritism toward the contractor. Further, when the district entered into the contract, the director of maintenance initially used the contractor’s service agreement form as the formal contract document instead of the district’s standard contract forms for repair and construction work. The district later signed a new agreement in May 2016 using the district’s own forms. According to a legal memorandum that the district’s general counsel prepared during the period of the contract, the contractor’s service agreement form did not include several provisions that board policy requires, and it also contained nonstandard terms that were potentially unfavorable to the district. We found that the agreement lacked a nondiscrimination clause, a conflict-of-interest clause, and a not-to-exceed maximum contract amount, leaving the district without assurance that the contractor would comply with district policy or that the district’s obligation would be limited to a specific amount. The assistant superintendent of business services acknowledged that this contracting arrangement was problematic, and he said that if a concern had arisen before it entered the new agreement using the standard form, the district would have had to seek legal assistance to resolve that concern. We also determined that the district lacks policies or procedures addressing contracting requirements under emergency conditions. According to the director of maintenance, he used HARBRO’s service agreement form because he was not aware of the appropriate form to use for emergency repair services and had initially anticipated that the nature of those services would not result in a large project. He said that the assistant superintendent of business services at that time subsequently asked him to use the district’s standard form after realizing that HARBRO would not complete its services as quickly as expected. Although the superintendent indicated that she relied on that former assistant superintendent to ensure that the district complied with legal and policy requirements, the superintendent is ultimately responsible for ensuring that her staff comply with those requirements. Recommendation |
| Retaliation |
|
The Audit Committee directed us to determine, to the extent possible, whether the board or individual board members interfered with, directed others to interfere with, or took any action intended to retaliate against employees who provided information to aid in investigations or who exercised their rights under applicable whistleblower laws. To address this objective, we interviewed key staff and board members, reviewed the personnel files of 12 current and former district staff members who have or had frequent contact with the board, and reviewed the state’s civil jury instructions for whistleblower retaliation. Within the personnel files, we did not identify any documentation of any adverse employment actions, such as a demotion or termination of employment, that could constitute retaliation for whistleblower activities or aiding an investigation. However, we did note that the Superior Court of Santa Clara County issued a civil restraining order against a board member in 2018 after finding that he had threatened the superintendent with violence during a closed session in August 2018 involving a discussion of the district’s contracts with Del Terra. This individual is no longer a member of the board as of December 2018. Courts have ruled that harassment of this type may be an adverse employment action for which an employee may file a claim for whistleblower retaliation. Further, before this closed session, the superintendent had informed the board in 2016 of various potential violations of law and district policy associated with Del Terra’s contracts. Based on these court rulings, the timing of events, and the related facts and circumstances, we believe that a judge or jury could reasonably find that the board member’s threats were motivated, at least in part, by whistleblower activities related to the Del Terra contract. However, without a full hearing and testimony under oath, it is not possible for us to determine whether all the elements of a retaliation claim would have been satisfied. Finally, other district employees informed us that they had felt uncomfortable or insulted by individual board members’ actions. Such behavior by board members is contrary to the district’s policy on its governance standards, which require board members to establish a positive organizational culture, operate openly with trust and integrity, govern in a dignified and professional manner, and treat everyone with civility and respect. Recommendation |
We conducted this audit under the authority vested in the California State Auditor by Government Code 8543 et seq. and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
Date: May 23, 2019
Footnotes
1 The county office has the authority and responsibility to stop payments from fiscally dependent school districts to contractors if certain conditions are not met. It made such a determination in this instance. We discuss the state superintendent of public instruction’s revocation of the district’s fiscal independence in the Introduction. Go back to text
2 We also identified one unrelated recommendation that the district has not implemented because it is no longer applicable. That recommendation also appears in Appendix B. Go back to text