The Alum Rock Union Elementary School District (district) in the city of San José has been the subject of scrutiny since 2016 for its governance, financial operations, and contracting practices. Our audit identified concerns in all of these areas. We found that the board of trustees (board) and district staff have violated state law and district policy in their operational and financial practices. The board and district committed these violations despite the fact that two other monitoring entities have issued recommendations to improve the district’s policies and practices in areas where we also found problems, and the Santa Clara County Office of Education has increased its oversight of the district. In particular, we noted weaknesses related to the district’s construction project oversight, financial interest disclosures, and public transparency. This report draws the following conclusions:
The District’s Operational and Financial Practices Did Not Always Comply With State Law or Align With Best Practices
Several of the district’s financial and contracting practices have placed it at risk of not obtaining goods and services from the most qualified firms at fair and reasonable prices. These practices have also limited the transparency of its operations. For example, the board did not use a structured process to choose the most qualified firms when soliciting and awarding certain contracts related to construction projects, although state law and district policy require it to do so. We also question the district’s decision to hire the same contractor both to manage the construction of school improvement projects and to oversee that management, a decision that profoundly compromised quality control. Moreover, the district does not have a process for systematically monitoring its contractors to ensure that they have fulfilled the terms of their contracts before it pays them, nor does the district provide the board sufficient information about its payments to contractors. Finally, the district does not know whether some of its contracted personnel who filled key roles in the district had conflicts of interest because it does not require them to disclose their financial interests, even though these individuals served in roles similar to those of district employees who must disclose their interests.
During the past several years, board members did not consistently attend board meetings, limiting the effectiveness of the board’s governance. The district also violated state law by paying those board members for meetings they did not attend. Further, from fiscal years 2013–14 through 2017–18, the board did not consistently adhere to other aspects of state law, thereby affecting both its transparency to the public and the effectiveness of its governance. For example, one board member did not properly recuse himself from a vote involving the hiring of his son, while another recused herself from a vote when she had a potential conflict of interest but did not properly explain the nature of that conflict. In addition, the district did not ensure that it posted board meeting agendas in compliance with state laws, potentially limiting public involvement.
The board could not demonstrate to the public that its selection of a law firm to serve as its general counsel was the most appropriate choice for the district. Although district policy requires a comparative evaluation of proposals when contracting for legal services, the board did not perform such an evaluation in its 2018 selection of this law firm. The board also failed to provide the district’s superintendent with timely performance evaluations, and it still had not taken action as of March 2019 to implement several recommendations a state-established monitoring entity made in 2017 to improve district governance and operations. Finally, the board is not subject to a state law requiring biennial ethics training for government officials.
We also reviewed the district’s adherence to legal requirements regarding disclosure of its bond issuance costs, its processes for entering into contracts for emergency repair services, and the possibility that key staff were subject to retaliation from the board. In each area, we found that the district could improve its processes, as we present in the Other Areas We Reviewed section of this report.
Summary of Recommendations
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 to receive ethics training once every two years.
To ensure that it selects the most qualified firms to perform certain contracted construction projects, the board should follow state law and its own policies in such selections.
To ensure compliance with state law, the board should request training in and adhere to applicable state requirements pertaining to governance and transparency by August 2019.
To assess whether the superintendent’s performance aligns with the board’s expectations, the board should provide timely annual performance evaluations to the superintendent.
To comply with district policy, the board should work with district staff to evaluate proposals when it next contracts for legal services.
To ensure that its contractors fulfill their requirements to perform contractually agreed-upon work, the district should develop contract monitoring procedures by November 2019 and train its staff to follow these procedures.
To identify its contracted personnel’s potential conflicts of interest, the district should develop and implement a process by November 2019 to assess whether these individuals should be subject to the district’s policy requirements regarding the disclosure of financial interests.
To increase board member accountability at future board meetings, the district should adhere to state law by reducing payments to board members when they fail to attend these meetings.
To reinforce the ethical principles, laws, and policies that the board must follow, the district should provide its board members with training in ethics at least once every two years.
The district agreed with our recommendations and stated the actions that it and the board will take to address them.