The Rise of New Investigative Reporting

Back in November the New York Times had an interesting article, the focus was on a San Diego blog--Voice of San Diego.

Writes the New York Times:

"Over the last two years, some of this city’s darkest secrets have been dragged into the light — city officials with conflicts of interest and hidden pay raises, affordable housing that was not affordable, misleading crime statistics.

Investigations ensued. The chiefs of two redevelopment agencies were forced out. One of them faces criminal charges. Yet the main revelations came not from any of San Diego’s television and radio stations or its dominant newspaper, The San Diego Union-Tribune, but from a handful of young journalists at a nonprofit Web site run out of a converted military base far from downtown’s glass towers — a site that did not exist four years ago."

Indeed in this country we have seen a trend of local newspapers going out of business, struggling financially, cutting their staffs, etc. The result has been that there are fewer and fewer investigative reports from mainstream newspapers. This has led to a huge hole in local coverage, a hole filled now by the rise of "a new kind of Web-based news operation" which is now forcing the local papers to follow the stories that they uncover.

Sound familiar?

The New York Times reports that similar operations have cropped up in New Haven, the Twin Cities, Seattle, St. Louis, and Chicago. In fact, there are many more in big and small towns.

Where this movement perhaps differs from the Vanguard is that it is being led by professional journalists rather than citizen journalism posted by unpaid amateurs.

The fledgling movement has reached a sufficient critical mass, its founders think, so they plan to form an association, angling for national advertising and foundation grants that they could not compete for singly. And hardly a week goes by without a call from journalists around the country seeking advice about starting their own online news outlets.

“Voice is doing really significant work, driving the agenda on redevelopment and some other areas, putting local politicians and businesses on the hot seat,” said Dean Nelson, director of the journalism program at Point Loma Nazarene University in San Diego. “I have them come into my classes, and I introduce them as, ‘This is the future of journalism.’ ”

All around the country, newspapers are struggling to survive. We learned recently that the owners of some of the largest papers in the country the Los Angeles Times and Chicago Tribune are declaring bankruptcy. Locally reporters are being laid off because of struggling times.

The death of newspapers does not have to come, what needs to happen is that newspapers change the way they operate.

"That is a subject of hot debate among people who closely follow the newspaper industry. Publishing online means operating at half the cost of a comparable printed paper, but online advertising is not robust enough to sustain a newsroom.

And so financially, VoiceofSan Diego and its peers mimic public broadcasting, not newspapers. They are nonprofit corporations supported by foundations, wealthy donors, audience contributions and a little advertising."

This is a model that the Vanguard is likely to follow in the coming year.

But some experts question whether a large part of the news business can survive on what is essentially charity, and whether it is wise to lean too heavily on the whims of a few moneyed benefactors.

“These are some of the big questions about the future of the business,” said Robert H. Giles, curator of the Nieman Foundation for Journalism at Harvard. Nonprofit news online “has to be explored and experimented with, but it has to overcome the hurdle of proving it can support a big news staff. Even the most well-funded of these sites are a far cry in resources from a city newspaper.”

The people who run the local news sites see themselves as one future among many, and they have a complex relationship with traditional media. The say that the deterioration of those media has created an opening for new sources of news, as well as a surplus of unemployed journalists for them to hire.

“No one here welcomes the decline of newspapers,” said Andrew Donohue, one of two executive editors at VoiceofSanDiego. “We can’t be the main news source for this city, not for the foreseeable future. We only have 11 people.”

I think what we will see are more of these kinds of operations. The question is whether these kinds of entities are providing the kind of coverage that people seek.

It is worth reading the full New York Times article from November.

From a local level, one of the things the Vanguard has done in the last year has been to move to more investigative and more watch dog reporting. The local newspaper offers people a better guide to community events, but the Vanguard has the luxury of being able to focus on a single story or two a day and going much further in depth than the local paper. Thus the Vanguard was able to delve deeply into the operations of a Tahir Ahad where the local paper never really covered the story.

Investigative reporting is an issue that many local papers have gone away from. The result is that most stories scratch the surface and rely heavily on official sources. The EPA story from earlier this week represents an interesting case in point. The local activists are concerned about developments on the Superfund Site which will house the new Target. The EPA writes a letter laying out their position that the site does not pose a health risk. However, the local group is skeptical of these claims. The Vanguard actually reports the issue first and takes the side of the local group. The Enterprise reports the next day but takes the side of the EPA. That will likely be the last article you see on this subject by the Enterprise, meanwhile the Vanguard has already written a follow up.

But there is more going on in this story, and probably as soon as next week, we will have further information as the Vanguard continues to dig to get to the bottom of what is going on while the Enterprise has long since moved on and declared there is nothing to see. Perhaps the Vanguard will find something out that changes the course of the story, perhaps it won't. But the fact that the Vanguard keeps looking beyond the official word sets it apart from the rest.

Recently the New York Times had a Q&A with a numbers of their reporters and editors on their internet site. So I asked a question of Walt Bogdanich assistant editor at the New York Times Investigative desk (must be nice to work for a large paper).

In 2008, Mr. Bogdanich won the Pulitzer Prize for Investigative Reporting for the series "A Toxic Pipeline," which tracked how dangerous and poisonous pharmaceutical ingredients from China have flowed into the global market. In 2005, Mr. Bogdanich won the Pulitzer Prize for National Reporting for his series "Death on the Tracks," which examined the safety record of the United States railroad industry. And in 1988, he won the Pulitzer Prize for Specialized Reporting, for his articles in The Wall Street Journal on substandard medical laboratories.

So I ask how local papers can continue investigative reporting given their limited budgets.

"There seems to be a vicious circle now in the media. Primarily that investigative reporting is not funded in all but a few papers because of the loss of revenue and profit that newspapers have brought in. But in part that is due to the declining dedication and quality of the product. How can local newspapers re-commit themselves to investigative reporting?"

Unfortunately his response missed the point:

"Yes, many newspapers have less money to spend on investigative reporting. But it is also true that investigative reporting costs less today than 20 years ago because of the Internet. Case in point: while sitting at our desks in New York, reporters were able to analyze the types of pharmaceutical ingredients that Chinese chemical companies were selling on the open market. Having a great cash flow is not a prerequisite for investigative reporting. It helps, of course. But remember, back in the days when newspapers were flush with cash, most of them did very little of it."

The point is that local newspapers are not doing investigative reporting. It may be cheaper than it used to be, but newspapers are cutting back staff.

The future of local newspapers in part will depend on their ability to figure out a way to restructure in a different economic environment. They will need to find a way to make money and provide a service that people want.

The Vanguard on a good day probably has about a quarter of the readers that the Enterprise gets on a daily basis. (The Enterprise itself only gains access into roughly one-third of the households in the city of Davis with its regular circulation.) There is a niche here to be exploited. The Vanguard has been able to do this with hardly any money used to promote itself. There is obviously a yearning in the populace for more than the bare bones news coverage that most local papers offer while at the same time the local papers provide vital information on an array of topics that the Vanguard could never even hope to try to cover.

The bottom line here is that newspapers are going to have to change if they want to survive. So far they seem reluctant to do so.

---David M. Greenwald reporting

Vanguard Report: Genesis of DJUSD's Fiscal Problems

The Vanguard has recently received a public memo from former Davis Joint Unified Superintendent David Murphy to the Board of Education dated September 20, 2006. The memo was a response to questions, requests, and comments pertaining to a proposed teacher salary hike of 6.5% and a concurrent proposed administrative salary hike.

In this memo are factually incorrect statements that ultimately led the school board to approve a 6.5% teacher pay hike based on claims in it that the district had the funding available over a three-year period to pay for this pay increase. At the time this was a factually incorrect assessment. According to sources however, it is likely that neither the Superintendent nor the interim CBO were aware of this fact.

At the outset, it is important to realize that this assessment should not be construed as an attack on teachers, the Davis Teachers' Association, or their worthiness to receive a pay increase. On the contrary, the Vanguard believes that in general, teachers are well underpaid for the services they render to a community and to society as a whole. Rather, this points to specific problems in DJUSD at the time, that led to the need for changes to be made both in terms of fiscal accounting practices and personnel.

Finally, it should be pointed out that the problems that led to this incorrect assessment have been taken care of. The District's commissioning of FCMAT as discussed in our investigative series on the district's former Chief Budget Officer revealed key flaws in the district accounting practices--flaws that have now been corrected by current CBO Bruce Colby and new Superintendent James Hammond. In other words, these problems will not repeat themselves in the future, however, they do have a lasting impact the district's current budget situation.

According to Bruce Colby, this pay increase cost the district roughly $2 million in salary increases. Looking at that within the context of the original and now current budget shortfalls, one quickly realizes the magnitude of such a situation.

The Memo

Beginning on page 2 of the memo the former Superintendent writes:

"Our budget experts, Cathi Vogel [Ms. Vogel was the interim CBO who was hired to temporarily fill Mr. Tahir Ahad's position and occupied the position until the hire of Bruce Colby in 2007] and Maureen Fitzerald, both of whom are fiscally conservative in a responsible way, have said that the three-year projections of ongoing expenditures have ongoing revenues. Maureen has assured me of this. Thus, the funds are there to support whatever the board wants to do--to fund the 6.5% for all employees or to use some or all of those funds for other purposes. Thus, a fiscally conservative superintendent would say that the funds are there for board decision-making, according to board priorities about what is in the best interests of the district, all things considered."

He continues:

"Given that the funding is available, given the other considerations of funds for the district programs, and given the effect on ALT members of board choices, I do think and would recommend that the board fund the 6.5% improvement to the ALT salary schedules as the next priority item to fund. In fact, I do think that would be in the best interests of the district and board priorities, all things considered."

A board member then asked:

"Since I have been on the board, the unappropriated amount of the ending fund balance has always been considered "one time money." How can we justify this change?"

The Superintendent responds in his memo:

"The fiscal solvency of the district's budget is detailed in the three year projected budgets, based on a 6.5% increase to all employee salary schedules [this included administrative pay raises at 6.5% in addition to teacher pay raises]... Maureen assures us that the ongoing expenditures of 6.5% increases to employee compensation packages have ongoing revenues to support those expenditures."

Inaccurate Information Provided to the Board

The board was told that they would have to use one-time reserves the first year of this pay increase in order to cover the expenditures. After that, monies would become available on an on-going basis to pay for the salary increase. The board was told that this increase would thus only require a one-time use of one-time money. As it turned out, this was not accurate either.

The three-year ongoing fund projection was wrong. There were at least two glaring errors in it.

First, the budget was missing some positions that were being paid $400,000. FCMAT discovered this in their report to the school district.

Second, there were changes to special education funding that were not factored in and this accounted for nearly half a million dollars in expenditures. Both of these errors accounted for $900,000 or just under half of the money spent in the salary increase.

The district would keep itself fiscally solvent and the budget on the positive side by spending the district's voluntary (as opposed to the state mandated) reserves. As those reserves have become depleted however, the district has run into huge fiscal problems. [On a side note, districts such as Woodland right now are using their reserves in order to remain fiscally solvent and they will likely run into similar budget problems in the next few years if this economic downturn continues].

What is the root of these problems? According to a board member at that time, the problem largely consisted of problematic budget tracking procedures that were in enacted under Tahir Ahad.

Again please see our four-part series on the former CBO for a more detailed explanation.

Basically the money in the district was poorly tracked. It was difficult to distinguish on-going funds from one-time money. Carry-over money and other one-time money was rolled into the general fund masking the differences between funds and funding sources.

It is the best guess that the Superintendent probably did not know at the time he was providing the board with incorrect information.

During this time, the role of keeping track of the money had fallen to interim CBO Cathi Vogel. Ms. Vogel repeatedly told the board that it was difficult and murky to figure out what was going on in the books. As the FCMAT report makes clear, the former CBO had left the district with the books in a complete mess. In addition to FCMAT and the work of an independent auditor, it would take present CBO Bruce Colby nearly a year to figure out the district's fiscal situation. These problems are now corrected and this type of problem will not happen in the future.

Nevertheless, the damage was largely done. The district has to heavily rely on their professional staff to make assessments about the viability of new spending programs. There is little doubt that the district is inclined to give teachers salary hikes when the money is available. However, they need to be able to make fiscally sound decisions based on the advice given by professional staff. They need to be able to make informed decisions.

During this incident they received incorrect information based on sloppy accounting practices of past employees and poor decision making by present employees. As a result, the district has dismissed employees who were not providing them with good advice, and put into those positions, individuals who they trust to accurately tell them the truth of their fiscal situation.

One cannot stress enough the importance of the FCMAT report or the changes that the district enacted as a result of that report.

Again, for further information please take a look at the Vanguard's reporting on FCMAT and the problems with the previous accounting system and subsequent changes to the system that have made the district far more sound in its fiscal decision-making.

---Doug Paul Davis reporting

Vanguard Investigation Part IV: Fiscal Crisis Management Assistance Team Findings

The Vanguard continues its multipart series of former DJUSD Deputy Superintendent Tahir Ahad, Total School Solutions, and fiscal mismanagement of the Davis Joint Unified Business Office during Tahir Ahad’s tenure from 1999 to 2006 as CBO of DJUSD.

The first segment of this series which ran on Sunday, February 24, 2008 examined the inherent problems involved in a conflict of interest. The conflict of interest we examined involved a series of disturbing findings of how Mr. Ahad used his position as Chief Business Officer (CBO) with the Davis Joint Unified School District as a means by which to start up his own private company for his own private gain. In short, he used public resources for private gain, a serious breach in the public trust.

The second portion of the series ran on March 3, 2008 and focused specifically upon the facilities planning and management beginning with the lost state matching funds for Montgomery Elementary, problems with Korematsu and eventually the King High debacle which led to the new school board finding out exactly what had been going on with the district’s facilities construction money. Basically money was shifted from later projects to make up for lost matching funds for Montgomery, lower than expected matching funds for Korematsu, and other cost overruns. Instead of acknowledging the depths of the problems, Mr. Ahad asked the school board in 2005 to pass a COP (Certificate of Participation), a form of debt financing, to pay for King High and some other projects. In 2006, the board learned that they only had half the money they needed to fund King High, and they realized that money had been shuffled, but only after an extensive investigation and the temporary halting of construction activities at King High.

The third segment which ran on March 10, 2008 continued to look at the facilities funding problems and other fiscal management issues. We examined the property exchange deal involving the Grande Property, which was a highly secretive and unusual process that we will argue violated a number of the California Education Code’s provisions for the sale of public surplus property. There were several primary problems with the property exchange for King High School. First, the process was conducted primarily in secret with a limited bid process. It required a property exchange to avoid possible efforts by the city to invoke the Naylor act. Finally, the process would have resulted in the district getting a low sale price for the property.

This final segment examines the report from consultant Terri Ryland and the Fiscal Crisis and Management Assistance Team (FCMAT) report. We have discussed both in previous weeks, but this time, we do so in more detail, looking at the problems with the district’s tracking and management of its facilities money and then efforts by the district—which were successful—to fix those problems.

Terri Ryland’s Report

We start this segment by returning to the problems with King High School that emerged on November 2, 2006 and resulted in the halting of construction on that project. Recall from the second segment of this series, that the school board was surprised to find out that the money that they had thought they had approved to pay for King High School in 2005 was not there. Now, the Superintendent, David Murphy, was asking for an additional $5 million in COP to fund the high school. The school board learned that they only had half of the money needed to finish the construction of King High.

As Board Member Gina Daleiden said during that meeting:

“We learned just a few minutes ago that more than fifty percent of the [king high] project is unpaid unless we make a decision about COPs. That is news to me… We need to look at the COPs that the previous board took out because I think they were for King High.”

Throughout this trying and at times contentious meeting, Superintendent Murphy was steadfast in his belief that the $10 million was still there... "I’m sure we have all the money that we think we have, but the documentation provided to the FCMAT team was deficient… I’m confident that not only do we have the money that we believe we have, but the documentation will show that.”

He explained that since we were short-staffed on the business services side, the top two positions were vacant, and that the facilities people were not people with fiscal expertise, and that this was the cause of the confusion.

It was at this point that Superintendent Murphy brought in Terri Ryland to examine the district’s books and figure out where the money that the school board believed should be there was.

As we learned two weeks ago, Superintendent Murphy was correct—the $10 million was there, it simply had been used to backfill payments for previous facilities projects and therefore unavailable to pay for King High.

As consultant Terri Ryland put it, “that wasn’t negative money, that was a shortfall in money that at one time we anticipated receiving.”

Part of the confusion on the board's part is that as Board Member Jim Provenza put it, we were “carrying the anticipated state revenue from Montgomery in our facilities plan as revenue available for projects.”

That money according to Terri Ryland was carried on the book until the end of the 2005-06 year. In other words, to the school board, it looked like money was there, that was not in fact there.

FCMAT Report

This problem among others were laid out more fully in the Fiscal Crisis and Management Assistance Team (FCMAT) report that was released on December 14, 2006.

After District Chief Budget Officer Tahir Ahad left the district in 2006, DJUSD hired an interim CBO Cathi Vogel. One of Ms. Vogel’s key recommendations to the Superintendent was to bring in the FCMAT team to examine the district and assess its conditions.

Part of the problem that came to light during the course of both the November 2, 2006 meeting and the December 7, 2006 meeting is that once Tahir Ahad left the district, there was literally no one in the district who understood the budget, where the documents were, and who could help piece together the district fiscal reports. This was a problem in and of itself.

As Board Member Provenza put it on December 7, 2006:

“We had an interim CBO, we had fiscal people here. That’s really what I’m going to. In my mind, correct me if I’m wrong, if someone leaves a district, the fiscal situation should be such that someone else could pick up the books, could look at the records and understand them and you wouldn’t have to pay someone for hundreds of hours of work to put it together. That you could have a system like that, that any CPA could go in and look at and understand.”

FCMAT not only came in to evaluate the district, but they came in to make recommendations on how to better run the fiscal office, so that these problems do not repeat themselves, so that next time someone leaves the district, it is easy for an individual to look at the books and figure out what money the district has. Instead, the district had to bring in Terri Ryland for hundreds of hours of billed work to literally reconstruct the books by hand.

One of things that encumbered the FCMAT team was the fact that “Both the prior Deputy Superintendent and the Director of Business Services cleared off their computer hard drives before departing the district.” FCMAT therefore recommended the enactment of policies and procedures for the retention of information on computer hard drives and notes, so that history can remain even when employees leave the district.

In their executive summary, FCMAT also notes that

“The organizational structure of the business division must clearly define and delineate the job responsibilities of managers, supervisors and employees… Although board policy exists, business office employees have not been evaluated annually. Some have not been evaluated for several years. A process needs to be implemented to ensure that employee performance evaluations are prepared regularly.”

While we have primarily focused this investigation on the Facilities projects and their mismanagement, there is a significant trail of mismanagement within the district offices themselves in terms of personnel. We discussed some of this briefly in the first segment. Interviews with past employees suggest that these structural designs were not accidental and not merely sloppy, but rather intentional features of the office designed to maximize control and loyalty to the former CBO, Tahir Ahad.

The FCMAT report goes on to discuss the fact that “business department staff do not currently receive cross training… Cross training helps departments perform effectively when an employee is absent, and enables employees to perform tasks outside their normal duties when necessary.” It goes on to note: “It appears that the previous CBO and director completed a lot of tasks and analyses on their own, and did not leave backup or information for future employees to follow and understand.”

This again seems to be an innocuous function of an individual’s management style, but it also leads the entire office to be dependent on a single individual in order to effectively function. That means that once that individual leaves the district, the ability to carry out previous functions virtually collapses. Indeed, FCMAT noted, “the district lacks written desk manuals, standard operating procedures or other specific reference documents in the business office.”

FCMAT then goes on to rate the district as having a “high fiscal health risk level. The areas of concern include cafeteria interfund borrowing, cafeteria encroachment, management information systems, retiree health benefits, leadership stability, district liability, and facilities.”

Most importantly—“no single report adequately tracks projects and the different types of funding used on each project for both past and current projects.” I shall talk more about this shortly.

Right now, it is very important to emphasize that all of the shortcomings that FCMAT put into place were addressed by the district in short order. In fact, by the time Montgomery came up before the State Allocations Board, the district informed the board that they had already implemented the recommendations of FCMAT. This will be discussed more at the end of this segment, but given the gravity of the current budget situation it is important to note that at the very least the district is on sound fiscal footing in terms of policies and procedures—however, this was not true in 2006 and that led to a high risk rating that was quite alarming to current school board members.

FCMAT looks at 18 categories of “Fiscal Indicators” and determined 7 categories were “not acceptable.” That put the district into the “high” risk category.

It is interesting to note that FCMAT rated the category, deficit spending, as acceptable. However, they also noted that “since FCMAT’s review, the district has given a 6.5% salary increase that will result in deficit spending of $1,030,758 in 2006-07.” This was not included in their projections and analysis and should be a note of concern that would carry-over to later budgetary issues. Unlike other fiscal practices, this one can be put on the current school board.

The first problem that FCMAT cited was interfund borrowing. On paper, FCMAT said that the district does not appear to have interfund borrowing. However, since the cafeteria fund had ended in a negative balance the previous four years,

“interfund borrowing should have occurred instead of ending the year with a negative cash balance. Because interfund borrowing is not occurring, there has been no awareness or discussion at the board level regarding the negative fund balance.”

Along the same lines, the district got a negative finding on encroachment. “The district needs to engage in interfund borrowing at year end to cover the negative fund balance, and address the issue of why this fund is continually in the red.”

Furthermore, the district was criticized because key fiscal reports were not readily available and understandable.

“The COE [County Office of Education] expressed concerns about how questions are answered on fiscal reports. The district provided backup as requested, but the COE often had additional questions or concerns based on the data provided, and felt that the reports did not answer the questions in many cases.”

The district scored poorly on retiree health benefits that were funded on a “pay-as-you-go basis” rather than having an actuarial study and a plan to fund the ongoing liability.

The district also go dinged because they had an interim CBO and therefore lacked stability in leadership.

An interesting point was made that the governing board of the district generally refrains from micromanaging.

“Comments were made that the board micromanages, but interviews and board agendas and minutes did not corroborate that. Board members have asked for additional budget information, such as budgets by department and history of past reductions versus what has been reestablished. These types of requests are common and reflect fiscal responsibility.”

The district liability was not acceptable either. The district had not done the proper legal analysis regarding potential lawsuits nor had it set up contingent liabilities for anticipated settlements and legal fees.

While some of these problems were serious, most of them appeared to be easily resolvable with good management from the administration and direction by the school board.

The most serious problem, not surprisingly for anyone who has read this series, is in the facilities area.

The biggest and most alarming finding is that “over the years, the district has transferred money between funds and it is difficult to ascertain which funds were used for which project.”

One of the biggest findings that both FCMAT and Terri Ryland pointed out is that the district used a single account for its facilities funds rather than creating a separate account for each new project. That meant that in addition to difficulty tracking the project as FCMAT pointed out, it also meant that it was easy to use monies that had been designated to pay for one project could easily be used to pay for previous projects—and the board would have difficulty tracking those payments and funds.

“The tracking reports are inadequate and appear to have been used throughout the program.”

Part of the problem was that the Chief Business Officer left in February of 2006.

“An interim CBO was hired but was told not to work on facilities accounting and funding, because the former CBO would do that. That apparently did not occur, and thus the area of facilities needs immediate attention… The previous CBO controlled all facilities planning and long-and short-term funding recommendations and decisions with no input from the Facilities Department since 2004, when the previous Facilities Director left.”

Furthermore, personnel was not the only problem the district faced on this.

“Even if adequate personnel were available to track projects, the tracking mechanisms used are inadequate and have been for the length of the program. A number of reports are used, but do not appear to reconcile with the district’s accounting system.

There also is no reporting mechanism to track past, current and future projects and their budgets in a master plan format so that the board, staff and public can readily see the expenditures of facilities funds over the duration of the program since approval of the Master Plan in 2000.”

FCMAT goes on to discuss the problems with Montgomery and Korematsu that were discussed in detail in the second segment of this report.

The problem of commingled funds may be explained away as sloppiness or even expediency on the part of the previous CBO. However, one point that needs to be made is that this is not an accidental policy but rather the result of specific board action early in Tahir Ahad’s term as CBO that allowed facilities project money to be placed in a single account rather than giving each project its own account that could be tracked over time by the board or the public.

Board President Sheila Allen found this the most alarming aspect of the FCMAT report’s findings.

“I think the most alarming thing about it was my concern about the specificity of the tracking of the dollars. If someone is in charge of tracking the money, I would hope that they would know exactly which dollars come in, into which pot, how exactly they were spent, and that is something that should be fairly easily tracked. I know it’s a very big organization and I absolutely know how complex school financing is, but that is my expectation of a finance department—is to know exactly how much comes in, how is it supposed to be spent, and how was it spent. "

A final problem that we have already discussed is the use of anticipated but not yet board approved moneys in line items as though the money were there and approved.

“In February 2004, staff prepared and presented a report detailing another revision to the Master Plan. The revisions included another $9.7 million in additional projects. In this report, no mention was made of the proposed funding sources for these projects.”

FCMAT then goes on to say:

“Because of the way the reports have been developed and presented to the board and community, it appears that all such projects have been planned. However, the funding sources are unclear because the board has not yet approved additional debt, such as COPs. Potential future revenue amounts are shown on the cash flow statements even though they have not been approved by the board, giving the impression that there is sufficient cash to proceed with the projects. The reports must be developed to distinguish between secured funding and potential funding to give the board greater certainty and understanding in their discussion of future facility projects.”

Board Vice President Gina Daleiden addressed this point when she spoke to the Vanguard in January 2008:

“There was also a problem with documents that went to the board and the public not clearly reflecting reality. When we adopted the FCMAT report, we made a motion… I made a motion seconded by Tim Taylor to direct the business staff to insure that speculative, not yet board approved financing is not reflected as available cash in cash flow documents and is instead clearly marked as possible options. The FCMAT report also says that that should happen.”

On page 95 of the FCMAT report they note $3 million was erroneously entered onto the line item of “projected redevelopment fund.”

“Since the issuance of FCMAT’s initial draft report, the district has disclosed that the $3 million was entered on the wrong line and instead should have reflected a new COP issuance, with a second $3 million to be requested in 2007. Since neither amount had been approved by the board, it is not appropriate to reflect that as cash flow unless clearly noted as potential cash. The current practice of listing the amounts without such a notation must be discontinued. The district should insure that all revenue projections are realistic and based on likely funding.”

According to Board Vice President Gina Daleiden, the board took the findings very seriously.

“Because that was such a concern when the board adopted the FCMAT report, the board made a series of motions adopting a lot of the recommendations from the from the FCMAT report that was done very deliberately so we could say we take this very seriously and make sure that our practices become best practices. Now in terms of what key changes were most vital to make, you can find that online in Bruce’s response to the FCMAT report, our new CBO. And I would cite these changes as well as… so here’s some of the changes… Some of the changes are new fiscal team has implemented, stronger financial controls, clear separation of authority within the accounting staff, and more accountability in staffing decisions. We have hired a director of facilities who will save us money by bringing professional oversight to our facilities budgets, maintenance and projects. We have instituted more regular reporting to the board on budgeting items. One of the things that it says in the FCMAT, that it notices in the past that the interim budget reports were put on consent without discussion and those are always on our regular agenda now so that the board can consciously talk about any adjustments to the budget and track how budget expenditures are meshing. [refers to PowerPoint on website that shows Colby’s changes to the FCMAT report]. I’m confident that our new CBO is implementing the FCMAT report. And it was very clear that that was one of the board’s top priorities for our interim superintendent. To make sure that the FCMAT report was being implemented.”

Board President Sheila Allen:

“To my knowledge we have either already implemented the recommendations or there are plans in place to do the recommendations. The key changes that they wanted in place were two things, is that they were talking about a coding system—that’s the standard practices. And the other thing is that you need a permanent head person and fiscal manager and we have both of those now.”

Some have defended past fiscal practices of the district on a number of fronts. The first point of course is that no money has been lost or misspent by the district.

Even strong critics of the previous regime agree on this point.

Board Vice President, Gina Daleiden:

“I do want to be clear that the money was spent on district buildings. So it wasn’t taken away or put into something that had nothing to do with the school district. They were spent on our buildings just no one realized the way in which it was being spent”

Board President Sheila Allen was very adamant that there was no lost money.

“The FCMAT report, and to my knowledge there was no lost money, there was no money that was illegally spent, but it was very difficult for someone to come in and be able to track exactly—here’s the money coming in, here’s how it was spent. And that’s concerning because these are taxpayer dollars. So we want to make sure that we know how much money we have, how it was spent, and that it was spent in the right category.

The good news about FCMAT is that it gave us some very clear guidance from professionals of where we need to go to do better. Although there was alarming information in there, the important thing to me was very help that rather than someone to say to me it’s a mess, or we don’t know exactly where the money’s been going, what was important to me is that they said here’s what you can do, you can do this… And also it was very important for me to know, and I’m sure I said this at public meetings, there’s no lost money. Nothing illegal has happened.

All of the experts, both ours and their’s were able to say, there’s no lost money, there was nothing illegal happened. That was very important to me that was very clear to me… I’ve been looking around for a better word than sloppy bookkeeping. It wasn’t very precise. So we put into place a more precise approach to bookkeeping and there’s all new people over there. So that’s the really good news is that we have people that we can trust—their numbers, we can trust that they’ll get us the information straight up…”

The Vanguard agrees with that assessment, but would argue that it is less than clear that this the end of the story. While in the true sense of the word, money was not lost, the poor fiscal practices of the district monopolized board and staff time that could have been spent better in other areas. Moreover, it is far from clear that these practices did not cost the district money both in terms of inefficiency of operation but also in terms of the time and money needed to get a straight accounting from both FCMAT and Terri Ryland. That in a very real way is lost money.

A second point was made to me that the FCMAT rating of “high risk” was misleading. The district got good marks on position control for the most part, which is the means of tracking and projecting employee salary and benefits. “A reliable position control system establishes authorized positions by site or department and ensures that staffing levels conform to district formulas and standards, thus preventing overstaffing.”

They go on to point out that a number of the deficiencies were minor and easily correctable, and that given four of those factors, that would place the district in low risk rather than high risk. On the other hand, one might wonder if some of the past practices of the district have not caught up with them in the current budget crisis.

Board Vice President Gina Daleiden was asked about the rating system.

“As with any standardized numbers, the numbers are not the whole story. So whether or not one question was weighted more than another, whether or not our score was a nine instead of a nine and a half, and I’m making that number up, the numerical value doesn’t matter to me, as much as the substance of the report. I am a trustee of this district, when I look at a document that says to me here are some issues with how the district’s finances are being run, we need to take those seriously, that’s the only way to get better. You have to look at things that can be improved and work on improving them. Some of the findings in this report—the responsible thing to do is to pay attention to them. To fix them. And it doesn’t really much matter to me whether it’s a high risk, medium risk, it’s not a grade on a paper and it’s not points in a pageant. This is about the practices of the district. And wanting to insure that they’re not only adequate but they’re really good. We have a great school district, and we need to have great fiscal practices so that we can support all of our programs and do the best for our kids. And it’s public money so we have to be careful in how we expended it.”

Both Sheila Allen and Gina Daleiden agree that things have changed.

Board Vice President Gina Daleiden wants to the public to know that “Past practices are in the past.” We have according to her new safeguards in place. We have new conflict of interest codes that will protect us from future problems with employees working in outside consulting firms, we have implemented the recommendations of the FCMAT report, the district reports to the board on a regular basis with easy to understand and clear budget updates. She expressed confidence both in the new CBO Bruce Colby and the new Superintendent James Hammond. And the board along with Bruce Colby has enacted a series of careful fiscal procedures so that it is easy to track monies as they go to and from projects.

Board President Sheila Allen likewise, declares it a “new day.”

“I really am not interested in having the district dragged through the mud further when these are things that have already happened. I’m totally fine with people knowing what happened that’s fine with me, but I want the headline and I want the last part of it to be here’s how it’s changed. It’s a new day. We have a new superintendent; we have an all-new budget office. We have this accounting information put into place. The board since I’ve been on it, has a very strong commitment to open government, no more closed door discussion about district information.”

Summary

My concluding remarks for this four-part series basically echoes the comment made by Board President Sheila Allen. I think the public can look at these problems and better understand in part why we are facing some of the budget problems that we are facing. However, I also think we must understand that the then new school board which came into office in December 2005 with newly elected members Sheila Allen, Gina Daleiden and Tim Taylor, joined with Jim Provenza in providing the leadership that has over the last two years taken deliberate and concrete steps to put the district on better fiscal ground. It was these school board members who led the fight to clean up the fiscal house of the district and in many cases uncovered past business practices condoned by previous school boards that have plagued the district for years.

There is better tracking, better oversight, and a new fiscal team. What is unfortunate is that the budgetary bottom has fallen out of the district at a time when in terms of policies and procedures, the district has never been stronger.

Nevertheless, I think there is a good amount of important information that has been gleaned out of this investigation in terms of the way that the business office was run, the way in which monies were handled, and most importantly the need for all districts to enact strong conflict of interest policies in order to better protect themselves from employees and companies that are seeking to profit on public money.

---Doug Paul Davis reporting

Vanguard Investigation Part III: The Grande Property Agreement

The Vanguard continues its multipart series of former DJUSD Deputy Superintendent Tahir Ahad, Total School Solutions, and fiscal mismanagement of the Davis Joint Unified Business Office during Tahir Ahad’s tenure from 1999 to 2006 as CBO of DJUSD.

The first segment of this series which ran on Sunday, February 24, 2008 examined the inherent problems involved in a conflict of interest. The conflict of interest we examined involved a series of disturbing findings of how Mr. Ahad used his position as Chief Budget Officer (CBO) with the Davis Joint Unified School District as a means by which to start up his own private company for his own private gain. In short, he used public resources for private gain, a serious breach in the public trust.

The second portion of the series ran on March 3, 2008 and focused specifically upon the facilities planning and management beginning with the lost state matching funds for Montgomery Elementary, problems with Korematsu and eventually the King High debacle which led to the new school board finding out exactly what had been going on with the district’s facilities construction money. Basically money was shifted from later projects to make up for lost matching funds for Montgomery, lower than expected matching funds for Korematsu, and other cost overruns. Instead of acknowledging the depths of the problems, Mr. Ahad asked the school board in 2005 to pass a COP (Certificate of Participation), a form of debt financing, to pay for King High and some other projects. In 2006, the board learned that they only had half the money they needed to fund King High, and they realized that money had been shuffled, but only after an extensive investigation and the temporary halting of construction activities at King High.

This segment will continue to look at the facilities funding problems and other fiscal management issues. We examine the property exchange deal involving the Grande Property, which was a highly secretive and unusual process that we will argue violated a number of the California Education Code’s provisions for the sale of public surplus property.

Next week, we will also examine the FCMAT report and Consultant Terri Ryland’s findings. Future segments will include the efforts by the school district to rectify the problems that existed under Tahir Ahad and former DJUSD Superintendent David Murphy; some of which have already been discussed in previous issues. We are also following up on several different reports from other school districts about similar problems with Total School Solutions and Tahir Ahad. Last week in the Modesto Bee, a story was written about the Waterford School District. We will be looking further into that situation.

Grande Property

In 1971, the Davis Joint Unified School District purchased the Grande Property, which is located in North Davis, for the use of an elementary school in anticipation that Davis would continue to grow in a northern direction. They paid just under $60,000 at the time for that property; however, nothing was ever built and growth patterns in Davis have not continued north of the city.

With the growth in the real estate market during the past decades and inflation of housing and property values, the property is worth at least 100 times the value it was purchased, if not more.

The district realizing that it would likely not use the property for a future school began in the late 1990s to look into selling or exchanging the property. Those efforts moved into high gear in 2005.

Complicating any sale of school property is the Naylor Act or Education Code Section 17485 which governs the sale of certain land owned by a school district.

According to the City of Davis’ attorney, Harriet Steiner, the Naylor Act applies if the property meets three specific conditions. First the land must be used at least in part for “outdoor recreational purposes and is open space land particularly suited for recreational purposes.” Second, the land must have been used for those purposes for at least eight years. Third, there can be no other publicly owned land in the area of the site that is adequate for meeting “the existing or foreseeable needs of the community for recreational and open space purposes, as determined by the public agency proposing to purchase the land.”

If the Naylor Act applies:

Before selling or leasing the land, the district’s governing board must first offer it for sale or lease to the city within which the land is situated. § 17489. If offered for sale to the city, the city must notify the district of its intention to purchase the land within 60 days. § 17489. If the city chooses not to acquire the property, the district must then offer it to park districts, if any exist, and then to the county. Id. The selling price must be not less than 25% of the fair market value and not less than the school’s cost of acquisition, as adjusted for increase in the area cost of living3 and any improvements made by the school. § 17491.

There was a good deal of debate at that time and really even now as to whether or not the Naylor Act even applied given the third provision. There is also a good degree of speculation as to whether or not the city council at that time would have invoked the Naylor Act. Many claim that the city was not interested in the land, although those on the other side mention that at least one councilmember was interested in the use of the Naylor Act. However, the fear was that the school district could lose the property and gain just 25 percent of its worth should the city council choose to invoke the Naylor Act.

As a result, the school district went to great efforts under the leadership of Superintendent Murphy and Tahir Ahad to avoid an open sale that would risk a potential invocation of the Naylor Act. These tactics raise serious ethical and perhaps legal concerns.

From the start, the district met in closed door sessions and in secret during discussions involving the sale of the Grande Property. Instead of noticing the public via the public notice section of the newspaper as is generally required for such sales of public land, the notice was buried in the classified section of the Davis Enterprise where few would be looking for such a public notice.

The arrangement that Superintendent David Murphy and Tahir Ahad had employed by October of 2005 was a land swap that involved a UC Davis property that was the home of Fairfield Elementary School. This piece of property that the university had not wanted was offered to Davis Joint Unified for at least three years prior to this land exchange. The university had been willing to simply give DJUSD the Fairfield School property at no cost.

Instead, the school district would enter into an agreement with BP Equities in which BP Equities would pay the school district $4.5 million in exchange for helping the school district to acquire the 10-acre site west of Davis. In essence, Davis Joint Unified would trade BP Equities the Grande Property in exchange for $4.5 million and the Fairfield School.

Coincidentally, this $4.5 million happened to be the same monetary amount that the district lost out on matching funds from the state when they missed the Montgomery Elementary school deadline. Questions have arisen as to whether the speed, urgency, and also secrecy of this deal had something to do with that lost funding.

The land exchange generated a large amount of controversy in the community. Under pressure for the seemingly sub-market value sale price, the offer was raised on November 22, 2005 to $5.5 million and the deal was locked in.

Nevertheless, controversy continued to rain down on this deal. First, even the revised sales figure seemed too low. According to the best information the Vanguard has uncovered, even given a semi-secretive, non-open process, there were at least three other offers that the district had at the time of the sale that were considerably higher. One of these was from a West Sacramento developer who eventually threatened to sue the district. Another was from John Whitcombe who had proposed a trade of 160 acres for Grande. A third proposal offered anywhere from $7.5 million to $10.5 million and offered to front the development costs.

The existence of these higher offers caused former Davis Mayor Maynard Skinner, who was in attendance at the November 22, 2005 meeting, to proclaim angrily that the district had just “kissed” away $2.5 million.

The problems with the Grande deal were not merely fiscal in nature. There were also severe procedural problems with the manner in which this deal came down. From all appearances the District simply did not follow the procedures that were outlined in the Education Code for the sale of surplus school property.

Education Code Section 17466 specifies that ordering the sale or lease of any property must be done in open session at a regular open meeting. However, this by all accounts did not occur.

“Before ordering the sale or lease of any property the governing board, in a regular open meeting, by a two-thirds vote of all its members, shall adopt a resolution, declaring its intention to sell or lease the property, as the case may be. The resolution shall describe the property proposed to be sold or leased in such manner as to identify it and shall specify the minimum price or rental and the terms upon which it will be sold or leased and the commission, or rate thereof, if any, which the board will pay to a licensed real estate broker out of the minimum price or rental. The resolution shall fix a time not less than three weeks thereafter for a public meeting of the governing board to be held at its regular place of meeting, at which sealed proposals to purchase or lease will be received and considered.”

Section 17232 requires that the process must be open and remain open for no less than 60 days. The provision includes for the transfer of property in addition to outright sale.

“A school district's offer to sell or transfer the land shall be made to all park districts, cities, and counties in which the school district is wholly or partially situated pursuant to this article and shall remain open for not less than 60 days. The sale or transfer shall be made to whichever public entity first accepts the offer, or whichever public entity can negotiate satisfactorily for the purchase or transfer of the surplus land.”

Furthermore, the education guidelines stipulate that “a request to waive the bidding process for a lease or sale of surplus real property” must assure a number of things including that “no other state code section or another agency’s jurisdiction will be nullified in order for the request to become effective.” Furthermore, “waiver requests generally indicate that districts have complied with the Education Code requirements but have been unsuccessful in selling or leasing the property…” Education Code Section 33050.

In fact, the district did not request any such waiver. It certainly did not go through the normal process and failed to get a viable offer. No effort was ever made to go through a public, open bid process as the stipulation for waiver would seemingly require.

Furthermore even if granted the waiver, the district still must go through an open public process at a “regular open meeting” and “the governing board will announce, at a public meeting, the applicants deemed to be qualified.”

Education Code Section 17387 specifies:

“It is the intent of the Legislature to have the community involved before decisions are made about school closure or the use of surplus space, thus avoiding community conflict and assuring building use that is compatible with the community's needs and desires.”

Furthermore per Education Code Section 17388:

“The governing board of any school district may, and the governing board of each school district, prior to the sale, lease, or rental of any excess real property, except rentals not exceeding 30 days, shall, appoint a district advisory committee to advise the governing board in the development of districtwide policies and procedures governing the use or disposition of school buildings or space in school buildings which is not needed for school purposes.”

One of the requirements per Education Code Section 17389 is the appointment of a “school district advisory committee made up of no less than seven members and no more than 11 members. The term that those who have followed this process the last few years might be familiar with is the 7/11 Committee—so-called for the membership requirement. But in 2005, this was body was not formed.

Basically the Davis School District did not follow Education Code in the original Grande Property agreement with BP Equities. It was a secretive, closed door process that appears, to this non-lawyer, to have violated each of these provisions of Ed Code.

With a new board in place in the fall of 2005 and Board Members Gina Daleiden, Sheila Allen, and Tim Taylor on the board, the concerns of many in the community led the school board to re-examine the issue on March 16, 2006.

Davis City Manager Bill Emlen effectively took the Naylor Act option off the table during this meeting. According to the minutes from the meeting, “Mr. Emlen noted the city’s interest right now is on the best project for that neighborhood.”

Bill Emlen told the board, “The Naylor Act although relevant probably isn’t a defining factor in this case.”

Maynard Skinner speaking as a member of the public said, “In my opinion, the previous school board was in violation of the Brown Act, if not de jure, then de facto…”

Brian Purcell, the President of BP Equities was asked by then School Board Member Jim Provenza if there had been an appraisal on the Grande Property done prior to the agreement. Mr. Purcell told the board that there was not.

Jim Provenza would move to withdraw from the agreement. Tim Taylor seconded that motion.

School Board Member Keltie Jones told the board that she had serious concerns about withdrawing from the agreement.

“I have serious ethical concerns about withdrawing from this agreement; I think it was entered into in good faith. I think it was entered into with the understanding that this was an agreement that we would follow through with.”

She argued that she did not believe that property values in Davis were increasing and that the district could end up with less money.

Jim Provenza then issued forth a lengthy statement on the Grande Agreement from the dais.

“I have an ethical concern about going forward because I feel that the process from the beginning was flawed. And it’s not because of anything that Mr. Purcell did, he was negotiating with Tahir Ahad in good faith, but our process I believe was flawed from the beginning. To begin with it was not actively marketed. An ad was placed in the paper the Friday before the weekend with proposals due on Wednesday. A lot of people didn’t even hear about it until it was too late. Another ad was placed in a trade journal. I spoke to several realtors and developers who felt they were not wanted in the process. That a particular result or particular developer was desired from the beginning of the process. Whether that’s true or not that’s the perception that’s out there. But we did not have the type of active marketing to find everybody out there that might have been interested in the property, and getting bids.

Those bids that we did receive we received one as high as $9 million. We were told, well don’t pursue that one because we were told you have to exclusively negotiate. But we ended up negotiating with a single developer for what was initially a $4.5 million offer. There was no appraisal done before we entered into this agreement until the very day that we voted the first time. That was the first appraisal that we received that was done that week, although I had requested one several times. The response and I’m sure it was in good faith, was it doesn’t make sense to do appraisals, they always come out too low or they always come out lower than the amount being offered. On the night that we voted for $4.5 million, we had an appraisal that said it was worth $6.3 million. Remarkably, we went ahead anyway, but with an escape clause.

We sought two other appraisals. But prior to those two other appraisals we had a letter from the city making Naylor Act claims which was forwarded to those appraisers. I believe that that letter affected those appraisers and I think it affected the amounts of the appraisals. I can’t say for sure that’s it, but it makes me really question the process.

What I heard from one of the appraisers was that he was feeling pressured to come up with a lower amount. That made me question the process. We proceeded with an agreement that had various escape clauses. BP equity has the right to walk out of this deal for no money today—that’s what was written into the agreement. This district has the right to withdraw from the agreement.

If I felt that this process was fair and open to everyone, I would feel comfortable going forward. One of the things I found when looking for an example at one of the Public Record Act requests about documents concerning this, is that there was confusion even as to information as to how the deal was going to work. I don’t think it’s anyone’s fault, I don’t think it was intentional, but I think the process was flawed. I think that the prior board wanted to conclude this agreement before the new board was seated. I think that we were, as a board, giving away this property at a fire sale price. I can’t prove that, but that’s my impression. And I feel as if I have a fiduciary duty on behalf of the taxpayers and on behalf of the students of this district, to make sure that we are getting the most for this property.”

Jim Provenza’s statement confirms a number of aspects of this process that we have mentioned. To begin with the property was not actively marketed. That raises questions about the sale price that was obtained. There was a reluctance to get an appraisal for the property. When Mr. Provenza requested an appraisal, a number of excuses were furnished in an attempt to avoid such as appraisal that would show the reality of the deal that the district was getting.

By far the most important implication is that one of the appraisers was “feeling pressured to come up with a lower amount.” While the appraiser would not go on the record about this incident, he did confirm the accuracy of Jim Provenza’s public statement. It appears that the district, and specifically Superintendent Murphy, apparently in trying to justify the low price for Grande, is alleged to have attempted to obtain a lower assessed price for the property. That is the opposite of what one would expect from a district that was badly in need of funds.

To this day, there remains no good answer as to why the Superintendent and CBO did this. One can only speculate on the rationale.

Current Board President Sheila Allen told the Vanguard during our interview was asked about reversing the decision to sell Grande:

“My recollection of why we reversed the decision—I think it was in my first meeting—is because I didn’t think it was the best deal for the taxpayers and the students of the district. I thought that we could do much better financially with an open process for the community. I had a problem with the process and with the amount of money and so I wanted us to have an opportunity to come in and start over. I truly believe—we’ll have to see what get for the sale price of it and subtract off because we have had some consultant work on it—but I can’t to see exactly what it is in the end that will have done a better service for the students.”

Current Board Vice President Gina Daleiden:

“In all of my conversations, before I was elected and after I was elected, in reports to the board, so my conversations with people who talked to me individually and also who did reports to the board who were professionals in land use/design/development field, the consensus was that Grande would be much more valuable sold as entitled property instead of as raw land which was what the first sale/ exchange was to be. Particularly if the school district as a public entity could find a way to work cooperatively with the city as a public entity to help us along with the entitling of that property we would really increase the value to the developer who would eventually buy the entitled land.”

Why was this agreement rushed through? Was it an effort to cover up for the loss of Montgomery? Was there another financial relationship between members of the district and BP Equities? That is not clear. Jim Provenza would not speak on the record beyond what he said at the public meeting in March of 2006. And those currently seated on the board were not in a position to know.

The district working with the city and developers is working on an entitlement process at present that is likely to bring in a far more lucrative sale from the property.

Current Board Vice President Gina Daleiden would explain the current process.

“The board has had a subcommittee of me and Tim Taylor, along with two members of the city council Don Saylor and Steve Souza. Katherine Hess from planning is staff for the city and Tom Lombrazo, who is a professional in land use and design is our staff person on this. We’ve been meeting including the neighbors in public—they are public to the extent that anybody is welcome to come, often the Grande neighbors are the only ones who choose to come. Usually reporters come in and out and I think just one other community came, maybe we’ve had two.

We can work cooperatively with the neighborhood association and have an open process. We have an MOU/MOA signed by the full board and the full city council… It basically says we’re going to work cooperatively together and try to maximize the value for the school district as well as fit the existing neighborhood and be a positive project for the town. We’re actually getting pretty close to being able to go back to the full board to get a decision on something to take to the city to their planning department… We’re going to put a tentative map on the property that shows how many lots and then we will sell those. The board will decide when to sell those and how.”

In their November 18, 2007 Op-Ed in the Davis Enterprise, Marty West and Joan Sallee argued:

“When we left the school board in December 2005, the finances of the school district were in good shape. Any financial mismanagement that has occurred has been on the 2006 and 2007 school board's watch. In early 2006, the board majority rescinded the $5.5 million contract we had signed to sell the Grande Avenue site, thus jeopardizing funding for building a student commons at the high school and modernizing Emerson Junior High School.”

In fact, what more likely would have happened is that $5.5 million would have simply vanished into the facilities problems that we discussed last week. However, instead of taking out a COP to pay for King High in 2006, the sale of the Grande would have covered it. It seems fairly clear that the Superintendent and CBO would then have been able to have avoided the discovery of the missing King High money the following year.

Summary and conclusions:

The Davis Enterprise on January 10, 2008 reported that a consensus, at least a conceptual agreement between the School District, the Neighborhood Association, and the City.

“The new school board formed a 7/11 Surplus Property Committee — so named because state law specifies the committee should have between seven and 11 members — that recommended the district sell the property. The money from the sale be used only for school facilities, not salaries.

The committee, along with city and school staff, and members of the Grande Neighborhood Association, reached consensus on a plan that features 39 lots, a workable traffic pattern, and greenbelts flanking the west and north edges of the site.”

Several things have changed with the school district, including unprecedented cooperation between the city of Davis and Davis Joint Unified to ensure that the process benefits both the city and the schools.

One of the common denominators during both King High and Grande under Tahir Ahad and David Murphy, was the lack of communication and the almost combative and adversarial relationship with the city.

It is important to note that the sale of Grande will not alleviate the current fiscal crisis in the school district. The money from any sale could only go to facilities and not to the general fund.

However it is pretty clear from the public record and a cursory examination of the law, that the original Grande Property sale made little fiscal sense and it certainly pushed up against the laws of public meetings and the Education Code.

---Doug Paul Davis reporting

Vanguard Investigation Part II: Facilities Finance and Construction Irregularities

This is the second story in our continuing series of examining the tenure of former DJUSD Deputy Superintendent Tahir Ahad and problems that arose out of his establishment of a private education consulting business in 1999—Total Schools Solutions. The first segment of this series which ran on Sunday, February 24, 2008 examined the inherent problems involved in a conflict of interest. The conflict of interest we examined involved a series of disturbing findings of how Mr. Ahad used his position as Chief Budget Officer (CBO) with the Davis Joint Unified School District as a means by which to start up his own private company for his own private gain. In short, he used public resources for private gain, a serious breach in the public trust.

If those specific problems were not serious enough, an extensive investigation by the Vanguard has found a series of questionable decisions and critical mistakes by Tahir Ahad and his staff, especially with regards to facilities planning. During the course of this second segment, we shall examine problems that arose with the construction of Montgomery Elementary School, Mace Ranch Elementary, which eventually became Korematsu, and King High.

Due to the length of this discussion, the next segment of this series will cover the Grande Property, and also examine the Fiscal Crisis and Management Assistant Team (FCMAT) report and how the implications of a budget deficit was created by the use of one-time monies to fund ongoing projects.

One key point that needs to be made at the onset is that the district brought in FCMAT. They also brought in a consultant, Terri Ryland who reconstructed the district’s books that were in disarray following Tahir Ahad’s 2006 exit from the district. The key point however, as Board President Sheila Allen emphasized, “there was no lost money, there was no money that was illegally spent, but it was very difficult for someone to come in and be able to track exactly—here’s the money coming in, here’s how it was spent.” The other key point that will be demonstrated much more thoroughly in a future segment of this story is that many of the problems that FCMAT found with the district’s books have been thoroughly examined by the school district and new CBO Bruce Colby and the district has fixed many if not all of these problems.

Nevertheless, despite the fact that no monies appear to be missing, what the Vanguard has uncovered amounts to serious fiscal mismanagement. Money may not have been lost, but these practices undoubtedly cost the district much in terms of inefficiency, time, energy, and the expense of repairing the damage caused by Mr. Ahad’s business practices. The FCMAT report rated the district a “high risk,” a score that will be explained during the course of this report.

Background

In 1998, the district attempted but failed to pass a facilities bond with the voters. Complaints ranged from the fact that the bond was too high to the fact that it covered too many schools and facilities. So in 2000, the school district placed a $26 million school facilities bond before the Davis voters. Included in this bond was $32 million in matching funds from the state. Measure K sought to alleviate overcrowding by building a new junior high school and two new elementary schools—one in South Davis and one in Mace Ranch.

The paired down ballot measure passed easily with 85 percent of the vote. However, in it contained the seeds that would cause almost a decade worth of problems for the Davis Joint Unified School District as well as many in the community.

The first problem was the decision to include Mace Ranch Elementary School in the bond measure. There were strong political reasons for its inclusion including a Mello Roos levied on the residents of Mace Ranch and the political need to include it in order to insure passage of the bond measure. But there were warning signs as well including a 1996 Future Facilities Task Force Report that suggested that future enrollment might only support an additional 1.5 schools rather than two full-two schools. Unfortunately, that projection has played out to present, where the Best Uses of Schools Task Force report basically found the same thing—the district does not have significant attendance to sustain a ninth elementary school. This is just a side note however; even now it is difficult to ascertain whether the decision to build two new schools was a clear mistake without 20-20 hindsight.

The larger problem however was the reliance of $32 million in state matching funds. The tenuous nature of such reliance was underscored just a little over a month after the passage of Measure K when the Davis Enterprise ran a December 19, 2000, article that questioned what a State Allocation Board decision to reserve a large amount of money in matching funds for Los Angeles might mean for Davis. This put into question whether Davis would receive their allotment of matching funds.

Ironically enough, Tahir Ahad was quoted in the article as saying:

"I believe it does not reflect positively on the work that districts like Davis have done to make sure we comply with the rules and regulations, and to get our applications in on time."

The problematic nature of depending so heavily on state funding becomes apparent as we examine the problems that underlie the construction of Montgomery Elementary and Mace Ranch Elementary, which would become Korematsu Elementary School.

Montgomery Elementary School

In August of 2001, the Davis School district signed construction contracts to build Montgomery Elementary School. According to the plan, the approximate funding requested for this project was just over $9 million of which the State was requested to fund just over $4.5 million.

According to the state law, the district had 180 days from this date to submit a funding application. However, the district did not file until July of 2002, or 11 months after the contract was signed. This application was “rejected due to the District being non-responsive to Staff’s request for addition information. In addition, the District did not qualify for funding since the construction contracts were signed more than 180 days prior to the District’s submittal.”

A key point needs to be made clear at this time—it was not clear that the District knew that it had missed the deadline. However, the application submitted was missing required information and the district failed to respond to requests for additional information.

While the facilities plan in general fell under Tahir Ahad’s auspices, the specific employee in charge of the application was Henry Petrino, the Facilities Director who also worked on the side for Total School Solutions. The readers should be reminded that Henry Petrino left the school district to work full time for Total School Solutions but was hired back as a consultant by Tahir Ahad (as was discussed in the previous segment).

By January of 2003, the school construction was completed. The district then submitted funding application for a second time. The application was rejected once again since the contracts were signed more than 180 days prior to the District’s submittal. The deadline was missed not by a short period of time either; it was missed by a full five months.

The Davis School District was not alone in missing the deadline however.

As Marty West and Joan Sallee wrote in defense of the district administration at the time, in their November 2007 Op-Ed:

“Much has been made of the district's ultimate success in August 2007 in obtaining $4.5 million from the state for the 2001-02 construction costs of Marguerite Montgomery Elementary School. We are also delighted at this successful result of many years of work by many people. When we learned in 2003 that a new regulation jeopardized our application for state construction funds, we supported the superintendent in his immediate efforts to secure the funds. More than 70 other school districts had run afoul of the same obscure regulation.”

In point of fact there were problems with the regulations; however, that really does not excuse missing deadlines. A simple call could have clarified any deadlines for matching fund allocations. Many familiar with such processes told the Vanguard that it would be the first thing we find out, because almost all applications have deadlines. One would ordinarily build a calendar to ensure compliance with any and all regulations. This did not occur with the school district in the case of Montgomery.

The Vanguard asked Board President Sheila Allen about the chief problem involved in losing the state matching funds during the course of her interview in January.

“The chief problem for why we lost the state matching funds was because we missed the deadline. To me, that’s inexcusable to just miss it. For something as huge as this, I don’t know what else that you’re doing, but something so very important as this, you just don’t miss the deadline. That’s the reason that the whole thing started is that you missed the deadline. And there can be speculation as to why one would have missed the deadline, but the bottom line is that the deadline was missed. I don’t think there was a sufficient consequence for such a large mistake as that.”

The bottom line however following the denial of funds is that the district was short of $4.5 million that was being counted upon to fund Montgomery. Worse yet is the fact that the construction was already completed before matching funds were secured. So what did the school district do? Did they issue a mea culpa and ask for more funding? No, they did not. They began a process whereby funding for other projects got shifted to Montgomery. However, the lost money from Montgomery was magnified by subsequent problems with the funding from Mace Ranch Elementary School—soon to be called, Korematsu. Before we discuss Korematsu, we will discuss the recouping of the Montgomery money, which took place just last summer.

“Winning the Lottery”—Recouping the Montgomery Money

Following the second denial in April of 2003, the Governor placed a freeze on all regulations until May of 2004. Upon the lifting of the freeze, regulations for a 120-day grandfathering filing period were approved by the State Allocation Board (SAB) on an emergency basis. The district in November of 2004 submitted a 3rd application and this application was rejected since the District did not have eligibility for the project during the grandfathering period.

The problem was that by 2004, the district was experiencing declining enrollment and no longer eligible for matching funds by the state. It would take until the summer of 2007 until the district, with great effort on the part of staff and community, would secure this matching funding upon appeal.

Assemblywoman Lois Wolk told the SAB:

“It’s true that there have been numerous mistakes made on this application dating from the early year 2000 when the bond was passed and after that 2002 and onward… Many of these issues resulted in a new school board, a new school, a new chief budget officer, and a new superintendent. Heads have rolled indeed. But if the district is not granted this appeal, it is not those individuals frankly who were responsible for the errors who will pay but rather the Davis students.”

Former Assemblywoman and current County Supervisor Helen Thomson also apologized to the SAB for what she described as “very highhanded and arrogant” treatment by former employees of the district. She too emphasized personnel change in the form of a new superintendent and new business manager.

A thorough reading of the minutes from the SAB suggests that while the district did in fact recoup the $4.5 million in matching funds, it took tremendous effort and in many ways it was a decision made not on merits of the case as West and Sallee describe, but rather on mercy by the SAB. They certainly were well within their rights to follow the staff recommendation of rejecting the appeal.

Board Vice President Gina Daleiden told the Vanguard it was a combination of the efforts of Lois Wolk and Helen Thomson along with changes made by the school board that led to the reinstatement of the funding.

“We had a huge helping hand from our widely respected representatives, Assemblywoman Lois Wolk, Supervisor Helen Thomson, and Senator Mike Machado who all went in and made the statements that you can find reflected in the transcript. But basically it is my belief that the State Allocation Board, in that second meeting, understood that the district had made changes to correct past problems and mistakes, had acted responsibly, and had understood that our students would be the ones that would be most hurt by the denial. And our interim Superintendent listed several changes that had been made in the district that he helped make, and that our new CBO had made in our financial practices, so I believed sitting there in the audience, that the state allocation board understood that we corrected a lot of past mistakes and they were willing to give us the funding.”

The Davis School Board led by Jim Provenza worked very hard to make key changes that would enable the SAB to consider overturning the rejection on appeal. Senator Bob Margett, a Republican was a key player in the appeal process. He would not have been willing to overturn the decision had the district not worked hard to clean up their business office beginning with CBO Tahir Ahad, the replacement of David Murphy with Richard Whitmore as Superintendent, the hiring of Bruce Colby as the new CBO, and an implementation of the changes requested by FCMAT.

The Davis Enterprise quotes Keltie Jones praising Jim Provenza’s leadership and expertise on this matter.

School board trustee Keltie Jones credited Provenza, an attorney with the Los Angeles District Attorney's Office in Sacramento.

"We benefited from your expertise in the state Capitol," she said.

Board Member Sheila Allen generously praised the efforts of all involved.

“I have to take another opportunity, because I don’t know if they get a lot of positive press in your blog or not, but Mike Machado and especially Helen Thomson and Lois Wolk, not only came to the meeting and spoke for us, but they were doing political assisting behind the scenes and people were going out of the room and there were phone calls happening at the dais while people were doing their presentations. It passed with more votes than we actually needed. I felt like I won the lottery that day.”

Korematsu

As was the case with Montgomery, the district had budgeted roughly $9 million for the construction for Korematsu. Roughly $4.5 million of that was supposed to be financed by state matching funds. Instead, the district received only $2.476 million or roughly $2 million less than originally planned.

According to Board Vice President Gina Daleiden:

“When we filed for state funds enrollment was at one level and at the time the funding came in we had declined in enrollment so we actually received fewer dollars for Korematsu.”

Local funds had to make up the difference between the $2.4 million in state money obtained and the amount originally planned. Clearly, this is the fault of no one. However, it does illustrate once again the pitfalls of relying on state money as a necessary funding source. Due to the shortfalls and lost revenue, the district between these two projects was around $6.5 million in the hole as compared to the amount that was originally budgeted for the two elementary school projects.

Mismanagement however comes into play here as well. The project bid went to NTD Edge as a “sole source designed build” in which exactly one company was consulted.

The contract itself was very “unusual.” It was a “design-build lease-back contract.” The site would be actually leased to the contractor for $1 per year. According to the minutes from the September 18, 2003 board meeting:

“The design-build lease-back would allow the contractor to negotiate the price with the subcontractors of their choice, reducing cost and ensuring quality workmanship.”

The board would be informed that this arrangement would be “expected to see reduced architectural cost and reduced change order costs with this type of approach.”

This would turn out to be largely untrue.

Moreover, the minutes note, “Deputy Superintendent Ahad noted that the district qualified for funding for this project, but the funding is not released until a construction contract is awarded. There is a possibility the money would not be available, although the district already qualified.” Further Mr. Ahad “indicated that eventually the money would be released, but in the meantime the district would have a cash flow issue. The board member noted that was a concern.” A board member, believed to be Don Saylor, although not identified in the article, “noted that was a concern.” And in fact, the district received less than they expected from the state for this construction.

Further problems resulted from the structure of this contract. The board was told that they needed to adopt this contract the evening of September 18, 2003 or the contract opportunity would disappear.

In fact written into the contract were timelines and deadlines for the district to deal with issues such as the burrowing owl habitat within a timeframe that was largely infeasible. This led the contract to not be executed. As a result, the cost of materials went up and costs increased by at least $600,000 on the project.

Questions persist to this date about the nature of this contract and the reason for a single-bid award rather than an open bidding process.

King High

The fiscal practices of the district and the loss in revenues would catch up to the district and Tahir Ahad with the construction of King High. As we would learn in November of 2006, funding was just the tip of the iceberg. There was a fundamental lack of communication between the school district and the city of Davis. Davis City Manager Bill Emlen came before the board to report on several problems that developed.

The three largest were construction crews severing the root structure of trees on B Street that had been at the center of controversy. Suddenly a huge logistical problem conveniently resolved itself. Second, because the district did not consult with the city before proceeding, there was a discovery of a storm drain that ran underneath the King High structure. Finally, the footprint of King High intruded onto city property.

While Emlen was at this meeting, the board learned that the district needed an additional $5 million in COPs (Certificate of Participation) in order to be able to afford to complete the King High construction project. The revelation that the district only had enough money to complete half of the King High project put an immediate halt to the prior conversations and eventually a halt to the King High project itself until the district and school board could figure out what had happened with now nearly $10 million in facilities money.

In order to trace the timeline more accurately, we go back in time to August 18, 2005. It was this meeting prior to the election of Gina Daleiden, Tim Taylor, and Sheila Allen, that set the stage for what would happen.

At that point, Tahir Ahad was coming before the board for approval of a $10 million COP.

Tahir Ahad stated:

“These items are brought to you to implement the action plan which you briefly talked about on June 9 [2005] to raise money for the construction of King High School and to pay for some other projects in the master plan.”

Board Member Joan Sallee would then ask Mr. Ahad:

“And the reason we are doing this is to give us additional money because we have not enough left in the facilities bond. We’ve fulfilled our requirements, we’ve fulfilled our responsibilities to the community, but we want to go on and work on King High School and some other projects that deserve funding but were not included in that original facilities bond.”

Tahir Ahad responded:

“Yes, you are right Joan.”

Later in the discussion, Board Member Jim Provenza expresses his support for this plan:

“It would be a benefit to the students of the district to get started on those projects a little earlier.”

Keltie Jones follows by saying:

“Particularly for me, the key factor is that this is supporting the reconstruction of King High which I think is long overdue and that the students shouldn’t feel they’re second class and not included in all the upgrades that everyone else gets in the district.”

This sequence is vitally important because it establishes that Tahir Ahad as well as three board members at that meeting acknowledged and clearly understood that they were voting to authorize debt to be taken out to finance the construction of King High and other projects.

November 2, 2006, just over a year later Superintendent David Murphy, with Tahir Ahad now gone, was already talking about taking out another COP for $5 million to fund King High School.

Gina Daleiden forcefully spoke to this:

“We learned just a few minutes ago that more than fifty percent of the [King High] project is unpaid unless we make a decision about COPs. That is news to me.”

On the videotape of that meeting, you can hear both Jim Provenza and Sheila Allen stating their agreement with Gina about this.

David Murphy however tried to reassure the school board that all the money was in place; however, they just did not have the documentation. How he could make such an assertion prior to the audit was unclear.

“I’m sure we have all the money that we think we have, but the documentation provided to the FCMAT team was deficient… I’m confident that not only do we have the money that we believe we have, but the documentation will show that.”

The Superintendent then uses the fact that the top two DJUSD administrators in charge of business services were not there as a reason for not knowing what happened with $10 million.

Former Board Member B.J. Kline came before the board during public comment to make a strong statement.

“When we approved back in September or October last year I believe what it was when we did King High, we were told we were fully funded. We had the money in the facilities master plan, because we got the COPS, we had the money, I signed it, my name is on it. So I’m disturbed that we might not have half the money to build this school. And we made a commitment to that community to give them their school… This is one of the questions we asked during the discussion. Are we done with this? Can we move ahead with no problems? And we were assured that there would be no problems… The financing, there’s no excuse for that, absolutely, 100% no excuse… I’m a little bit, I’ll use the word, it’s pretty heavy, disgusted tonight.”

Board member Daleiden expressed her discomfort for going ahead with the project without secured funding:

“The deal is that ultimately this board is responsible for the finances of the school district… So all of this clean up work essentially eventually falls on our shoulders. I am feeling very uncomfortable and a little nervous… I’m worried about causing more problems for our system than we already have. The problems seem to be a little deep. As I sit here today, I don’t know and that’s part of the problem.”

In their November 2007 Op-Ed, Marty West and Joan Sallee blame the school board for creating this mess and suggest that stopping the construction of King High was costly to the district.

“The construction of a new King High School was on track. Funding had not been finalized, pending the completion of other facilities projects, but we knew sufficient funds would be available. The superintendent told the current board in August 2006 that additional borrowing would be needed, secured by future receipts from existing bonds measures.

In November 2006, the board majority, trying to create an impression of financial mismanagement, put King High construction on hold, causing unnecessary delays and costing an extra $175,000. In early 2007, the budget officer reassured the board that the construction money was, in fact, available. King High is now ready to open.”

The fact that this seemed to catch all five board members off-guard (and indeed even former board member B.J. Kline), the fact that no one could account for what happened with the $10 million surely suggests that the board majority (in fact, a unanimous board) did the right thing by stopping construction and figuring out what happened with the money.

The question quickly became: What happened with the money, and was it lost? The school board would take the lead to answer that question bringing in Terri Ryland, a consult, to examine the books. The board majority made up of four members heavily pursued the answers to what had happened with the King High money.

Their efforts led to an inquiry by Terri Ryland and FCMAT that got to the bottom of the story.

On December 7, 2006, Superintendent David Murphy gave what amounted to an apology to the school board.

“The project was approved by the board on August 17. However, on November 2, it was quite clear that the district’s procedures and the staff’s work by which we’ve kept the board updated and clearly involved in a timely way to understand changes by which to fund this project were very inadequate.

On November 2, it was clear that five board members were surprised to learn that the complete funding of the financing project had not already been approved by a board decision and would be dependent on a current or a future board decision. During the November 2 board meeting, staff indicated a second certificate of participation [COP] would be needed at that time to be issued in the future in order to complete the funding of this budget and that was not expected by this board.

Although that COP would be repaid by CFD revenues, the fact is the board was quite surprised by that need and believed the King High School had already had a formal board approved financing plan. I had not realized the board would be surprised, but the fact is all five board members were. We’d like to and should acknowledge where we see those things occurring, and then we should say what we should do as a consequence of looking at those facts clearly, publicly, and that’s what we’re doing. No one wants such surprises, I don’t want them, the board doesn’t want them, nobody wants them. They’re not done by deliberate intent but they sometimes occur.”

The district hired a consultant, Terri Ryland to figure out what had happened with the $10 million ahead of the FCMAT report that would be coming out later on and we will discuss at length in the next segment.

The answer of course you probably already suspect, the District under David Murphy and Tahir Ahad’s leadership took the money that was a shortfall for Montgomery and Korematsu and took it from the money that was supposed to go to King High.

As Gina Daleiden stated at the meeting:

“Essentially it’s telling us that the bulk of that COP money went to Korematsu… It looks like about $7 million dollars went to Korematsu… That would be a little bit of a new surprise for me. I mean I’m pretty surprised because that was not a discussion that I ever heard that the COP money was for Korematsu.”

So money that was supposed to go for King High instead went to pay for Korematsu. And money that was supposed to go to Korematsu went to pay for Montgomery. How could the board not know this?

Because the state matching money from Montgomery was actually reflected in the district’s flow sheets for several years even though the money had not been received—and so the board members were led to believe that the money was there.

Here was the key discussion during the December 7, 2006 board meeting when this was disclosed:

Ryland: “There was a time yes, when you did, and in fact, there was a receivable on your books as late as the 05-06 year anticipating the receipt of that money… So there was a time when it was part of the plan and it was anticipated that it would be spent on the projects at that time.”

Provenza: “At what point did it go off…”

Ryland: “It was reversed just this last fiscal year, at the end of the 05-06 year, negative five million dollar adjustment to state apportionment was made.”

Murphy: “In the district’s tracking documents that I looked at, that change occurred sometime before May of ’06.”

Gina: “So for two years it looked like the money was there when in reality we had not obtained it.”

Provenza: It wasn’t in our flow sheets but it was still being relied on… It was not in the flow sheets.” “We weren’t aware of the Montgomery money being relied on. But it was in fact being relied on.” “I think the problem is that the board was not properly informed that that money was still being relied on. That’s one of the reasons that we thought that the money was there for King… What I’m hearing is that the Montgomery money was being relied upon to pay for these projects, it was not in our cashflow reports, so that we did not know that.”

Ryland: “It was on the books as a receivable until the end of the year.”

Provenza: “But we don’t see the books as the board, we just see the cashflow report.”

Ryland: “Right, exactly. That’s one of the key points by FCMAT, and would be one of my key points as well is that if that reconciliation had been occurring, between the facilities department and the finance department regularly. ”

Gina Daleiden in her interview with the Vanguard sums up what happened as what was reported in Terri Ryland’s report.

“Basically here comes Montgomery, they’re short the money because they missed the filing deadlines, so now Montgomery is drawing more local funds than were anticipated. Here comes Korematsu, that’s budgeted for a certain amount, enrollment declines… Korematsu gets fewer dollars from the state, so now Korematsu is drawing on more of the local funds, and at some point this $10 million gets dumped into the same fund and now it’s all rolling together so it’s covering whatever was being pulled out before, also modernization projects are in that same funding… Basically King was the last project in, in that course, and the first one to run out of money.”

The problem is that the board was not apprised of what was going on. Part of this is that anticipated funds were included on line items as though they were actual funds. Compounding this problem was the fact that these funds were also not yet board approved.

Gina Daleiden in her interview with the Vanguard cited the FCMAT report (available on the district webpage on the right hand column) page 95:

“There was funding that was not yet board approved that was on a line that was called “redevelopment agency” funds, and that is actually in the FCMAT report, page 95, “since the issuance of FCMAT’s initial draft report, the district has disclosed that the $3 million was entered on the wrong line and instead should have reflected a new COP issuance,” which would have been financing, “with a second $3 million to be requested in 2007. Since neither amount had been approved by the board, it is not appropriate to reflect that as cash flow unless clearly noted as potential cash. The current practice of listing the amounts without such a notation must be discontinued. The district should insure that all revenue projections are realistic and based on likely funding.”

Why this money was placed under the label, “redevelopment agency funds” is not clear. The district staff under David Murphy claims this was an error. Regardless, it led the board to believe money was actually there when in fact it was only “anticipated.”

Summary and Conclusions

To summarize this segment, we can look at the problems with the district’s facilities planning as twofold. There was an initial mistake made in the filing for the Montgomery matching plan. Board member Sheila Allen calls this mistake in itself as “inexcusable.” And that is clearly accurate; you simply cannot miss out on substantial funds because of missed deadlines. That is why you hire professional staff and why you cannot have that staff preoccupied with other projects such as his work at Total School Solutions as Henry Petrino was involved with at the time.

The second problem, is instead of issuing forth a mea culpa, they took what appears to be steps to downplay and minimize their mistake. They shuffled monies around and then asked for additional funding under false premises. How many of these errors were errors rather than concerted efforts at cover up are unclear.

The district under Tahir Ahad and David Murphy assumed all along that they would get the money from Montgomery and that all would fall into place. However, based on what we know, this is incorrect. The SAB never would have granted the appeal and overturned the decision, had the district not made changes to their personnel. The board was mislead into thinking that they had money for project that they did not have. Tahir Ahad and David Murphy were not necessarily covering up the lost money—since the board knew that they had lost this money, but rather covered up the impact of the loss of the Montgomery money.

The board was shown line items that indicated that they had money that was not there. Money that they were told would go to pay for King High, instead went to cover for the lost Montgomery money.

The end result is that the district did not “lose” any money according to the best audit reports from both Terri Ryland and FCMAT. On the other hand, the district never performed a Forensic Audit of their accounts. The audits by FCMAT and Terri Ryland simply aimed at ascertaining where the money went and tracking it. A forensic audit would look to examine as to whether any malfeasance occurred.

Regardless of this point, as we shall discover in much greater detail when we examine the FCMAT report more thoroughly in the next installment, is that the district was at best sloppy with its money. That in and of itself, is a cause for concern. The amount of time spent dealing with these issues was prohibitive. Terri Ryland was hired at great expense to put books together for over 100 hours. The staff and consultant time in recouping the Montgomery money was considerable. The amount of money spent trying to fix King High design and construction problems and figure out the finances was considerable as well.

All of this results from a simple fact that deadlines for funding applications were missed and the need to somehow, some way, conceal the gravity of the situation from the board of education elected by the Davis voters.

---Doug Paul Davis reporting