Tag Archives: Michael Fine

FCMAT Attacks Weed Elementary

28 Jan

By Thomas Ultican 1/28/2025

In 1992, California inaugurated the Fiscal Crisis Management Assist Team (FCMAT) in the aftermath of the Richmond School District bankruptcy. It was set up as a quasi-autonomous non-governmental organization headquartered in Bakersfield. Unfortunately, from the beginning, FCMAT functioned as a tool of the politically connected and never provided actual assistance to districts dealing with financial matters. FCMAT, which is pronounced fick-mat, recently started attacking the Weed Union Elementary School District, a single-school district, based on little more than feelings and rumors.

Weed Elementary School is in Weed, California on the foothills of Mount Shasta, one of the twelve 14,000+ feet high mountains in California. Weed is 230 miles north of Sacramento along interstate-5 in Siskiyou County. Abner Weed came to the county in 1889 and became a business and political success. Weed founded the Weed lumber company and at one time his sawmills were the largest producers in the world. The town he built and its schools bear his name.

Weed California Entrance

Today, this small town of 2,900 people is not wealthy. The Weed Elementary school accountability report card shows 78% of its students are socioeconomically disadvantaged. This is the target of FCMAT’s warrantless attack.

Attack Background

Over the Thanksgiving break in 2019, there was some sort of flood at Weed Elementary School. The district took measures to clean up the district office, a conference room, two special day classrooms and the library. They believed that this was all that was required.

Soon after, the superintendent resigned and the district hired Jon Ray for the job in April, 2020. When Ray entered the school, he smelled an odder reminiscent of the mold infestation at a school where he previously worked. Ray hired a vendor to investigate and they found significant mold hidden in the walls.

Weed Elementary School

It seems that there was some bad blood between the Siskiyou County Office of Education and Jon Ray at Weed Union Elementary School District. In an interview, Ray voiced the opinion that most of those bad feelings were generated by his decision to open school for in person classes in August, 2020.

When the county superintendent received anonymous allegations of possible fraud, misappropriation of funds or other illegal fiscal practices at the Weed Union Elementary School District, he decided to call in FCMAT at a cost of $250,000. This is probably a decision he now regrets.

As Superintendent Ray was informed, FCMAT was not here to help. They were there to find issues and concluded in their report, “Based on the findings in this report, there is sufficient evidence to demonstrate that fraud, misappropriation of funds and/or assets, or other illegal fiscal practices may have occurred specific to bid splitting and other areas reviewed.”  (Report Page 28)

However, Mr. Ray’s response to FCMAT’s report is more convincing than the report. Most of the criticism of Weed Elementary was cited as feelings. For example, FCMAT stated:

“The district’s decision to use construction management multiprime (CMMP) as its construction method seemed questionable to both FCMAT and the county superintendent. … To the county superintendent and FCMAT, it seemed the district was reacting to issues as they arose rather than following a comprehensive plan”. (Report Page 6)

Superintendent Jon Ray responded:

“These comments are exemplary of the type of impressions and feelings that permeate the entire Report. Since FCMAT is claiming that its evidence supports grave accusations like fraud and misappropriation, it is shocking to find so many instances where the basis for these charges is solely the way it ‘seemed’ to FCMAT.” (Response Page 3)

Once you go thru the FCMAT report and all of its feelings you come to one substantive charge, bid splitting. The California Department of Education web site definition of bid splitting states:

“Bid splitting is intentionally dividing purchasing to avoid getting price quotes or going out to bid using a more formal procurement method. Per Public Contract Code 20116, It shall be unlawful to split or separate into smaller work orders or projects any work, project, service, or purchase for the purpose of evading the provisions of this article requiring contracting after competitive bidding.

Mr. Ray and the district responded, “FCMAT has not provided any evidence, fact, or document indicating that the District ever split any bid to avoid a bid limit; they did not because none exists.”

Several of the FCMAT report findings seem to undermine the fraud and bid splitting allegations. Starting on page 6 in the report they site (1) the District determined that managing smaller contracts without paying a general contractor’s mark-up provided a cost savings; and (2) the district determined that it could purchase equipment, materials and supplies for projects to both reduce a contractor’s mark-up and to ensure supplies would be available during a country-wide supply chain crisis.

In 2021 and 2022, due to COVID, prices for raw materials were exploding and contractors were reticent to make commitments. Jon Ray and the board at Weed Elementary saw no choice but to act as contractor and purchase the needed materials. This was not something they wanted to do but while operating their K-8 school, concluded it was something they had to do.

Michael Fine Behind the Scenes was the Problem

Michael Fine is the chief executive officer of FCMAT. He and his team have found a Bakersfield, California money tree. Transparent California reveals that in 2023, Fine was paid $383,879.87 and there were 11 other FCMAT employees who received more than $279,000 for the year and five more workers made more than $158,000. It is a lot cheaper to live in Bakersfield than Los Angeles, San Diego, San Francisco or Sacramento. To keep their money tree alive, they just need to keep the rich and powerful happy. That is not the people in Weed, California.

The Data Center Reported that in 1992 that FCMAT had a budget of $562,000 which ballooned to $35.6 million by 2002. They also criticized its use of no-bid contracts and lack of accountability. Los Angeles State Assembly Woman Jackie Goldberg called for an audit of FCMAT in 2003. The state auditor reported that FCMAT was providing value to districts but did criticize the over use of no-bid contracts. That appears to be the only audit ever done of FCMAT.

FCMAT actually does bad financial investigating. For example, in 2022, a FCMAT study claimed that Stockton Unified School District (SUSD) was headed for serious financial difficulties when the one time spending from the federal government is gone in fiscal year 2024-25. They said the district is spending one time funding on $26.3 million in salaries, benefits and services that appear essential.

It turned out that a FCMAT consultant who previously worked for the Stockton schools, Susan Montoya, apparently created phantom positions that were the source of the $30 million dollar shortage. It was SUSD that discovered that the $30 million budget deficit was a rouge not FCMAT.

Time to Audit and End FCMAT

There are terrible FCMAT experiences all over the Golden state. What is never found is a good experience or a story of how FCMAT helped a school district. School leaders just talk about how they survived FCMAT, how costly it was and in the happy cases how they finally got FCMAT off their back.

The money going thru FCMAT needs to be examined. The salaries are outrageous and the services worse than stink.

California schools could use some expert help not a police force making money from struggling schools by finding something on them so the state can takeover.

Time to end FCMAT and start over.

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Education Support, More Harm than Help

10 Oct

By Thomas Ultican 10/10/2024

In California, we have the Fiscal Crisis and Management Assist Team (FCMAT – pronounced fick-mat) which is more often the bane of its clients than a help. It is a quasi-autonomous non-governmental organization signed into law in 1992 by Governor Pete Wilson. FCMAT was a response to the financial collapse of the Richmond school district. Unfortunately organizations with this structure become bureaucratic and overtly support the political agenda of whoever is in power. The unhelpful nature of FCMAT recently reared its ugly head in Stockton Unified Schools District (SUSD).

The story of Stockton is that of a small city less than 50 miles south of Sacramento whose school district has become the target of unrelenting attacks by billionaires. It is a minority majority city of about 321,000 people. The demographic makeup is 45.2% Hispanic, 20.9% Asian, 31.3% White and 11.6% Black. The city has a little more than a 15.6% poverty rate; however, SUSD reports that 77% of their students live in poverty.

California’s Data Quest enrollment data for the 2023-24 school year shows charter schools with 6,282 students, public schools with 32,448. That means charter school enrollment is 16% of the 38,730 total publicly supported students in Stockton.

The two biggest problems for the schools is massive spending by billionaires to privatize them and an unrelenting superintendent of schools turnover. Since 2005, there has been a revolving door for superintendents. The longest serving one in that period was John Deasy and he resigned June 15, 2020 serving just 2 weeks more than 2 years.

Deasy was succeeded by Brian Beiderman who already worked in the district and appeared to have been Deasy’s choice. Beiderman was interim superintendent for 8 months and then resigned. He was replaced by John Ramirez Jr., who resigned under a cloud just over one year from being appointed interim superintendent. Going into the 2022-23 school year, the SUSD board settled on Dr. Traci E. Miller as interim superintendent.

In December 2022, Superintendent Miller was informed that “we have decided to go in another direction” six months before her contract was allowed to expire. She says the call was from Don Shalvey, CEO of San Joaquin A+, and Fritz Grupe a real estate developer, who leases charter facilities. It is of note that neither of these gentlemen had any actual standing in SUSD.

June 30 2020, was the 75 year old Shalvey’s last day at the Gates’ Foundation. For the entire 11 years he worked for Bill Gates, Shalvey commuted from his ranch in Linwood, California where he lived with his wife Sue. Linwood is 10 miles outside of Stockton.

San Joaquin A+ was a small non-profit (TIN: 51-0536117) supporting education initiative with modest holdings of less than $40,000. Coincident with Shalvey’s availability, Helen Schwab, a San Francisco billionaire, donated $400,000 to A+ and Shalvey was named CEO. In the three years prior to his arrival, A+ had taken in $15,169. The haul in 2020 was $3,176,833 and in 2021, $3,942,790. Shalvey’s new part-time job was paying him a high six-figure salary and billionaire dollars were flooding Stockton.

FCMAT Arrived

FCMAT Main Web-Page

John Ramirez, who was interim superintendent in 2021, appeared concerned about the reliability of his district’s budget. He contacted FCMAT for help. In June 2022, an odd Stockton grand jury reported on the district. Local news group Stocktonia briefed:

“The biggest concern: SUSD is “headed toward at least a $30 million deficit by `the fiscal year 2024-2025.” And if the current management practices continue, that deficit will “likely escalate.”’

Despite Ramirez having called on FCMAT months before this grand jury report, the San Joaquin County office of Education stated:

“The SJCOE can confirm that it has contracted with the Fiscal Crisis Management Assistance Team (FCMAT) in order to conduct a comprehensive review of the school district.  The San Joaquin County Superintendent of Schools initiated the AB139 Extraordinary Audit earlier this year.”  (An AB139 audit gets its name from the assembly bill 139 that authorized these audits of school district budgets.)

In 2023, FCMAT issued two reports. February saw the release of their Extraordinary Audit which was a bureaucratic nightmare. On page 33, the report states, “Based on the findings in this report, there is sufficient evidence to demonstrate that fraud, misappropriation of funds and/or assets, or other illegal fiscal practices may have occurred in the specific areas reviewed.” The audit cost the district $50,000 and provided no insight into the looming $30 million dollar deficit or what evidence of fraud and illegal fiscal practices had been unearthed.

The same unfounded claims of criminality were lobbed by FCMAT CEO Michael Fine at Sweetwater Union High School District where I worked. No serious legal charges were ever made and the district finally got FCMAT off their back.

The final report, Fiscal Health Risk Analysis, was presented in August. FCMAT has developed a group of tables with a series of questions having three possible responses, yes, no or N/A. They then use some secret formula to turn these answers into numbers which guides the conclusion. They determined that SUSD’s solvency risk factor was high. The report is not that convincing.

These reports were responses that provided little to no help for SUSD, who originally asked for the audit. The Extraordinary audit seemed to be a regurgitation of the grand jury findings. FCMAT trashed the board and management of the school but offered few insights. During COVID, the school board received federal money to do things like improve ventilation in schools. The audit spent five of 45 pages on the air purifier purchase from IAQ that the board made. It seems some people wanted a different company to get the contract and felt the school board froze them out. However, this was a – spend the money or lose it – purchase, and did not affect the viability of the budget.

An interesting character in this episode is financial expert Susan Montoya. She was chief financial officer when John Ramirez was superintendent of the district. Supposedly she informed Ramirez that she would be away for a while, but would have the 2021-2022 budget ready. She did return with the budget in hand and then resigned. Later, Montoya was hired by San Joaquin County school superintendent, Troy Brown, to be the counties “Fiscal Expert.”

Before Montoya’s hiring, SUSD interim superintendent, Traci Miller, wrote Brown sternly warning against the hiring. Miller stated that Montoya was unprofessional and many of the district’s “current fiscal problems can be traced back to Montoya.” Miller feared she “will sabotage our progress and our implementation of new and improved processes.” Miller was ignored.

When FCMAT was conducting its audit, the county’s “Fiscal Expert,” Susan Montoya, was a primary source. The person Traci Miller blamed for the district’s fiscal problems was part of the team doing the audit. In effect, grading her own home work. In the extraordinary audit, FCMAT writes, “Limiting the possibility of any personal influence, either directly or indirectly, is about avoiding even the appearance of a conflict.” (Page 10) Their statement seems a little hypocritical.

To put a cherry on the top, SUSD has discovered that the $30 million budget deficit was rouge. Supposedly, Montoya had created phantom positions that were being funded and that was the source of the apparent deficit that never existed.

Public Schools are Resilient

After years of turbulence and leadership turnover, it could be that SUSD is on a better path. Traci Miller took over a mess and improved the district’s functioning. In 2003, the district hired Michelle Rodriguez to be superintendent. After one year on the job, her contract was extended from three to five years.

Rodriguez studied at Chico State University and upon graduation went to Spain for further study. She is fully bilingual. Rodriguez earned a PhD from University of Southern California, was a principal in San Diego, became chief academic officer in Santa Ana and was Superintendent of Pajaro Unified School District in Watsonville for 7 years prior to accepting the Stockton job. Michelle stated she expects to be in Stockton for 7 years declaring, “I plan to retire here. I plan to stay here and affect change.” 

SUSD has been demeaned because it does not have good standardized test scores. In statistics, the r-value correlation has a value between o and 1 for determining the effects of different inputs on education testing results. An r = 0 means there in no relationship and an r = 1 means the input is 100% determinative. Inputs like teacher, curriculum design, class size, etc. can be evaluated. The only input ever found with more than 0.3 r-value is family wealth at a 0.9 r-value. Stockton parents are poor and many of the students are language learners; for them to perform as well on standardized tests as wealthy students would show statistical evaluations to be meaningless.

The California dashboard reveals that Stockton has no academic areas in crisis and meets all professional standards. It has a relatively low graduation rate of 82% but is improving the rates of chronic absenteeism. Public schools are very resilient. With the constant leadership turnover, high poverty rates, billionaire attacks and widespread belief the district is corrupt, schools are still functioning at a high level. With a little stability and professionalism at the top, the future looks bright.

On the other hand, FCMAT needs to be defunded. Programs aiding districts should be in the California Department of Education and not be in some semi-private organization in Bakersfield, California.

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FCMAT – California’s Unaccountable Political Player

28 May

By Thomas Ultican 5/28/2022

California Assemblywomen Delaine Eastin wrote legislation creating the Financial Crisis Management and Assistance Team (FCMAT) in 1991. Her legislation was in response to the bankruptcy of the Richmond School District and requests for financial help from four other districts. In 1992, Governor Pete Wilson signed the legislation into law and located FCMAT (pronounced Fick-Mat) under the auspices of the Kern County Superintendent of Schools. Since then, its power has grown and portfolio expanded with little oversight. Today, there is a burgeoning chorus of critics calling for reform or even termination.

In the mid-1990’s, I made the trip through the south end of the San Joaquin Valley many times. On the car radio, the only listening choices available were Rush Limbaugh and the Buck Owens show from the Crystal Palace in Bakersfield. Bakersfield is named after founder Thomas Baker but the name easily could refer to the weather. The city of a half-million sitting about 140 miles from Death Valley regularly sees temperatures over 100° F between May and October. It gets really hot for extended periods. That is where the FCMAT home office is located.

Bakersfield, the county seat of Kern County, is an economic powerhouse in both oil and agriculture. In 2020, it had a slightly larger Republican voter registration than Democratic (R=158,771 & D=152,102). Registrations have been almost evenly split for decades. In 1992, when Republican Governor Pete Wilson chose the Kern County Office of Education as administrative and fiscal agent for FCMAT, the Republican voter registration advantage totaled 118.

The Developing Juggernaut

FCMAT employs a neoliberal structure popularized in the United Kingdom called QUANGO. The Scottish writer Roland Watson describes QUANGO as a “quasi-autonomous non-governmental organization.” Those of short duration are sometimes referred to as a task force. They carry out government mandates by receiving and issuing contracts. Watson noted that “its rear end looks distinctively democratic and accountable but the front part is definitely statist and bureaucratic.” The problem with a QUANGO is the tendency to overtly support the political agenda of whoever is in power.

The Data Center Reported that in 1992 FCMAT had a budget of $562,000 which ballooned to $35.6 million by 2002. The report also criticized its use of no-bid contracts and lack of accountability. Los Angeles State Assembly Woman Jackie Goldberg called for an audit of FCMAT in 2003. The state auditor reported that FCMAT was providing value to districts but did criticize the over use of no-bid contracts. That appears to be the only audit ever done of FCMAT.

Besides the legislation listed in Table 1, there are many legislative edicts for FCMAT to audit specific school districts. The districts are charged a no-bid fee for the mandated audits; FCMAT contracts out much of the work. Local school districts that have had previous financial issues often must pay a consulting fee to obtain FCMAT’s blessing in order to implement a budget. In districts with financial problems, this agency has more power over district policy than voters.

Transparent California reveals that the top 2020 total salary at FCMAT, $313,780.72, went to CEO Michael Fine. Including Michael, there were thirteen FCMAT staff members who earned more than $214,000 that year. The data shows that FCMAT had seventeen employees on staff being paid a total salary of $3,568,008.

Is it really about Gentrification?

In 2018, two school districts in California requested emergency funding to maintain operations. Both Oakland Unified School District (OUSD) and Inglewood Unified School District (IUSD) arrived in this predicament due to incompetent (unethical?) administration during a state takeover.

California took over Inglewood’s schools in 2012 because of financial problems that should properly be credited to George Bush’s No Child Left Behind and the state of California’s almost unregulated charter school movement. In 2016, Secretary of Public Instruction (SPI) Tom Torlakson recruited Vincent Mathews to be IUSD’s forth state appointed Superintendent.  

At the beginning of the millennium, Mathews led the for-profit Edison school in San Francisco. Later, he went through training at the infamous Broad Academy which included studying their handbook for closing public schools. He also served for two years as the state appointed superintendent for OUSD (2007-2009).

Mathews stayed 18 months in Inglewood before accepting the Superintendents position in San Francisco. About his Inglewood tenure, the LA Times noted,

“A recent report by the state’s Fiscal Crisis and Management Assistance Team found that, under Matthews, Inglewood had left day-to-day tasks to consultants, hadn’t monitored its budget and had underestimated its salary costs by about $1 million. The district had also overestimated its revenue, in part by incorrectly counting the number of students.”

FCMAT was supervising that state loan given to IUSD and was charged with monitoring the district’s finances. However, they missed the bad budgeting practices implemented by the state appointed administrator.

In Oakland Antwan Wilson another Broad Academy graduate blew a hole in the Budget under FCMAT’s less than watchful eye. After two and a half years on the job, he left Oakland to be superintendent of schools in the nation’s capital. Soon after that, huge budget problems were discovered causing the school board to immediately order more than $15 million in mid-year budget cuts.

In an article detailing some of the mismanagement and greed in Oakland, Valerie Strauss of the Washington Post reported:

“Wilson brought in dozens of executive staff members from outside the Oakland district, creating new positions and departments that were not budgeted, and paying more than was customary in the district, …. In 2013, before Wilson arrived in Oakland, only four administrators earned more than $200,000; two years later, at least 26 did…“

The 2018 solution to these financial issues from the state legislature was AB 1840 which dictated the terms under which OUSD and IUSD could receive emergency funding. It signified that in the budget acts for the coming years, Oakland and Inglewood could apply for emergency funding if they met certain criteria. It also meant that their respective counties – Alameda and Los Angeles – would assume control from the state and use FCMAT to financially supervise the districts.

In SB 74 the 2020 budget act, Oakland received $16 million with the law stipulating “affirmative action by the governing board to continue planning for, and timely implement, a school and facility closure and consolidation plan that supports the sale or lease of surplus property”.

The next year, the new school board turned down $10 million authorized in SB 129 which again required “Affirmative action by the governing board to continue planning for, and timely implementation of, a school and facility closure and consolidation plan that supports the sale or lease of surplus property.”

FCMAT explains on their web site how the governing power in OUSD was changed by AB 1840:

“Under the provisions of Assembly Bill (AB) 1840 (Chapter 426/2018), the trustee serves under the direction and supervision of L.K. Monroe, Alameda County Superintendent of Schools. Assembly Bill 1840 designates FCMAT as the agency to identify and vet candidates to serve as county trustee. The final selection of a candidate for Oakland Unified School District trustee will be made by Superintendent Monroe, with the concurrence of the State Superintendent of Public Instruction (SPI) and the president of the State Board of Education.”

In other words, OUSD no longer under state control is now under county control and their fiscal agent is FCMAT. Many people are wondering if the big push to sell off school properties from both the state and county is not motivated by gentrification and developer profits. It is well known that outside of a onetime cash infusion there are no significant savings associated with closing wholly owned school sites.

Working for the Bosses!

Sweetwater Union High School District (SUHSD) in San Diego County went through a grueling few years. In April of 2014, four of the five Sweetwater board members plus district Superintendent Jesus Gandara pled guilty to corruption charges and resigned. This is when the current SUHSD board of Trustees was originally elected. Unlike the previous board that got its financial support from the construction industry, the new board members were all supported by the teachers’ union. This was not greeted enthusiastically by some local political forces.

During their first three years, the district ran harmoniously. In 2018, trouble emerged. There was a transition in leadership within the SUHSD financial team. The CFO, her top assistant and two other members of her small team retired after submitting the budget for the 2018-19 school year. That summer the new CFO, Jenny Salkeld, discovered a $20 million dollar error. She immediately reported her discovery to the district and county.

After receiving Sweetwater’s alert about the accounting errors, the County Office of Education officially disapproved the 2018-19 budget the district had submitted. The reasons for disapproving the budget were the reasons Salkeld had reported.

Apparently someone at the county leaked the budget information to the Voice of San Diego. The district which was in the process of understanding the extent of the problem lost the opportunity. Instead they were faced with a withering public attack in both the San Diego Union and The Voice of San Diego. Headlines implied that a group of incompetent people at SUHSD were incapable of managing their affairs honestly.

Enter FCMAT. SUHSD was forced to pay them $50,000 to have finances reviewed. A preliminary report was delivered that December at a SUHSD district school board meeting. Voice of San Diego’s Will Huntsberry shared,

“FCMAT’s chief executive officer Michael Fine told board members that 302 entries in the district’s accounting system were doctored to create the impression the district had more money than it really did. ‘That my friends and colleagues, is a cover-up,’ …”

For weeks, local San Diego TV and Print media were filled with damning headlines like the NBC affiliate’s, “Audit of Sweetwater Union High School District Finds Evidence of Fraud” or the online publication Voice of San Diego’s “Audit Finds Sweetwater Officials Deliberately Manipulated Finances.” Every local news outlet published a story with some version of these headlines. There was speculation that the fraud had to do with a large school bond measure voters had approved and predicted multiple people were going to prison.

The following June FCMAT issued its completed report. It certainly weighed an ‘A’ (my mother’s satirical goal for a college research paper) but was not of great value. By the time the report arrived, SUHSD had already implemented a vast majority of the recommended fixes to their budgeting process. Eventually, the former SUHSD CFO was fined $28,000 for falsely attesting to the accuracy of the budget and the district agreed that they would bring in an independent consultant for any future bond offerings. Ironically, the district had used an independent consultant for the bond offering in question.

This April, the San Diego Union’s Kristin Tanaka reported, “Seventeen of San Diego County’s 42 school districts are projecting that they will spend more than they take in — not just in the current school year, but the next two years — as districts grapple with rising costs and lower enrollment, according to the latest batch of financial projections districts submitted to the county.” SUHSD was not one of the seventeen. The district survived the crisis and still has the same apparently popular school board in place.

It was a similar story in 2003 for OUSD. Then Superintendent Dennis Chaconas realized that the accounting system was dated and needed modernizing. EducationNext reported “New software, installed so that the school district could better understand its finances, had uncovered a $40 million deficit from the previous year.” Most sources say it was actually a $37 million dollar deficit but still big and shocking.

Ken Epstein shared, “OUSD had adequate money on hand in a construction fund that could have temporarily paid off the shortfall, but the state would not allow Oakland to tap into that fund, though the practice was allowed in other districts.”

Local political leaders like then Oakland Mayor Jerry Brown and influential state Senator Don Peralta wanted OUSD taken over by the state. They used FCMAT in an effort to make it happen. Online news source Majority reports that when OUSD proposed covering the shortfall with construction funds:

“Tom Henry, the CEO of California’s Fiscal Crisis and Management Team (FCMAT) opposed this plan, and Mayor Brown questioned it heavily. (During a state takeover, FCMAT would be responsible for monitoring the school district’s financial progress.) Phone records later obtained by the Oakland Tribune revealed over 40 phone calls on key dates between Brown, Henry, and Randolph Ward, who would end up in charge of OUSD when it was placed under state control, in the two months before the state takeover.”

During the same period, there were no phone calls to OUSD Superintendent Dennis Chaconas.

OUSD was forced to accept a $100 million dollar loan and taken over by the state instead of paying off the deficit with the $37 million dollars from their construction fund. After almost two decades of state and county control financially supervised by FCMAT, Oakland is still stuck with $6 million dollar yearly loan payments until at least 2026 and the state appointed administrator was allowed to create a new financial crisis.

….

At the very minimum, it is time to reign in and reform FCMAT. They have become an authoritarian lever used by people in power to enact their unpopular agendas. It is supposedly an “Assistance Team” but in reality FCMAT is causing more damage than their “assistance” is worth.

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Fraud at Sweetwater; Maybe but Unlikely

1 Jul

By Thomas Ultican 7/1/2020

For the past week, local San Diego TV and Print media have been filled with damning headlines like the NBC affiliate’s, “Audit of Sweetwater Union High School District Finds Evidence of Fraud” or the online publication Voice of San Diego’s “Audit Finds Sweetwater Officials Deliberately Manipulated Finances.” Every local news outlet published the story with some version of these headlines.

On Monday June 23, the Fiscal Crisis Management Assist Team (FCMAT) presented the results of its long awaited audit of Sweetwater Union High School District’s (SUHSD) finances. The report authors state,

“Based on the findings in this report, there is sufficient evidence to demonstrate that fraud, misappropriation of funds and/or assets, or other illegal fiscal practices may have occurred in the specific areas reviewed.”

How Did SUHSD Arrive Here?

For Sweetwater, this is really a continuation of the course set by corrupt leadership a decade earlier. It is also emblematic of the financial stress all California school districts are facing. Kristen Taketa reporting for the San Diego Union noted in November 2018:

“At least 10 districts in the county are projecting that they will not be able to meet their financial commitments next school year, including Chula Vista Elementary, Jamul-Dulzura Union, Mountain Empire Unified, Oceanside Unified, San Diego Unified, San Marcos Unified, San Ysidro, Sweetwater and Vista Unified. More districts won’t be able to meet their financial commitments after next year.”

Three factors are mainly responsible for these growing financial stresses. The state has mandated a more than doubling of teacher retirement payments from 8.1% to 18.4% without providing extra assets. Special education costs have been soaring and enrollment has been shrinking due to an increase in state funded privately operated schools.

enrollment-graphs

The Drop in Attendance Accounts for a $20 Million Drop in Revenue

In April of 2014, four of the five Sweetwater board members (Jim Cartmill, Bertha Lopez, Pearl Quinones and Arlie Ricasa) plus Superintendent Jesus Gandara pled guilty to corruption charges and resigned. The fifth member of the five person board, John McCann left the board to run for a seat on the Chula Vista city council.

Cartmill and Lopez pled guilty to a misdemeanor charge of accepting gifts over the state limit. Quinones, Ricasa and Gandara were charged with felonies. Arlie Ricasa pled guilty receiving probation and a fine. Gandara was sentenced to 7-months jail time and fined $7,994.

Pearl Quinones also pled guilty and stated “I would have fought it to the very end if I had been able to afford to keep fighting it.” She received a three-year probation with the felony being reduced to a misdemeanor.

District Attorney Bonnie Dumanis called this a “pay-for-play” scheme stating,

“For years, public officials regularly accepted what amounted to bribes in exchange for their votes on multi-million dollar construction projects. This case is outrageous and shameful.”

In my opinion, Gandara was out of control and deserved the outcome. On the other hand, the school board members’ biggest mistake might have been being careless while the district attorney was planning to run for mayor.

I was politically opposed to the four indicted board members but never believed they were selling their votes and still don’t. I believe they did put the school district and the community first. Dumanis painted them with Superintendent Gandara’s malfeasance.

It is true that they all accepted a small number of free dinners and tickets to local sporting events and did not report some of them correctly. DA Dumanis over-charged them with misdemeanors and felonies that forced their resignations from the board. She could have more appropriately cited them with infractions which would have brought fines, however, the DA valued headlines over justice.

An entirely new five member school board was elected in November, 2014. After completing the school year with interim-superintendents, the board selected Karen Janney to be the new permanent Superintendent of SUHSD. That June 8, 2015 decision was a hailed by the board, the community and the teachers union.

In a 2019 interview, teacher’s union President Gene Chavira said he felt Janney made two critical errors. She rejected the expense of having a forensic audit performed on the district’s finances and she did not listen to board members and labor leaders when they encouraged her to bring in an outside leader for the finance department.

Janney had been a teacher, principal and assistant superintendent in the district. She evidently had formed a strong relationship with Karen Michel and wanted her to be the district’s Chief Financial Officer (CFO).

Michel and her number two, Douglas Martens, retired in June of 2018. There last official act was delivering the budget for school year 2018-19. The budget was approved by the board on June 25th and sent to the County Office of Education (COE) for final approval.

Jenny Salkeld was hired to replace Michel as CFO. In early September, Salkeld discovered a $20 million negative discrepancy in the budget and reported it to the Sweetwater leadership team which forwarded her report to the COE.

The County immediately disapproved of the SUHSD budget and brought in the Fiscal Crisis Management Assist Team (FCMAT) to investigate Sweetwater’s finances.

The FCMAT Audit

Audit Team

CEO Michael Fine and the Four Women Who Performed the SUHSD Extraordinary Audit

FCMAT was created and signed into law in 1991 by Governor Pete Wilson. The Kern County Superintendent of Schools office was selected as the administrative and fiscal agent for FCMAT. It is not a government entity but does receive financial support from the state.

FCMAT is organized as a non-profit. The purpose of FCMAT was to provide districts experiencing budget issues with professional leadership. However, they have developed a reputation for being more about helping political allies than struggling school districts.

The County’s official rejection of the 2018-19 budget was a trigger bringing in FCMAT to conduct a Fiscal Health Risk Analysis. On December 17th, 2018, the Analysis results were presented to Sweetwater’s board by FCMAT CEO Michael Fine. The Voice of San Diego reported,

“FCMAT’s chief executive officer Michael Fine told board members that 302 entries in the district’s accounting system were doctored to create the impression the district had more money than it really did. ‘That my friends and colleagues, is a cover-up,’ …”

Although Michael Fine’s charge of “cover-up” appears mistaken according to the new audit, it does point to a central problem that led to a bad budget. The audit revised the 302 “negative budget entry” count to 220 and explained the origin of these often inadequately documented inputs.

The auditors reported that SUHSD began the budgeting process by rolling the 2017-18 budget into the beginning template for the 2018-19 budget. This was not viewed as unusual, but projections concerning changing budget demands then needed to be inserted into the budget model and that was not satisfactorily done.

FCMAT states, “Interviews with staff … indicate that the district was not utilizing data from a position control system to project salaries and benefit obligations.”

Apparently the suspicious entries were the budget being updated based on actual costs when they arrived. These entries were suspicious because they were not documented in accordance with the California School Accounting Manuel.

I worked in SUHSD from 2002 – 2017 and these findings seem to confirm my own impression of unprofessionalism in the district office. It didn’t appear corrupt but there was little concern with meeting deadlines, crossing t’s and dotting i’s.

In the audit, FCMAT questioned delays in posting payroll transactions. They wondered if these delays were purposeful for hiding the understatement of salaries and benefits in the budget. They concluded it was not, but does give more evidence of the lack of professionalism in the financial department.

In the report, FCMAT says Superintendent Karen Janney, CFO Karen Michel, Director of Financial Services Douglas Martens and Financial Consultant Adam Bauer may be guilty of financial fraud over the February 2018 bond deal. However, much of the damning evidence comes down to the fact that they followed Bauer’s advice about the best path to guarantee a good bond rating.

Laws and methods had changed since the last time Sweetwater did a bond deal. It is difficult to understand why SUHSD not following previous processes with fidelity was considered suspicious.

FCMAT also claims Sweetwater officials should have known that the drop in ending revenue between 2016 and 2017 from $36,285,098 to $21,469,748 indicated deteriorating financial conditions. This was also part of FCMAT’s evidence for Sweetwater knowingly misleading the bond markets about the district’s financial health.

The “extraordinary audit” was triggered by FCMAT’s declaration in December 2018 of possible fraud and cover up. By agreement with the county the audit was quite limited and focused almost exclusively on the 2017-18 budget year and SUHSD internal budgeting processes.

By comparison, a forensic audit of SUHSD is estimated to cost as much as $2,000,000; the county cost for this “extraordinary audit” was estimated at $50,700.

The auditors did not look at data from previous years.

Going Forward

The audit was delivered Monday, 6/23/2020. The document reminds the district’s board, “Within 15 days of receipt of the report, the governing board is required to notify the county superintendent of its proposed actions regarding the county superintendent’s recommendations.”

Board member Paula Hall indicated this would not be a problem since they have already instituted many of the FCMAT suggestions. She also expressed how pleased she was with CFO Jenny Salkeld’s professionalism. Hall believes the district now has strong leadership in finance.

Governor Gavin Newsom signed the state budget on Monday, June 29th. Now Salkeld’s team needs to finish the 2020-21 budget and present it to the board.

Wednesday the 25th, the Sweetwater board met in a virtual executive session and put Karen Janney on paid administrative leave by a vote of 4-1. A board member said that in the uncertain legal climate they felt this move was needed to protect both the district and Janney.

The board also voted to lay off 223 employees and selected Dr. Moises Aguirre to serve as acting Superintendent.

Aguirre must now pick up the ball and continue the planning for opening school on August 3rd.

Dr. Aguirre faces the challenge of how to safely open schools in the Sars-CoV-2 era if that is even possible. If not, he and the Sweetwater team must find a way to make distance learning work for all 36,000 students.

My best guess is that there was no intentional fraud or purposeful financial misleading in SUHSD. It looks like there was a significant budget creation error that collided with state created structural deficits. I do not expect any prosecutions.

If meaningful changes are not made to California school financing, there are going to be many more districts running into these same structural deficits with no good solutions.

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The Vicious Attack on Sweetwater Union High School District

14 Mar

By Thomas Ultican 3/14/2020

Chula Vista, California

Superintendent Karen Janney and the school board at Sweetwater Union High School District (SUHSD) have a target on their backs. In September 2018, new Chief Financial Officer, Jenny Salkeld, announced there was a $20 million dollar hole in the submitted 2018-2019 school year budget. Salkeld had discovered a long smoldering budget irregularity. Janney immediately reported the budget issue to the County Office of Education and informed the bargaining units with whom she was negotiating about the new uncertainties. Since then, journalists looking for readers and politicians looking for opportunities have robustly slimed the district and its leaders.

A Quadruple Whammy

Besides the mystery of going from a reported $17 million positive budget to an actual $10 million deficit, Janney and the board of trustees had to deal with the states increased pension payment requirements, a hike in special education costs and shrinking enrollment.

In the 2013-2014 school year, the state required school districts to pay 8% of teachers’ salaries to the California Teachers Retirement System (CalSTRS). In the just submitted Second Interim budget report, Salkeld revealed that the rate is now 17.1% and will increase to 18.4% in the 2020-2021 school year. In other words, the retirement costs have more than doubled.

This school year, spending on special education has zoomed to $62.5 million and is projected to reach almost $70 million in two years.

In addition, SUHSD is experiencing shrinking enrollment. Between 2014 and today the average daily attendance in the district has dropped from 38,302 to 36,023. That accounts for another $20 million in lost revenue. The drop is almost entirely fueled by the expanding charter school sector. In the 2018-2019 school year, 15% of 7th grade through 12th grade students in the Sweetwater service area were in charter schools; a total of 6,281 students. (Number of students derived by cross referencing county charter school data with state attendance records.)

With all of the turmoil, the fact that SUHSD has 13 high schools and 11 middle schools in excellent facilities with professional leadership and highly skilled educators is often overlooked. According to the state, 23% of the district’s students are English language learners and 60% are socioeconomically disadvantaged. What might surprise outsiders is that the professional educators in Sweetwater love their jobs, their students and their schools. They take great pride in the quality of education being provided and are not disturbed in the least by the learning challenges associated with these kinds of student demographics.

However the current situation has presented an opportunity for demagoguery. Chula Vista Elementary has for several years gotten around the law limiting them to grades K-6 by starting dependent charter schools. They now have five dependent charter schools educating 2,108 students who would otherwise be in SUHSD schools. A recent article in the San Diego Union reports “Chula Vista district leaders say they want to give parents more options for middle school as soon as this July.” They want to steal more students.

Sweetwater 2018 Budgets Compared

Comparing the June 2018 Budget with the Revised October 2018 Budget

Is it Time to Replace Karen Janney?

In April of 2014, four of the five Sweetwater board members (Jim Cartmill, Bertha Lopez, Pearl Quinones and Arlie Ricasa) plus Superintendent Jesus Gandara pled guilty to corruption charges and resigned. This is when the current SUHSD board of Trustees was originally elected. On June 8, 2015 the board selected Karen Janney to be the new permanent Superintendent of the district.

Janney was born and raised in the district. She began teaching in SUHSD in 1978 and soon became an administrator. When Jesus Gandara was appointed Superintendent in 2006, Janney was serving as Assistant Superintendent of schools. By 2009, she had completed her doctorate in Education Leadership and Administration at San Diego State University (SDSU) and had been forced out of the SUHSD by Superintendent Gandara.

Janney had many friends in the district who were excited by her selection as the new superintendent. I was working at Mar Vista High School at the time and vividly recall how two staff members that were taking her education leadership course at SDSU were absolutely thrilled. I was OK with her selection but had some unfounded reservations that I kept to myself.

I soon became troubled by three different Janney agendas. I was bothered when she found funding to buy tee-shirts for all staff. The shirts had “Sweetwater Union High School District Putting Students First” emblazoned across the front. Though not mandated, there was pressure applied to wear these corporate styled promotional tee-shirts on certain days. It reminded me of the corporate approach to leadership employed by large charter school chains.

IMG_20200312_125802

Corporate Type of Promotion Foisted on SUHSD Teachers

A second and more troubling policy change came a few months into her tenure. Janney announced that Sweetwater was joining the Core Districts. Originally conceived as an organization for leaders in urban school districts to share strategies, CORE gained notoriety when its eight districts led by John Deasy of Los Angeles Unified made a legally questionable side deal with US Secretary of Education Arne Duncan. They agreed to evaluate teachers using testing data for a chance at Race to the Top grants. Today, CORE is offering to conduct school evaluations for California districts using the residual-gain growth model as an alternative to the California Department of Education evaluation method.

Worse – in 2017, Janney scrapped the district’s expensive I-pad program and replaced it with another Ed Tech industry scheme for putting students at glowing screens. She purchased laptop computers for all students and staff. She had succumbed to the allure of education technology and its associated bad pedagogy. Janney also signed the Future Ready pledge making SUHSD a target for education technology salesmen.

Since the budget crisis began, it has become apparent that Janney is incapable of creating a good working relationship with the County Office of Education (COE). It may not be all her fault. She has been careful to legally comply with the COE but has not developed any visible cooperative relationships.

Superintendents are in charge. School boards only approve or disapprove of the agenda set before them by the Superintendent. From the beginning of her administration, board members, union leaders and community members recommended that she replace the financial department’s leadership. Janney refused and turned away calls in 2015 for a forensic audit of the district’s finances. She was not willing to accept the almost $2 million dollar price tag. These two decisions are central to the financial situation the district is in today. Many people were predicting financial issues would eventually be revealed.

When the crisis first manifested in September 2018, trustees and others encouraged Janney to utilize existing expertise within the district to run a messaging campaign making sure the district’s side of the story was being told. Janney chose instead to leave existing communications director, Manny Rubio, as the sole district spokesperson. During the first two months, there was no public response to the crisis by SUHSD. Rubio was content to wait and react to media questioning.

As the hidden $20 million dollar problem and growing structural issues created an urgent need for budget cuts, Janney made another critical error. Under her leadership the district’s central office staff has doubled. This is where cuts should be expected but Janney has rejected most cuts to her staff. To successfully solve the crisis she needs the cooperation of the Sweetwater Education Association (SEA – the teacher union), however, cutting teachers before district staff is undermining collaboration.

Union Chart of Sweetwater Staffing

An SEA Flyer for the March 10 School Board Meeting

FCMAT is a QUANGO and that’s Not Good

The Financial Crisis Management Assist Team (FCMAT) was summoned to Sweetwater to look at the budget. After a three day deep dive into SUHSD finances, FCMAT CEO Michael Fine delivered a report and some damning words. He said that 302 entries that made the district finances look better were not well documented. He concluded, “That my friends and colleagues, is a cover-up.” He also suggested the district was in danger of a state takeover.

FCMAT was created and signed into law in 1991 by Governor Pete Wilson. The Kern County Superintendent of Schools office was selected as the administrative and fiscal agent for FCMAT.  It is a QUANGO which Roland Watson describes as “a Quasi-Autonomous Non-Governmental Organization.” It is a neo-liberal construct common in the UK. Those of short duration are sometime called task forces; they are set up to look at an issue, report their recommendations and then disband. The purpose of FCMAT was to provide districts experiencing budget issues with professional leadership. However, they have developed a reputation for being more about helping political allies than struggling school districts.

It is eerie how closely the issue in SUHSD echoes the 2003 events in Oakland, California. In 2000, the School Board appointed Dennis Chaconas Superintendent over the objection of Oakland Mayor Jerry Brown, who had pushed a city hall official for the superintendent’s post. In 2003, Education Next Reported, “New software, installed so that the school district could better understand its finances, had uncovered a $40 million deficit from the previous year.”

Chaconas wanted a waiver from the state to allow use of existing construction funds to temporarily pay off the deficit. Instead State Schools’ Superintendent Jack O’Connell and influential Democratic politicians like State Senator Don Perata and Mayor Jerry Brown were instrumental in putting together a deal requiring the district to accept a $100 million loan, even though it was only $37 million in debt. Through apparent complicity with FCMAT, a state takeover of the district came about which gave Broad trained administrator Randolph Ward complete control.

The problem with a QUANGO is they carry out the political agenda of whoever is in power. An article in the Black Agenda Report stated,

“FCMAT did “hit” jobs for anyone willing to pay. Brown paid Tom Henry to prevent Oakland from solving its fiscal problem. FCMAT lobbied the State Attorney General, Bill Lockyer, the former Democratic Assemblyman from Alameda, to rule that Oakland’s plan to borrow construction funds was a violation of state and local law.” (Tom Henry was FCMAT CEO)

FCMAT is still draining money from Oakland. Former Oakland School District Public Information Officer, Ken Epstein writes,

“State appropriation for FCMAT in 2018-19 was about $6.3 million, plus the fees school districts are required to pay for the “aid” provided by FCMAT staff. This past school year, the district paid FCMAT and the county $1.4 million to oversee OUSD.”

“… The district loan payments are $6 million a year until 2026. The $100 million loan was spent unilaterally by the state Receiver Ward with no input from the community.”

In December 2018, FCMAT CEO Michael Fine accused SUHSD of the felonious offense of covering up bad financial information with no evidence. At the same time his team moved in to perform a forensic audit of Sweetwater’s finances. To this date no evidence of criminal malfeasance has been presented and no forensic audit has been conferred.

That has not stopped Will Huntsberry and the Voice of San Diego from running banner headlines like “State Investigators Say There’s Evidence of a Financial ‘Cover-Up’ in Sweetwater” and linking to these allegations repeatedly throughout the last year.

Another Huntsberry headline claims, “Docs, Interviews Show Sweetwater Officials Ignored Budget Warnings.” This article which Huntsberry repeatedly linked in latter reports says one unnamed employee went to Director of Finance Doug Martens and CFO Karen Michel to raise concerns. Huntsberry says both of them told the employee not to worry about it. Martens and Michel resigned from Sweetwater after the June 2018 budget was submitted. If there were legal or ethical problems with financial reports, they are the main suspects. Technically, the report is not false but it is purposefully misleading and sensationalized.

A Final Observation

I lived through the three superintendents’ tenures of Brand twice and Gandara once. They were perverse and unethical. At the same time, many Trustees serving on the board appeared to represent the construction industry more than parents, students or taxpayers. The present board and superintendent might not be perfect, but I do not believe they are corrupt. That is important.

At this point in time, billionaires throughout America are openly hostile toward public education including US Secretary of Education, Betsy DeVos. Many politicians who take money from them would be happy to facilitate the state taking over our school districts. It is in the best interest of the entire Sweetwater family to close ranks and solve this crisis before outside forces take advantage.

 

 

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