Audit: Alum Rock School District Broke State Law, Local Policy

An East San Jose school district hammered for years by audits, investigations and claims of corruption took another hit in the latest rundown of its storied dysfunction.

A new report by California State Auditor Elaine Howle found that the Alum Rock Union Elementary School District ran afoul of the law and its own policies in the way it managed construction projects, kept track of hundreds of millions of dollars in bonds and otherwise ran the public’s business.

Howle conducted the audit at the behest of state Sen. Jim Beall and Assemblyman Ash Kalra, both Democrats from San Jose. In a letter summarizing her findings, Howle wrote that the district and its elected leaders “must improve their governance and operations to effectively serve the community.”

Questionable Contracts

The report affirms what local watchdogs have long known: that Alum Rock screwed up a major construction deal that allowed one company to essentially police itself.

According to the audit, the district failed to follow state law and district policy in selecting Del Terra Real Estate, which had a reputation for blowing past deadlines and leaving other agencies with incomplete work. Despite that, the board awarded the contractor more than $6.4 million from 2013 to last year.

In early 2018, Howle found that the board violated district policy again by failing to scrutinize bids for outsourced legal counsel. Since it ignored policy and protocol, the board then had no way of proving whether the firm they selected—Long Beach-based Leal Trejo—was the best choice for the district.

“By failing to adhere to the district’s policy for selecting legal counsel, the board committed the district to a contract that it cannot demonstrate to the public was the best choice,” the audit reads. “If the board had teamed with district staff to conduct an evaluation as district policy requires, it could have presented a summary of the evaluation process at a public meeting and demonstrated the basis for its decision.”

Howle also took issue with a contract struck up with HarBro—a firm hired to fix fire damage at an elementary school—that had terms that were unfavorable to the district.

“The district’s director of maintenance awarded the contract of $525,000 on behalf of the district to HarBro, with whom he had been employed before he came to work at the district,” the report states. “Although he acknowledged the connection and the Superintendent [Hilaria Bauer] was aware of this contract, this situation still creates the appearance of possible favoritism toward the contractor.”

Weak Oversight

Additionally, the district failed to make sure that key staffers and contractors filed Form 700s disclosing their financial interests.

“The district did not require some individuals who performed services for the district through contracts to disclose their financial interests, even though these individuals, whom we refer to as contracted personnel, served in roles similar to those of district employees who must disclose their interests,” Howle reports. “In accordance with state law, the district adopted and implemented a conflict-of-interest code (code) identifying those employees who are responsible for making—or participating in making—decisions that may have a material effect on their own financial interests.”

The board’s divisiveness last year also undermined its ability to evaluate Superintendent Bauer, as required by the terms of her contract.

Poor Governance

Remember that time then-Board President Esau Herrera reportedly played hooky to watch Luis Miguel in concert? Apparently, he might’ve still been paid a meeting stipend.

State auditors found that the five-member panel of trustees had a spotty attendance record, which delayed important decisions, and that the district unlawfully compensated some board members for meetings they didn’t attend.

The board evidently fell short of basic transparency standards, too.

One time, a trustee who should have recused himself cast a vote on a key board decision in violation of state law. Yet another board member who did recuse herself neglected to provide the legally required information about why she did so. “The two board members’ actions limited the board’s transparency and accountability to the public,” Howle states.

Meanwhile, the district should’ve done more to keep the public in the loop. The audit found that the district didn’t post meeting agendas on time, and would leave out sufficient details about closed-session items, “potentially limiting public involvement.”

It should be noted that some of the trustees serving at the time of the audit, which went up to December 2018, are no longer on the board. Herrera and Khanh Tran—considered some of the worst offenders—didn’t survive the last election.

Lack of Disclosure

Howle raised questions about the district’s stewardship of general obligation bonds pegged for school improvements. Per the audit, the district failed to report critical financial data, including the cost of issuing the bonds and how much money went toward consulting and advisory fees.

“For one of three general obligation bonds the district issued from fiscal years 2013–14 through 2017–18, the district’s financial advisor appropriately presented at the required board meeting the actual costs of $239,000 for the bond issuance of $32.4 million,” the report states. “However, the board did not present information on actual costs at the meetings following the other two bond issuances, which totaled $21.1 million. When we asked why the board did not disclose the actual cost information for those two bond issuances, the assistant superintendent of business services said he was unaware of the legal requirement to do so, even though district policy clearly states this requirement.”

That seemed like a weak excuse, the audit suggests.

“[Ev]en without knowledge of the relevant legal requirements,” it goes on, “district staff should have been familiar with district policy and ensured that either the advisor or the board disclosed the cost information.”

Cleaning House

In closing, the audit recommends that the board to go through ethics training, draft a code of conduct and come up with a system to keep track of contracts, train employees and deal with conflicts of interest.

Since a few new trustees have come on board since last year, that work is reportedly already underway. The district, for its part, agreed with the findings.

“The district takes the analysis seriously and fully intends to take actions to put in place systems, trainings and practices designed to prevent the types of problems that this report has found,” Bauer wrote in response to the state agency.

Jennifer Wadsworth is the news editor for San Jose Inside and Metro Silicon Valley. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

17 Comments

  1. Cheating Children and Families: this has become a popular theme in Santa Clara County when it comes to the elected officials. What is revealed in the State Auditor’s report could be simply reissued for any other government agency operating in this county.

    Wash. Rinse. Repeat.

    Brown Act violations, lack of disclosures, improper governmental activity and poor attendance at public meetings. The Santa Clara County Board of Supervisors leads the way by poor example. Supervisors are bad parents letting their children run amok. They are crafting a dangerous path as they are critical of a national government doing exactly the same thing.

    Thanks Jennifer Wadsworth for reporting on these important reports from the State Auditor. Hopefully this will inspire the terrific youth media organizations in our local high schools and colleges to join in and assure much needed transparency in our local government that will hold our elected officials accountable.

    • Amen and totally agree with Ms. Bassi. It was ridiculously for Zoe Lofgren to have an event to fight corroption in Washington! It was like critizing other’s big nose when your own is bigger. The democratic elites in SANTA CLARA COUNTY formed a mafia style goverment composed by attorneys, judges, and other insiders. They apparently believe being a leader of a community equals to having a governmental position. They break law, ethics, and morals. I would love to see dome of these people in jail. That is where they belong! I also appreciate Jennifer’s brave and honest reporting.

  2. > Howle conducted the audit at the behest of state Sen. Jim Beall and Assemblyman Ash Kalra, both Democrats from San Jose.

    Good start, Ash and Jim.

    Next you can audit Santa Clara County’s “homeless” programs. Probably some “improprieties” there.

    And, after you get your auditing juices flowing, how about taking on the Federal Reserve?

  3. It is rewarding to know the state is finally paying attention to the corruption that has been happening for so long in Santa Clara County. Ash Kalra is one of those many politicians in our county that conduct negociations based on PR points. It is clear that as many others in our county he has state office in his mind, so his government is focused on forming the collision of influential donors that can help him win a state office. His closest pals are Córtese, Chavez, and local non-profit executives with political background. Just check the facebook pages of these people and you will see what they plan and those around to support them. I hope the state will continue to investigate local public corruption. VOTE THESE CORTUPTED POLITICIANS OUT!

  4. All of this chicanery is an artifact of a big picture of corruption that suffuses the whole system. It also affects the academic performance of the students. Check out 4 years of Math and ELA academic performance in Alum Rock at http://sipbigpicture.com. Corruption has consequences!

  5. Clearly pathetic! Charter schools, simply put, wins hands down! Even though they follow the same core, they can cast their own leaders and put the students’ education first! None of this political crap which eventually falls downward on the innocent…the students. Took my daughter out of the public school system a long time ago and it was the BEST thing I could’ve done! She is the 1st graduating class this year from an established, well respected and class A Charter High School! Maybe someday, the County will do the right thing…um…wait….er….never mind….that won’t happen!!!

    • Tina, we should not give up! We have to fight it. Much more people are honest than these corrupted politicians. Let them hear your voice when you vote!

  6. Someone should look into San Jose Evergreen Community College District . These are community colleges but they spend our taxes money to travel to oversea to recruit international students . They have a lot of money and spend like a free ride. Common, SJCC and EVC is a community college. They should serve local community first!

    • Santa Clara County is awash in money and corruption. It is time for the people to stand up and demand change! It is a very seriousl problem and affects multiple levels of government. Easy money.

  7. If one makes accusations of corruption, please provide an example and have the courage to state one’s name. Otherwise, we can assume that one is a BOT (Russian or otherwise) whose sole purpose is to undermine trust in government. I don’t put much state in broad accusations of corruption EVERYWHERE. However, I do support the public being more involved in local governments. And yes, Alum Rock School District governance has been terrible for years and drove many good people out of the district. So glad that Esau Herrera is gone. Pay attention to school board meetings in your district.

    • A 25 year old woman is currently fighting the local Gilroy and Santa Clara County corruption that has protected her father who has engaged in serious crimes including watching child pornography and IRS fraud. Local officials have engaged in covering this man’s crimes as a way to protect his employment. He is a former San Jose Police officer and current SANTA CLARA COUNTY Sheriffs deputy. It is hard to hear stupid women like yoyrself still exist! Call Gilroy Mayor Velasco AND ask if this case is real. The father attempted to chock this young woman at the beginning of this month and Gilroy Police gave him a pass as other times. The same corruption was the basis for the 2011 Gilroy Murder Suicide. Gilroy Police failed that family by also giving passes to the then San Jose Police Department Officer who killed himself after killing his wife. Get out of your emotionally immature bubble!

  8. The 15 young ladies of SCUSD had the courage to stand up and speak out against the sexual harassment of Dominic Caserta. They are at real risk of retribution as the culture at SCUSD is extraordinarily toxic. I know because I worked in that system. They are trying to brush the sexual harassment issue under the rug hoping that their new messiah superintendent will bail them out. Good luck with that. They also failed to appropriately allocate Title III funds to schools as required by law. It was only $3 Million for one year so the state who also loves to cover up let them adjust their books so everything looked OK. The backbiting and positioning for power is second to none except maybe for the power plays at the Santa Clara County Office of Education where I also worked amongst power hungry but incompetent education schmoozers and griftes.

    It is not easy to stand up in this kind of toxic environment due to the rampant nature and depth of the corruption. Believe me it is ubiquitous across the system!

    • Actually the word screw up has been commonly used within the mainstreamm of American parlance since the 1900’s. It is a colorful way of describing a blunder. Jennifer is a colorful writer who is quite capable of using engaging and appropriate language in her articles.

      Rather than playing Miss Manners on San Jose Inside by trying to rearrange the lexicon in the midst of a disaster, you might want to redirect your focus to the real obscenity of the rampant corruption within Santa Clara County that is being exposed by our courageous and competent investigative reporter, Jennifer Wadsworth!

      Keep up the great journalism Jennifer! You will never screw up!

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