May 23, 2019
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this audit report pertaining to the Alum Rock Union Elementary School District (district) and its operational and financial practices, governance, and public transparency. This report concludes that the district and its board of trustees (board) must improve their governance and operations to effectively serve the community.
Specifically, the board did not use a structured process to choose the most qualified firm when soliciting and awarding certain contracts related to construction projects, despite state law and district policy requiring it to do so. We also question the district’s decision to hire a contractor to oversee its own work managing the construction of school improvement projects rather than seeking another firm to perform such oversight for quality control purposes. Moreover, the district neither has procedures for monitoring its contractors to ensure that they have fulfilled the terms of their contracts, nor provides the board with sufficient information about its payments to contractors. The district is also unaware of whether some of the individuals with whom it contracts have conflicts of interest because the district lacks procedures to identify those individuals who should disclose their financial interests.
The board’s actions at its meetings have also raised concerns about its transparency and accountability to the community. In two instances, board members did not properly recuse themselves from voting on certain decisions as state law requires, and in another instance, the board violated state law by not having a sufficient number of board members present within the district when voting on several decisions. In yet another instance, the board could not demonstrate to the public that the law firm it selected to serve as the district’s general counsel was the appropriate choice because it did not adhere to district policy requiring a comparative evaluation of proposals. Furthermore, the board has not yet taken action to implement many of the recommendations made by the Fiscal Crisis and Management Assistance Team in its June 2017 audit of the district. Finally, although the board is not subject to a state law requiring biennial ethics training, we believe that—given the concerns we identified—it would be prudent for board members to receive such training.
ELAINE M. HOWLE, CPA
California State Auditor