The Los Gatos Union Elementary School District has received failing marks for "ineffective internal controls" for its handling of computer network equipment inventories, construction inspection, and administrative staff time off accounting. The 118-page report, by the state's Fiscal Crisis and Management Assistance Team (FCMAT), details missing equipment worth more than a quarter million dollars, no-bid contracts given to family members of a district employee, and poor accounting for administrative staff time off.
Update (1/11/08): FCMAT is not a state agency. It is related to California School Information Services, whose mission includes facilitating electronic reporting from schools to the California Dept. of Education. See Inspector Files Claims Against Los Gatos Schools (1/7/08).
The LGUSD consists of Fisher Middle School and Blossom Hill, Daves Avenue, Lexington, and Louise Van Meter Elementary Schools, which serve a total of 2,587 students. FCMAT was created in 1992 and has performed 637 studies to date, 94% of them classified as management assistance rather than fiscal crisis.
"FCMAT found significant material weaknesses in the district's internal controls related to inventory control and conflicts of interest, which indicated areas in which fraud and/or abuse occurred," according to the report. Over the past 10 years, as Internet technology has become vital to schools everywhere, the LGUSD has filed more than 20 reports of equipment theft with the Los Gatos/Monte Sereno Police Department.
The most recent police report, filed in August 2006, reportedly claimed that $200,000 worth of equipment, including six Macintosh G5s and thousands of dollars worth of Cisco networking hardware, had been missing since 2005. The FCMAT report notes that a claim for this loss has not been made, to date, with the district's insurer. There were contract negotiation tensions between the district and the teacher's union as the 2006 school year began, and by December, the inventory concerns had been communicated to the county.
"In response to a formal written allegation, in December 2006, the Santa Clara County Office of Education requested that FCMAT conduct an extraordinary audit of the Los Gatos Union Elementary School District," according to the report. County Superintendent of Schools Dr. Colleen Wilcox signed the FCMAT paperwork February 8, 2007.
FCMAT, based in Bakersfield, hired Kessler International of New York City, and conducted an on-site investigation in February and March with a four-man team that included Michael Kessler.
In addition to numerous inventory control issues--boxes received were not opened immediately, serial numbers were not always recorded, and inventory was retired without due process--FCMAT audited construction and construction inspection contracts and reviewed records to determine whether administrative staff was taking more time off than permitted. FCMAT found that the district was violating specific rules meant to ensure fair bidding and contracts, including limiting change orders to 10% of the contract price.
An unnamed employee in the district's facilities department allegedly approved and pressured the business office to speed up payments to a construction inspection company that employed a member of the facilities employee's family. At least two technology employees are no longer with the district.
"Over the years, we've taken steps to tighten internal controls," District Superintendent Suzanne Boxer-Gassman told the Mercury News. The report criticizes the district's recent sale of 167 Macintosh computers to the Live Oak School District for $1 each, and it recommends that each school's principal be given responsibility over their school's equipment rather than district staff.
Tristan Ludlow Construction (TLC) was specifically mentioned in the FCMAT report because Mr. Ludlow's father was allegedly contracted by the district to inspect his son's company's work. The study calls this a conflict of interest that should be "referred to the appropriate legal authorities." Ludlow received over $200,000 for carpentry work on Daves Ave. Elementary School, including $8,500 for a simple wood trellis/fence, the price of which raised "concerns" for the FCMAT team.
The report reviewed allegations that leaving early and long weekends are common with some employees, despite the 13 paid holidays, 4 and a half weeks of vacation, and 12 sick days the district provides for its administrators. FCMAT recommends a thorough reconciliation of all administrative leave.
The cost of the FCMAT study was estimated, in an appendix to the study itself, at $50,000.
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