Want the news summarized?
Subscribe to The Morning Report.
Tuesday, February 21, 2006 | The extent of the fraud is unknown as yet, but damage control is in full swing at the Sweetwater Union High School District.
In addition, according to Sweetwater’s communications director Lillian Leopold, two weeks ago, the school board gave its attorney the go-ahead to pursue the district’s own civil lawsuit against the alleged perpetrators.
When they learned of the extent of the violations, Sweetwater officials also asked the San Diego County Office of Education to provide independent examination of the evidence and of the district’s internal procedures.
This resulted in an audit concerning fraudulent actions by the former Sweetwater plumbing supervisor, which was released last Wednesday by the district. Also released was a lengthy, point-by-point response from the district, a stern letter to the Sweetwater school board from county schools superintendent Rudy Castruita, and a response to Castruita’s letter from Sweetwater’s interim superintendent Bruce Husson.
The 12-page audit was released to SDCOE on Feb. 3 after Castruita requested the assessment of the situation. In his letter to the Sweetwater board, Castruita wrote that the audit revealed “a lack of accountability,” and “an inattention to proper controls,” leaving the district open to “unscrupulous employees.”
Castruita wrote that, as a result of the findings, he was “considering the withdrawal of the district’s fiscal accountability status,” meaning the county would provide oversight on spending.
“The district hereby requests that you take that action forthwith,” reads Husson’s reply. His letter continues, saying the district “will reapply for fiscal accountability status” after it has fully implemented tighter internal controls.
The auditors were asked “to look for instances of fraud or other illegal acts” for the years ending June 30, 2004 and 2005. Sweetwater’s superintendent at the time of the suspected criminal activity was Ed Brand, who has since left and is now superintendent of the San Marcos Unified School District. Brand could not be reached for comment.
The audit focuses primarily on the disclosure of questionable district business practices in Sweetwater’s maintenance, purchasing and accounting departments that the local accounting firm of Rosner Brown Touchstone & Keller says represent “serious weaknesses in internal control.”
Unlike most audits, Sweetwaters release did not include an accounting of the total amount of money stolen, except for isolated examples of ways in which the district was robbed.
One finding showed that the use of large, open purchase orders was common at the district, a practice that can be easily abused. For example, the report says, open purchase order amounts for routine supplies might be issued at $5,000 but can be adjusted past $50,000 without review.
In an example, “a vendor was paid $25,000 over the purchase order limit.” One invoice for $15,000 was paid twice, the audit says.
The former Sweetwater employee implicated in the case is said to have conspired with American Asphalt and Concrete, Inc. to defraud the school district of what two independent sources say could amount to millions of education dollars.
The magnitude of the case rests on exactly how much money was stolen from the district, but those close to the investigation refuse to disclose details. So, whether the district was defrauded of $10,000 or $10 million is anyone’s guess at the moment.
When asked about the total amount of money involved, Castruita told me, “I’m not privy to that information. I’d be speculating.”
Also familiar with the case is Lora Duzyk, SDCOE’s assistant superintendent for business services, who also denied knowing the extent of the loss.
Sweetwater’s Leopold said she too did not know exact figures. She added that Husson told her he didn’t want to jeopardize the on-going investigation by giving out preliminary numbers.
Sweetwater grants manager Anthony Millican said he couldn’t release even a ballpark number until they have the exact amount. “We could have held the audit until we had the numbers, but we wanted to disclose it to the public as soon as possible,” he said.
It’s beginning to smell like a lot, isn’t it?
Sweetwater and SDCOE aren’t the only agencies that aren’t talking.
Leopold said the district is cooperating fully with the D.A.’s office in its investigation. SDCOE’s Duzyk confirmed this, saying, “It’s all been turned over to the D.A.” Yet the D.A.’s office is mum on the issue.
Paul Levikow, Public Affairs Officer and major roadblock at the district attorney’s office, said, “I can’t even acknowledge that an investigation exists; nor can I deny it.” This, even though both Sweetwater and SDCOE state that the D.A.’s office is pursuing a criminal investigation.
Sweetwater is the largest secondary school district in the state, with 29 schools serving 39,000 students in seventh through 12th grades. The district encompasses 153 square miles and includes Bonita, Chula Vista, Eastlake, Imperial Beach, National City, Otay Mesa, South San Diego and San Ysidro.
When asked about the delay, Leopold said the district wanted time to compose a response to all the findings in the audit, so they could release both documents together. She said the audit could be requested under the Freedom of Information Act, but it would take 10 days to process anyway.
The audit offered 26 findings and recommendations for improvement of internal policies that the report indicates are currently ripe for abuse.
The district’s response admits that “in certain instances there were weaknesses in the adherence to internal control procedures.” But it also says the conclusions reached by the Rosner firm “are demonstrably exaggerated extrapolations based on anecdotal findings that are not representative of the district’s entire financial or operational status.”
The district agreed with many of the findings but noted that most of the problems were being addressed. “We had already implemented a number of actions based on our internal review,” said Sweetwater’s Husson, in a prepared statement. “We’ve already taken action or will be taking action on 25 of 26 recommendations.”
The district’s response asks readers “to put these findings in context and perspective.” The document points out that the district’s general fund was more than $300 million for the 2004-2005 school year. Of this, 83 percent was for salaries and benefits. The remaining 17 percent ($51 million) was for services and materials. And of the 17 percent, 3.9 percent – or $2 million – was allocated to the maintenance budget.
So, less than 1 percent of the district’s total budget for one year went to the maintenance department, and only part of that $2 million was stolen, they claim.
Trying to minimize the damage by implying that the loss from the fraud was insignificant is troubling when one considers that a mere $500 could buy a personal computer for a low-income student.
Initially, my reaction was to sympathize with the district for being victimized by such a brazen conspiracy. But my pity dissipated substantially after reading the district’s 15-page response, item by item, to 26 recommendations from the auditors on ways to improve internal control procedures.
All this cover-your-backside posturing and intense focus on business practices is a distraction from the fact that the district simply lost control over the public’s money, a dishonest employee came in and abused the system, and students were robbed.
In a prepared statement, Sweetwater school board president Greg Sandoval expressed outrage “that these alleged criminals stole money from children.”
This is the real offense. In the midst of a budget crisis where educators are scrambling for every measly dollar, a serious crime against children has been committed by corrupt individuals that has drained precious education money from students.
Conduct audits, issue reports, send letters, tighten procedures, file lawsuits, don’t talk about the money, deflect inquiries about the status of the investigation. Fine, do all that. But just remember who the big losers are in all this – the children.
Marsha Sutton writes about education and children’s issues. She can be reached at