Investigation reveals possible WCCUSD fund mismanagement

Representatives of accounting firm  Vicenti, Lloyd & Stutzman, LLP present the findings of a recent forensic financial audit to a WCCUSD school board subcommittee during a meeting last Thursday. Photo by Marian Davidson.

Representatives of accounting firm Vicenti, Lloyd & Stutzman, LLP present the findings of a recent forensic financial audit to a WCCUSD school board subcommittee during a meeting last Thursday. Photo by Marian Davidson.

An investigation into allegations of mismanagement of the West Contra Costa Unified School District’s (WCCUSD) school construction bond program has found misspent funds, inconsistent budget reports, noncompliance with district policies and potential conflicts of interest. Results of the investigation, a forensic financial audit, were presented during a Board of Education subcommittee meeting at Alvarado Adult School last Thursday.

Investigation subcommittee member and former WCCUSD Citizens Bond Oversight Committee chairperson Ivette Ricco said the bond money was not spent when and how it should have been. “Now we have nothing left,” she said.

Funds in the bond program, created by a series of six bond issues approved by voters between 1998 and 2014, are designated for school construction and improvement projects. In April 2015, district accountant Dennis Clay released numerous documents—including project budgets, contracts, expenditure data and meeting minutes—indicating possible financial mismanagement of the $1.6 billion program.

In late January, the WCCUSD School Board approved the audit, which was completed by accounting firm Vicenti, Lloyd & Stutzman, LLP. The Federal Bureau of Investigation and Securities and Exchange Commission conducted separate investigations of the bond program beginning in 2014.

The accounting firm’s nearly 1,500-page report noted instances of misspent money, such as $106,150 paid to SGI Construction Management from July 2008 to July 2013 for sick, vacation and other time off not authorized by the firm’s contract with the school district. It described instances of board approval of over-budget contracts, including a $98,800 contract approved for a DeAnza High School project with a budget of $62,425. And it detailed bond program budget summaries in which the beginning balance of one report did not match the previous report’s ending balance.

“What really deeply troubles me is the sloppiness, the lack of checks and balances,” said school board trustee and investigation subcommittee chair Liz Block. “What it makes me wonder is how widespread is this?”

The VLS report includes recommendations to address financial mismanagement and enhance accountability, such as regular fraud and ethics training. The firm also suggested the Board of Education create a Recommendations Implementation Task Force.

The investigation is complete, said Ernie Cooper, a partner at VLS, “but that’s not where it stops.”

Responses to the report’s presentation at least week’s meeting were mixed.

Ben Steinberg, a former district parent, said the report was a “total vindication” and urged the community to accept the report, its findings and recommendations.

Don Gosney, a retired senior general foreman and union president and current co-director of The Ivy League Connection, a local scholarship program, said he had “great concerns” about the audit report, because of errors such as a table including Richmond Middle School, which does not exist in the school district.

The VLS report flagged the The Ivy League Connection, which was founded by school board member Madeline Kronenberg and former school board member Charles Ramsey. The program received more than $1 million in donations from district vendors from the 2008-2009 through the 2014-2015 fiscal year, and provided benefits to three children of school board members.

Kevin MacQuarrie, a principal architect with WLC Architects, a WCCUSD vendor, said that the report “completely misrepresented” his firm, whose work was “scrupulously vetted by the district during the entire project.”

Block said “sloppy” work and inadequate practices played a large role in the spending mismanagement, and that blame should not be placed solely on vendors, architects and project managers. “We can’t just look at one group to blame for this,” she said.

There is currently $160 million remaining non-earmarked funds in the bond program, and Ricco predicted the district will “need another billion” dollars to meet its construction goals.

The forensic financial audit investigation cost nearly $1 million, but Block said it was money well spent. “I think we’re moving in a positive direction,” she said.

The Clay Investigation Subcommittee will present the audit report to the district’s Board of Education on Sept. 21. The subcommittee will also recommend that the board form a task force to implement the report’s recommendations.

An earlier version of this story stated that there is $225 million remaining in the WCCUSD bond program; the correct figure is $160 million in non-earmarked funds. The story also stated that the FBI and SEC investigated the program in 2015; the investigation was launched in 2014. Don Gosney’s professional title has been changed, to retired senior general foreman and union president.

5 Comments

  1. Deborah

    Why is this surprising!?

  2. Mikey

    You did a super job capturing a complex issue. Nice work.

  3. Good job covering a very complex subject. Those of us who have followed this scandal for years appreciate the sunlight you’ve brought to the community’s attention.
    Jack Weir
    President, CoCoTax

  4. Don Gosney

    A few corrections/clarifications if you don’t mind:
    • The only thing that the FBI, SEC and IRS asked for were copies of correspondence (emails, letters, texts) and their inquiries were concluded in 2014—before Dennis Clay took his own allegations public. No allegations were ever made against and Board or staff members (except from some members of the public who are still convinced that everyone is corrupt except them).
    • Why is it that VLS never even attempted to speak to the architect of the Bond Program—the one person who knows more about the Bond Program than any other person? If this is the one who—according to some members of the community spoon feeding the auditors juicy tidbits—why didn’t they make even the slightest attempt to speak to him? And if they wanted to know about the ILC, why did they blow off the one person who knows more about ti than anyone else (me). They scheduled an interview but blew me off the day before saying they would reschedule. That’s been three months ago and still no reschedule.
    • With the two Board members who supposedly benefitted from the Ivy League Connection scholarships, just how did they benefit? First, with one Board member, his daughter was awarded a scholarship in the middle of January, her father wasn’t convinced to run for the Board until the following July (AFTER she had returned from Brown where the ILC sent her) and he wasn’t sworn in until the following December. So just how was this a pay for play scenario 11 months AFTER she was awarded a scholarship? And as for the second Board member (who had two daughters who were awarded scholarships), the applications were redacted so their schools, home towns and last names were not available to the interview panelists, the panelists did not know the Board member and he was not even allowed in town on those days. Plus, he donated $17,000 to the ILC—which covered the costs of his daughters’ scholarships. So, again, where was the pay for play? Where was the benefit to those Board members? Perhaps this is why the FBI scoffed and rolled their eyes when they heard the details and realized that they had been sent on a fool’s errand by people with a grudge.
    • I’m unsure what my former profession has to do with anything but at least get it correct in that I was the former President of my union and also served as General Foreman and Senior General Foremen.
    • Continuing with my concerns about the report included the numerous factual errors contained in the audit, aside from the dates, names and locations that were incorrect, these also included “quoting” sources but admitting that they summarized the quotes to relay what they believed to be the intent of the speakers. They also failed to give a single attribution to any of the allegations. Nor did they give a time frame of when incidents allegedly occurred. How is anyone supposed to defend themselves when they have no idea who is making the allegations or the context of the alleged incident? Do not people who are accused of wrongdoing entitled to confront their accusers?
    • Why is the Dennis Clay Subcommittee so opposed to a public review of the audit with the traditional written public comments? Why are they so obsessed with accepting this flawed report without giving the public, staff and even the Board sufficient time to review it and post comments. And on Wednesday evening, the public will be allowed just 90 seconds to comment on a 1,485 page document? Exactly what are they trying to hide? What are they trying to pull over our eyes?

    When you hear people say “good enough for government work” this is what they’re talking about. The District authorized a million dollars directly to VLS but since they borrowed the money, the interest alone will be another $1.4 million. Add on the attorney fees and the thousands of manhours of staff time, and by the time we’re finished paying for this flawed report, the cost will approach $3 million.

    Personally, if they want to conduct their own affairs in this slipshod manner, that’s up to them. But when they sit as Board members, I expect them to set a high standard so our children can emulate them. Paying this money for a report that is as flawed as this one is just embarrassing—and deserves it’s own investigation (just not by VLS).

  5. Don Gosney

    Had VLS actually done their job and asked the questions, they would have learned that the ILC had other funding sources that, combined, exceed the contributions from the District’s vendors.

    And, had they bothered to ask, they would have learned that the last contract awarded to an architect was in 2011—five years ago. So, with no further contracts being let, how can anyone claim that there was pay to play when there was no “play” involved?

    And should anyone look at the statute of limitations for fraud (five years)? So how is the District going to get anything back from these architects when there’s no mechanism for redress?

    There are still unanswered questions about SGI but the very people that can answer those questions, were never approached.

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