Bond Oversight Done Right –___ – -- =- - Issue 54 • May 1, 2023
Stockton Unified School District Under Investigation For Fraud Following State Audit
By Daniel Garza | April 25, 2023 | FatCityFeed.com

Excerpt: The Stockton Unified School District is under investigation by the San Joaquin County District Attorney's Office after two critical grand jury reports and a state audit uncovered evidence of fraud in the district's financial dealings.
-- District Attorney Ron Freitas announced the investigation in a brief press conference, pledging to prosecute any fraudulent actions that harm children to the fullest extent of the law.
-- The investigation was prompted by an extraordinary audit report released in February 2022, which found that illegal activities had occurred within the district. The report cited "sufficient evidence" of fraud, misappropriation of funds and/or assets, or other illegal fiscal practices. ...

This article will be reported in two parts:
Part 1: the background & Part 2: the lessons learned
Part 1: The Stockton Unified School District FCMAT Audit

The San Joaquin County Office of Education requested the Fiscal Crisis & Management Assistance Team (FCMAT) to investigate procurement irregularities in contracts especially with IAQ Distribution, Inc., a distributor of indoor air quality monitoring and disinfection devices. As in every investigation, a review of processes including internal controls, was conducted. Additionally, the role of the School Board, Superintendent, Chief Business Officers and Procurement officials were evaluated. This FCMAT audit focused on expenditures from the Elementary and Secondary School Emergency Relief Fund (ESSER II Fund). ESSER II funds support COVID-19 response efforts. 

Background:
Located in San Joaquin County, the Stockton Unified School District has a seven-member governing board and serves approximately 34,000 students in transitional kindergarten (TK) through grade 12 at 49 traditional schools. Four of the school board members have served from 2016 through 2020 and the remaining three have served starting in 2022. The district has also authorized five district-operated charter schools and 13 independent charter schools, bringing total district enrollment to almost 40,000.

Leadership:
The school district has experienced turnover with three Superintendents and three Chief Business Officers (CBO) from April 2020 through July 2022. It is important to note that the leadership changes affected the district's operations and identified the need to have the appropriate Conflict of Interests forms (California Form 700- Statement of Economic interests) in place during any transitions. 

FCMAT 
The FCMAT team concentrated their investigation on IAQ, Indoor Monitoring & Disinfection Devices Contract. Their findings concluded that the procurement process was not followed and was influenced by school board members and the superintendent. 

What Happened:
IAQ Distribution Inc. a subsidiary of the Alliance Building Solutions Company was awarded a contract by the Stockton Unified School District.

The Findings:
  • A school board member arranged to have Alliance Building Solution make a presentation to the board about ultraviolet (UVC) disinfection technology and recommended the use of this technology. 
  • The unsolicited proposal to the interim superintendent, CBO and purchasing manager bypassed the RFP process. 
  • The RFP process seems to have been manipulated to favor IAQ. 
  • The superintendent appears to have been hostile and threatening to the CBO (later retired) and the purchasing manager (later resigned) regarding the award of this contract.
  • As directed by the superintendent, a second request for proposal (RFP) was issued and the two highest-rated respondents were not awarded the contract, but rather IAQ, rated third, was awarded the contract. 
  • The district failed to perform due diligence with IAQ before awarding the contract. IAQ was not registered with the California, Secretary of State – as a licensed contractor with the California Department of Industrial Relations
  • The school board awarded an unsolicited contract to a legal firm. Additionally, an attorney from the legal firm drove the school board president to the meeting inferring a conflict of interest. 
  • The payments preceded the invoice date and were inconsistent with the invoice. 
  • There appeared to be a conflict of interest between the superintendent and school board members. 

In summary, the FCMAT team reported that the RFP process was not followed, and invoicing inconsistency and conflict of interest exhibited by the superintendent and school board members. In the following newsletter Part 2 will review processes and procedures that were ignored that resulted in illegal fiscal practices. 

See complete FCMAT Extraordinary Audit: FCMAT-stockton-usd-final-report.pdf
CABOC Board Meeting May 13, 2023 Saturday
10am Via Zoom
Action items partial list:
Item 4: CBOC Members’ Names and Email – Invitation of a Lawsuit
Item 5: Does an Independent CBOC Have the Right to Create and Adopt Bylaws? – Request a
California Attorney General Opinion
Item 6: Does an Independent CBOC Have the Right to be Represented by an Independent
Legal Counsel Paid for by the District? – Request a California Attorney General Opinion

Join Zoom Meeting:
Log into Zoom from your laptop, PC, desktop, or tablet and enter the Meeting ID: 873 3925 8072 & Passcode: 293000. If you are calling in only, you will also need the meeting phone: 1.669.444.9171, after which you will be prompted for the meeting ID.
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