$13.5 Million Question
As Election Day approaches, MPUSD’s forensic audit looms large.
Thursday, November 3, 2005
When community member Shauna Rowe submitted a document titled “Why You Must Do a Forensic Audit” to a divided Monterey Peninsula Unified School District last September, she set off a series of events which has significantly altered the course of local education politics. There is some question, however, about how much of what she presented is based on fact.
Rowe’s document, which listed 14 reasons why the board needed to vote for the independent audit, leveled serious charges of misconduct and conflict of interest by 3D/I International, the construction company hired by the district to modernize facilities. It also charged that $13.5 million had been mismanaged or was missing.
Perhaps the most contentious allegation, however, was the document’s ominous conclusion. It implied that former Superintendent Daniel Callahan, who retired earlier this year, had stolen the money.
“I wonder,” she writes, “how is it possible that Daniel Callahan can afford to take five years off work, buy a 45-foot yacht and sail away to the Caribbean?”
Callahan is abroad and was unavailable for comment at press time. But according to the school district’s chief business officer Tom Woodruff, all of the money has been accounted for. After conducting an internal investigation, Woodruff has concluded that everything is above-board.
“There’s no money missing to my knowledge at all,” Woodruff says. “There is no evidence of fraud or embezzlement. It might be more an issue of competency.”
Yet faced with Rowe’s allegations, and a large, vocal contingent of wary parents and community members, the MPUSD board members did some soul searching. Either cough up $29,000 for a forensic audit or simply concede that mistakes were made and move forward.
Ultimately they decided the district could not move forward before it cleaned up its past. And on Sept. 19, after Rowe’s presentation, board members voted 5-2 to hire Price, Paige and Company, a Clovis, Calif.-based accounting firm to conduct a forensic audit.
Woodruff says he believes that much of the financial confusion stems from the fact that the board members didn’t understand how the modernization program—paid for by money from the state—worked.
According to Woodruff, the district received $53 million in state grants, all of which was specifically earmarked for 24 different modernization projects. Problems arose when the board failed to follow the detailed spending guidelines of each grant.
“The district operated under the mistaken assumption they could move that money among the schools,” Woodruff says. “That’s clearly not the case. That one assumption accounts for about 90 percent of the errors that were made.”
Woodruff says that the other 10 percent of so-called “missing” money is, in fact, in Sacramento. The district did not receive the grant money because the board failed to submit paperwork on deadlines.
“The state has a requirement that you provide them progress reports on an 18-month deadline,” Woodruff says. “The deadlines for Marshall and Monte Vista schools were missed, and missing those deadlines is a fatal error for those two grants. That’s unrecoverable money.”
But regardless of its results, the forensic audit has become an issue, which may affect the Nov. 8 elections.
Incumbent board member Regena Lauterbach, who voted in favor of the forensic audit, is up for reelection. She believes that Woodruff has since accounted for the financial discrepancies, but feels an independent investigation of the board’s finances will regain the public’s trust and provide a detailed explanation for how things went so wrong.
“I just think that because we’re elected by the people and we’re responsible for others’ money,” Lauterbach says, “we should be accountable for it. I’d just like to know exactly what happened.
“It was not an easy decision. Twenty-nine thousand dollars [to pay for the audit] is a lot of money. But we have to regain the trust. This is one of the first steps.”
MPUSD Foundation President Richard Grahlman, who is challenging Lauterbach for a seat on the school board, on the other hand, agrees that district administrators have shown that there is no missing money. And he says there are better ways to spend $29,000.
“There may be some over-runs, there may have been some missed deadlines, but there’s no evidence that there’s any money missing,” Grahlman says. “There may have been some mistakes made, but it’s certainly not some kind of grand embezzlement.
“I’d rather spend the $29,000 on a part-time librarian. But if it can help the district heal and move on then it’s money well spent.”
Still, Grahlman is clearly frustrated by the situation.
“The state is supposed to go through and look at all the financial stuff every year,” he says. “It’s an independent auditing company hired by the Department of Education. Don’t you think they might be able to find something if there was something wrong?”
According to Leah Veile, MPUSD’s director of fiscal services, this annual independent audit would not find anything amiss. The problem is, Veile says, the board’s budgetary problems occurred back in 2001 when the grant money was initially apportioned. Consequently, a forensic audit is necessary to accurately track the money over the course of the last five years.
“When they do a forensic audit they go back to day one and track the dollars to where we are now,” Veile says. “I guess then we’ll have confirmation that what we know is true, that they moved this money inappropriately from one account to another. We’ll see.”
Ultimately, Lauterbach voted for the forensic audit because she wants to be held accountable.
“I want to do [the forensic audit] to find out what my role was,” Lauterbach says. “What did I miss? What was I not told? I just want to be a responsible board member.”