Sacramento County Grand Jury June 30, 2004 The Sacramento City Unified School District Board of Education Was Negligent

Conclusions 8

• CL1
  The Sacramento City Unified School District Board of Education did not fully explore, question nor understand the joint powers proposal presented by the Chief Financial Officer and supported by the Superintendent.
• CL2
  In approving the JPA, the Board authorized transfer of district classified employees to CASA.
• CL3
  The SCUSD Board, once CASA was established, paid little attention to issues of oversight and management of the JPA. For example: 6 Sacramento County Grand Jury June 30, 2004 a. The Board did not appoint representatives to the CASA board but delegated the selection to the Superintendent. b. The Board did not require periodic reports or yearly audits of CASA. c. The Board allowed CASA bylaws to be amended without approval. d. The Board allowed the CFO to assume the position of Executive Director of CASA while serving concurrently as the District CFO.
• CL4
  The Board opted to reward its three contract employees (Superintendent, Chief Financial Officer, Legal Counsel) by giving them inflated retirement benefits. For example: a. Granting 10 additional years of service credit which was excessive and unprecedented for public service positions. b. Granting mileage allowances, travel expenses, and vacation pay to be included in the final compensation calculation for retirement was inappropriate.
• CL5
  The CFO and the outside consultants she selected appeared to mislead the Board with incomplete information and strong assurances of cost neutrality of the CASA plan.
• CL6
  The Board authorized the issuance of an unnecessary $6.5 million pension obligation bond and incurred financial liability with little or no discussion or understanding of the possible financial impact to the District. The $420,709 cost to issue the bond could have been applied to educational purposes.
• CL7
  The Board of Education and top administrators were dismissive of community concerns regarding the JPA and CASA.
• CL8
  The Sacramento City Unified School District Board of Education failed in its oversight responsibilities. It was negligent in its responsibility to protect the interest of all its constituents, including voters, students, parents, taxpayers and employees by authorizing a joint powers agreement ostensibly for retirement purposes. Inasmuch as Board members make decisions in complex areas, they depend on district administrative staff for advice and recommendations, including school finance, curriculum, student safety, personnel practices and facility use. In the case of the establishment of CASA, the Board did not receive or request a complete and balanced picture. By their own admissions, they were convinced by their administrative staff of the efficacy of a unique retirement program—a program that ultimately proved to be flawed, and a liability to the District. Although the Grand Jury reviewed the conduct of Sacramento City Unified School District, some of the recommendations could apply to the administrative functions of all school districts within Sacramento County. In order to strengthen the integrity of the administrative functions of school districts, the Grand Jury respectfully requests all school districts within Sacramento County consider the report’s recommendations. Findings and Recommendations Findings for the Board of Education: Finding 1. The Sacramento City Unified School District Board of Education did not fully explore, question nor understand the joint powers proposal presented by the Chief Financial Officer and supported by the Superintendent. Finding 2. In approving the JPA, the Board authorized transfer of district classified employees to CASA. Finding 3. The SCUSD Board, once CASA was established, paid little attention to issues of oversight and management of the JPA. For example: 6 Sacramento County Grand Jury June 30, 2004 a. The Board did not appoint representatives to the CASA board but delegated the selection to the Superintendent. b. The Board did not require periodic reports or yearly audits of CASA. c. The Board allowed CASA bylaws to be amended without approval. d. The Board allowed the CFO to assume the position of Executive Director of CASA while serving concurrently as the District CFO. Finding 4. The Board opted to reward its three contract employees (Superintendent, Chief Financial Officer, Legal Counsel) by giving them inflated retirement benefits. For example: a. Granting 10 additional years of service credit which was excessive and unprecedented for public service positions. b. Granting mileage allowances, travel expenses, and vacation pay to be included in the final compensation calculation for retirement was inappropriate. Finding 5. The CFO and the outside consultants she selected appeared to mislead the Board with incomplete information and strong assurances of cost neutrality of the CASA plan. Finding 6. The Board authorized the issuance of an unnecessary $6.5 million pension obligation bond and incurred financial liability with little or no discussion or understanding of the possible financial impact to the District. The $420,709 cost to issue the bond could have been applied to educational purposes. Finding 7. The Board of Education and top administrators were dismissive of community concerns regarding the JPA and CASA. Recommendations to the Board of Education: Recommendation 1. The Board needs to fully investigate and research all proposals that incur financial obligations and have fiscal ramifications. A discussion of the pros and cons should be publicly presented with adequate provision for public input. Recommendation 2. Future attempts of the Board to compensate district individuals for outstanding service should be within the limits of what is generally given to people in education. Recommendation 3. The Board should monitor and control all agencies or entities that the school district creates and for which it assumes liability. The Board should not delegate its oversight responsibilities to others. The Board should demand timely reports and audits. 7 Sacramento County Grand Jury June 30, 2004 Recommendation 4. The Board of Education must guard against appearances of potential conflict of interest whether ethical or legal. Recommendation 5. The Board should establish a process to assure that community and constituent concerns are heard and addressed. Findings for District Administration: Finding 1. The Superintendent allowed the CFO to control the central office without necessary checks and balances. For example: a. The Internal Auditor reported directly to the CFO rather than to the Superintendent and the Board. b. The transfer of funds between the District and CASA went unsupervised by the Superintendent and the Board. Finding 2. The centralization of power in the hands of the CFO created a climate of intimidation and coercion within the administrative offices. For example, employees were discouraged from questioning the CASA plan and some stated they felt pressured into joining. Finding 3. The proposed retirement program and the enhanced retirement package put forward by the CFO for herself, the Superintendent and the Legal Counsel were self- serving. Finding 4. The appearance of a conflict of interest occurred when the CFO of the District served as the unpaid Executive Director of CASA. Recommendations to the District Administration: Recommendation 1. Community concerns regarding district administration actions or policies need to be fairly and openly addressed. A community oversight committee could be established to directly monitor the response to these concerns. Recommendation 2. The Superintendent must actively oversee the business administration of the school district, as well as the educational program. Recommendation 3. It is one of the responsibilities of the Superintendent to establish and maintain a positive climate within the district office. Communication lines should be structured in such a way as to encourage and permit employee access to the Superintendent, enabling all opinions to be heard. Recommendation 4. The Superintendent is responsible for assuring that a system of checks and balances is maintained so no one person or a group can bring undue or unfair influence on decisions. 8 Sacramento County Grand Jury June 30, 2004 Recommendation 5. The internal auditor should be autonomous and responsible and accountable to the Superintendent and report directly to the Board on a quarterly or bi- annual basis. Response Required Penal Code Section 933.05 requires that specific responses to both the findings and recommendations contained in this report be submitted to the Presiding Judge of the Sacramento Superior Court by September 30, 2004 from: · Board of Education, Sacramento City Unified School District 9