A report by a state agency on several specific issues in the
Morgan Hill School District found no evidence of illegal practices,
fraud or misappropriation of funds.
A report by a state agency on several specific issues in the Morgan Hill School District found no evidence of illegal practices, fraud or misappropriation of funds.
In the audit report released Friday, the district is cited for negligence, although not criminal negligence, lack of oversight and exercising poor judgment.
“While all of this adds up to poor decision making and resulted in large amounts of money spent inefficiently, FCMAT found no evidence of fraud, misappropriation of funds or other illegal practices,” the report concluded.
The Fiscal Crisis and Management Assistance Team (FCMAT) was requested to look into the district’s dealings with Jacobs Facilities, Inc., formerly Sverdrup, the company that built Barrett Elementary and began renovations at Live Oak.
The Santa Clara County Office of Education received a request from a community member and requested FCMAT conduct an “extraordinary audit” of the district, focusing on the district’s construction activities.
MHSD Superintendent Carolyn McKennan responded that the fault lies with Jacobs Facilities.
“The district made a purposeful decision to enter into a full-service contract with Jacobs Facilities, Inc., as a way to provide necessary construction expertise in which the District could place its trust,” she said. “Jacobs Facilities, Inc., took advantage of that trust and abused it. This resulted in cost overruns and overcharges that led the District to terminate the contract … .”
The report recommends that the district develop policies and procedures regarding construction process that will prevent future problems, including the development of a construction policy and procedures manual.
Another recommendation involves district employees: “The district must hire and retain key employees with the necessary qualifications to have oversight of the building program for the next several years. Once this is accomplished, the district can engage the services of the consultants needed to carry out the building program.”
Martell Taylor, a former facilities director for the district, resigned in December 2002 because of the problems with Jacobs, he said, alleging that cost overruns and other difficulties stemmed from Jacobs, which was hired, he alleged, due to a personal relationship between McKennan and a Jacobs employee.
The district has not hired someone to replace Taylor. Director of Construction/Modernization Al Solis was hired to oversee the renovations at Live Oak High and the construction of Sobrato High.
According to the report, Taylor’s allegations do not represent a legal problem.
“While this relationship between the superintendent and the company that Steve Wallace represented may appear inappropriate to the general public, it does not represent a legal relationship that violates regulations,” the report states. “A legal relationship is defined as one of blood relation, marriage or personal financial interest. There is no indication of a legal conflict of interest in which the superintendent or her family would benefit personally from the contract.”
McKennan said the district has already begun to address the problems and follow recommendations in the report.
“As part of the district’s ongoing commitment to improvement and in an effort to maintain the public trust, we will continue to implement recommendations made by FCMAT and other outside agencies that have performed reviews and audits of the District school construction projects,” she said.
She outlined the steps she said the district has taken to remedy the problems caused by the district’s association with Jacobs:
“Terminating the contract with Jacobs Facilities, Inc. when the abuses became known; Hiring a knowledgeable director of construction/modernization with expertise in complex school construction projects; Retaining new legal counsel to pursue the district’s claims against Jacobs Facilities, Inc., and to defend against their multi-million dollar claim against the district; Retained Saylor Consulting to review costs related to the Barrett Elementary School construction project; Retained RGM to analyze change orders and review building industry standards in relation to the construction of Barrett Elementary and the renovation of Live Oak High School.”
McKennan does not agree with one of the findings in the report concerning legal counsel. According to the report, “Administrators ignored the advice of their legal counsel who expressed concerns about the contract, and they did not seek assistance or advice from an outside expert.”
“The district takes strong exception to the incorrect position in the report that the district proceeded with the contract arrangement with Jacobs Facilities, Inc., against the advice of its former legal counsel,” said McKennan. “Without waiving any attorney-client privilege, the district points out that its former legal counsel negotiated the contract, drafted significant portions of the contract, and recommended to the district that the district execute the contract. Based on this advice, the district believed that the Jacobs Facilities, Inc. contract represented a sound, legal arrangement given the district’s needs for construction expertise.”
The FCMAT team was also requested to look into possible violations of the Brown Act, a law governing procedures, meetings and communication between public boards and entities.
“Although there is disagreement among board members, no evidence exists of Brown Act violations,” the report states. “Some board members indicated they had access to information from the district staff when they requested it, while others indicated they did not get information that they requested. FCMAT finds no error with respect to violations of the Brown Act.”
