Having had a few days to digest the 17-page report from Fiscal
Crisis and Management Assistance Team (FCMAT), trustees of the
Morgan Hill School District Board of Education had differing
reactions to the state agency’s conclusion following its
investigation of the district’s dealings with construction company
Jacobs Facilities, Inc.
Having had a few days to digest the 17-page report from Fiscal Crisis and Management Assistance Team (FCMAT), trustees of the Morgan Hill School District Board of Education had differing reactions to the state agency’s conclusion following its investigation of the district’s dealings with construction company Jacobs Facilities, Inc.
“There weren’t any big surprises,” Trustee Mike Hickey said of the report, which was released last Friday. “The information provided in this report coincided with the construction audit performed by Saylor. It is clear that numerous bad decisions were made. The decisions that were made cost the district financially and also cost a lot of the employees their reputations.”
Jacobs Facilities was hired to build Barrett Elementary School, which opened in 2001, and renovate Live Oak High, as well as build the new Sobrato High. Money for these projects was to come from a bond which passed in July 1999 on the third try.
The FCMAT report was commissioned by the Santa Clara County Office of Education in response to a request by board watcher Harlan Warthen.
The report also contains a 25-page appendix containing sample policies for the board to consider adopting to help avoid such problems in the future. It concludes that neither the Education Code nor the Public Contract Code were violated, that there is no evidence of legal conflict of interest and no evidence of fraud, misappropriation of funds or other illegal practices.
However, the report does find “ordinary negligence,” which it defines as “a form of carelessness with no intent to deceive,” on the part of district staff in the selection of Sverdrup, which later became Jacobs Facilities, as the sole contractor.
The report conclusion several times mentions poor decision-making on the part of district administration.
“The district administrators exercised poor judgment in entering into a design/build construction contract that was untested in California,” the report states.
“By entering into such a contract with a firm that was unknown and un-experienced in California school construction, the district relinquished control of a process over which it should have maintained oversight. 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.
“They did not plan or staff properly for the construction projects. The board approved the contract without appropriate policies and procedures in place for a construction program. 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.”
Superintendent Carolyn McKennan wrote a response to the report, saying that the district “takes strong exception” to the statement about ignoring the advice of legal counsel because counsel was involved in drawing up the contracts. She also states that Jacobs Facilities “abused the trust of the district.”
The board voted, once new Trustees Shelle Thomas, Hickey and Amina Khemici were seated in December 2002, to end their contract with Jacobs and hire Turner Construction to complete renovations on Live Oak High and build Sobrato High. The district purchased architectural designs for Sobrato from Jacobs and is currently involved in a lawsuit with Jacobs.
Warthen said the report adequately address the issues he was concerned with.
“I think that the report was well done,” he said Thursday. “It really basically answers the question that people have been asking for the last 18 months – why is this district so screwed up.”
Thomas said the problems the report addresses are serious.
“This is not just an academic finding,” she said Thursday. “Millions of dollars have been lost and it will continue if we do not change the way business is conducted. What is gone … cannot be recovered. What we can do, as a board, working together, is to see that this never happens again. We need extended public discussion, we need to look at where we are in relations to current construction projects, (i.e., Sobrato), and if we need to make adjustments we do so immediately.”
Now that the report is completed, Thomas said, it should not be closed and filed away, but its recommendations followed.
“In order to restore public trust the board has the duty and responsibility to take appropriate actions,” she said. “FCMAT found negligence on the part of the district. Negligence is a habit of failing to attend to or perform what is expected or required. It is serious.
“FCMAT also recommends needed reforms and steps, polices and procedures. It’s time for action. Lack of action has cost this district too much already.”
Warthen said the district does not have a good track record on recommendations from outside agencies.
“In the recent past when reports have been issued, such as the Goodall audit (an annual financial audit paid for by the district), the Saylor Consulting audit (an audit of the cost of Barrett Elementary), I really haven’t seen the district move forward with the recommendations presented in the reports,” he said. “Let me see in writing the plan on the Saylor recommendations, the plan on the Goodall recommendations.”
Trustee Del Foster, who was on the board at the time Sverdrup, later Jacobs, was hired, along with Trustee Jan Masuda and former Trustee Tom Kinoshita, who resigned March 15, agreed with Hickey that the report had no new news.
“There was nothing new in there that we haven’t already heard,” he said. “In my opinion, based on their two days of investigation, there was a lot of supposition with the benefit of hindsight, with hindsight being 20/20, as they say. But if people are out there alleging fraud, I suppose it was worthwhile because it dispels that myth, and that’s the goal.
“(The report) is just two people’s opinion, two people that didn’t live through that period. When strategic changes are to be made you make a decision and you move forward in a constructive manner. You’d never make any decisions if you’re not willing to move forward without second-guessing. You make decisions on the information you have at the time, not information that comes to light later.”
Masuda was out of town on family business; Board President George Panos did not return calls for comment.
Khemici said she also was not surprised at the report’s conclusions.
“I was very glad there were no findings of fraud or anything illegal,” she said. “We knew there were some mistakes made, so it’s really not a surprise what the report said. But I agree we need to do something so we can be more careful in the future.”
Trustees six weeks ago in a unanimous vote directed district staff to request another, more general audit by FCMAT, which Foster said has been requested but the details have not been finalized.
“This isn’t about any particular issue,” he said. “This is about where we spend our money, how we spend our money, how we obtain services, what options do we have. Some people mistakenly believed this was about special education, but it is not. The audit will look at all of our departments, transportation, maintenance educational delivery systems, not just special ed.
Foster said what many people don’t realize, however, is that the board is limited in what it can change in some areas.
“For example, some decisions are negotiated, some are mandated,” he said. “For example, we are not allowed to contract out services, there is a minimum staff loading size, there’s a lot we actually can’t do. Part of the audit will be looking for areas we can do something or to give us some ideas in negotiating. Our ability to make decisions is extraordinarily limited.”
Hickey said now that the audit on the Sverdrup/Jacobs issues is completed, there are other things the district needs to focus on.
“The problem is were at a pivitol point in the district, with a new high school opening and our middle schools moving to two-year schools, these are the issues we need to be dealing with over the next year,” he said. “I think that the issues that we need to deal with are these important ones along with the day-to-day.”
Warthen, however, said more needs to be done. He said the report vindicates his criticism of district operations.
“The district is in a state of leadership crisis,” he said. “FCMAT has worded the report in a politically correct way, but what they are saying is the leadership is incompetent. And although there is no fraud, no illegalities, there is the appearance of wrongdoing.”
