Audit looking for fraud at Stockton Unified to be ready Feb 14

A report addressing potential fraud at Stockton Unified School District will be ready for the Board of Trustees to review at a Feb. 14 meeting, a California education official confirmed.

Michael Fine, chief executive officer of the state’s Financial Crisis and Management Assistance Team (FCMAT), said their audit of SUSD is nearly complete. FCMAT has spent nearly a year determining if fraud, misappropriation of funds or other illegal fiscal practices took place within Stockton’s largest school district.

The San Joaquin County Office of Education will be the first to receive the report. SJCOE confirmed they plan to present the findings at the Feb. 14 board meeting.

The AB 139 extraordinary audit is the first of its kind inspecting a public school district in San Joaquin County since the bill was passed in 2001. A county superintendent can call for an extraordinary audit if they have reason to believe fraud, misappropriation of funds or other illegal fiscal practices have occurred that merit a deeper look.

SUSD has a nearly $600 million budget and is projected to have at least a $30 million deficit by 2024. After receiving the report, the Stockton Unified Board of Trustees will have 15 days to tell County Superintendent Troy Brown how they plan to respond.

Flores wants SUSD investigated for ‘illegal contracts,’ as Mendez counters board did nothing wrong

Two Stockton Unified School District trustees want an internal investigation into the district’s business dealings, but for different reasons.

At the Jan. 24 SUSD board meeting, Board President AngelAnn Flores called for an investigation into what she called “illegal contracts” the district has engaged in over the last several years.

“If you noticed in the budget, there’s often times where we spent more money in facilities. I can’t talk way more than that, but that’s where some of the misspent money went to,” Flores said at that meeting. “There was wasted money, and we will discuss that … as we are allowed to discuss in time.”

Trustee Cecilia Mendez, who spent the previous two years as school board president, welcomed an investigation. SUSD legal counsel did not answer her direct question asking if the board had done “any illegal activities.”

“I’ve been subpoenaed several times … This board has done nothing wrong. We don’t have a checkbook; we don’t have anything. We’re just public servants,” Mendez said. “It is very important that our names be cleared.”

Here’s what we know about the investigations and a contract in question:

Alliance/IAQ air filters

A scathing June 2022 San Joaquin County Grand Jury report, the second report on the school district in two years, reported dysfunction, financial mismanagement and lack of transparency.

In the report, the board is scrutinized for the way they approved contracts. One example is with the board’s handling of a $7.3 million contract in 2021 with IAQ Distribution, Inc., a subsidiary of Alliance Building Solutions, Inc., for air filter disinfectant technology.

A perceived conflict of interest arose when Trustee Scot McBrian introduced Alliance Building Solutions. At the request of the former superintendent John Ramirez Jr., the school district asks companies to submit proposals, and Alliance is one of them.

The board bypassed some of its policies and eventually approved the contract that went to IAQ, despite ranking the lowest among all proposals. Flores voted against the contract, and former Trustee Maria Mendez was absent.

SUSD paid IAQ $2.9 million in August 2021, the report said, and the contract was completed only in part. At the time of the June 2022 grand jury report, 1,400 of the 2,000 filters ordered had been delivered; only 802 had been installed. As of last Friday, the remaining uninstalled filters from the 1,400 delivered were still sitting in storage at Stockton Unified’s facilities yard.

SUSD facilities director tells staff he’s under investigation by FBI, FCMAT

Armando Orozco, Stockton Unified’s director of facilities and planning, told about 100 staffers at a July 27, 2022 meeting that he had been in multiple depositions — testimony under sworn oath — and interviewed as a part of an FBI investigation, with the state of California and with FCMAT as a part of their audit of the school district, sources said.

ICYMI:More money concerns come from Stockton Unified ESSER funds meeting

The school district later clarified Orozco’s remarks for him and said he was speaking of previous school districts he worked for, not Stockton Unified.

Orozco is currently on leave. In September 2022, Orozco threatened to sue Stockton Unified, demanding $800,000 to “leave your corrupt district in silence.”

The FBI declined to comment whether Stockton Unified is under federal investigation.

The June 2022 grand jury report shows that the school district’s facilities and planning department failed to get board approval for change orders to construction projects. According to Public Contract Code §21152, a contractor is required to submit all change orders to the board. Many of these projects are funded by bonds, the report states, paid for by Stockton taxpayers.

Of 31 Stockton Unified construction contracts reviewed by an outside education consulting firm, only one change order was taken to the Board of Trustees for information, approval or ratification. The report cites an example in an athletic facility project at Franklin High School that had an overrun of about $6 million. No change order was submitted to the board for approval, the report states.

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