An audit of Sweetwater Union High School District conducted by the independent Fiscal Crisis and Management Assistance Team in agreement with San Diego County Office of Education to determine whether the district participated in fraud, misappropriation of funds or other illegal fiscal practices was released Monday.
Findings suggest the district might have broken the law.
The Office of Education requested the audit after it rejected Sweetwater’s initial 2018-19 budget and accompanying multi-year financial projection submitted in June 2018.
A June 17 letter from the auditors to county board superintendent Paul Gothold proposes three points to investigate within the audit: review the district’s use of Mello-Roos proceeds for internal borrowing, evaluate the potential for possible manipulation of the district’s 2017-18 budget, review payroll transactions and determine if a correlation exists between general ledger posting and suspected understated budget.
The California Land Title Association defines Mello-Roos as a special tax imposed on property owners through the sale of bonds for the purpose of financing certain public improvements and services, which can include schools.
Results of the audit reveal that auditors could not confirm all cash transactions recorded at the county treasurer were accounted for in the district’s cash account, nor effectively analyze the use of Mello-Roos funds recorded in the general ledger in part because the Truecourse financial accounting system used by Sweetwater does not directly link to the standard system used by the county’s Office of Education.
“Sweetwater was the first client that invested in licensing the (Truecourse) software under the leadership of the CFO seated at that time, who was reported to be extensively involved in the development of the product. Interviews with a consultant indicate that after the district was heavily invested in Truecourse the company folded,” states the report.
The report also says internally generated records indicate the interfund borrowing undertaken violated Education Code 42603.
Finally, the review of the district’s board approved budgets and unaudited actuals financial reports for fiscal years 2016-17 and 2017-18 indicates salary and benefit budgets were not properly revised to reflect increases resulting from negotiated agreements with employees.
Furthermore, salary increases were calculated from a base salary that the report says doesn’t add up.
The report closed with a reminder that auditors cannot make a statement confirming illegal practices, but reiterated sufficient evidence exists to indicate fraud, misappropriation of funds and assets, or other illegal fiscal practices may have occurred.
Under Education Code 42638, the county superintendent is legally required to notify the governing board of the school district, the state controller, the superintendent of public instruction and the district attorney of those findings.
