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Show Them the Money 

Late reports prompt state to hold S.F. school district head's pay

Wednesday, Jan 26 2000
Six months after former Superintendent Waldemar "Bill" Rojas unexpectedly resigned and left town to take the top school spot in Dallas, the financial records of the San Francisco Unified School District remain in shambles. The district's books are in such disarray, it turns out, that in late December the state Department of Education actually withheld acting Superintendent Linda Davis' pay for more than three weeks until the district coughed up long overdue financial reports.

Suspending a superintendent's paycheck is exceedingly rare, and it seems that Davis has paid -- literally -- for the financial chaos that is Rojas' legacy.

The district's finances are in such a mind-boggling state of disorder that it has not reconciled its cash in at least a year and a half, according to auditors, and was months late filing routine accounting reports with the state.

The district fell so far behind in filing the mandatory accounting reports that the Department of Education took the rare step of withholding Davis' salary on Dec. 21. Davis' paycheck finally was released on Jan. 18, after the state received year-end reports from the 1998-99 school year, and the first interim report for the 1999-2000 school year.

Since Rojas checked out in July, the SFUSD's business operations seem to have been adrift. The district's former chief financial officer, William Coleman, followed Rojas to Dallas, and a number of other administrators left for positions elsewhere, all before the district closed its books for the fiscal year that ended June 30, 1999. And as many of its top bean counters were exiting, the district switched to a new computer program, and moved its headquarters.

As a result, the remaining employees in the district's business office could not close out the books, even after the Board of Education voted last fall to pay former CFO Coleman a consulting fee if he would come back and help reconcile the accounts.

The accounting for the 1998-99 fiscal year was finally finished on Jan.14, more than six months after the year ended, and far later than law or common sense dictate. The delay caused a chain reaction of chaos beyond threatening Davis' paycheck. Outside auditors were unable to complete a routine annual audit of the district, which is required by law.

Perhaps more important, the delay heightened suspicions among a special team of state financial experts who have been sent in to monitor the district's shaky finances.

Last spring, Rojas and the state got in a nasty fight over how much state aid the SFUSD should be getting. Rojas was arguing that the state owed the SFUSD more than $12 million for costs springing from a federal court's desegregation order. But both Gov. Gray Davis and former Gov. Pete Wilson disagreed, arguing that the state wasn't responsible for the $12 million -- which the SFUSD had already spent -- because the money was used for all sorts of things that didn't have much directly to do with desegregating schools.

As a practical matter, the real problem was that the SFUSD included the costs in its budget on the assumption that state money would ultimately be forthcoming, and was caught short. The disputed amount has now reached almost $18 million, and the Governor's Office still shows no signs of including the money in the state budget.

In the midst of the fracas, Assemblywoman Carole Migden called for the state's Fiscal Crisis and Management Assistance Team (FCMAT), a sort of school money SWAT team, to review the district's finances.

State Superintendent of Public Instruction Delaine Eastin dispatched the FCMAT troops last spring for a look at the district's books. But the financial experts couldn't do their work, because the SFUSD hadn't finished its accounting. Meanwhile, Rojas and Coleman left the district.

As months passed last year, Migden, Eastin, and the auditors grew concerned and impatient. By early December, with still no review completed, Eastin moved to increase the state presence in the SFUSD's business affairs. She expanded the FCMAT team's role, assigning it to serve as "fiscal expert," to "assist" the district and "ensure that adequate fiscal controls are in place." Later the same month, Eastin instituted the salary sanction against acting Superintendent Davis.

"It doesn't appear that this is a district going bankrupt, but this is a district that has had some serious problems managing their cash, and their programs, and their revenues," says Tom Henry, chief administrative officer of FCMAT. "We have some very serious recommendations in that regard."

In the absence of an audit, or year-end financial reports from the previous year, Eastin classified San Francisco Unified's books as having "a lack of going concern," which is an accounting term that has the effect of keeping oversight on the district until issues in question are addressed.

Now, according to Migden's staff, school district officials are still looking for money for the programs that were not funded with desegregation money. But they're not likely to get anything until the auditors are finished.

"The audit is not completed," says Eric Potashner, an aide to Migden. "The audit was taken because the school district kept asking for money.

"[Migden] is going to be happy to work with the district to locate where in the district there are programs that need to be funded and ways that those programs can be funded," he says, adding that it will not be with desegregation funds.

Meanwhile, FCMAT's Henry says that it's likely to be awhile until the past is sorted out. "Until the [outside] audit is complete, we really can't render a report," he says. "This is in regards to the 1998-99 year. [The schools] are in the 1999-2000 year and beginning to budget for the 2000-2001 year. This is very difficult for the district and the agency in there monitoring."

About The Author

Lisa Davis


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