Missing millions lead to FBI probe of S.F. schools

The Associated Press
Wednesday May 09, 2001

SAN FRANCISCO — Millions of dollars in missing grant money, shoddy bookkeeping and poor management are at the center of an FBI investigation into San Francisco schools focusing on the mishandling of federal grants and bond funds. 

Superintendent Arlene Ackerman said Monday that the school district asked authorities last week to investigate whether former employees violated laws. That request came after a review of the San Francisco Unified School District’s accounting and expenditure practices. 

The review, completed by the Andersen accounting and consulting firm, reveals years of inadequate documentation in several areas, including $27 million in bond money used for unauthorized projects and salary payments. 

The review highlights a district in disarray inherited last year by Ackerman, who was hailed for her work in turning around the troubled schools in the District of Columbia. 

Ackerman has her work cut out for her once again. 

“In 32 years of experience, there were some practices that for me were absolute firsts,” Ackerman said. “Any time there are appearances of mishandling of funds that should be used for our children it’s, for me, inexcusable.” 

The review, commissioned by the city’s Board of Education, focused heavily on district practices regarding facilities and management. The findings were based on interviews with district personnel and document reviews. 

The FBI is looking at whether the district improperly requested a $48 million federal technology grant and mishandled a $32 million energy-saving contract awarded to North Carolina-based Strategic Resource Solutions in 1998. 

The review found it was unclear when the company’s computer systems were compatible with the district’s network or if the software to support such a system met with district requirements. 

Ackerman acknowledged that one troubling aspect in investigating the SRS Energy Management System grant is that many documents relating to the grant and the contract are missing. 

The application for the $48 million technology grant failed to follow standards and the financial implications were not investigated thoroughly, the review found. The grant was approved for the district by the U.S. Department of Education, but Ackerman refused to accept it. 

Other reported misdeeds involved funds regularly shifted between accounts without proper authorization, and the use of 1997 Proposition A and 1990 Proposition B funds to pay some salaries, overhead and projects unrelated to Proposition A. 

The two propositions were bond issues passed by San Francisco voters to build new schools and make health and safety improvements on existing campuses. 

The review also discovered that district staff could account for only $14.9 million of the $29 million in Leroy Greene Funds received since 1996.  

District officials don’t believe the money was stolen, only that it was so poorly accounted for that a document trail is difficult to find. 

Leroy Greene Funds are monies set aside to improve schools throughout the state. The fund is named after a former California state senator. 

“There has been a very significant lack of documentation, partially caused by the fact that in the facilities department they had a stand-alone bookkeeping system that didn’t integrate or reconcile with the accounting records that were maintained in the accounting department,” said Cathi Vogel, the district’s chief financial officer. 

Ackerman and city attorney Louise Renne, both cooperating fully with the FBI, did not rule out that there could be arrests as investigations into the work of current and former district personnel continue. 

“I think that there were suspicions early on and there are several ongoing investigations that are now in the city attorney’s office,” Ackerman said. 

Dan Kelly, vice president of the Board of Education, said he’s had grave concerns about the district’s fiscal responsibility for years.  

Many contracts were awarded without board approval, often going to less-than-qualified bidders for “whimsical and arbitrary reasons,” Kelly said. 

“I’m very saddened, but I’m not shocked or surprised. This is exactly the kind of activity that some of us thought was going on,” Kelly said. 

According to the review, many of the breakdowns in management and accounting performance came during the tenure of Bill Rojas, the superintendent Ackerman replaced. 

Rojas left San Francisco schools to serve as superintendent at the Dallas Independent School District. But he was fired after 11 months there for failing to maintain good relations with the school board in Dallas. 

Andersen recommended the district establish new policies for real estate acquisitions, clarify the existing computer network and hire new qualified staff to address many of the shortcomings listed in its review.