Stockton Unified School District processes surrounding finances, ethics and conflicts of interests that do not meet state and federal requirements will be addressed at a governing board policy subcommittee meeting this week.

The California Department of Education said last month SUSD had fallen short in reforming certain policies and regulations brought to light as problematic during a state audit that found evidence of fraud in the district’s financial dealings. 

“Based on our review, we concluded that SUSD is not meeting all state and federal requirements,” Alice Lee, director of the state education department’s Audits and Investigations Division, told district trustees and newly-minted Superintendent Michelle Rodriguez in a letter dated June 30.

The governing board has until the end of the month to make necessary revisions and submit them to the state or risk losing federal funding.

Stockton Unified leadership were informed earlier this year that the district would need to review and revise, when necessary, certain financial and ethics policies and regulations in order to be compliant with state and federal law.

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The directive came in response to a year-long investigation into the district’s finances, known as an Assembly Bill 139 Extraordinary Audit, conducted by the state’s Fiscal Crisis and Management Assistance Team. The investigation came at the request of San Joaquin County Superintendent of Schools Troy Brown. 

State investigators found evidence of illegal financial practices, possible Brown Act violations by the district’s Board of Education, that trustees and the superintendent on occasions did not follow board policies and the law, apparent conflicts of interest, and abuse of power. Findings were reported to State Controller Malia Cohen, California Superintendent of Public Instruction Tony Thurmond and San Joaquin District Attorney Ron Freitas. 

Shortly after the state’s findings were made public in February, Lee sent an initial response letter addressed to district leadership laying out specific tasks that trustees, staff and the superintendent would need to complete by various deadlines running through July 31.

“The CDE takes seriously the (state’s) findings … and trusts that SUSD’s management will work diligently to address these issues,” Lee said in the March 10 letter.

Tasks included updating procurement — the purchasing of goods and services by the district — record retention and economic disclosure policies and regulations. Training was also mandated for trustees and district staff regarding SUSD financial, ethics and conflicts of interest policies, regulations, guidelines and procedures.

Trustees were required to submit the revised and reviewed board policies and regulations in question to the state by the end of May, though the board approved an extension request a few weeks before the deadline for early June. The policies and regulations were ultimately submitted June 13, but the state notified district leadership last month that additional work needs to be done. 

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While the district brought procurement and record retention processes into compliance with state law, the CDE says trustees failed to “identify federal requirements related to bid thresholds and small purchase procurement procedures,” recommending the district develop a manual or handbook for staff detailing instructions on how to stay compliant.

The state also noted that it didn’t see any language specific to how the district would identify possible conflicts of interest with vendors and did not meet federal requirements by including language outlining disciplinary action for violations. 

SUSD has until July 31 to resubmit their policies, while also completing any other remaining outstanding tasks assigned to the district in March by the required deadlines.

“In accordance with federal regulations, the CDE is responsible for ensuring that local educational agencies resolve all identified deficiencies in a timely manner,” Lee said. “Failure to do so may require (the state) to consider further action, which may include additional reporting requirements and/or the withholding of federal program funds.”

The Board Policy Committee, chaired by Board President AngelAnn Flores, was initially scheduled to meet at the end of last week but has since been rescheduled for Thursday at 4:30 p.m. in the board room at the district’s administrative complex near the downtown waterfront on South Lincoln Street. Board Vice President Kennetha Stevens and Trustee Donald Donaire also serve on the committee. 

Flores told Stocktonia that the meeting change was made so that experts could be brought in to advise trustees as they review the district’s policies and regulations.

Any revisions will then need to brought before the full Board of Education, which only has one more meeting scheduled for the month on July 25.

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