Stockton Unified leadership disregarded the law and ignored its own policies when making financial decisions, county education officials told the school district’s governing board at its meeting Tuesday.

State investigators released an audit report earlier in the day that found evidence of illegal financial activity within the Stockton Unified School District.  

Troy Brown, San Joaquin County superintendent of schools, expressed disappointment at “deeply troubling” issues raised by the investigation and said SUSD “deserves better.”

“When looking at the pattern in the findings of an independent auditor … a troubling picture of the leadership culture of Stockton Unified comes into focus,” Brown told the district’s superintendent and Board of Education trustees. “There is sufficient evidence to demonstrate that fraud, misappropriation of funds and or assets or other illegal fiscal practices may have occurred.”

Other findings include 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.

The state audit, known formerly as an “Assembly Bill (AB) 139 Extraordinary Audit,” began in February 2022 at Brown’s request and was conducted by California’s Financial Crisis & Management Assistance Team (FCMAT). He said in a formal letter to district trustees and interim Superintendent Traci Miller that reports from Stockton Unified employees “regarding procurement process irregularities and the unusual circumstances surrounding the award of a contract with IAQ Distribution INC., including federal funds,” prompted the investigation.

Stockton Unified trustees awarded IAQ a contract worth millions of dollars at a meeting in August 2021 following what was described as a flawed if not illegal process to provide ultraviolet light air purification units to the district to help mitigate the spread of COVID-19 using federal money. IAQ provided the lowest ranked bid of the five companies presented to the board for consideration.

The FCMAT report comes on the heels of more than two years of controversy for the county’s largest school district, including two scathing grand jury reports, accusations of financial mismanagement, looming deficit and outrage from the public of the district’s handling of certain issues.

Deputy Superintendent of Business Services Scott Anderson reads the FCMAT report to the SUSD Board members. (Carlos Rodriguez/Central Valley TV)

“The audit was narrow in scope and was focused on procurement processes, contract award and possible conflict of interest,” said County Deputy Superintendent of Business Services Scott Anderson, who presented the report’s findings to the district governing board Tuesday. 

Among other SUSD vendor hiring process issues, Anderson said that out of a sample of 64 transactions from the time period of July 2019 to April 2022, investigators found more than 96% of those that required documentation of competitive bidding or requests for proposals did not show any such documentation.

The San Joaquin County Office of Education has notified State Controller Malia Cohen, California Superintendent of Public Instruction Tony Thurmond and San Joaquin District Attorney Ron Freitas of the report’s findings. Brown has also given the district the following recommendations moving forward:

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After reading the report, Anderson opened the floor to comments and questions from trustees.

Board President AngelAnn Flores described the FCMAT report as vindication for what she’s known all along and vowed to county officials and the wider audience to hold those responsible for any wrongdoing to account.

“It’s disappointing, but it’s something I’ve been shouting about for a long time,” Flores said after the presentation. “So to have another agency to come in and confirm and finally identify the illegal activities that were taking place that were taking funds away from our babies and our district. We’ll work diligently to fix it quickly and as best that we can.”

Flores often served as the lone opposition against a majority voting bloc on the seven-member board that included trustees Ray Zulueta, Alicia Rico and Cecilia Mendez, who gave up her gavel to President Flores in December following an election that shook up previous board politics.

Flores was one of only two dissenters when the board originally approved the AIQ contract.

However, Trustee Mendez welcomed the FCMAT report and thanked investigators, igniting a quick protest against her and fellow Trustees Zulueta and Rico, who were board officers through much of the time frame cited in the report. Some audience members holding small printouts with the trustees’ faces shouted for their resignations.

Members of the crowd at Tuesday’s SUSD board meeting protest Ray Zulueta, Cecilia Mendez and Alicia Rico, the three trustees who voted in favor of the IAQ contract questioned in the FCMAT report. (Scott Linesburgh)

Alyssa Leiva, a member of the Fix SUSD reform group, had a larger handmade sign written in Spanish that read: “Where’s the money? Cecilia Mendez, Ray Zulueta, Alicia Rico are corrupt. Resign.”

Board President Flores had to call the meeting to order several times during the outbursts.

Zulueta used his time to speak to directly challenge SJCOE and Superintendent Brown, who was seated in the front row after the presentation. Zulueta stated that the county approved previous budgets showing a deficit without voicing a concern, and questioned Brown’s objectivity in pursuing the FCMAT investigation of SUSD because of possible political differences with with himself and other board members.

Brown did not respond to Zulueta’s comments.

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The district has 15 days to formally reply with a plan of action to the county’s recommendations.

SJCOE will continue to work with Stockton Unified to shore up its fiscal systems, Brown said, noting that the future holds an opportunity for the district to improve. He also pointed out that there is good work being done in the district.

“While the issues raised about the district are troubling, they should not overshadow the hard work and success of Stockton unified students. Nor should they diminish the important work that the dedicated teachers, administrators and other staff perform everyday for their students and families,” Brown said. “They deserve our respect and support.”

This is a developing story.

Read below for the full FCMAT report.

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