The grand jury finds that the Laguna Salada Union School District (LSUSD) Board of Trustees fails to exercise proper oversight of the district. Many of the current policies are flawed or incomplete. By failing to update its policies and practices and follow those policies currently in effect, the board often operates in a dysfunctional, uncivil manner, with a disregard for keeping the public informed.

In not following its own policies, the board trustees have improperly delegated responsibility that is theirs and have not been forthcoming with the public. The board has allowed the superintendent to hire and fire without prior board approval, increased the superintendent's compensation without public comment, and allowed topics such as lawyer-client privilege and the transfer of principals to be discussed in closed, rather than open, session. The board failed to disclose on the ballot its intent to build a middle school in 1997 when the district voters passed bond Measure D to modernize schools. The board has neglected to take corrective action to recommendations from the independent auditor.

In addition, the grand jury is deeply concerned that the planned not-for-profit foundation, which is being established to manage the district's real estate assets, may violate the Brown Act unless its business is conducted in public and may constitute an invalid gift of public funds. The taxpayers of the district must clearly be informed and assured of legal validity before public funds or other assets are transferred to a non-public entity.

The grand jury recommends the LSUSD revise its polices and practices and receive training in the use of policies, conflict resolution, and board oversight. The board should correct audit deficiencies and review its fiduciary obligations. The grand jury further recommends the 2001-2002 grand jury evaluate and monitor the district's planned not-for-profit foundation.

In July 1999 the grand jury received a citizen's complaint that included accusations of the Ralph M. Brown Act violations and questionable financial practices by the Laguna Salada Union School District (LSUSD) Board of Trustees. The grand jury received a concurring complaint from a second individual. The 1999 grand jury did not have sufficient time to consider the charges; the 2000-2001 grand jury voted to pursue the inquiry.

In doing so, the grand jury examined district agendas and minutes from July 1, 1998, to the present; closed session agendas from July 1, 1998, to the present; all governing board policies; annual financial statements for 1997-2000; contracts with various district contractors; the superintendent's contracts; credentialed teacher and administrative salary schedules; and the district's implementation plan. The grand jury visited three school sites, interviewed several current and former LSUSD trustees, former and current school administrators, staff, and general consultants and attended several school board meetings in the fall of 2000.

Located in Pacifica, LSUSD is a district of ten school sites. There are four K-5, two K-8, two 6-8 schools, and two closed sites. A new middle school, Ingrid B. Lacey, is under construction. The FY '99 budget was $19 million. The school population is approximately 3,500 students, down from a high of 11,000, and has been declining by about 100 students a year, a figure that increased in the current school year. An estimated 1,000 to 1,500 students who live in the district currently attend private schools, which means that as many as 30% of district students choose not to attend district schools.

In June 1997 district voters approved a broadly-worded $30 million bond issue, Measure D, for "districtwide projects such as structural repair and improvements to existing schools" and "...constructing new classrooms, libraries, computer and science labs, and art and music classrooms...." A video produced by the pro-bond campaign stressed the deplorable conditions of the schools. At the time the bond was put on the ballot, the LSUSD Board of Trustees understood that the cost to repair the schools would exceed $30 million. The additional funds were expected to come from the sale of surplus school property. The superintendent, who was hired after passage of the bond measure, and bond counsel later obtained substantial funding from the state Office of Public School Construction (OPSC). The currently projected cost of modernization is $67 million. As of April 2001, $47.4 million has been raised, a sum that the district expects to rise to $87.4 million after sales of surplus school property and addition of interest. Completion of all school modernization is expected by 2005.

A 1999 audit by the district's independent auditor notes the "perception of board policies and regulations is that they are of little value." Interviews with members of the school district board and administrative staff in August and September 2000 supported the conclusion that district board policies were in need of review. It was also evident that the intent and interpretation of the policies differed among members of the board. The superintendent and board members indicated they planned to work with representatives of the California School Boards Association to update and revise the policies to bring them into agreement with the California Education Code and current practices of the district.

In April 2001 the LSUSD Board voted to form a private, not-for-profit foundation to manage its real estate assets. The foundation's purpose, according to school administrators, is to allow flexibility in the district's expenditures. While articles of incorporation and by-laws are not yet adopted and the corporation itself may not yet be legally formed, administrators say that the board of directors of the foundation will consist of three board members and two community members appointed by the board, plus the superintendent, a non-voting member. A $1 million gift and the $10 million proceeds from the sale of a school site were or will be transferred by the district to the foundation, according to LSUSD officials.

The grand jury finds a pattern of lack of openness and failure to inform the district's voters dating back to the 1997 Measure D bond issue. Two members of the 1997 board indicated during grand jury interviews that, in addition to school modernization, the board intended to build a new middle school and that bond money was to be used to that end; yet nowhere in the bond publicity or the wording of Measure D is any reference made to construction of a new middle school. The board, moreover, voted to complete the middle school before all existing schools were modernized, a priority which district voters could justifiably have reason to feel was not communicated to them at the time of the election. The board also had not identified sufficient funds to pay for the modernization and to build a new middle school when they began the modernization and building program, conduct that is financially risky, managerially unsound, and unfair to taxpayers. With the sale of surplus school property and receipt of OPSC funds that were later sought and received, the modernization project now appears to have adequate funds.

The grand jury is concerned about the cost effectiveness of the entire modification and building project, including the construction of a new middle school. When completed, LSUSD will still have nine active school sites, more than comparably sized districts operate, and an enrollment that has been dropping consistently in recent years.

The grand jury finds that on several occasions the LSUSD board has not followed the appropriate steps or procedures to conduct properly its closed or open sessions. This results in members of the public not being informed or able to participate in debating issues before the board. Agendas and minutes show that board members also failed to make all the necessary and appropriate efforts to fully inform each other and the public and to allow the public to participate after becoming fully informed. One example of failure to inform the public was the approval of the superintendent's contract in. December 2000. Minutes and agendas show no open discussion of the contract which was put on the consent calendar and summarily approved. The board justified this action by viewing the contract as a mere extension of the existing superintendent's contract, but the contract increased compensation in excess of the percentage increase granted other employees and provided new benefits. It was, therefore, by the board's own adopted policy (Board Policy 2121), not a continuation of the existing contract, and should have been discussed in open session.

A second earlier example occurred on October 11, 2000. After a closed session hearing, the board failed to announce in open session the actions taken in closed session. These actions dealt with the possible waiver of the attorney-client privilege following the grand jury's request to confer with the board's attorney. The public had a right to know the board was being investigated and what the board was discussing. The board's attorney, a deputy county counsel, reasoned that the possible waiver of the privilege during open discussion was more important than the public's right to know and participate. As discussed in a recent grand jury report, under the Brown Act (Government Code §54950 et. seq.) this subject was not properly set forth in the agenda and was not a proper subject for closed session. A similar example occurred in May 1999, when the board met in closed session to discuss transfer of school principals, a topic not appropriate to closed session according to the Brown Act. Board Policy 1120, "Community Relations Governing Board Meetings," does not now reflect the limited nature of closed sessions permitted under the Brown Act.

The grand jury also finds that the board fails to follow its own policies. Although, for example, the superintendent's performance should be evaluated by July 1 (Board Policy 2123), in 1999 and 2000 the evaluation was late or not done at all. The grand jury was informed through interviews with LSUSD board members that on several occasions a board member's request to remove an item from the consent calendar for discussion was denied and that on another occasion a board member was denied the opportunity of adding an item to a future agenda. The denials were made on the ground that it was "tradition" for two or more board members to make such a request. Such a response was contrary to the Brown Act (Government Code §54954.3), the board's own policy, and the spirit of the Brown Act which calls for openness and everyone's right to be heard on board calendar items.

The grand jury is also concerned that the planned new foundation may violate the Brown Act unless its business is conducted in public and may constitute an invalid gift of public funds. The taxpayers of the district must clearly be informed and assured of legal validity before public funds or other assets are transferred to a non-public entity.

The June 2000 annual audit of the district confirms several examples of inappropriate business practices that had been cited in the previous audit:

• · The combined financial statements do not include the general fixed assets account group, which should be included in order to conform with generally accepted accounting principals.
• · A complete historical record of all fixed assets has not been maintained.
• · Cafeteria funds are not deposited with the county in a timely fashion.
• · Nine of twelve Associated Student Body (ASB) expenditures tested appear to have been made prior to receiving approval.
• · ASB funds cannot be traced to bank deposits.

The audit shows that oversight of the student body funds was transferred to the parent group rather than being controlled by the board. Although nearly a year has passed since the 1999 audit was rendered, the grand jury observes that corrective actions have not occurred.

Interviews with board members indicate the board needs to understand the difference between its authority over the superintendent and its ability to delegate authority to the superintendent. The grand jury finds no evidence in LSUSD policies that the board has delegated to the superintendent the authority to hire and fire personnel prior to board approval. One example is the superintendent's hiring and payment of initial salary of a supervisor of construction before the matter was introduced to the board in open session. This situation appears inappropriate to one or more board members and generates conflict among board members, reducing the ability of the board to focus on the real needs of the school community and leading the board to operate in a generally dysfunctional manner. Despite having held sessions on conflict resolution, all parties have allowed the situation to deteriorate.

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