Part of the Bay Area News Group

MDUSD bond oversight committee meeting to address questions about spending, audits

By Theresa Harrington
Thursday, August 18th, 2011 at 6:11 pm in Education, Mt. Diablo school district.

The Mt. Diablo 2010 Measure C Bond Oversight Committee will hold a special meeting at 7 p.m. Monday in the district office board room to discuss concerns raised by recently-appointed taxpayer representative Alicia Minyen.

I am writing a story about Minyen’s concerns, which should be published in the Times before the meeting. With Minyen’s permission, I am posting a July 25 e-mail to her fellow committee members, as well as a letter she presented to the school board on Aug. 9. She has asked that these be included in the agenda packet for the meeting, so the public is aware of her concerns.

“From: Alicia Minyen
Sent: Mon, 25 Jul 2011 19:38:23
Subject: Multiple Issues with MDUSD’s Bond Issuances

Hello John and Bond Oversight Committee (“BOC”) Members:

In order to be a more effective BOC member, I’ve been researching the applicable laws pertaining to school district general obligation bonds found under Proposition 39, the Education Code, and California Constitution. In addition, I have been researching Proposition 55, and the MDUSD’s 1989 Measure A and 2002 Measure C since each of these have their own specific mandates, and Pete Pedersen indicated that the remaining funds from these sources of revenue would be used for current projects listed.

I have uncovered many issues and red flags that raise serious concerns of noncompliance with virtually every MDUSD measure and Proposition 55. I have outlined these issues and red flags below for your consideration, some of which require immediate action and full disclosure to the public. Accordingly, I believe the BOC should meet as soon as possible to address the issues below.

1. 1989 Measure A Community Facilities District Mello Roos Bonds

A. In November 7, 1989, the voters authorized the MDUSD to issue $90 million in bonds ‘to finance all or a portion of the facilities for the Community Facilities District.’ According to the California Debt & Investment Advisory Commission, the MDUSD to date has issued $201.5 million in Measure A CFD bonds.

B. It appears that in 2002, 2005, and 2006, the MDUSD issued illegal ‘cash out refundings’ where the MDUSD refunded amounts above what was owed on the outstanding bonds and took additional cash out beyond what was authorized by the voters. (See State Attorney General Opinion 06-1102: ‘Without voter-approval, no cash-out refunding bonds. Absent the required voter approval from a school district’s voters, a school district may not issue refunding bonds at a price or at an interest rate that will generate proceeds in excess of the amount needed to retire the designated outstanding bonds (i.e., cash-out refunding bonds).’)

C. MDUSD board minutes indicate cash out refundings occurred, e.g., board minutes dated May 10, 2005, Mayo states, ‘due to current low interest rates, the District may refinance 1995 Measure A Bonds, creating additional fund for Measure A projects at no additional cost to taxpayers.’ MDUSD financial statement footnotes in the audit reports also imply cash out refundings occurred.

D. I made public comment to Greg Rolen and the MDUSD board on June 28, 2011, addressing this issue and asked that they cease and desist in the expenditure of Measure A funds until this issue is resolved. I have had no response to this issue.

2. 2002 Measure C General Obligation Bonds Subject to Proposition 39

A. Proposition 39 requires 2 separate audits, a ‘performance audit’ and a ‘financial audit.’ The financial audits were never obtained for the 2002 Measure C bonds. In addition, in lieu of a ‘performance’ audit, the MDUSD engaged Perry Smith LLP to perform ‘agreed-upon procedures,’ where the MDUSD and prior 2002 Committee determined the scope of the engagement and the sample size, thus compromising the integrity of the results. The State Controller, John Chiang’s, Audit Division issued an opinion where he said “agreed-upon procedures” does not meet the ‘performance audit’ requirement or the intent of Proposition 39. Therefore, the taxpayers in the MDUSD have absolutely no assurance that the bond proceeds were expended in accordance Proposition 39 and applicable laws. Please see language below directly from Proposition 39 regarding the two audit requirements under Section 4:

-A requirement that the school district board, community college board, or county office of education conduct an annual, independent performance audit to ensure that the funds have been expended only on the specific projects listed.

- A requirement that the school district board, community college board, or county office of education conduct an annual, independent financial audit of the proceeds from the sale of the bonds until all of those proceeds have been expended for the school facilities projects.

B. I spoke with the Bureau Chief at the State Controller’s Audit Division charged with Proposition 39 audits, and they confirmed that agreed-upon procedures does not meet the performance audit requirement. The State Controller and founder of California League of Bond Oversight Committees confirmed the requirement for a separate financial audit, which was never performed. Instead, it the MDUSD is relying on their combined school audit, and this is not appropriate since additional test procedures are required by the independent accountant to address general obligation bonds.

C. On June 22, 2011, I wrote to Greg Rolen and the school board to inform them of this issue and asked that a cease and desist from expending the remaining 2002 Measure C monies be placed on the board Agenda. Greg Rolen did not respond to me until minutes before the MDUSD board meeting on June 28th, and he refused to comply and informed me that he consulted with their accountancy firm and bond counsel and thought there is no issue. However, I called Christy White and they said agreed upon procedures is not appropriate. I asked Greg Rolen to provide me with documentary evidence to support an opinion that supersedes the State Controller, and he never responded. Further, the Contra Costa Times heard my public comments on June 28th meeting, and an impending newspaper article may be on the way soon.

D. I’m asking the BOC and BOC chairperson to ask the MDUSD to pay for a performance and financial audit for all periods of the 2002 Measure C. A qualified auditor should be engaged immediately to perform these required audits. The audits should be performed before any remaining 2002 Measure C funds are fully expended.

3. Proposition 55 (MDUSD received over $100 million state matching funds)

A. In reviewing the MDUSD’s financial audit report for the year-ended June 30, 2008, I noticed an irregular $14 million interfund transfer from the County Schools Facilities fund (containing Proposition 55 funds) to the Building Fund (containing 2002 Measure C funds) to ‘cover increased costs.’ I confirmed with the California State division of General Services, who oversees Proposition 55 expenditures, and they believe that this $14 million is not an appropriate expenditure under Proposition 55.

B. I noticed in the 2002 BOC minutes for 2005, that Proposition 55 reimbursement funds would be used to pay principal on 2002 Measure C funds. I’m not sure if funds were used in his manner, however, I confirmed with the California State division of General Services, that this use of funds is prohibited.

C. Until these potential issues involving Proposition 55 funds are resolved, there should be a cease and desist on the expenditure of any remaining funds. Furthermore, the State auditor informed me that any savings from Proposition 55 funds must be used only on ‘high priority’ urgent need projects only, e.g., removal of asbestos, within 3 years for elementary school projects and 4 years for high schools.

4. 2010 Measure C

A. Proposition 39 requires that projects funded with Measure C bond proceeds must be spent on projects that will result in smaller class sizes and safer schools. As you know a massive solar installation project is underway. The State Controller said that this solar project may not be allowed if the disclosure was not adequate in the full text 2010 Measure C, and it does not result in smaller class sizes and safer schools. It does not appear that the disclosure was adequate, especially in light of the solar project’s magnitude and significant use of bond proceeds.

B. The State Attorney General has prohibited the use of bond proceeds to pay for salaries and general operating expenses. Generally, what you cannot do directly your cannot do indirectly. With that in mind, using bond proceeds to pay for solar panels, a revenue generating equipment arrangement, may be prohibited. The State Controller informed me that the MDUSD cannot keep the CSI rebates for the general fund. Such an act is prohibited and goes against accounting principles. The rebates must remain with the 2010 Measure C fund.

C. Further, Eberhart has stated that the MDUSD is trying to obtain federal tax incentives. These tax incentives, which now can be received via cash grants, are available to ‘for profit’ entities under the American Reinvestment Recovery Act (“ARRA”). The ARRA specifically excludes government entities, municipalities and school districts from receiving these federal tax credits because government entities are not subject to tax. I’ve requested records from Greg Rolen to determine the status of federal tax incentives 10 days ago, and I’ve obtained no response. My concern is that the receipt of the tax credits is illegal, will be misused, and the IRS may institute clawbacks of such credits if deemed illegal, placing the MDUSD at financial risk to the extent they are relying on such revenue.

D. $59 million in Clean Renewable Energy Bonds (CREB) were issued in September 2010 to partially fund the solar project. The IRS provides lump sum ‘subsidy payments’ or tax credits, depending on the situation. I’ve asked Greg Rolen several questions about the CREBS and related tax incentives, but he will not answer my questions regarding the CREBS. Further, when the MDUSD applied for the CREB bonds, an application describing the proposed project was submitted to the IRS. According to IRS rules, the solar project cannot deviate from what was proposed on the application. I believe the BOC should be made aware of those expenses that attributable to complying with the IRS rules pursuant to CREBS.

E. The voters were told that for the combined 2002 and 2010 Measure C, taxes would not exceed $60 per $100k of assessed valuation. The MDUSD reached the $60 cap in September 2010; however, the MDUSD issued an additional $10.9 million in bonds in March 2011. So absent the MDUSD issuing nontraditional termed bonds, the MDUSD may have exceeded this cap. It appears this $60 cap is the result of the most recent bond offers aggregating $10.9 million, and may explain the June 21, 2011, refunding of 2002 Measure C bonds in the amount of $37 million. I asked Greg Rolen for the calculation of the $60 assessment, and he will not provide me the records. In addition, my concern is that the MDUSD is paying exorbitant legal and underwriting fees as a result of the $60 cap, and there is another $220 million left to be issued on 2010 Measure C offering. I don’t know how the project timeline can be met given the $60 restriction. Further, I’m concerned that the MDUSD will exceed the cap when it may not be lawful to do so. The BOC is responsible for ensuring that legal costs and professional fees be kept to a minimum.

F. I’ve asked Greg Rolen if the June 21, 2011, 2002 Measure C refunding was a ‘cash out.’ He will not answer my question.

G. Bond counsel has informed me that they believe using 2010 Measure C funds to pay off prior long term debt in the form of certificates of participation and lease obligations is acceptable since “acquisitions” took place upon payoff. However, when I asked Greg Rolen for records to prove that an acquisition took place, including title transfer records, and he did not provide the records to me since he believes the district does not maintain such records. I find this implausible. Further, I believe the disclosure in the 2010 Measure C full text language does not adequately disclose this type of transaction. I noted that investors to the 2010 Measure C bond were told specifically that bond proceeds would be used to pay prior long-term debt, but that same language in the bond offering statement was not made to the voters in the 2010 Measure C full text. So this may also turnout to be a prohibited use of funds.

5. Other

A. Pursuant to California Legislature 1908, all BOC reporting should be posted on the internet. We may not be in compliance with Proposition 39, AB 1908, since not all the board minutes are posted on the internet, and written materials provided to BOC members during our meetings are also not posted on the internet.

B. 2002 Measure C performance and financial audit is not posted for 2009. Perhaps there is no audit?

C. Greg Rolen’s overall response to my records requests is disconcerting. I asked for specific records pertaining to expenses for the 2010 Measure C, I was accused of burdening his staff and abusing the spirit of the public records act. Pete Pederson to date has provided us only with expense information in general categories and aggregate balances. According to AB 1908, the BOC should be provided with appropriate financial records, and the California League of Bond Oversight Committees states that it is highly unusual for BOC’s not to receive detailed expense information like date, description, payee, and amount of each expense by project. At a minimum we should be reviewing the general ledger and related invoices. It is very disturbing that the MDUSD’s general counsel is pushing back on my request, and I find it impossible for the BOC to be able to attest to the appropriateness of expenses when the BOC has not seen detailed expenditures. This should be incorporated as part of our regular review, in addition, we should be making regular site visits to verify the work being done. Has anyone made site visits that would very the expenditures to date?

D. The projects list that was filed with the Board of Education should be brought to the BOC meetings so we can ensure that expenditures are for the “projects listed”.

E. Furthermore, I believe that posting the meeting Agendas should also be made on the internet. It is confusing when we have a website for 2010 Measure C, but it is not being updated, while Agendas are being posted outside of the Dent center making the public have to drive quite a distance to view the Agenda.

So I hope you all realize that the manner in which the MDUSD has been funding its projects complicates the ability to ensure that expenditures are appropriate, and we need to take immediate action, where necessary, to protect bond proceeds and ensure that MDUSD is in compliance with applicable laws. John, please advise on how you will proceed.

Also, to the extent the Greg Rolen does cooperate and provides me with the financial records I requested, is there anyone on the BOC who is willing to help with the review? Perhaps a sub-committee should be formed to address audit and financial budget issues. I welcome any opinions from other members, however, please keep in mind that what is discussed via email must be disclosed in a public forum to avoid Brown Act violations.

Thank you,
Alicia Minyen”

Here is the letter Minyen submitted to the board on Aug. 9, during the public comment period. It includes a list of questions she wants the bond counsel to answer at the Monday meeting:

“Date: August 9, 2011
To: Members of the Board; Superintendent Lawrence; and Greg Rolen, General Counsel
From: Alicia Minyen, CPA
Member of the 2010 Measure C Citizen’s Oversight Committee

Please have bond counsel ready by August 22, 2011, to respond to the following concerns and questions regarding the use of 2010 Measure C bond funds to pay for 1998 refunded certificates of participation totaling about $5 million. In addition, please have bond counsel ready to address concerns in my July 25, 2011, email I sent to all 2010 Measure C Committee members.

Further, I wanted to ensure that the use of 2010 bond proceeds were appropriate to payoff 2006 and 2007 lease obligations totaling about $8.7 million. I had asked the district under a public records request dated July 6, 2011, to provide copies of the lease agreements, description of collateral/property leased, and documents evidencing title transfer, among other things. The district has not provided these records. In order for the 2010 Citizen’s Bond Oversight Committee to make a determination of the appropriateness of paying off long-term lease obligations totaling about $14 million, please provide the records I had requested prior to August 22, 2011, so I have sufficient time to review. Please note that I already have a copy of agreements pertaining to the 1994 and 1998 certificate of participations.

When responding to the questions below, please keep in mind the requirements of Proposition 39 and its related laws (i.e., the expense must result in smaller classes and safer schools). Also keep in mind the State Attorney General’s opinion 04-0110, which states that bond proceeds cannot be used for general operating expenses.

1. Please explain why the debt service associated with the 1998 certificates of participation (COP), which are securities, do not constitute general operating expenses. Please also note that the 2010 Facilities Master Update refers to the COPs and Lease Obligations paid for with 2010 Measure C funds as ‘General Fund Relief and Debt Retirement.’

2. You have stated in the past that with respect to using 2010 Measure C bond proceeds to pay for COPs and Lease Obligation, that you are relying on the following ballot disclosure: A) ‘Acquisition of any of the facilitates on the bond project list through temporary lease or lease purchase arrangements, or execute purchase option under leases for any of these authorized facilities; and B) acquisition of leasehold interest on facilities currently subject to lease.’

It appears to me that the disclosure in A and B above would apply to new transactions (transactions subsequent to the passing of 2010 Measure C. Please explain why disclosures under A and B above would be relevant and apply to old COP transactions, i.e., a structure located at 2344 Bisso Lane, Concord, CA, built in 1994 subject to a COP, which was refunded in 1998.

Further, in my review of the COP, I do not find language that would define that an acquisition took place. For example, the COP states that the District retains title to the subject property at all times. Please identify the language that supports an acquisition took place by the district as a result of payoff. Also, identify language that would address a purchase option.

I did notice prepayment language; however, it simply said that if a prepayment occurred, the interest in the property would be vested. Perhaps I missed something. Please point out the language in the 1998 COP that states upon prepayment the District acquires a leasehold interest.

3. Please identify the facility located at 2344 Bisso Lane, Concord, on the projects listed. Please also explain how this facility results in smaller class sizes and safer schools.

4. Please explain if the district can enter into a new COP transaction using the same facility as used in the 1998 COP in the future…is there any waiting period since the time it was paid off?

5. In 1998, the COP was refunded and generated about $500,000 extra money to be used for additional acquisitions. Please describe what type of assets that were acquired with the $500,000. Also, please show the 2010 Committee if such assets are on the projects listed.

6. The 2010 Committee should consider the amount of professional fees paid for using bond proceeds. In light of this, please explain whether premiums/penalties were charged for prepayment of the 1998 COP.

7. Was there an appraisal obtained on the property located at 2344 Bisso Lane. What was the current market value of property in 1998 and was the market value below the amount raised from the sale of certificates (i.e., $7,760,000)? Was a new appraisal obtained just prior to the time of payoff? If so, did the appraisal support the amount outstanding?

8. I noticed that the 1994 COP agreement says it is a ‘project lease’ and the 1998 COP states it is a ‘lease purchase.’ Please explain the differences in these two types of leases.

9. I searched the county’s clerk & recorder’s records and couldn’t find that MDUSD held the 2344 Bisso Lane property. Please show the deed/title and owner of this property. If someone other than the district owned the property, provide evidence that the district was allowed to enter into the lease associated with the 1998 COP. Also, please explain this facilities current use and whether it is fully occupied.

10. Please explain why the prepayment of the COPs was a priority vs. using the bond proceeds to fund more urgent projects that may jeopardize the safety of children.

11. The counter- party to the 1998 COP is Mt. Diablo Unified School District Education Facilitates Financing Corporation. Was this related non-profit corporation created solely for the purpose of the COPs? Does the district use this corporation for any other purpose that may relate to the 2010 Measure C?”
————————————————————–
[END OF MINYEN'S LETTER]

Minyen has also sent additional e-mails and Public Records Act requests to district officials, beginning June 6. Rolen initially responded that her requests for information were overly burdensome to staff, that the district might not have the records she sought, that he wasn’t sure he was required to release some of the records and that her requests were an abuse of the Public Records Act.

Today, however, he informed her that “information responsive” to her requests would be made available at the Monday meeting.

“If you wish to receive them in advance, or, review them at your leisure there are 1,496 pages of documents the district has copied,” he wrote. “The generally excepted (sic) $.10 copying fee will be required prior to receipt. Accordingly, if you wish to receive the documents either before or after the meeting, please remit $149.60 to Bryan Richards in the Fiscal Department.”

Do you believe a board-appointed member of a Bond Oversight Committee should be required to pay for documents related to his or her duties as a volunteer on the legally required committee?

[You can leave a response, or trackback from your own site.]

  • Linda L

    The fact that the District is denying a Bond Oversight Committee member free access to information that is relevant to the job she is required to do under Proposition 39 is unbelievable. It is yet another example of typical bullying tactics.

    I was at the June 16 Bond Oversight meeting when Ms. Minyen questioned the audit procedures and the $10,000,000 bond issuance. The committee chair did not give credence to Ms. Minyen’s concerns but instead sided with Mr. Pederson who appeared annoyed with the questions being asked of him. It seemed as if Peterson expected to present his auditor choice and receive a rubber stamp from the committee.

    This committee is charged with overseeing the expenditure of $348mil. This committee is governed by laws that clearly state what is expected of them. At the very least this committee should request, and receive for free, line item expenditures, project lists, annual performance and financial audits that are in compliance with Prop 39, back-up contracts relating to Measure C expenditures, and forthcoming explanations regarding the commingling of funds among various accounts. Do deny this information, or to present barriers to the access of these documents, only leads the public to question the motive behind those who are insistent on standing in the way of true oversight… why would they do that?

  • g

    Sit back, and enjoy some Brown Act (my caps):

    Pursuant to section 6253(c), a fee equal to the DIRECT cost of duplication may be charged to any person requesting a copy of a public record. (§ 54957.5(c)); North County Parents Organization for Children with Special Needs v. California Department of Education (1994) 23 Cal.App.4th 144, 147-148.) In the
    North County case, the court indicated that a pro rata share of equipment and CONCEIVABLY personnel expenses directly involved in actually duplicating a record could be included in calculating the fee.
    However, research and retrieval costs MAY NOT be included in the fee. Thus, the direct cost of actually photocopying a record may be recovered, but associated costs such as the cost of research, redaction and retrieval may NOT be recovered.

    So, I as a public figure could expect to be charged in “honest” fees roughly $68.00 for 1500 pages of documents. Three reams of paper at a generous $6.ea, allow a generous $10. for toner, and a secretary (we’ll use a base rate of $39K/yr) and figure she had to stand and feed the copier for roughly 2 hours at $20 bucks per.

    On the other hand—A committee member should not have to pay a copper cent! Fees are approved by the Supt. and Lawrence should be ashamed if he refuses to relent on these charges. We aren’t THAT broke!

    And you know half of the pages she’ll get will be fluff “history” this and “explanation” that.

    Theresa, I’m in for $20.00 too. Let me know how and where.

  • MDUSD Board Watcher

    I am in for $20.00. Please let me know where to send this. This whole thing is dispicable.

  • Doctor J

    I think its time for the F.B.I. to be called in and do a search warrant on ALL of the MDUSD records. These are bonds that are sold on the federal markets and total nearly a billion dollars.

  • g

    Ms. Minyen obviously has a better handle on this than I, but I suspect to her point “E”, the $42million “Refunding Bond” that I have been harping about, is being used to circumvent having the 2002 issue on our “debt books”. By putting the $42million into an “Escrow” account favoring the 2002 first issue remaining balance, they can pretend the 2002 issue is, in effect, paid off, even though it isn’t, and isn’t even scheduled to be paid off before its original due date.

    The Escrow account simply is promissory proof of ability to pay. In Lawrence’s updates he indicates how much this un-voted-for Bond saves us, but I believe it is at best break even interest, and the cost inserted in the amount of nearly three quarters of a million for the boys that sell the bonds for us actually brings the cost up higher that what we owed on 2002 prior to this Bond issue. I may be entirely wrong here—but I’ve only read it 100 times!

    Twist your neck around and read both attachments:

    http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=4045&mtgId=303

    Then they’ll take the earnings from 2010′s $42million holding account, and spread them out through three more “debt fund” accounts they set up so that they can use the proceeds for “yet more” projects, and what isn’t used up, or what someday exceeds the payoff needs of the bond gets to be transferred into the General Fund! Back door laundry trick at it’s finest.

  • g

    Oh, and Bisso Lane–can you say parking lot and gas pumps?

  • MDUSD Board Watcher

    Looking forward to being at the meeting. Should be interesting. I predict John Ferrante will try to shut down public comment.

  • g

    I suspect Vanir would have been cheap at twice the price!

    The State of CA, in administration of its own construction contracts sets a cap on Change Order and Contingency fees. Max 5% on new construction and 7% on remodel or rennovation.

    So far, every contract budget set up by Pedersen is budgeted to allow 10.5% to cover all the low-ball errors in budget and bid estimates and “forgetting” to add up things like just how many kilowatts we will really need. Like the 10 years of Bond planning and 2 years of Solar planning and he supposedly forgot to count how many HVAC units were going to be installed!

  • Wendy Lack

    My two cents:

    1. Members of Citizen Bond Oversight Committees should be provided all records pertinent to their scope, without charge. Committee members are volunteer citizens who benefit government agencies by providing an essential oversight role. To charge them for such records seems patently absurd.

    2. Many if not most public agencies provide requested records in electronic form, without charge. Generally speaking, most everyone nowadays stores records in electronic rather than paper form. Since production of electronic records involves no duplication costs, government agencies provide them without any fee. If any of the records requested are available to the District in electronic form, they should be produced in that form to the Committee for ease of use, sharing and storage.

  • Alicia Minyen

    G #6 – Thank you for the link regarding the 2002 refunding. Anyone can view bond offering statements at the Municipal Securities Rulemaking Board website for every MDUSD bond issuance (i.e., http://www.emma.msrb.org).

    See the link for the 2002 Measure C refunding that occurred in June 2011 at: http://emma.msrb.org/IssueView/IssueDetails.aspx?id=ER342384

    You will notice that the stated interest rates appear to be above market, and as a result, the bonds were sold at a premium…meaning the investor paid extra (above par) so the investor can receive the higher stated interest rate. Bonds sold at par mean 1 for 1 or $100 for 100 in bonds. If a bond sells for more than $100, then the extra is considered a premium. Premiums should be used to pay debt service on the Prop. 39 bonds.

    Perhaps this refunding is fine. However, my concern, as in the case with Poway Unified School District, is that the premium was diverted to the general fund (which would be considered an illegal cash out refunding). So I want to verify that 100% of the premiums were kept in the debt service fund for 2002 Measure C. Although I asked this question on July 5th, I’m hoping I can get an answer this Monday.

  • Theresa Harrington

    As Minyen is pointing out, the Bond Oversight Committee is not given information about revenues. It is not told how much money the district receives after each bond issuance and how much the financial advisor, bond underwriter and bond counsel receives.
    Minyen has been asking for detailed “soft costs” since June 6. I have also requested them in Public Records Act Requests.
    As of today, the district still has not provided this information to me. In addition, it has not provided an audit of 2002 Measure C funds for fiscal year 2010.
    Rolen also denies that the district has any correspondence related to “audit inquiries” made by the Office of Public School Construction, which are noted in each of the Quarterly Reports between March and December 2008.
    “We are informed and believe that there is no correspondence or audits from the Office of Public School Construction,” Rolen’s secretary, Lori Amenta, wrote in an email to me.
    I have asked whether the audit inquiries noted in the Quarterly Reports were verbal. And if so, who received them and who was responsible for responding to them?

  • http://www.cocotax.org Kris Hunt

    The MDUSD was happy to use the existence of a bond oversight committee(BOC) in order to use the 55% election percentage instead of the normal 2/3rds. Therefore, you have to wonder why the district would not bend over backwards to meet the concerns of the BOC. The district is not entitled to have it both ways.

  • MDUSD Board Watcher

    Kris Hunt,

    You are 100% correct, but you are obviously not familiar with the individuals running our district. They care nothing of the law.

  • g

    This is just sooo much easier to understand than the convoluted information that Lawrence tried to muddle our brains with in his message back on 8/2.

    http://emma.msrb.org/EP514304-EP401484-EP798738.pdf

    Take one annual 09-10 Audited Financial Statement.

    Then add one 10-11 Projected Budget.

    One plus one equals two excuses for screwy multiple Bond desperation fire-sales.

    Late on property tax payments. “Other” Outgo at $2.5million… salaries budgeted down, but benefits budgeted up by a couple million bucks.

    This is in a District sitting on $30,000,000.000.00 in real estate, rusty buses, and what looks like a company vehicle for every nearly-upright person on Gasoline Alley and Bisso Lane. (that’s billion!)

  • g

    Oh– that $30Billion is “assessed” value. I suspect they could have scrapped the rust alone and twisted around enough proceeds to keep Holbrook and Glenbrook afloat for years.

  • g

    I just noticed the strangest thing. On the Board Agenda for Tue 8/23, there is a letter from Christy White’s agency accepting the proposal to do Financial and Performance audits for the 2002 Bond, but it appears to be 2010 and forward only. Nothing about looking back, as Ms Minyen suggested, to see if everything was proper from 2002 to 2009, or whether is was proper for the 2002 Committee to disband (or stop reporting activity) while there were still 2002 funds unexpended.

    Strange, because: I don’t recall this proposal to do this work, ever being brought before the Board or public. If I’m correct, this is just another slight of hand.

    They did approve her as Financial and Performance auditor for 2010 Measure “C” a few weeks ago though, I believe.

  • Theresa Harrington

    g: You are correct that this proposal was not discussed at a previous board meeting or at the July 16 bond oversight committee meeting for 2010 Measure C.
    I spoke to John Parker today, who was on the 2002 Measure C Oversight Committee and is on the 2010 committee. He said he recalled the 2002 committee discussing the need for another audit at its last meeting. He said he assumed the district requested the audit, but said the committee never met again to review it.
    In response to Public Records Act requests for all 2002 Measure C audits after 2008, I received one for fiscal year 2009. The engagement letter was dated July 7, 2010 and showed nearly $5.5 million remaining in the fund on June 30, 2009.
    I have repeatedly asked the district to provide me with records showing how the fund shrank to $3.5 million by April 2010, when Pete Pedersen wrote his 2010 Measure C Facilities History, which appears on the Measure C website.
    Perhaps this overdue audit will answer that question: http://esbpublic.mdusd.k12.ca.us/public_itemview.aspx?ItemId=4390&mtgId=313
    Parker also said he has spoken to John Ferrante about the need to have another 2002 Measure C meeting, since all funds were not expended when they last met.

  • D.F.

    Well, now that the solar panels are up, they should be able to put in room air conditioners in all the classrooms that don’t have air conditioning. Disgusting that some classrooms don’t even have a fan or fans that are effective.

    hmmm, maybe the district offices could do without their air conditioning, and put the money saved on their utility bill into an air conditioning fund for the children! What a great idea!

  • Doctor J

    @Theresa #17, are there public meeting minutes authorizing the 2009 Audit of the 2002 Measure C ? Is there a reasonable explanation for why the engagement letter doesn’t appear until July 7, 2010 ?

  • Theresa Harrington

    The June 9, 2010 minutes don’t mention another audit. Also, these minutes state that the balance in the Measure C account is $3.2 million: http://www.mdusd.org/Departments/AdministrativeServices/MeasureC/Documents/minutes/2009/06-04-09.htm.
    Here’s a link to the audits that are missing from the district’s website: http://www.docstoc.com/docs/document-preview.aspx?doc_id=91135270
    Actually, the July 7, 2010 date is the date of the 2009 audit report. Also, note that the 2002 audit was done together with the 2003 audit, released in a November 2003 report.
    I spoke to the executive director of the California League of Bond Oversight Committees, who told me his organization is pushing for a law that would require annual audits to be done by a specific date each year.

  • CV Parent

    Oh. My. Goodness. Is it any wonder CV is running as fast as they can towards a Charter conversion? This District is as corrupt as they come and Greg Rolen is despicable. While waiting for FBI, Civil Grand Juries, and the SEC to get involved, is there anything the public can do to clean house? Class Action, anyone??

  • Doctor J

    The minutes reference a “quarterly report” — have they produced the quarterly reports ? I think what you need to request is the “general ledger” and that will have all income and expenses and accounting adjustments.

  • LindaL

    D.F.
    Parents at Foothill were told there were no more Measure C 2002 funds for HVAC. Then they were promised HVAC if we passed Measure C 2010. Now we find out that there is a balance of funds in Measure C 2002… in the Measure A…. in Prop 55….
    Hmmmm?
    If anybody still thinks this bond was about anything but solar I have an orange bridge for sale… it is such a great deal. As owner you can save on tolls and collect tax credits!

  • Doctor J

    All you ever wanted to know about MDUSD spending on construction projects and were afraid to ask — or to put it another way, all MDUSD didn’t want the taxpayers to find out about how they waste the taxpayer’s money. Diamonds are a girl’s best friend. Happy hunting ! https://www.apps.dgs.ca.gov/tracker/ProjectList.aspx?ClientId=7-29

  • Doctor J

    A CPA and Fraud Investigator uncovering the shell games and cover-ups in MDUSD on the bond funds — this really requires the FBI, the US Attorneys office, the Calif Attorney Generals office, and the Contra Costa District Attorney’s Office to invesitgate. Only public outcry will cause this to happen. We need the TRUTH !!!!

  • Doctor J

    The plot thickens. No denials from the Board or Lawrence or Ferrante. Tanamount to confessions. Book ‘em Dano.

  • g

    Directly to Ms Minyen’s point “E”: California Education Code 53561. It is hereby declared that it is a public purpose for a local agency to issue refunding bonds for the purposes set forth in
    this article and to invest and reinvest the proceeds thereof, and any other funds legally available therefor, for the purposes set forth herein; provided, however, that it is the intent of this article,
    and this article shall be so construed,
    that in no single fiscal year
    shall a tax be levied or shall funds of a local agency other than those expressly permitted herein be used to pay the principal of and interest and redemption premium, if any, on both the refunding bonds and on the bonds to be refunded.

    I point directly at the “however” point. If I read this correctly, taxes can not be raised a cent to cover payments on the Refunded Bond and the Refunding Bond at the same time.

    If the rate has reached the limit, it sounds like they are going to assess higher taxes. I am wondering how we can tell which increase is for new money bonds versus old bonds versus refunding bonds versus refunded bonds?

    Any answers or opinion different from mine?

  • Alicia Minyen

    Dr. J #21 – I had asked for the general ledger. I had asked for detailed expenditures so I could tie out them out to the financial report on the Measure C website. In addition, I had asked for a list of vendors, and any bank statements that reflect the bond revenues. I wanted to ensure we received the right amount of bond revenues and then compare the revenues to budgeted and actual expenditures. Without these records, how can I ensure that all expenses are being disclosed to the Commitee? When I was accused of abusing the spirit of the public records act and burdening staff on July 15th, I asked to sit down with an accountant so I could modify my request…but no response until I asked to be placed on closed session to discuss alternatives to filing a formal compliant under the “School Bond Waste Prevention Action” (see AB 1908).

  • Alicia Minyen

    Dr. J #26: In order to keep under the $60 per $100k cap, the district is forced into issuing nontradional bonds (creative financing). In September 2010, the district issued $50 million in capital appreciation bonds and convertible capital appreciation bonds. CAB bonds are great for the district since there is no principal and interest payments until maturity date (a balloon payment is required at each maturity interval). However CAB bonds are more costly to the community since they must pay a higher interest rate to the investor since there is more risk. Also, one would think if you issue $50 million in bonds, you get at least $50 million back. Not so with CABs…the district’s Capital Appreciation Bonds were sold at prices with a deep discounts…prices as low as $51. Based on my calculation, the district raised about $27 million in cash, but we are all on the hook for $50 million plus much more to pay for the accreted/compounded interest.

  • Theresa Harrington

    Here’s my story about Minyen and the response she has gotten from the district: http://www.contracostatimes.com/top-stories/ci_18724351?nclick_check=1

  • Just J

    The more I read the more it makes me sick to my stomach. We shouldn’t have to worry about this. Just shows how truley messed up we are.

  • g

    The District website is fine, but the Measure “C” site, minutes portion seems to be having some “availability” issues this morning. Maybe we’re going to get some updates?

  • Theresa Harrington

    g: You’re right. Although I can get to the district’s website, the “Measure C” tab doesn’t seem to be working.
    However, the 2002 Measure C information is still available, if you search on “Measure C” on the district’s site: http://www.mdusd.org/Community/Pages/measurecjune2010.aspx

  • g

    I’m trying to look again at the 2010 minutes. Except for Dec. all others are unavailable right now.

  • Doctor J

    Ollie North used the Datatech Intimus 007 to shred his documents. Today, people try to erase them from the internet — the biggest problem is that people have already printed them or they are on so many servers that they cannot all be erased. Destruction of public documents is called “Obstruction of Justice” and is actually a felony according to my friends. I wonder if there will be a “Buttercup” meeting today ?

  • g

    It does seem strange that at 1:30p.m. on Sunday that virtually everything on the MDUSD main site is available EXCEPT for links to the 2010 Measure “C”. First just the minutes were down early this a.m., and then the entire site went down, and is still down. Somebody may be earning Sunday overtime to work on the site.

  • Doctor J

    @G, Drive over to the Dent Center and take down the license plate numbers — you will have your answer. I will also bet that the Dent Center is running out of toilet paper today too. :-)

  • Doctor J

    Gary is busy watching his rear view mirror and doesn’t understand they just put a magnetic gps unit on his vehicle to track whereever it goes. Cell phones are instantly traceable. As far as the home phone goes, they just tap them remotely. I wish I knew how to spell the theme from Dragnet.

  • Linda L

    The chairman of both the 2002 and 2010 committees, John Ferrante, said the committee relied on the auditor to comply with legal requirements and trusted the district to provide accurate financial information. He said most members of the citizens’ oversight committee, which has 15 members, wouldn’t be enthusiastic about poring over detailed financial records.

    “If you’re going to get down to line item by line item,” he said, “I don’t believe that’s our assignment.”

    ARE YOU KIDDING ME? That is exactly why he should not chair the Oversight Committee. John, tell us what is the committee’s job?

  • Theresa Harrington

    I have just posted another blog item that shows many Bond Oversight Committee members statewide don’t understand their responsibilities: http://www.ibabuzz.com/onassignment/2011/08/21/a-closer-look-at-school-construction-bond-oversight/

  • vindex

    Theresa,
    This is a FANTASTIC post. This Alicia M. is brilliant and she is doing her job professionally. She represents me (the taxpayer) and I appreciate her efforts on my behalf. Greg Rolen and the Board are guilty at the very least of incompetence. Possibly Fraud. For Greg Rolen to charge a committee member for documents is his way to say “back off”. GREAT JOB ALICIA! Hold these people accountable.

  • Doctor J

    If John Ferrante doesn’t think the “oversight” committee should inspect the transactions, I would like to know what his agenda has been for the last ten years ? Maybe there are some payments to people that have a conflict of interest ? Who is John Ferrante that he can wield such power for ten years ? After what we have seen and delay in producing the “general ledger” I think we need an actual inspection of the cancelled checks. There is something rotten in Denmark.

  • Doctor J

    Alicia Minyen’s questions are valid and need to be answered so there is no question about the veracity and verification of the answers. If Ferrante attempts to limit her comments, she as a member of the committee is entitled to perform her duties without limitation. Ronald Reagan held the Soviets to the same standard: Trust but verify. There have been so many irregularities the past few years in the MDUSD that the public, and even the employees, have lost TRUST in the TRANSPARENCY AND VERACITY of the district. Its time to clean up the mess and get back to providing a quality education to our children. If what Minyen says about Solar not being a valid project, then Eberhart’s adverstisement on LinkedIn is patently untrue.

  • g

    At the meeting, remember that Jon Isom, Meredith Johnson, and anyone else they send from Urban Futures DO NOT represent the taxpaying people. Nor do they care very much how poorly the District might handle a Bond Measure once it is passed.

    Urban Futures and Isom and crew have one job—to make a Measure get enough votes to pass. They don’t make their living overseeing the expenditures or the reporting of them. They make their money getting out the vote!

    They will be there tonight to pull wool, and protect their reputation and income stream.

  • Theresa Harrington

    After voters approve the bond measure, bond underwriters and financial advisors make their money by issuing and refunding bonds.
    At the June 16 meeting, Pete Pedersen’s PowerPoint presentation showed the district had already paid more than $2 million in Bond Issuance costs.
    I have repeatedly asked for a breakdown of these costs in Public Records Act requests, yet have not received them.
    The oversight committee should be told how much the bond underwriter, bond counsel and financial advisor are paid for each issuance and refunding.