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MDUSD Bond Oversight Committee to meet Thursday

By Theresa Harrington
Wednesday, February 15th, 2012 at 6:40 pm in Education, Mt. Diablo school district.

The Mt. Diablo school district’s 2010 Measure C Bond Oversight Committee will meet at 7 p.m. Thursday in the district office.

Since the agenda is difficult to find on the Measure C website (and the meeting is not listed under “Upcoming Events” on the district’s website, I am posting the agenda below, along with a link to the audit.

“2010 Measure C Citizen’s Bond Oversight Committee Special Meeting

Thursday, February 16, 2012
1936 Carlotta Drive
Board Room, Dent Education Center

7:00 PM

 Call to order

 Public Comment

 Audit Report

 Annual Report

 Other Committee Concerns”

Here is the audit: http://www.docstoc.com/docs/document-preview.aspx?doc_id=113403928

Also, I have received a copy of an Oct. 10, 2011 memo sent by taxpayer representative Alicia Minyen to the rest of the committee regarding “Questionable expenses paid for using 2010 Measure C bond proceeds.” According to Minyen, the district was supposed to post this on its website, since it was discussed as an agenda item at the last Bond Oversight Committee meeting.

Since this has not been done, I am posting a link to the memo here:
http://www.docstoc.com/docs/document-preview.aspx?doc_id=113407326

It is possible that some of these issues will be brought up again during discussions regarding the audit and annual report. Minyen had previously requested that the committee consider issuing a minority report, if all committee members do not agree on the annual report.

Committee members, however, decided it was premature to discuss a minority report until they saw the annual report. Some also suggested that a minority view could be included in the annual report.

What is your reaction to the audit and to Minyen’s concerns?

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

  • Doctor J

    So many questions, and questionable transactions, and no, none, nada, zip answers from the District. There is something rotten in Denmark when the auditor takes the cop out of — we express no opinion.

  • g

    One dare not bite the hand that feeds it. Audits are a tool to buy time and fool the masses.

    When White mentioned a perceived legal issue, the district’s legal beagle told her to ignore it. So, as suggested, she deferred to District Staff.

  • Doctor J

    WHERE IS THE PERFORMANCE AUDIT ?
    Christy White’s audit VERY CAREFULLY states “ not to
    provide an opinion on the internal control over financial reporting or on compliance.” Yet, Christy White says: “Measure C”),authorizing the issuance and
    sale of general obligation bonds, not to exceed $48,000,000. The Measure C 2010 Bond is a Proposition
    39 bond. The passage of Proposition 39 in November 
    2000 amended the California Constitution to include
    accountability provisions. Specifically, the District
    must conduct an annual independent performance audit  
    to ensure that funds have been expended only on the
    specific projects listed in the full text of the Measure C 2010 Bond ballot measure as well as an
    annual, independent financial audit of the proceeds from the sale of the bonds until all of the proceeds have been expended for bond designated facilities projects.”
    So Christy White does a “financial audit” but where is the PERFORMANCE AUDIT also required to make sure the project are listed in the Bond ballot measure ? There is no new “high school” listed in the Bond Ballot Measure !

  • Doctor J

    Christy White, on August 9 you agreed to do “Performance Audit”. Approved by the Board later that month. Where is it ? Let me quote your letter to the Board: “August 9, 2011
    Mt. Diablo Unified School District
    1936 Carlotta Drive
    Concord, CA 94519
    We are pleased to confirm our understanding of the services we are to provide Mount Diablo
    Unified School District for the fiscal years ending June 30, 2010 and June 30, 2011, plus the
    optional one year audits for fiscal years ending June 30, 2012 and June 30, 2013. We will audit the
    balance sheets of the 2002 Measure C Bond of Mount Diablo Unified School District as of June 30,
    2010, June 30, 2011, June 30, 2012 and June 30, 2013 and the related statements of revenues,
    expenditures and changes in fund balance for the fiscal years ending June 30, 2010, June 30, 2011,
    June 30, 2012 and June 30, 2013. The audits will include a financial and performance audit, in
    accordance with Article 13A of the California Constitution.”

  • g

    The Performance Audit starts at pages 18- we got a “twofer” discount.

  • Anon

    Theresa…did you obtain a copy of the 2002 Measure C audits?

  • Theresa Harrington

    No, do you know if the BOC did?

  • Doctor J

    @G, The cover letter says CWhite did NOT do a “performnce audit” and expresses “no opinion” on the “performance”: “not to provide an opinion on the internal control over financial reporting or on compliance.”. From page 17: “However, providing an opinion on compliance with those provisions was not an objective of our audit and,accordingly, we do not express such an opinion.”

    Where is the compliance audit that expresses an opinion ?

  • Doctor J

    Christy White says: ” the District must conduct an annual independent performance audit to ensure that funds have been expended only on the specific projects listed in the full text of the Measure C 2010 Bond ballot measure”

    Christy White’s findings: “In addition, the bond proceeds were used to prepay outstanding lease and general obligation bonds for a total of $14,288,580. We were unable to verify specifically in the bond ballot language the allowability of bond proceeds for debt service.”

    If its not listed in the “ballot measure”, which it isn’t, its a $14 million dollar charge to the General Fund.

    Additionally, “new schools” are not on the “ballot measure” nor are payments of the “CREBS”, both of which are paid for with Measure C 2010. The “performance audit” should not be approved.

  • J Weir

    As a former member of three bond oversight committees in this county – including the Mt. Diablo BOC – it is crystal clear to me that district leadership has consistently deceived the public on its 2010 bond program. It is also clear that the committee has been managed in a way to aid the district’s attempts to hide its multiple violations of Prop 39, the Brown Act and the Public Records Act. The failure to conduct authentic audits is only the latest in a long series of cover-up attempts. Fortunately, Ms. Minyen and others have strong evidence that will ultimately lead to full public disclosure, and appropriate action by enforcement authorities.

  • Wait a minute

    Thank you for sharing this Mr. Weir (Iknow you have shared it before btw).

    I hope that you, Alicia and others with more direct knowledge of these illegalities are making requests for a CCC Grand Jury investigation.

  • Alicia M.

    Theresa….I will ask about the 2002 Measure C audit tonight.

  • Doctor J

    Is there a difference between the illegal Pleasanton USD Bond “cash out” costing taxpayers over $9 million dollars and the MDUSD Meas. C Bond “cash out” ? Please explain. http://www.arounddublinblog.com/2011/07/pleasanton-ca-schools-on-hook-for-millions-over-illegal-bond-deal/

  • **anon

    Alicia M: thank you for your dedication to holding the district accountable regarding Measure C. There are so many like me that know not of the legalities (illegalities in this case)regarding bond measures. In these dire economic times, we are even more grateful for your knowledge, courage, and volunteering your time to speak up for us as homeowners and parents. Please know that there are many of us in our community that are right behind you tonight and are appreciative that you are one of few that can be a spokesperson for all of us.

  • Doctor J

    Live blog ? Theresa, we are spoiled !!!!

  • Theresa Harrington

    Sorry I wasn’t able to do a live blog tonight, however I did shoot some video toward the end of the audit discussion.
    The committee accepted the audit as presented in a 7-0-1 vote, with taxpayer rep. Alicia Minyen abstaining. It will be presented to the board along with the annual report, I believe.
    A question regarding the legality of paying off COPS and leases was raised. Minyen said she was not comfortable relying on the bond counsel from Matt Juhl-Darlington’s office because that firm donated money to the Measure C campaign and has been paid with bond premiums.
    John Ferrante encouraged any bond committee member who has questions or concerns to speak at the board meeting under public comment on the item.
    Minyen also questioned a $952,000 interfund transfer journal entry in the County Treasurer’s office. That question was not answered, but one committee member said she was not concerned because the auditor determined that no money was “missing.”

  • g

    I hate to get too-too technical, but a vote of 7-0-1abstain, was NOT a valid approval as it was NOT a quorum, unless two people have quit since the site was updated. Who quit?

    Jay Bedecarre
    John Burke
    Rick Calloway
    John Ferrante
    Bonnie McDonald
    Faye Mettler
    Alicia Minyen
    Susan Noack
    Jenny Reik
    Tina Segrove
    Mark Weinmann
    Marc Willis
    Brent Hayes
    John Parker
    Larry D. Wirick

    But then, a little technicality like that hasn’t stopped Ferrante, or his guru Pedersen for the past 10 years–why get legal now?

  • Theresa Harrington

    I arrived late. But, I heard that there wasn’t a quorum at first. Then, it was determined later that there was a quorum.
    Unfortunately, I don’t know all the members’ names, but these are the people I know who were there: Alicia Minyen (abstained), John Ferrante, Mark Weinmann and John Parker. There was a fairly new member named Maria and a couple more women and a couple more men.
    You can get a sense of who was there in this video: http://qik.com/video/48173136

  • g

    Not really Theresa, no matter how they want to count it. The point is that the committee MUST have certain and particular members at least on the committee, whether they all show up at meetings or not.

    This Committee set itself up with a membership of 16, which is fine if all rules are followed by proportion.

    The Prop 39 required minimum number is seven. Then there are five certain and particular members ‘required’. They currently only have 4 of those positions filled.

    Prop 39 does not say “you should have” these five, it says “you MUST have” these five in order to do business. Even the White audit they were discussing, points that out to them as a deficiency that must be corrected, and says they should actively get out and campaign to recruit that member.

    They have no member who is active in a senior organization, and Prop 39 precludes them from doing any business without the 5 “required” positions.

    Sadly also, I believe it was never intended in Prop 39 to allow that “at large” members be the majority on a BOC. This committee is now operating as a committee of 15, with only 4 requirements fulfilled, so even if they say that so-and-so makes an ‘extra’ businessman, or so-an-so is an ‘extra’ parent, the fact is, if the Prop 39 intent was that 5/7th of the committee be a certain make-up, they are failing miserably, with stack’n'pack “at large” members in the majority, yet again.

  • g

    Sorry, Theresa, I read too fast. Did they approve the Dec Minutes? Is Maria able to fulfill the missing “Active in a Senior organization” position? Was she voted in in Dec, and presented to the Board for approval? Did she vote tonight?

  • Doctor J

    What is the status of the 2002 Meas. C Audits ?

  • Theresa Harrington

    Since I arrived late, I’m not sure if they approved the minutes. I thought that Maria voted, but I’m not positive. She sat at the table and asked a lot of questions. I’m not sure if the senior position has been filled.

  • Doctor J

    The only way Pete Pedersen is going to follow the rules is with a Court Order and Supervision.

  • Theresa Harrington

    At first, Ferrante said the committee couldn’t vote on the audit, sinc it hadn’t been noticed for action on the agenda. But, Pedersen said he didn’t know he was supposed to do that and that he hasn’t done that in the past.
    No one else seemed concerned about it, so the committee voted after all, since Pedersen said he was expecting the committee to accept the audit.

  • Retired CPA

    Theresa-
    Regarding your comment #16. The Committee member who said she was “not concerned because the auditor determined that no money was ‘missing,’” doesn’t know what she’s talking about. The auditor can’t know if money is missing or not if the auditor doesn’t ensure the population (all monetary transactions) is complete. If Ms. Minyen found transfers that the auditor wasn’t aware of, the population is not complete and the audit is useless. The system of internal accounting control has to ensure all transactions are captured and properly recorded.

    It’s also problematic if the bond premium is being used to pay for bond counsel or other offering costs. Bond premiums are supposed to pay for debt service. Otherwise, the taxpayers will wind up paying more than they authorized when they voted to approve Measure C. Apparently, the District does have some potentially material weaknesses in its system of internal accounting controls. It’s back to the drawing board with this audit.

  • Retired CPA

    It’s a Brown Act violation if the committee took action to approve the audit and the action wasn’t included on the agenda.

  • Alicia M.

    G…you raised some excellent points with respect to the quorum. I’ll look into it today and get back to you.

  • Theresa Harrington

    Unfortunately, I missed that part of the conversation during the committee meeting, but Minyen said after the meeting that there are laws that prohibit districts from selling bonds at more than a 5 percent discount (to gain the premium). However, she said the auditor told the group that it is a common practice and appears to be legal. Minyen said she questioned whether that was the auditor’s opinion or whether she was relying on the district’s legal counsel. Minyen said the attorney general’s office has issued a letter to the Poway district telling them it was illegal to pay issuance costs with bond premiums.

  • Alicia M.

    Retired CPA…I agree with all your comments, but I couldn’t convince the auditor that her and management’s conclusion regarding the premium was inaccurate. Basically, there is no court ruling on the matter, and I doubt the auditor and district will change their opinions. It is so annoying that it would take suing the district to make the taxpayer whole. With respect to the quorum and agenda…we may be having another meeting.

  • Alicia M.

    Theresa#28. The Education Code says that bonds cannot sell at a discount greater than 5% (EC 15146). The district’s Series A capital appreciation bonds sold at a discount as high as 50%. However, schools can elect to issue bonds following Government Code 53506, 53532. The GC appears to allow deeper discounts as long as the yield does not exceed 12%. However, some of the capital appreciation bonds sold at accretion rates of 12% and without recieving bond premium…the district may not be in compliance. Further, the EC requires that the district inform the public the maximum interest rate on the bonds, which is 8% if following the EC or 12% following the GC. The district did not disclose the max rate as a percentage…instead they referenced the sections of the EC and GC…so any reasonable person would have no idea what the Max rate on the bonds might be.

  • Doctor J

    The only way to make the district follow the law is with a lawsuit and court supervision. As long as the district relies on incompetent attorneys and attorneys with financial conflicts of interest, the district will continue to flaunt the law and screw the taxpayer.

  • Alicia M.

    @19…. Based on who was present at the meeting last night and their title/representation (see page 1 of the audit report), I believe we had a quorum.

  • Doctor J

    Is there a difference between the audit reported committee membership and the Board minutes of who has been appointed to the Bond Oversight Committee ?

  • Theresa Harrington

    Here’s a link to the Poway letter that the audit references regarding the use of bond premiums to pay issuance costs: https://s3.amazonaws.com/s3.documentcloud.org/documents/202322/ags-warning-letter-on-poways-school-bond-behavior.pdf

    Here’s what Gov. Code Sec. 29303 says: “29303. This section does not apply to the sale by counties of bonds purchased as investments. Whenever any bonds issued by any county or by any school, drainage, or other district in any county, whose accounts are required by law to be kept by the county auditor and treasurer, are sold at a premium or with accrued interest, or both, the amounts received for the premiums and accrued interest shall be deposited in the debt service fund of the county or district unless it is expressly provided by law that they be deposited in some other fund.”

    Here’s what Ed Code 15146 subd. (f) states: “The proceeds of the sale of the bonds, exclusive of any premium received, shall be deposited in the county treasury to the credit of the building fund of the school district, or community college district as designated by the California Community Colleges Budget and Accounting Manual. The proceeds deposited shall be drawn out as other school moneys are drawn out. The bond proceeds withdrawn shall not be applied to any other purposes than those for which the bonds were issued.
    Any premium or accrued interest received from the sale of the bonds shall be deposited in the interest and sinking fund of the district.”

    The auditor says that since the funds WERE deposited into the debt service fund, the fact that nearly $1.8 million was then transferred out to pay the costs of bond issuance does not violate these laws.

  • g

    Ed Code 15146 subd. (f) states …”The bond proceeds withdrawn shall not be applied to any other purposes than those for which the bonds were issued”.

    But, it seems to me that– the bonds were not issued for the “purpose” of paying for their own “issuance”. Even if the law states that bond money can be used to pay issuance costs, that doesn’t mean the “interest earnings” of the bond funds can also be used that way.

    Is there something wrong with White’s mental processes? Is Juhl-Darlington really cute or something?

  • Theresa Harrington

    White concluded: “The district appears to have complied with the law.”

  • g

    Alicia @32; Hi! Question please. Since we cannot see minutes newer than last Sept, can you give me the accurate number of members on the committee.

    There are 15 on White’s list, which is 8 months old!

    The website lists 15, but it is waaay out of date, but we’ve come to expect that–since both Ferrante and Pedersen plead the “duh” when questioned about anything legal.

    Per Sept Minutes counting the two new members, there were 17 members, but since then, Schulte (senior member) left.

    Has someone else left? Are there 16 still? Were there only 8 at this meeting?

    If Pedersen wasn’t allowed virtual control of the Committee and its website, and if Ferrante had managed to learn anything at all from his “at large” membership on virtually every committee on earth, maybe we wouldn’t have so many questions.

    And speaking of basic info questions, :) When the ‘one year’ memberships expired in June 2011, was there ever a formal discussion or vote to renew those memberships? It was not in the Sept minutes, or on the Dec Agenda…?

  • Theresa Harrington

    Here’s a new blog post outlining some of Minyen’s questions about the audit: http://www.ibabuzz.com/onassignment/2012/02/17/questions-raised-about-mdusd-bond-expenditures/