OAKLAND — After months of digging, a private auditing firm has concluded that the cash-strapped, state-indebted Oakland school district has even less money than anyone thought — nearly $15 million less.
For years, state auditors have been unable to give an opinion on the condition of the state-run school district's finances, saying too many records were lost or incomplete to be sure of the bottom line. In May, the school board hired the firm Vavrinek, Trine, Day & Co. to uncover the truth by sorting through records dating to the beginning of the tumultuous 2002-03 fiscal year, which ended with a state takeover.
The firm, whose findings will be discussed at Wednesday's board meeting, says the district's cash balance is $5.6 million less than previously estimated — $37.8 million, rather than $43.4 million — and that its payroll reserve fund appeared to be about $9 million short. The school district might have to draw from the state loan or borrow from another fund to make up for the $14.6 million shortfall.
Alice Spearman, Oakland school board president, said she was relieved to know the school district's true bottom line after years of uncertainty. She said the school board, which was stripped of its governing powers when a state administrator was appointed in 2003, long had pushed for answers to such questions.
"It's sad that it's taken so long to do this, but I'm pleased that it's been done," Spearman said. "Now we can move forward knowing, actually, what moneys we have."
Although the state administration was charged with cleaning up the Oakland school district's finances — the state takeover, after all, was triggered by major financial problems — school board members and others have complained that the state focused too much on big-picture reform and not enough on the district's fiscal health.
Hilary McLean, press secretary for state Superintendent of Public Instruction Jack O'Connell, defended the state administration's priorities, saying O'Connell and his appointees would have been remiss to ignore the Oakland school system's other challenges. "Their task has certainly been to improve the fiscal stability of the district, but at the same time, their challenge is also to improve the educational aspect of the district and the systems of the district," she said.
Many of the accounting problems brought to light in the recent audit apparently occurred shortly after the district adopted a new accounting system in 2002. The audit team documented dozens of payroll and cash account discrepancies caused by human error.
The auditors also noted that the district lacked the checks and balances to catch those mistakes. Oakland Unified didn't routinely reconcile its accounts for six years, the auditors reported.
High staff turnover and the resulting lack of institutional memory complicated the situation, district spokesman Troy Flint said. Those responsible for overseeing the district's finances during the early years of the state takeover long since have left the crumbling administration building.
"It was kind of a perfect storm of instability, which resulted in flawed business practices," Flint said.
Flint said it was the district's former interim CFO, Leon Glaster, who noticed the accounts were not being properly reconciled, among other problems. Glaster pushed for a number of changes, which began in 2008, Flint said. Vernon Hal, Oakland's new CFO, was hired late last year.
Flint said the district will hire someone to oversee account reconciliation, a position that has been vacant for years. Now, he said, district staff members are equipped to prevent such problems from happening again.
"That's the very, very tiny silver lining to this very unfortunate situation," Flint said.