Fraud Possible in Calexico Unified School District Bond Expenditures

Sweetwater Union High School District and Southwestern College continue to be subjects of district attorney investigations related to school bond expenditures. Calexico Unified School District had concerns about bond-related activity, so superintendent Richard Fragale and Calexico trustees ordered a forensic audit. The audit was released this week.

In a July 23 interview, Fragale said that all the funds from Measure J had been expended; however, questions raised first by the grand jury and more recently by a district audit indicated the need for a forensic audit. Fragale mentioned that, among the problems, there was a scarcity of minutes from the Measure J bond oversight committee.

Measure J was a 2004 general obligation bond for $30 million to build and modernize Calexico Unified school facilities. Fragale was brought into the district in February 2011, as he describes it, “to save the district from state takeover.” Last year the district was teetering on the brink of insolvency.

The investigation was done by VLS Fraud Solutions, a service of Vicenti, Lloyd & Stutzman, LLP. Jenny Dominguez, the manager who worked on the audit, said that her company typically divides the audits into phases for districts so they can determine the depth and the cost. So far, VLS has done phase one of the forensic audit.

The report from VLS had a number of notable findings: in some instances the district was unable to provide proof of bidding; in other instances the district was unable to provide copies of contracts for vendors. In the case of the architect Garcia & Associates, some invoices had no other details than “fee earned to date.”

One of the report’s recommendations is to “obtain a background check of David Alvarez, the superintendent at the time Measure J was passed, to determine if there is any known association with Garcia & Associates.”

VLS conclusions include this statement: “Although VLS did not identify evidence of fraud, there are indicators of possible fraud: missing support, missing contracts, change orders that exceed code limits, excessive change orders, payments that exceed contract amounts, and work that was not properly bid. These weaknesses are indicators of possible kickback schemes, vendor favoritism, and bid-rigging. In order to make a final conclusion on the existence of fraud, additional work would be required….”

Fragale says the board will soon consider whether or not to contract for additional investigation. Fragale said, however, that the report only “implied the possibility of wrongdoing and that the bottom line is it would cost the district a lot of money to do a thorough job — and then, where would we go with it?” He said the district has not ruled out taking the information to the district attorney.