Audit Finds Some Potential Conflicts of Interest in New Construction Program From 2002-2006, but Dramatic Improvement in Oversight by LAUSD from 2006 to Present
(Los Angeles) –City Controller Wendy Greuel released the first ever audit by a City Controller of the LAUSD today. The audit looked at the school district’s New School Construction Program and whether there was any potential conflict of interest in the selection of construction contracts. After a contract professional at the District was indicted in April, 2010 for allegedly funneling business from the NCP to a company he co-owned, Superintendant Cortines asked the City Contoller to audit the NCP to identify any other potential conflicts of interest.
The audit found that from 2002 to 2006 the LAUSD’s policies and oversight for how these contractors were selected was weak. However, from 2006 to the present day the district has undergone a dramatic improvement and has done a good job ensuring the integrity of the selection process.
“While we found some potential conflicts of interest during an earlier era at the district, it appears that the LAUSD under its current leadership has made significant progress in reforming the process for awarding construction projects,” said City Controller Greuel. “The district still has room for improvement, but they appear to be on the right path.”
“I would like to thank City Controller Wendy Greuel for the commendable job she and her staff did on conducting this comprehensive audit of our facilities department,” said LAUSD Superintendent Ramon Cortines. “We are very pleased the results of the audit are generally quite positive. In their review the auditors found consistent compliance with our District’s policies and procedures for retaining contract professionals in place for the past three years, and appropriate and needed controls were in place to avoid potential conflicts of interest.”
The audit found that in more than 225 instances from 2002-2006, a CP or a regional director sat on a panel which selected a person employed by their employer – thus creating a potential conflict of interest. The audit also uncovered 80 CP appointments that were made without any hiring panel being convened. There were also four instances identified where someone participating in a hiring panel stood to receive a direct financial benefit because they selected a CP from a firm in which they had an investment.
"External eyes are always a good thing. We appreciate the Controller's leadership in this review,” said School Board President Monica Garcia. “The voters and our children deserve effectiveness and transparency in all of our business"
Since 1997 voters in Southern California have approved more than $20 billion in bonds overseen by the LAUSD, to finance the largest school construction program in America. From July 2002 to present, LAUSD has hired more than 1,000 Contract Professionals to provide a range of construction and project management services to the New Construction Program (NCP).
Some of the specific audit findings include:
- ·From 2002 to 2006 LAUSD’s hiring policies are unclear and the district lacks documentation of whether policies were followed.
- LAUSD was unable to locate their original Staff hiring Procedures policy making it difficult to determine the strength of their policies and whether they complied with them.
- In the first 12 months of the program, nearly 80 percent of the selection panels, which decide the CP that is hired, did not meet with the LAUSD’s updated policies requiring that there are at least 3 panelists and that at least one of them be an LAUSD employee.
- ·Since 2006 the district has created clearer policies and more thorough documentation, which reduces the risk of a conflict of interest.
- The District has greatly improved its processes and requires specific steps and recordkeeping procedures that include uniform candidate information forms and post-interview summaries from individual hiring panelists, which provides greater transparency of the panel’s decision.
- Moreover, the District is currently following these CP hiring processes that will reduce potential conflicts of interest.
- ·There is still room to improve the program’s oversight and certain policies need to be strengthened.
- CPs should file a Form 700 (Statement of Economic Interest) when they are hired and when they leave LAUSD employment, not just every April.
- Ensure that newly hired CPs – particularly those in senior management – are trained on LAUSD’s conflict of interest policies, Form 700 filing requirements and New Construction hiring procedures.
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