Friday, August 12, 2011
Van de Kamps Controversy Spurs State Audit of College District
State Controller John Chiang has released an audit of the Los Angeles Community College District's (LACCD’s) bond construction program. The audit questions more than $140 million in district spending, which is part of $214 million in state bond money received by the district from three bond measures approved by voters between 2001 and 2008.
According to Chiang’s office, “LACCD could not produce complete and timely records, spent funds outside voter-approved guidelines, ignored its own procurement rules, failed to plan effectively, and provided poor oversight of bond funding.”
The Controller’s audit has its roots in an investigation of the controversial Van de Kamps project on the border of Glassell Park and Atwater Village.
Many Northeast Los Angeles residents voted for and campaigned for passage of state bonds based on the promise of a college campus at the former bakery site on Fletcher Drive just off of San Fernando Road.
After spending approximately $86 million in district bond, state and federal funds to develop a satellite campus at the Van de Kamps site, Los Angeles City College determined that it had insufficient operating funds for the site and returned it to LACCD. LACCD is leasing most of the site to a charter school under a five year contract.
The Van de Kamps campus ultimately was not included in the audit, because related documents are the subject of pending litigation brought by local activists who have fought since 1999 to save the 1930 Dutch Revival style bakery building from demolition and to see it returned to a productive use. However, the controversy spurred further investigation by the Controller.
“The [Controller’s Office] initially conducted a survey of LACCD’s use of State funding in its bond construction program that was prompted by concerns over the district’s use of $3 million in seed money to start a satellite campus at the former Van de Kamp bakery site,” according to the Executive Summary of the audit. “As a result of the survey, which revealed that approximately $214 million in State funds have been involved in the various bond construction program projects, the [Controller] decided to proceed with an audit to ensure proper accountability of project funds.”
Bond measures carry specific lists of projects on which the money may be spent. The funds are intended for construction, repair, improvements, expansion and upgrade of facilities.
Although the Van de Kamps campus is not included, many of the findings of Chiang’s audit echo contentions that the local “Van de Kamps Coalition” has been making for some time.
The auditors found many LACCD expenditures throughout the district outside of what bonds were designated for. These violations include the construction of buildings that are not on the approved projects lists, the diversion of bond-funded buildings to unapproved uses, completion of projects not completed under previous bond authorizations and construction of buildings without accounting for operating costs. $28.3 million was spent on projects that were canceled before completion, but LACCD could not readily provide Chiang’s office with a list or accounting of canceled projects, had to develop these records during the course of the audit and changed the definition of cancelled project mid-audit.
Further, Chiang’s office contends that the project list for Measure J, the third and largest bond authorization in the Los Angeles Community College District's $5.7-billion construction program, which was approved by voters in 2008, “was intentionally crafted in such as way that virtually any expenditures could be construed to be on the list.”
Measure J, although passed by voters, was a subject of ire among supporters of another Northeast Los Angeles iconic structure, the Southwest Museum, when the measure’s project list was found to include “upgrade the Southwest Museum facility” as part of its laundry list. The discovery was the first that local supporters of the Southwest Museum’s retention in the Northeast area as a fully functioning museum had heard anything about a potential college presence on the museum campus.
The project list also contained the nebulous phrase, “identify opportunities to work with public and private entities on common projects that serve students and generate revenues for the district.” The inclusion of that phrase at the end of a long list of potential projects is now being used by LACCD to support its contention that the leasing out of the Van de Kamps campus is legal under the bond measure.
“The intention seems to be a way to circumvent control and avoid accountability,” Jeffrey V. Brownfield, Chief of the Division of Audits for the Controller’s Office, said of the Measure J project list in a letter to LACCD Chancellor Daniel J. LaVista.
The audit also identified district-wide costs that were inappropriately charged to the bond funds, including $2 million for copying and binding; $1.5 million for public relations, tours and special events and $1.5 million for photography.
Meanwhile, the head bond oversight citizens committee, which is required to issue annual reports, failed to issue any report for seven years. The latest report was found to be virtually meaningless by Chiang’s office. It noted little more than the fact that the committee members had met.
An Inspector General position was filled by an outside consulting firm formed just before the district went out to bid on the contract. That firm, at the time of its interview, had no clients, no employees and no office space. The consulting firm was selected from among 11 applicants, at a cost of $250,000 more annually than what an experienced auditing firm proposed.
Nine months after the hiring of the outside firm, Policy Masters, Inc., founded by a former Director of Policies for the Los Angeles Unified School District, the Controller’s office could find evidence of only one completed “financial review”—of the Van de Kamps project.
“The report bore little resemblance, if any,” wrote Brownfield in his letter to LaVista, “to an audit by an independent entity.”
“Please be advised,” wrote Brownfield, “that, under the .School Bond Waste Prevention Action section of the Strict Accountability in Local School Construction Bond Act of 2000, any citizen who has paid an ad valorem tax on real property within the community college district can pursue legal action against any officer of the district for failure to use bond proceeds in accordance with legal requirements…”
The audit covered the period of July, 2001 through December, 2010. It makes special note of the fact that, despite the Van de Kamps debacle, LACCD is continuing with an aggressive expansion program “without empirical data to demonstrate that LACCD has a viable source of revenues to operate the expanded facilities.”
LACCD says that it expects to return the Van de Kamps complex to Los Angeles City College in 2014.
The district also says, in its response to the audit, “…due to the current State-wide fiscal crisis, it is necessary for the District, in its budget planning processes, to reacess the building program and the resources available to cover the anticipated increases in M&O [maintenance and operation] costs.”
"Local voters raised their property taxes for a major investment in workforce development and higher education," said Chiang. "Shoddy fiscal management and sub-par oversight of a project of this magnitude will undermine the public's trust and threaten billions of public dollars."