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Grand Jury Finds Much To Criticize At San Ysidro Schools

San Ysidro School District Superintendent Julio Fonseca sits with his head in his hands during a district board meeting in this undated photo.
Megan Wood
San Ysidro School District Superintendent Julio Fonseca sits with his head in his hands during a district board meeting in this undated photo.

Down the street from the San Ysidro School District offices sits empty land that was once home to Beyer Elementary. The school was torn down to make room for brand new facilities, and almost four years later, the land is still vacant.

Grand Jury Finds Much To Criticize At San Ysidro Schools
A scathing but flawed report adds credence to long-standing complaints of financial mismanagement at the San Ysidro School District.

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That’s only one criticism in a scathing new report from the San Diego County grand jury that hammers the district for mismanagement. It cites missteps that include buying unusable land, scheduling “questionable” bond payments and burning documents. All that occurred, the report said, as the district “amassed hundreds of millions of dollars in long-term debt with little to show for it.”


The report was also critical of the San Diego County Office of Education, which had financial oversight of the district during some of its most trying financial times. The county agency didn’t provide “adequate guidance and oversight” to the district, the report said.

However, the report seems to make errors about the chronology of some financial decisions. It holds the county responsible for school district actions more than a year before Office of Education advisers had direct oversight.

Failure to plan

The empty lot where Beyer Elementary used to be is visible behind an old school crossing sign, May 26, 2016.
Megan Wood
The empty lot where Beyer Elementary used to be is visible behind an old school crossing sign, May 26, 2016.

The district, according to the report, “has no strategic plan for facility management.”

While Beyer waits to be rebuilt, the district did open the $23.7 million Vista Del Mar Elementary in 2012.

The school in the Ocean View Hills neighborhood was paid for, at least in part, with one of the most expensive capital appreciation bonds in California. Most of that bond has since been refinanced, except for one particularly painful payment. In 2041, the district faces a $14.2 million bill to pay back $581,000 in principal. That comes out to $24 for every $1 borrowed.


An inewsource analysis shows the district still has more than $430 million in bond debt.

To make matters worse, the report said part of the 20 acres purchased for Vista Del Mar are “environmentally protected and unusable,” a fact the district didn’t know until after the purchase.

The district is also not sure where all of its bond money is. The report states it didn’t pay back about $6.1 million in bond money it had borrowed. It also found “inadequate record keeping” for about $367,900 in bond money moved around with wire transfers.

In other districts, these bond questions might have been flagged early on by a bond oversight committee. San Ysidro is not legally required to have such a committee thanks to a decades old bond authorization, but in 1998 the district PTA asked the district to form one. To date, no such oversight exists.

Forming an oversight committee is one of the grand jury’s recommendations. It also suggested strengthening internal financial controls and training, and making the district’s long-term debt more transparent. The grand jury also recommended conducting an independent, forensic audit of the district’s finances.

Too much oversight, or too little?

According to the report, the Office of Education had placed a “financial officer to monitor” San Ysidro schools in 2012, following concerns about its solvency. That same year, the district used an opaque financing tool — called certificates of participation — that allowed it to circumvent voter approval and debt limits.

With the district in this dire financial situation, the report said, it’s unclear why the county “did not strongly advise against (San Ysidro) incurring additional debt.” The report argued the county had “special fiscal oversight powers” over the district.

In an online statement, Office of Education spokeswoman Music Watson said the “grand jury misunderstood the laws governing the role of county offices in providing financial oversight to school districts.”

“We strongly disagree with the characterization of our fiscal oversight as anything other than rigorous and active,” Watson said in the statement.

That friction over whether the county had the power to stop the district from taking on new debt appears to be based on conflicting chronological interpretations.

The report says the financial overseer came to the district in 2012. However, a letter from County Superintendent of Schools Randolph Ward placing a fiscal adviser with the district is dated March 20, 2013.

Official documents for the debt in question were published on Jan. 25, 2012, a full 15 months before there was a fiscal adviser. The certificates of participation were also not the only new debt the district took on in 2012. In May of that year, it issued a $29 million bond that was supposed to pay, at least in part, for the modernization of Beyer Elementary.

Office of Education spokeswoman Watson said in an email the county can only comment on nonvoter approved debt, such as the certificates of participation. It did that in late 2011.

County advisers

Questions about the Office of Education’s oversight of San Ysidro are not new. In interviews with inewsource last year, two trustees criticized budgeting at the district, which they said the county should have been watching closely.

As far as whether the county Office of Education could stop the district from issuing additional debt as the grand jury report seemed to imply, it did so in February 2015.

Lora Duzyk, the country adviser, said in a letter hand delivered to the district’s interim superintendent that she intended to “stay and rescind any action related to indebtedness” of the district until her office reviewed any plans and found them “consistent with the district’s fiscal recovery.”

The bond decisions must also be made clearly “contingent on receiving the approval” of the county, the letter said.

The bond in question, eventually issued in May, was $45.6 million intended to refinance some of the district’s most expensive capital appreciation bonds. The grand jury described two of the bond’s payments as “questionable.”

In a 2015 interview, Duzyk said the county’s job was to provide guidance, not direct orders.

“We can’t tell them what to do. That’s not our role and we don’t have the ability to make them do anything,” Duzyk said then. “What we can prevent them from doing is things that are not in their best financial interest.”

To do that, the district appointed Duzyk and Brent Watson, the executive director of the Office of Education’s district financial services office. It also appointed an outside consultant, G. Wayne Oetken, whose fees were paid 75 percent by the district and 25 percent by the county.

Oetken was a former interim chief financial officer at San Diego Unified. His company, G. Wayne Oetken and Associates, has also contracted with Bonsall Unified and districts in Contra Costa County.

The Office of Education billed San Ysidro for a “financial advisor” for a total of $56,925 between in July 2013 and August 2014. Oetken’s job was to keep an eye on the ongoing negotiations between the district and its union, Duzyk said last year.

“He would sit in on negotiations, not to be part of the negotiating team but to observe and see what they were doing,” she said. When there were specific proposals for deals, the county would review them to make sure they meshed with the district’s finances.

In early October 2014 negotiations broke down and the union went on a three-day strike that ended with a deal giving teachers 1 percent raises and one-time 1 percent bonuses.

Emails between the interim superintendent at the time, George Cameron, and Duzyk discussing ongoing negotiations with the union do not mention or include Oetken.

The Office of Education said in an email Oetken was still working with, and monitoring contract negotiations, in the months leading up to the teacher strike.

An audit referenced in the grand jury report found district staff signed contracts and change orders without board approval. It also found staff improperly used bond money, double paid vendors and received services that didn’t match purchase orders. It’s unclear if any of the issues listed happened during the two years the district had a county financial adviser.

Help from the county extended beyond financial oversight. In an email dated May 21, 2013, the interim San Ysidro superintendent at the time, Gloria Madera, emailed Office of Education spokeswoman Watson about a bond downgrade notice that had to go out to board members.

“I urgently need some talking points for this item,” she wrote. Watson provided the talking points, which Duzyk then reviewed. The next day she emailed an OK.

“We're good to go with this,” Duzyk wrote. “We'll incorporate in the larger district PR strategy.”

Watson confirmed in an email she provided San Ysidro with talking points in 2013 around the bond downgrade and negative certification. She said the Office of Education “regularly helps districts communicate with parents and the community, particularly those districts that don't have communications staff.”

The district

The San Ysidro School District serves about 5,000 students in a stretch of San Diego hugging the Mexico border.

The district is no stranger to scandals. Since 2013, separate corruption investigations brought down a superintendent and a trustee. Public pressure forced out two more trustees last year.

The current superintendent, Julio Fonseca, is the first permanent hire for the job after about two years and three interims.

In a statement, Fonseca said the district agreed with the grand jury, which he said matched findings from internal reviews.

Fonseca attributed many of the issues, including the destroyed documents and lack of due diligence in land purchases, to previous boards and administrative staff members.

The new board and administration are “wholeheartedly committed to not only correcting the errors of the past, but building a strong financial infrastructure for the future.”

To that point, he said the district is “considering” a bond oversight committee. It was also praised by the grand jury itself for hiring consultants to build a system to track how bond and state grant money has been used.