In 11 Years of State Oversight, No Audits of Oakland Schools’ Finances

Oct 11, 2014

Posted in BusinessEconomic DevelopmentEducation/Schools/YouthEqual Rights/EquityGentrificationPolitics

By Post Staff

In the 11 years since the State of California declared the Oakland Unified School District bankrupt and seized complete control of district governance and finances, the state has not conducted an audit of the district’s financial condition.

According to a new report by the Alameda County Grand Jury, over 10 years of poor financial recordkeeping in the district cost city residents over $29 million in extra property taxes after the district lost its credit rating for borrowing money.

Moody’s removed its credit rating in 2012, and Standard & Poor’s withdrew its rating of the district in 2011, driving up the cost of borrowing on bonds.

The credit ratings were removed because the district’s state appointed trustees, acting under the authority of the State Superintendent of Instruction, did not require financial recordkeeping reforms since 2003 that would allow the district to do an audit.

State Senator Don Perata pushed for a state takeover of Oakland schools. Photo courtesy of SFGate.
Then State Superintendent of Instruction Jack O´Connell appointed a trustee to run the school district

The problem is a lack of internal accounting controls and books that are basically in shambles, according to a spokesman from the State Controller’s Office

In 2003, OUSD was $37 million in debt and forced by the state to take a $100 million emergency loan, and the State Controller’s Office became the district’s auditor. The superintendent of schools was fired, and the power of the elected Board of Education was suspended.

Oakland’s powerful State Senator Don Perata pushed for the takeover. He also advocated for selling the school district headquarters complex to real estate developers in order to repay the loan.

Though the district was only $37 million in debt, it was forced to take the $100 million loan, in part to install new computer systems to put Oakland’s finances in order.

Yet during those years, the district has not been able to complete a single audit because “there was a weakness in internal controls, and their records were in disarray,” according controller’s office spokesman Garin Casaleggio in an interview with the Oakland Tribune.

Senator Perata supported selling  Oakland school district headquarters property to build this TerraMark development on Lake Merritt.

The latest audit the State Controller attempted to finish was for the 2010-11 school year. The controller will continue to audit the district’s books until it pays off the remaining $55 million of the emergency loan.