|Office of the Chancellor / Public Affairs||
Thursday, November 11, 2004
Sacramento Bee 11-11-04
Report slams San Juan buyout
San Juan Unified School District officials didn't understand what they were getting into when they approved a retirement incentive program in February, a private investigator told the school board Tuesday.
The investigator, hired by the board to try to assuage parents' fears of a cover-up, described a dysfunctional district administration that was ill-equipped to analyze a vendor's proposal that was confusing and, some think, intentionally misleading.
About 265 district employees, including teachers and principals, took the buyout last spring as the district looked for ways to close a $17 million budget gap.
The incentive program was designed to save $2.6 million and avoid layoffs, but a district analysis in June concluded it would cost the district $397,000 because the district had originally counted the savings it expected twice.
"Financial personnel were not heavily involved in the discussions and analysis of the plan," the investigator wrote. "This lack of involvement has been explained by those involved as either assuming someone else was doing the analysis, never being asked by superiors to perform the work or being shut out by other departments."
Instead, the district relied on Public Agency Retirement Services, an Irvine benefits consulting firm selling the program, to provide a fiscal analysis of the retirement incentives. PARS made more than $1 million in fees on the program, a figure tied to the size of the incentives.
School board members said they didn't know how much PARS was earning until the investigator told them recently, but PARS said it disclosed the fee structure and contends the district could have calculated the total before agreeing to the proposal. The district's superintendent said the fees were reasonable, given the service PARS promised.
A school district lawyer concluded this summer that the situation was the result of miscommunication and sloppy work, not malfeasance or a conflict of interest.
Some parents were unsatisfied with that determination, and in September the district hired Don Vilfer, a private investigator who formerly was FBI special agent in charge of the Sacramento white collar crimes unit, to investigate the retirement incentive program.
Vilfer agreed there was no malfeasance or conflict among district officials. He recommended that the district's legal staff review his report to determine whether legal action against PARS is appropriate.
School board members and district General Counsel Diana Halpenny said they hadn't made any decision whether to sue.
Vilfer's report also pointed out that the district could have saved $4 million by laying off personnel, instead of the $2.6 million it hoped to save through the buyouts.
Superintendent General Davie Jr. said the district did not pursue layoffs because of the turbulence they create, but Vilfer said the district should have at least calculated how much the alternatives could have saved before accepting the PARS proposal.
Kevin Murphy, a senior vice president at PARS, said he was reviewing the report and declined to comment on it.
"Obviously it is somewhat critical of the company," Murphy said. "We've been in this business 21 years. This is the program our company was founded to do."
Beyond the district's miscommunications, Vilfer said much of the confusion was generated by the PARS proposal, which he called "not easy to understand."
Outgoing Trustee Janet Smith said she thought PARS made its proposal intentionally confusing; others were less certain.
"They have a business to sell," said Lucinda Luttgen, who was elected to the school board last week. "They might put a spin on it that might have made it sound a little more rosy than it was."
Even before the district approved the proposal, there were unheeded warnings of potential trouble.
The district had hired another consultant, School Services of California, to evaluate the PARS proposal before it was approved. School Services warned of possible double-counting of the savings.
Vilfer wrote that the PARS response "appears to have been to make adjustments to their calculations for every recommendation made by School Services except for that related to double-counting."
PARS then told the district it had made the changes School Services recommended, even though it had not, and the district could not verify it, according to the Vilfer report.
The issue was further confused because Bob Nehls, then district interim associate superintendent for business services, often was not around or participated in decisions by e-mail or conference calls.
Still, Nehls told Vilfer he had reservations about PARS and did not recommend the proposal, although he initialed its cover sheet. Davie told Vilfer he relied on Nehls' opinion and gave weight to Nehls' initials on the cover sheet.
Davie would not discuss whether any of the staff involved in the PARS decision had been disciplined. He said the district had taken steps to ensure that the department's budget staff, under a new associate superintendent, reviews all future financial proposals.
The district staff had earlier concluded there was no way for it to undo the PARS agreement.
Nancy Griffin, one of the parents who pushed for the Vilfer investigation, said she was surprised the district didn't know what the fees would be before approving the program. She said she continued to believe there hadn't been adequate accountability among district staff.
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