After years of mistrust, Stockton Unified unable to accurately track finances: auditor

Throughout last school year, Stockton Unified School District’s bookkeeping lacked the checks and balances necessary to ensure the district’s financial statements accurately showed where money was, independent auditors found. 

It was the second year in a row that Stockton Unified — which had a net $354.7 million in the 2022/2023 school year — appeared unable to catch discrepancies in its books, according to the district's latest yearly audit, done by a Sacramento accounting company. 

Double-checks of how much money was in district accounts — in which Stockton Unified records were compared with those of the San Joaquin County Office of Education, which acts as the district's bank — were late and incomplete, auditors stated.

As a result, there were significant errors in how much money the district told auditors was in certain funds, auditors said. And there was “insufficient evidence” showing who at Stockton Unified carried out the double-checks, the report said. 

Balances of funds for district buildings, facilities and bonds were first reported inaccurately, the report said. The same three funds also had discrepancies last year. 

Yet it was “the cleanest audit that we have had in years,” Superintendent Michelle Rodriguez told the school board this month.

"What (the district) was saying was in certain accounts was actually in other accounts," she said of the balance problems Friday. "It wasn't that money was missing or anything like that."

“What is important for the public to know, is not only are we trying to reduce the number of findings, but we are also trying to reduce the severity of those findings,” she said.

Strained public trust

Before Rodriguez started as superintendent in July, public trust in Stockton Unified’s finances — and its ability to guard them against misuse — had been eroding.  

Last February, state auditors found evidence of fraud at the district in the form of a $7.3 million contract for air filters paid for with COVID-19 relief money, The Record reported. All but one school board member at the time voted for the contract, which fell short of district and legal requirements, state auditors said. 

Last April, San Joaquin County District Attorney Ron Freitas pledged to crack down on wrongdoing at Stockton Unified alongside investigators with the FBI and the US Attorney’s Office. Little information about the investigation’s progress has been released since.

Around the same time, the district’s chief business official Joann Juarez reported school board member AngelAnn Flores to the San Joaquin County Sheriff’s Department.

Juarez claimed Flores improperly spent “up to $1,000” on a district credit card, sheriff’s documents show.  

Flores is known for running to reform the district, and for voting against the $7.3 million air filter contract. No charges against her have been filed.

Why is financial accountability still a problem? 

Rodriguez pointed to high turnover among district leaders as a main reason Stockton Unified hasn't held itself financially accountable in the past.

“I'm superintendent (number) 14 in 19 years,” she said. “If you have constant turnover at the superintendent level, at the chief business official level, at the cabinet level, you do not have systems in place.” 

In a healthy school district, it’s up to the business department to raise the alarm if the finances seem amiss, according to Rodriguez. At Stockton Unified, the head of that department is Juarez.

However, “it would be inappropriate to place all the blame on business services” for the district's accountability failures, Rodriguez said.

“If you actually look at the (audit) findings, a lot of it is linked to them. But it’s not only them.”

"They need all other staff members ... to do the work behind that," she said.

To help fix the problem, Rodriguez has made most department heads in her cabinet permanent in their roles instead of interim, she said. They've also hired a new staffer dedicated to continuously double-checking the district's books against the county’s, she said.

Rodriguez has also restarted leadership meetings where department heads can discuss problems, she said. 

However, not everyone is convinced systemic change is under way.

"Here we are in the same situation, being fed the same information," board member Flores said at this month's meeting.

“(There’s) no trust here.”

When asked if the public can be confident that business officials will raise a red flag over any future misconduct, Rodriguez said, "we provide the time and space for them to be able to do that."

"I feel like with the system ... we have in place, we have the right people talking to the right people."

Record reporter Aaron Leathley covers government accountability. She can be reached at aleathley@recordnet.com or on Twitter @LeathleyAaron. Support local news, subscribe to The Stockton Record at https://www.recordnet.com/subscribenow.