Los Banos school board trustees clash over Creekside audit

An external financial investigation into the building history of Creekside Junior High School has led to more questions on the Los Banos Unified School District’s fiduciary responsibility.

The investigation completed by Herr Pedersen & Berglund LLP of Visalia centered around the cost of the school; the board-hired contractor, Woodland-based Oral E. Micham Inc.; and questions about outgoing Superintendent Steve Tietjen’s reporting on the project and his relationship with Micham.

The concerns with Tietjen came up because of a recent controversy over the school official-contractor relationship on a lease-leaseback agreement in Fresno.

On Tuesday, board member Anthony Parreira told the Los Banos Enterprise that some board members’ allegations that the project was $5 million over budget were so pervasive the board needed to find out whether the statements are true.

“We hoped the report puts it to bed,” Parreira said.

The investigation found that there was no evidence Tietjen misled the board in cost projections or benefited personally through a past connection with the contractor.

But it also found that the lease-leaseback agreement between the school district and Micham was invalid, due to the findings in the recent case involving the Fresno Unified School District.

As a result, the Creekside contract should have been competitively bid, according to the firm.

Construction on Creekside is expected to be completed by the end of June, according to the contractor.

The board entered into a lease-leaseback agreement with Micham in February 2015 with a guaranteed maximum price of $24.79 million plus a $500,000 contingency fund owned by the district, according to the investigation.

Lease-leaseback agreements allow cash-strapped school districts to fund large construction projects at lower costs by allowing the district to select its own contractors to pay for the construction. The contractors are then repaid by the district over time.

This type of deal has come under fire recently in Fresno, where a federal investigation is ongoing.

Contracts

On March 15, the firm was hired by the board at a maximum cost of $50,000 to answer questions surrounding the project.

Firm partner Rachele Berglund presented the findings to the school board May 12.

The analysis found that the cost of the school construction, as advertised by Tietjen, was “in the ballpark” of the actual total construction price of $24.19 million. That was according to documents provided by the contractor, Berglund said.

Tietjen, who is leaving Los Banos at the end of June to take leadership of the Merced County Office of Education, was not at the May 12 board meeting. He declined to comment on the issue when contacted by the Enterprise.

Berglund said the total profit made by the contractor was unknown, and that when asked, it would not provide its contracts with subcontractors.

By providing those contracts, Berglund said, the board could figure out how much Micham profited, perhaps indicating if the contractor excessively benefited from the lease-leaseback agreement at the expense of the school district.

That infuriated Jones at the meeting.

“We’ve got to see those contracts,” he said, saying the board must be financially responsible to the students of the school district.

However, Micham Vice President Steve Tindle told the Enterprise on Thursday that Berglund never asked for those contracts.

“They asked for all the bids, bid breakdowns ... I gave everything they asked for,” Tindle said.

Also, Tindle said he knows Tietjen, but that there is no personal friendship with Tietjen.

“We gave the project at fair value,” Tindle said. “There is nothing to hide.”

Law firm

Berglund’s firm was the second law firm the district hired to audit Creekside.

Trustee Dennis Areias questioned having the firm do the work, noting it has no experience doing school audits. “Basically, you’re a painter. We need somebody to pour cement,” Areias said.

Trustee John Mueller also criticized Berglund’s analysis and said he found her use of the term “ballpark” unprofessional.

Berglund conceded that her firm hasn’t completed an analysis similar to this, but she defended her firm’s qualifications and ethical standing.

While Areias and Mueller doubted the need for an analysis, board member Dominic Falasco noted that it is important the board monitor how it is spending the district’s money.

Superintendent position

Tietjen’s resignation will take effect June 30. He is on paid administrative leave as he takes care of a very ill relative, Parreira said.

Assistant Superintendent of Administrative Services Dean Bubar is filling in as interim superintendent.

Bubar’s salary hasn’t been raised to reflect the addition in his duties, but that was discussed in closed session May 12, Parreira said.

This story was originally published May 19, 2016 at 2:46 PM with the headline "Los Banos school board trustees clash over Creekside audit."