State agency finds ‘high’ financial risk for San Dieguito Union High School District

A state agency found weaknesses in San Dieguito Union High School District’s financial practices that could make it harder for the district to prevent internal fraud.

Those weaknesses, according to a report from state’s Fiscal Crisis Management and Assistance Team, include a lack of checks and balances to ensure that budget, payroll and employee numbers total up correctly, and that one person doesn’t have control over an entire financial process, which could make it easier for mistakes or manipulation to occur.

Because of those conditions, the agency called San Dieguito “high” risk in its ability to maintain fiscal solvency ⁠— in other words, to meet its long-term obligations and stay financially sustainable.

But Michael Fine, CEO of the agency that audits school districts and charter schools, said he believes the issues identified in the findings for San Dieguito are relatively easy to fix.

“Those are all significant issues ... I’m not trying to downplay them, but they can also be addressed fairly easily,” he said.

The agency, which audits districts and charters to root out potential fraud, also, by request, studies schools and districts to show where they need to improve their financial practices.

The San Dieguito report is the only study the Fiscal Crisis Management and Assistance Team has published on a district or charter in San Diego County since 2020.

In November, then-San Dieguito Superintendent Cheryl James-Ward asked for the study. James-Ward was fired in late June after two and a half months of controversy surrounding comments she made linking Asian student academic performance to an influx of wealthy Chinese immigrant families.

The report adds another layer to the numerous issues facing San Dieguito, a district of 12,700 secondary students at 10 schools that has struggled with political division and turmoil since 2020.

The agency’s identification of issues with the district’s financial management doesn’t mean it found reason to believe there is fraud happening, Robbie Montalbano, intervention specialist with the Fiscal Crisis Management and Assistance Team and co-author of the study, said while presenting the findings at a San Dieguito school board meeting late last month.

“But we do address it because obviously having good controls and practices in place prevent it from occurring,” Montalbano said.

Tina Douglas, who was the district’s associate superintendent of business services and became interim superintendent in April, told the agency she and other staff members are addressing the issues outlined in the study, including the lack of checks and balances.

According to the report, district staff do not regularly check that the budget, payroll and counts of employee positions match. The same employees who receive checks are the ones who distribute them, and the same employees who create invoices are the ones who receive payment. Experts recommend segregation of duties to prevent potential theft or manipulation.

“There is opportunity there for some problems when you have the same person in charge of requesting the check and sending the check out,” Montalbano said.

Payroll and accounts payable are not reviewed by a supervisor before final processing, according to the report. San Dieguito’s business department could not provide documentation to show who has access to the district’s financial system. And staff download some payroll information into an unsecured Excel file before uploading it to the payroll system.

“There is opportunity to make changes to that file, and no one would know about it,” Montalbano said.

The agency also found that San Dieguito does not regularly train administrators who handle the budget and finances, and not all board members have been trained in budget and governance at least every two years.

The agency also found several factors that increased San Dieguito’s fiscal solvency risk, including high turnover of superintendents is one of them. San Dieguito has changed superintendents three times in the past year and a half.

“Whenever there is turnover in superintendents and CEOs, there is a higher risk for fiscal crisis,” Montalbano said.

San Dieguito also failed to conduct a thorough analysis of how it would be able to afford employee salary increases, according to the report.

Douglas said she plans to report progress in addressing the issues identified in the report to the school board later this month.