Bid-Rigging Investigation : Orange Schools Had Poor Fiscal Practices, State Says

A study by the state controller’s office of the operation of Orange Unified School District from 1975 to 1984 showed poor fiscal and management practices that “contributed” to alleged contract bid-rigging and kickbacks in the district.

The state report referred to police findings of “kickbacks in the form of money, services and material from construction contractors to district administrators.” But no administrator’s name was mentioned.

Two-Year Investigation

The Orange Police Department and the Orange County district attorney’s office for the last two years have been investigating past irregularities in Orange Unified’s spending and contracting. Court documents filed earlier this year said police suspect former Orange Unified maintenance supervisor Steven Presson of rigging contracts between 1979 and 1984. Presson resigned in October, 1984, and subsequently moved to Florida.

There have been no criminal charges or arrests as a result of the continuing investigation, Orange police said Tuesday.

Orange Unified’s Acting Supt. John Ikerd said Tuesday that fiscal-control defects criticized by the state report “have been corrected some time ago.”

Ikerd said he didn’t think the state report’s criticism was aimed at any past or current district official. The district has had four superintendents since 1975, many shifts of lesser administrative positions and several changes on the elected school board.

The state Department of Education asked the controller’s office to examine Orange Unified’s records for 1975-84. The controller’s office issued its report Friday.

Among the findings:

- “Certain district personnel circumvented district policy and state law relative to bidding, awarding, and monitoring miscellaneous construction contracts. . . .” The report did not name the personnel.

- “General fund expenditures exceeded revenues by $7,223,610 for the eight fiscal years from July 1, 1976, to June 30, 1984.”

- “Inadequate documentation procedures and poor management practices allowed inappropriate disbursements from the (district) revolving cash fund.”

- “The district . . . cannot identify all equipment purchased over the years and cannot identify the price paid for certain equipment in its possession.”

Another finding of the controller’s office was that some construction work in Orange Unified during 1975-84 did not get state-required inspections. The report said that because inspections of the construction weren’t made, “it is unknown if such construction and alteration of school buildings provide a safe environment for students and faculty.”

The report said there were 105 construction projects that didn’t show required state inspections. No site was mentioned by name.

Declining enrollment has caused Orange Unified severe budget problems during the last 10 years. The school district serves the cities of Orange, Villa Park and parts of Anaheim, Garden Grove and Santa Ana.

Auditing Firm Called In

But despite declining revenues, Orange Unified during the nine years between 1975 and 1984 worsened the situation by poorly managing its money, according to the controller’s office.

Ikerd, who became the school district’s acting superintendent on Oct. 23, said Tuesday that the Orange Unified school board instituted the first investigation in 1984 by calling in a private auditing firm.

“The board was pretty well on top of this,” Ikerd said. He added that the board subsequently requested a police investigation.

Some supporters of former Orange Unified Supt. Kenneth Brummel have privately said they thought a major reason he was fired in October was because he had become suspicious of past district contracting policies and had asked for a police investigation. The current school board members, however, say the board itself requested the police probe.

Brummel became school superintendent in July, 1984, and he said in an interview last summer that he asked Orange police to “take a look at some things” after becoming suspicious of discrepancies he found.

When the current school board fired Brummel in October, it declined to disclose specific reasons. But board members said the firing was not because Brummel had called for a police investigation. Brummel has declined comment since his firing.

Savings Used Up

The controller’s office report, among other things, criticized Orange Unified’s spending $7 million more than it took in during an eight-year period. In doing so, the district used up savings--a procedure that many declining-enrollment school districts had to use after the passage of tax-cutting Proposition 13 in 1978.

However, the controller’s office said Orange Unified had poor budgeting practices that “contributed to depletion of the unrestricted surplus.”

The few specifics that have surfaced so far in the two-year police investigation of the school district came to light in search-warrant requests filed in Orange County Superior Court last July.

Those documents said that Presson, the former district maintenance supervisor, took part in “the rigging of bids” for several school district projects. The documents also said that Presson, in return for the rigged bids, received gifts, improvements to his home or money.

Presson’s current whereabouts in Florida are unknown, school district officials have said, and he has not publicly commented on the search-warrant accusations.