Adult Ed Program Draws Criticism and Financial Aid : Education: Despite two reports saying the adult education program is mismanaged, the district will lend it $8.5 million.

Hot on the heels of two reports that cite financial mismanagement in its mammoth adult education program, the Hacienda La Puente Unified School Board has agreed to lend the program $8.5 million from its general fund until next summer to cover shortfalls.

Under the agreement reached Tuesday night, the adult education program, which has an annual budget of $35.6 million, has until June 30 to pay back the loan, plus about 5% interest, said John Kramar, the board’s assistant superintendent for business services.

Kramar said the board has approved internal loans to adult education for lesser amounts in the past, because state payments can arrive up to one year after the district lays out money to hire teachers, rent buildings and buy supplies. This often leads to cash flow problems, he said.

For instance, the adult education program is owed more than $4 million by the state for 1991-92 classes it runs in the Los Angeles County jails and other correctional facilities, finance officials said.

The district serves 21,727 students in kindergarten through 12th grade in Hacienda Heights and in La Puente, where its headquarters are. Its huge adult education program serves 100,000 students, most of whom live outside district boundaries, Kramar said.

The district receives state funds for each adult education student, based on verified daily attendance. It is expected to conform to a variety of state requirements and maintain paperwork showing it is in compliance.

Several board members voiced dissatisfaction with Kramar’s explanations Tuesday night, questioning the prudence of the loans.

“One of my concerns is that we establish some budgetary restraint, so we’re got getting ourselves into trouble like this,” board member Lyla Eddington said. “If we can’t guarantee that money (will be paid back), we’re held hostage. And it’s just not good business practice.”

Tuesday night’s acrimonious, five-hour meeting was the outgrowth of two critical reports that have rocked the district in recent months and deeply divided the board.

An audit in June by the state Controller’s Office found that, among other things, the district, inflated adult education attendance hours, kept poor records, misspent funds, offered classes not approved by the state Department of Education, employed teachers who lack credentials, and advertised classes it did not offer.

The state disallowed many of the district’s expenditures, demanding that it pay back up to $4.4 million dollars in state funds, district officials said.

Contested payments included classes where attendance could not be verified, teachers who were not certified, classes that were not offered to the general public and classes for which the district could not provide the names of instructors.

If the district is forced to pay back the $4.4 million this year, “it would be a significant blow to the adult school; it would mean heavy budget cuts,” said Gary Matsumoto, the district’s director of fiscal services.

But district administrators say they are challenging many of the state’s findings and hope to be vindicated in coming weeks, when the state Department of Education sends down a group of financial experts to review the district’s accounting procedures.

“I believe we have a real strong case to have much of this mitigated,” board member Sandy Johnson said. “Some of the practices that the state audit brought forward are common practice. We’re not doing anything that many districts aren’t doing.”

The state audit prompted the board to commission a second study this summer by Paul M. Goldfinger, a Sacramento education consultant. However his report, released in October, only corroborated many of the state findings.

Goldfinger concluded that the district policies “raise serious questions of accountability.” The report also urged that the district develop an accounting system “that clearly shows income and expenditures for each program.”

Additionally, the report raised alarms that the district spent more than it received each year in state funds. In 1990-91 for instance, the district funded more than 800,000 hours of adult education, even though the state Department of Education capped reimbursement at 296,782 hours for that year, according to Goldfinger’s report.

In the current school year, the district has projected $5 million more than it is scheduled to receive from the state for so-called apprenticeship programs, in which students learn trades. Though the district expects to be reimbursed for some of these outlays, it is unclear whether all the money can be recouped.