ORANGE COUNTY PERSPECTIVE : High Price for School District Scandal

What happened in the Newport-Mesa Unified School District is now a part of Orange County history: In a remarkable and gut-wrenching saga of embezzlement, the district’s chief financial officer, Stephen Wagner, diverted about $4 million to his personal accounts between 1986 and 1992, and bought cars, real estate, gems, even mink-lined bathrobes. He is currently in prison and has been ordered to pay restitution.

The handwriting may have been on the wall in the district long before the scandal broke. There was no system of checks and balances to keep anyone person from having complete control of the books, and complaints about arrogance at the top went unaddressed.

The district, now under the leadership of Supt. Mac Bernd, who took over last summer, appears to have made a course correction. However, a newly released Orange County Grand Jury report on the scandal spells out in painful specifics what the handwriting on the wall actually said. The report offers a lesson in consequences for Newport-Mesa and other school districts so that they might take extra steps to avoid similar pitfalls in the future.

The report says the district has been forced to reduce the number of classroom aides by 50% and lay off 59 teachers and 150 other employees as a result of the embezzlement. Moreover, the district has been forced to increase its class size from 28.5 students per teacher to 31 students per teacher. The extent of some of the changes attributed to the embezzlement has been disputed by Bernd, but he acknowledges enough to make clear the significant disruption and costs that resulted. All this comes at a time of tight finances for school districts everywhere.

The problem in retrospect seems simple enough. The report notes that an anonymous district employee contacted the grand jury about a check that had only one signature on it instead of the two required by district. It pointed the finger of blame at the right place--a failure to exercise “more vigilance in the first place to prevent the theft of funds,” as grand jury spokesman Jim Cooper put it.

The district since has placed an internal control system in all district accounts and expanded the scope of an outside auditor to include bookkeeping.

The hiring of Bernd promised a new era of openness and accountability. The district’s first-ever Education Summit in November charted a fresh course for ensuring the quality of teachers and administrators and for strengthening the curriculum, among other things.

The district has learned some broad lessons already, and has begun to act on them. The new report is a cautionary tale; it shows the extent to which the devil can lie in the details.