L.A. Schools’ Fiscal Watchdog Faces Dismissal

A roiling dispute that involves allegations both of racial animus and the potential mishandling of millions of dollars of school funds seems likely to cost the job of a seasoned corporate manager hired by the Los Angeles schools seven months ago to fix its troubled accounting controls.

School officials said Wednesday they are recommending the termination of Wajeeh Ersheid, the district’s internal auditing director. Ersheid says he found substantial evidence of an auditing system at the Los Angeles Unified School District that has come close to collapse at certain campuses. He also clashed repeatedly with district administrators and some of his staff.

The furor over Ersheid represents a new setback for the district’s efforts to introduce business-world efficiencies into its ingrown management structure.

That effort already has hit numerous snags, raising questions about the district’s ability to reform itself. The district repeatedly has hired high-profile executives from private companies, only to have them quit or be fired amid complaints about the difficulty of reforming school management.

Ersheid asserts that he could save the district $30 million to $50 million with a stronger and larger auditing staff that was free from political influence.

“My gut feeling is that for every dollar, 20 cents is wasted or embezzled,” Ersheid says.

A typical student store, for example--an operation that can handle up to $500,000 at large campuses--is like “a 7-Eleven without a cash register,” because of the absence of auditing controls, he says.

But in his few months on the job, Ersheid’s blunt manner quickly ran afoul both of top administrators, whom he viewed as meddling, and a number of his employees whose qualifications he questioned.

The district’s auditing and accounting staffs, like those of Los Angeles city government, are mostly Filipino immigrants--a phenomenon that personnel officials attribute to a combination of circumstances: U.S. policies that have encouraged the immigration of Filipinos with certain job skills, including accounting; low entry-level salaries in government accounting jobs that have discouraged other applicants; and a perception among many immigrants that private companies are more likely to discriminate against job applicants with accents.

Ersheid sees his clashes with the staff as necessary efforts to spur them to improve their work. But opponents charged that although Ersheid is married to a Filipina, he is racially biased against Filipinos. The charges have led to a barrage of hundreds of letters demanding his removal.

Tension in his branch reached a crescendo in July when an employee wrote “Freedom from the racist” on a blackboard and, in confronting him, Ersheid was reported to have said in front of several other staff members, “We are living in a civilized society. This is not the Philippines.”

The Pilipino Assn. of School Employees of Los Angeles, a 300-member professional group, wrote David Koch, the district’s chief administrative officer, about the incident asking for “appropriate action.” That, in turn, led to Ersheid’s receiving a negative performance evaluation.

Shortly afterward, Ersheid answered his critics with a vitriolic letter telling the head of the Filipino employees association “you are the product of your own culture” and recounting tales of “corruption” he had encountered while working in the Philippines as a corporate recruiter.

After the letter, school officials say, they had no choice but to fire Ersheid. “I was shocked at the attitude and appalled at the poor judgment shown in that letter,” said Koch, who reviewed the case this week.

Ersheid’s dismissal will be presented to the Board of Education Aug. 25 for ratification. Because he is a probationary employee, the action is considered routine.

Ersheid, who has retained an attorney, said he has not decided what action to take next.

He lambasted his superiors for being unwilling to discipline the district’s sprawling finances that range from cash accounts at hundreds of schools to central payroll.

“What we have here is a disaster,” Ersheid said. “We have a nonexistent internal control system, absolutely no checks and balances at the schools.”

At Crenshaw High School, the financial manager left his job last year after officials learned that he had kept virtually no financial records for more than two years and apparently commingled student funds with the regular school accounts, eventually depriving students of such requirements as sports equipment.

A team of auditors and accountants has been working for a year to reconstruct Crenshaw’s accounts, Ersheid said--a statement confirmed by the district’s chief financial officer, Henry Jones.

A growing number of requests by school principals for audits suggests there are similar problems at other schools, Ersheid said.

Ersheid said the absence of routine computer monitoring prevented the district from detecting outlandish expense reports by an employee of Hollenbeck Middle School.

Attorneys for the district say that two employees were fired this year and charged criminally for submitting 69,000 miles for auto reimbursement over a five-year period. The matter came to light only after the district received a tip from a private citizen, officials say.

Similarly, Ersheid said, the district’s purchasing, contracting, maintenance, transportation and central shop operations all escape auditing.

Ersheid outlined a cure in March, asking the school board’s audit committee for 12 new auditors and more independence from Jones, his immediate supervisor. Because Jones also oversees the district’s $6-billion spending--the operations that the auditors are supposed to keep tabs on--having the audit branch report to Jones was a built-in conflict of interest, Ersheid said.

School officials say they see merit in Ersheid’s analysis and are taking steps to shore up the weaknesses he pointed out.

Those efforts include raising the qualifications for auditors and increasing their independence, said Koch, who added that he is reviewing a proposal made last year by board member David Tokofsky to create an independent inspector general.

Jones says the district is close to launching a five-person fraud investigation unit authorized by the Board of Education this summer.

But the issue is not a new one. As far back as 1993, one of the country’s largest accounting firms, Arthur Anderson, criticized the district’s management controls.

“People didn’t get it,” said Tokofsky, who proposed an inspector general reporting directly to the school board. “I think it’s fundamentally because of this perversion of ‘being a team player’ and building a team attitude,” he says.

Ersheid said his frustration mounted when no action was taken against the principal of Marvin Avenue School near Culver City after he turned in a lengthy negative audit.

District audit reports state that Principal Anna McLinn had submitted damage assessments for federal earthquake reimbursement that could not be accounted for and had used school funds to build a library of nearly 1,500 videos--many geared toward adults, not students. District lawyers confirmed that she had also purchased four big-screen TVs that disappeared. An attorney for the district said a review is pending.

Late last month Ersheid wrote Jones a terse memo formally requesting to report to someone else.

“Audit is not a political football game, Henry,” he wrote.

Koch said he was considering making such a change, but that the deterioration of Ersheid’s relations with his own staff overtook any resolution.

Business leaders familiar with the district lamented Ersheid’s predicament.

“Knowing the organization and the politics, it doesn’t surprise me that it came to a head,” said William R. Isinger, Los Angeles Times senior vice president for finance, who has sat on a committee of volunteer consultants advising the district. “The culture doesn’t respond well to people who want to make dramatic and quick change.”