Auditor Seeks Wide Review of L.A. Schools

The new top auditor for the Los Angeles schools has asked the board of education to finance an ambitious top-to-bottom evaluation of 89 district units--from payroll to police--that he said have seldom or never been subjected to scrutiny.

Don Mullinax, a former Defense Department auditor, said he would need to nearly double the staff of his internal audits and special investigations unit to establish fiscal controls now lacking in the $6.6-billion Los Angeles Unified School District.

Approval of the request would increase the auditing budget from $2.6 million to $7.3 million over five years and dramatically boost the number of investigators from four to 25. In a report from Mullinax distributed to board members last week, he warned that without the additions to the investigative team, the district would lose millions of dollars to waste and fraud and that serious crimes would go undetected.

Mullinax was hired in January to bring credibility to the district’s archaic and strife-ridden auditing branch. Former chief auditor Wajeeh Ersheid was fired last summer, after less than a year in the job, over charges of racism when conflicts arose over his efforts to raise the qualifications for the largely Filipino auditing staff.

In parting, Ersheid said publicly that internal checks and balances were almost nonexistent in the district and estimated that hundreds of millions of dollars could be saved by beefing up the auditing function.

His criticisms were largely supported in an October review by a management consulting firm. KPMG Peat Marwick concluded that district auditors lacked independence from administrative meddling, spent too much time on minor inquiries and received insufficient training.

The audit branch was functioning at a “paper and pencil” level of sophistication with no standards for reports and no budgeting and tracking procedures to manage its own work, the firm said.

After conducting a 120-day assessment to determine which district activities require the most immediate attention, Mullinax identified 83 branches and units as high risk, with only six as medium or low risk. All of them would be reviewed in the first year, he said.

The high-risk group includes the offices of superintendent and general counsel, the board of education, information technology, personnel management, contract management, purchasing, government relations, special education, adult and career education, food services and student health services.

“Right now we are trying to build controls into a flawed system,” Mullinax said.

The request will be presented to the school board as part of this year’s budget.

Board member David Tokofsky praised the report as a bold step toward correcting 30 years of decay in fiscal management that bleeds money from the district’s educational mission.

“I think the most important thing [is that the audits will benefit] people at schools and parents who have been concerned that you have to have a bake sale to get crayons for a classroom,” Tokofsky said.

The lack of oversight was the primary reason for the high-risk rating given to most district operations, Mullinax said.

“The majority of those functions have not been audited in the past, either internally or externally, and [of] those that have, the review was not sufficient to determine all possible weaknesses,” he said.

For example, past audits of payroll operations have only probed whether district procedures are followed.

“My question is, ‘Are the established procedures adequate?’ ” Mullinax said. “Does it encourage improper activity to occur? We’ve never really looked at best practices. How does private industry do their payroll? How do other school districts like Chicago or New York do their payroll? There’s got to be some ways we can improve the way we do things today.”

Along with last week’s report, Mullinax produced a strategic audit plan with a strong emphasis on ethics and service.

In past public comments, Mullinax has said he is concerned that the district places too little emphasis on ethics. An ethics policy exists but is not enforced, he said.

He has proposed mandatory ethics training for every district employee.

Anticipating that the new proposals will threaten many bureaucrats, Mullinax said he hopes to persuade them that his goal is to make them better managers.

“We’re not coming out there to put somebody in jail the very first day we’re out there,” he said. “We’re there to help them.”