O.C. Supt. of Schools calls for independent audit of Laguna Beach Unified’s finances

Having been notified that the Orange County Department of Education had ordered an independent review of its financial records earlier this month, Laguna Beach Unified School District officials report that work is about to begin.

The district informed its stakeholders in a July 14 news release that the department had engaged the Fiscal Crisis and Management Assistance Team, an independent state-level agency, to perform the review in accordance with a provision established in California law.

Assembly Bill 139 gives a county superintendent the authority to initiate financial audits of local school districts within one’s county.

In a statement announcing the review, Orange County Supt. of Schools Stefan Bean said the action followed “requests from members of the Laguna Beach community,” though specific individuals or groups were not identified.

The review will look into financial and administrative matters relating to “employee health benefit contributions, associated contracting decisions and the appropriate use of district resources,” the superintendent said.

A FCMAT review should not be viewed as a “finding or indication that fraud, misappropriation of funds or other illegal fiscal practices have occurred,” Bean’s statement clarified. It will simply determine whether findings should be reported.

LBUSD Board President Sheri Morgan said Thursday an initiation of an audit under AB 139 is pretty serious as it may be invoked “due to suspicions of fraud, misappropriation of funds, or other illegal fiscal practices.”

“The county superintendent performs due diligence to ensure the allegation or concern is credible,” Morgan said. “Then the scope of work is developed that is specific to the allegation, concern, time frame and elements to be reviewed during the examination. We’ve gotten that scope of work, and we’ve gotten information about what this is going to entail, and it’s starting next week.”

Laguna Beach Unified Supt. Don Austin, who started in his new post on July 1, said Friday that as the subject of the review, the district will not incur any expenses, as the Orange County Department of Education has agreed to pay up to $125,000 to FCMAT for conducting the audit.

LBUSD officials and trustees have no ability to speak in favor of or against the study, he confirmed.

“To a large degree, our role here is nothing but to comply with their requests, whether that’s review of documents, interviews, whatever it is that they want and need to conduct the investigation,” Austin said.

“Nobody wants to be investigated. That’s just human nature, so I wouldn’t say people are excited about it, but hopefully at the end, it can provide some closure that has otherwise escaped the school district.”

The scope of work for the review covers fiscal years 2021-22 to 2025-26. Asked if the district has a policy for how long it has to keep records on file, Austin said the district’s records should cover that time period.

“The district currently does not have a policy that outlines when records are purged,” he added. “That’s actually very rare. Most districts have a policy for purging documents that aren’t required to be maintained beyond a certain period of time. Two to four years is pretty common, but this district does not have that policy, so our records go back further than that.”

There is no estimated timeline for the completion of the FCMAT review, the findings of which will be reported to the public. Austin noted the analysis will be shared with the Orange County Department of Education first, but the plan would be to present them to the community at a future school board meeting.