By Hillel Aron
By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
When school-board member David Tokofsky and others sought an internal investigation of the Belmont Learning Complex, they hoped for an exhaustive look at the misdeeds of their management team and consultants.
This week‘s internal auditor’s report documents an assortment of conflicts of interest at Belmont, the high school that sits half-finished atop an oil field. But it falls short of the intended mark, never quite making sense of the money trail or the workings of the now-defunct Office of Planning and Development, which oversaw the project on the contaminated site.
The report is unequivocal, however, in its sweeping condemnation of the $7.5 billion school system‘s financial apparatus, which gets a failing grade in the view of internal audit chief Don Mullinax. To the audit team, the Belmont episode underscores grave problems in how the district handles all of its budgeting matters. “The findings involve the waste and mismanagement of funds that could have been used to provide a better education for Los Angeles children,” said Mullinax. “In short, we found the school district as a whole did not place a sufficient priority on financial management. We found significant breakdowns in financial controls, procedures and systems.”
This assessment immediately cost the job of Chief Financial Officer Olonzo Woodfin, who was demoted a notch to district controller.
When it came to the $200 million Belmont project itself, Mullinax chased meticulously after lost nickels and quarters until they added up to more than $2 million in potentially fraudulent overbillings by subcontractors.
Mullinax singles out six subcontractors, including those who performed work on tile, dry wall and electrical wiring, as having overcharged the school district. He faulted not only the subcontractors, but also the developer, district staffers, and two private firms hired to oversee and review the project.
An immediate denial of wrongdoing came from the team of developers, which is anchored by a unit of the Kajima Corp. “Our development agreement includes a process for addressing billing issues, and we are confident of resolving any disagreements between the district and subcontractors in that forum,” said project executive Ken Reizes in a statement. He added, “It is important to note that the district has not paid a penny on any of the disputed pay applications cited by the auditor.”
While this bread-and-butter auditing of subcontractors is the sort of valuable analysis that the school system has long lacked, it’s also far from the heart of the matter at Belmont, the nation‘s most expensive high school project ever. In fact, much of the Mullinax report sits at the opposite end of where critics wanted to point auditors. What’s missing are any groundbreaking information or analyses on the origins of the project, and a detailed review of all the operations of the disbanded Office of Planning and Development, headed by former planning director Dominic Shambra.
That‘s not to say that Shambra didn’t take some hits. Mullinax singled out the retired planning director for “ultimate responsibility as the senior LAUSD official directly responsible for the current Belmont situation . . . Mr. Shambra failed the children, staff and taxpayers.” Specifically, he said, Shambra and his advisers, time after time, left the district unprotected and ill-prepared for the environmental problems that have halted construction. In addition, Shambra allegedly failed to require proper documentation on payments to consultants, including one who became his girlfriend.
Shambra, in turn, defends the validity of the payments to all his consultants. And he classifies the environmental issues as a “scam” of self-serving environmental consultants: “If you take the environmental B.S. away, the auditors haven‘t found a whole lot in there.”
Mullinax also took on the development agreement itself, arguing that the project’s touted “Guaranteed Maximum Price” was more of a “guaranteed minimum” price.
“This analysis went to the heart of the development agreement,” commented board member Tokofsky, “and its lack of protection for the district and the ability for the developer to continually hide costs in another area and shift costs around.” At the same time, said Tokofsky, he wanted Mullinax to reach even further: “I would have liked to see more on the texture of how the interpersonal relationships between the consultants, staff members and developers actually worked.” The auditors “clearly cut off from some significant issues, like an examination of the very money that created the Office of Planning and Development.”
The text of the audit report concedes that it‘s less than definitive regarding Shambra’s consultants. But for this, the auditor frequently blames Shambra‘s own record-keeping and the lack of district oversight. In the case of consultant Wayne Wedin, the report states, “the Internal Auditor has probable cause to believe that Mr. Shambra failed to exercise sufficient supervision and control over the activities of Mr. Wedin, to the point that it is not possible to document accurately the value of services delivered to the LAUSD by Mr. Wedin.”
The school system paid Wedin more than $1 million over a 12-year period for his work with Shambra on a variety of projects, including Belmont.
Contacted at his Orange County office, Wedin said he hadn’t seen the report. “My generic comment is that I was given assignments. I performed that work, turned in the invoices. Those were reviewed by the district and approved ultimately. And now I guess I‘m being criticized for that.”