Long-Awaited Foundation Audit Released
Key Questions Raised by Students Left Unanswered
Board Instructs Superintendent to create a Memorandum of Understanding to Govern Foundation Relationship
The San Dieguito Union High School District (SDUHSD) held its regularly scheduled board meeting on August 7. While the agenda included several routine items, the most significant item on the agenda was the presentation and discussion of an independent audit of the district’s high school foundations.
Over 50 members of the public attended in person at the district office, with many exercising their right to speak to the board, including Kevin Wang and Litong Tian, the two students who independently launched their own investigation.
Background
Last September, the two Canyon Crest Academy (CCA) seniors published a detailed report raising concerns about the financial policies and procedures of the Canyon Crest Academy Foundation (CCAF).
At the core of their concerns was one major issue: that a substantial portion of parent donations to certain student clubs — notably the robotics club — was being redirected away from the club’s activities.
The students reported that in some cases up to 50% of parent donations to their club were not credited to their club account. The Foundation would not meet with the students to review data or explain the donation flows. Shortly after they published their investigation on their website, Ravens for Transparency, the students were called into the principal’s office, told they were wrong, and were pressured to take down their report. The students said they felt intimidated.
Their story was picked up by local and national media, eventually prompting the SDUHSD Board of Trustees to commission an audit of all high school foundations.
Audit Result
After nearly a year since the students published their report, the auditors, CWDL, presented their findings at the August 7 board meeting.
The audit reports and summary of control issues can be found on the District’s website, but a summary of the audit findings are:
All four of the foundations had some minor control deficiencies that should be corrected, which is not an unusual finding in any audit.
The CCA Foundation had an unusually large number of control deficiencies, some of which were significant.
The problems included improper accounting procedures, flawed revenue recognition, booking assets in the wrong category, and other mistakes.
Even after making accounting corrections, at least one noted error could not be fixed.
As a result, the auditors could not issue a “clean” audit opinion stating that the CCAF financial statements fairly represented the Foundation’s operations.
The auditors provided a list of detailed recommendations, including that all the foundations enter into a Memorandum of Understanding (MOU) with the district that would proscribe certain policies and procedures, with a particular focus on financial and operational transparency.
The Audit Missed the Key Issue
The scope provided to the auditors was to conduct routine audits of the foundations’ financial statements, which have one primary goal – to render an opinion as to whether the published financial statements for each foundation fairly present, in all material respects, the respective financial positions and results of operations of the foundations in accordance with generally accepted accounting principles.
This limited scope did not include an assessment of the key allegation made by the students – that the Canyon Crest Academy Foundation charged excessive fees and required reallocation of donor-directed contributions to their clubs, such that as much as half of the money raised by the robotics club was not used to directly support robotics club activities.
Thus, although the auditor formed an opinion on the top-level reported financial statements (which, for Canyon Crest, they found many issues and ultimately could not give a clean opinion), they did not opine on the appropriateness of the fees charged to the robotics club, nor did they form an opinion as to if the donor-directed contributions were used the way the foundation promised the donors they would be used. My preference was for an audit whose scope included a review of the students’ direct allegations, but the board decided on an ordinary financial statement audit instead. Unless the CCAF either voluntarily or is required to provide access to their financial records, it is unlikely we will ever know if the donors’ directions were adhered to by the Canyon Crest Academy Foundation. CCAF required 25% of all donor-directed donations to go to an unrestricted fund controlled by the foundation. In other words, CCAF does not allow all of a donation go to a child’s club. The auditor confirmed, during my questioning at the Board Meeting, that he had never seen a foundation with this requirement. In addition, the foundation also charged clubs overhead fees that could amount to an additional 25% of the donation. It is important to note that the other three foundations do not have this requirement or level of expenses charged.
Board Discussion
The Board discussion began with Trustee Jane Lea Smith recusing herself because she served on the CCAF board before she was elected to the SDUHSD board. The remaining four Trustees then had the opportunity to ask questions of the auditor and consider the direction to the superintendent on how to proceed from here.
There was some tension in the room while I was asking questions of the auditor. This is one of the most consequential issues to come before our board in recent memory, and the public should be fully aware of the result of the audit and what it means (and doesn’t mean) for the District and the foundations. As an elected Board Trustee, I have the right to decide what questions I find pertinent to the issue being discussed.
After the discussion, Superintendent Staffieri made it clear that she had a strong desire for the Board to provide clear direction for next steps.
After some discussion, the Board voted 4-0 to direct the Superintendent to begin creating an MOU between the district and each of the foundations that includes transparency into the foundations operations and financial results as an important component.
The next SDUHSD Board meeting is scheduled for September 11.