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Portola Valley schools superintendent resigns under cloud of investigation

Original post made on Feb 3, 2012

Tim Hanretty has resigned from his position as superintendent of the Portola Valley School District while an investigation is conducted into suspected "financial irregularities" in the accounts of the Woodside School District, which he previously worked for, according to district officials.

Read the full story here Web Link posted Friday, February 3, 2012, 8:31 AM

Comments (12)

Posted by can happen to us, too?, a resident of Another Palo Alto neighborhood
on Feb 3, 2012 at 9:42 am

This brings up a question - what do we do in Palo Alto to be sure this kind of thing doesn't happen? What spurred these investigations? What mechanisms to we have to keep things from going so long without being caught?

The better mechanisms we have in place to keep something "irregular" from happening, the better the district is protected, obviously, but also the better the people who take these positions, who are NOT doing anything wrong, are able to be protected from false accusation. I have no idea whether this is warranted or not, but it's disturbing to think that if it is warranted, it could go on so long before being investigated (or better, prevented), and if it's not warranted, that the investigation would have such consequences.

School districts are fairly autonomous government bodies. What checks and balances are there?


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 3, 2012 at 10:12 am

> what do we do in Palo Alto to be sure this kind
> of thing doesn't happen?

Good question.

The PAUSD does not hire an auditor, like the City of Palo Alto does. There is some level of auditing of financial matters that is performed by the Santa Clara County Department of Education. To what extent this auditing is performed on the PAUSD's finances is unclear. The County will provide certain "advisory" services, but again--to what extent these are available, and to what extent the PAUSD avails itself of these services, is unclear.

The California State Auditor does, from time-to-time, look at school districts. The motivations for selecting specific school districts is unclear. The State Auditor will not accept referrals from state residents--only from some level of government, such as someone in the state legislature, or board of supervisors. County Grand Juries sometimes investigate local school districts, but the Grand Juries are not transparent, on-going, accountable, government agencies, so they do what they do, and their is no effective way to enforce Grand Jury findings without resorting to litigation, instigated by individuals.

Presumably, School Boards are supposed to be the last line of defense against these sorts of problems, but school board members are more-often-than-not bought-and-paid-for by labor unions, and pro-school elements, so actually asking hard questions, and being prepared to cut through the smoke-and-mirrors of the kinds of bureaucratic responses we have come to see (as a society) leaves us more at the mercy of these people, than being their employers--expecting the best service for the "top dollar" that government workers now command (salaries and deferred salaries/pensions).

The Auditor for the City of Palo Alto has never been all that effective. There has never been an operational audit of the City's major departments. And this can most certainly be true of the PAUSD. Sadly, the taxpayers are no longer in charge of their government--we have allowed ourselves to become little more than cash-cows, to be led to slaughter by people whose goals, and agendas, are not aligned with the general public, in most cases.


Posted by Concerned, a resident of Evergreen Park
on Feb 3, 2012 at 10:21 am


We must get tougher locally and hold our local officials to a higher standard of ethics and overall accountability. If we don't do this in our own community, we have no hope of expecting things to change on a national level!


Posted by Chris Kenrick, Palo Alto Weekly staff writer, a resident of Old Palo Alto
on Feb 3, 2012 at 10:31 am

To Hire-More-Auditors:

Here's the most recent audit report on PAUSD, dated June 30, 2011 with compliance letter Dec. 15, 2011, conducted by the accounting firm Vavrinek, Trine, Day: Web Link


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 3, 2012 at 11:20 am

> link to financial auditors

This audit is performed yearly. However, it is not performed on any of the construction projects, which is the basis for the investigation of the former Portola Valley School Official. These sorts of improprieties are generally identified by someone working on the financial records of a school construction project, who courageously goes to the local DA, or Grand Jury, to report what he/she thinks is an impropriety.

Back in the mid-1990s, when Measure B money was wasted in great quantities, it became clear that no one at the PAUSD had the slightest idea how to run a construction project. People associated with the work (often teachers) would come forward, from time-to-time, and tell horror stories about work that was poorly done, or the need for what seemed like unnecessary (and expensive) change orders, because the planning process was poorly done.

Eventually, the PAUSD became aware that hiring a retread class room teacher (or principal) was not the way to get the job done, and began to hire 3rd-party construction management companies to manage/oversee the work on the most of the Measure B work, which had generated a small number of law suits over specification failures/work completion.

Unfortunately, the public record of expenditures on these 3rd-party projects is less clear than it could be. Certainly construction projects run by a construction manager with 20 years experience is a better choice than a teacher who wants out of the class room. But the transparency of these projects is almost non-existent.

Prop.39 bond elections require that a "citizen's oversight committee" be formed. These committees have, as it turns out, little authority to investigate problems with construction, and certainly no funding to hire auditors. Nor do they have the ability to refer issues to the Grand Jury, or the local District Attorney. One such committee down in the East Side District of San Jose tried to become "activist" and was ultimately "shut down" by the school board. It was amazing to listen to the school district officials claim that the oversight committee had no "right to review financial data" associated with the building projects.

The PAUSD has a bond oversight committee, but it has not produced anything of interest. All of these committees seem intended to do little more than rubber-stamp the "status quo". Certainly the so-called Library oversight committee for the Mitchell Park Library was more than useless in dealing with the cost overruns that have been exposed in the last few months.

Keep in mind that the City of Palo Alto has a similar audit on a yearly basis, and it never identified the cash handling problems of the Children's Theater.

Financial audits are necessary, but operational audits are clearly needed to identify bad management decisions that cost the taxpayers billions every year.


Posted by What kind of audits?, a resident of Adobe-Meadows
on Feb 3, 2012 at 6:47 pm

@Hire-More-Auditors - what kind of audit procedures do you think would be effective? What do you mean by an "operational audit"? Who should conduct the audit? What kind of "bad management decisions" would they be looking for? Or is it to look for some kind of conflict or impropriety?

I'm curious since I've never seen that kind of audit service at a private sector company. You might have consultants come through and give you advice on this or that, but not anything that could be called an audit on "bad management decisions." Have you seen these kind of audits before?


Posted by oscar, a resident of Mountain View
on Feb 3, 2012 at 9:59 pm

Yaking about audits, more consultants and other gobbidly gook gets everyone nowhere fast and is just another way to yank wool over the eyes of the public.

More consultants and audits will not solve this problem.

The real issue is with cronyism and nepotism, which is running rampant in upper management and especially in school districts. This is how these Superintendents and other upper managers get their jobs. Unqualified and corrupt white collar criminals are destroying our schools.


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 4, 2012 at 9:47 am

> what are "operational audits" ..

Fair question. If you google around looking "financial audits" you will find a goodly number of references to this sort of audit. These sorts of audits are fairly well structured, tending to deal with the appropriate handling of an entity's finances. Operational audits are, on the other hand, less structured, and tend to examine aspects of an organizations practices, or procedures, that can be modeled, along cost lines—with an eye towards identifying cost-ineffective practices.

Perhaps an example might help—

Scenario 1:
A school system with N sites needs to provide teaching and administrative staff the ability to make copies for teaching and administrative needs. On site copy machines, paper and toner, and service needs are procured by a central procurement service. Each school is given a certain amount of "funny money" for its copy needs, which it then transfers to the central procurement service to pay for its needs. Teachers/staff/students/volunteers do the copying. The cost of this service is generally then: cost of machines + cost of paper + cost of toner + teacher/staff time.

Scenario 2:
High speed copiers are now available which can copy thousands of pages per hour, and which can be connected to a data network (typically an intranet). Persons wanting copies direct an e-form of what is to be copied to the print (via the data network), and the copies are made according to the current work load, and any "urgency" indicated on the work order. The copies are delivered to the requesting school site same-day, or over night, depending on "urgency" of the submitter. All of the costs data is handled via software that is part of the scheduling/dispatching/execution processes. An email is sent to the submitter when to expect the work on his/her site. There are no copy machines on-site, as all the work is now done at a central site. Cost of copying is now cost of machine + labor costs + cost of supplies + cost of room + cost of transportation.

Scenario 3:
Same as Scenario 2, except in this scenario, multiple school districts share a central site copy facility.

Scenario 4:
Same as Scenario 2, expect some/all of the work is outsourced to a local private sector copy shop.

The operational audit team would create a financial model of each of these scenarios that would identify the costs of each, providing a clear view of what the costs differences between a centralized vs de-centralized operation would be. This sort of audit would not be attempted by a conventional financial audit team.

This sort of review could easily be extended to all the operations of a school district: Transportation/Motor Pool, Facilities Management, Information Technology, Human Resources. It is not hard to see a well-designed audit team actually take on issues associated with classroom instruction.

Most school districts are not inclined to do this sort of work themselves. Cost controls, and cost reduction often runs head-on into labor union obstructionism. Here in California, for instance, the Legislature has banned outsourcing some jobs to the private sector that have traditionally been performed by unionized school district employees. In many cases, the hands of school boards are tied by laws passed by legislators bought-and-paid-for by labor unions.

Nonetheless, performing these audits would be the first step in opening the eyes of school officials as to how expensive their management practices are, and how rethinking the work flows, or organizational structures could save money.


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 4, 2012 at 10:04 am

> I'm curious since I've never seen that kind of audit service
> at a private sector company

Operational audits exist in private sector companies that are large enough to need them. This typically means a company that has been in business for some period of time, has sizable physical assets, and might not have employed as much "automation"/informational technology as it could have. Manufacturing companies, or companies with a lot of personnel, are clear candidates for these sorts of periodic audits. Since the Silicon Valley tends to focus on design/intellectual property these days, and most companies don't survive the five year mark, then these sorts of audits don't occur as often as in location where companies are bigger, and have longer lifetimes.

On the other hand, department/quarterly reviews do occur in smaller companies. These reviews can identify the same problems that an audit team might—depending on how farsighted the general management team of the company might be. For companies that spring up over night, and whose management is more interested in "getting rich" than building a company that will be around for decades—it's unlikely they will be aware of the need for, or even remotely interested in anything--but finding a buyer for the company.

Government entities, on the other hand, are intended to exist forever. So, auditing their management practices every few years becomes necessary to insure that the best management practices are in place, and that cost control issues are not ignored by managers who "rose from within the ranks", and have not been provided adequate training to perform their jobs effectively. Failure to do so results in high-cost practices, and too often—mischief on the part of employees who think that they will never get caught because no one is looking at their work.


Posted by What kind of audits?, a resident of Adobe-Meadows
on Feb 4, 2012 at 12:19 pm

@Hire-More-Auditors - thank you for your explanation. So you mean more like a review of operations with an eye toward efficiency. In my experience, this is often done by hired-in management consulting firms in bigger companies, or they do it themselves if they have the chops.

I've got nothing against that - I was one of those management consultant at one point - but I'm not sure what impact we'd gain by having consultants review the construction practices for the current PAUSD bond projects. They are virtually all fixed price contracts, with the lowest responsible bidder chosen based on fixed bid package. So if the construction firm is inefficient, it is on their nickel.

There is a performance audit of the bond program (additional the financial audit - it follows the financial audit on the document on the district's web site) that appears to look at the bid procedures, which bidder chosen, projects actually getting done, etc., to make sure that the process is followed. And of course there is a paid construction managers overseeing the construction firms - so the kind of separation of duties that you look for in these situations.


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 4, 2012 at 2:44 pm


>. So you mean more like a review of operations with an eye
> toward efficiency.

Yes .. although "effectiveness" is a better word to use than "efficiency".

> In my experience, this is often done by hired-in management
> consulting firms in bigger companies, or they do it themselves
> if they have the chops.

Yes .. we run into a number of different terms that apply here. In the Military, for instance, this sort of thing is done every day at the lowest organizational levels (platoons, squads, ships). These activities are called "inspections". They are a little different, in that inspections are intended to determine if a unit is "combat ready". However, as the scope of these "inspections" increase (battalion, division, Army, Theater, etc.) those in charge begin to look for patterns of activities that can be done differently in order to increase combat readiness. Much of the Pentagon is run by "civilians", who are more likely to want "audits", rather than inspections, however.

Audits usually imply that some higher level of "authority" is reviewing some lower level of the organization. These sorts of "line oriented command structures" are generally not found in most civilian organizations, however. They do exist, at least in theory, in some government entities.

We could expect to see terms like "management review", or some such in the private sector. One of the big differences between the private sector and the public sector is that private sector management can deal with issues of 'lack of effectiveness" by firing people, or more often, simply closing down the division, or moving the essence of the organization under scrutiny to another state, or country. Government sector entities do not have this luxury.


Posted by Hire-More-Auditors, a resident of Another Palo Alto neighborhood
on Feb 4, 2012 at 3:00 pm

> There is a performance audit of the bond program (additional
> the financial audit - it follows the financial audit on the
> document on the district's web site) that appears
> to look at the bid procedures, which bidder chosen,
> projects actually getting done, etc., to make sure that the
> process is followed.

If true, this is the first time in over 100 years of Palo Alto schools administration that this exercise has been run, and documented. However, since Measure A was a Prop.39 election, the law requires that all of the projects be documented for the voters to vote on. Any chance that this "performance audit" is actually tracking the projects vs the ballot language? (It's kind of a trick question, since the law also says that even though the school administration pushing the bond has to document the project list, it does not have to actually construct any of those pojects.)

> And of course there is a paid construction managers overseeing
> the construction firms - so the kind of separation of duties
> that you look for in these situations

This is where things get sticky, and outside auditing is required. Simply put—the "cops watch us, but who's watching the cops?" The Construction Management company gets the school district off the hook of having to manage the project directly, but what happens when things go wrong—as they always do? Bad/incomplete specifications lead to change orders that involve delays, added costs, and more often than not result in law suits. With a construction management firm in the loop, public records requests can not be used by the public to investigate construction related problems. This is particularly true when government boards go "behind closed doors" and or settle out of court.

By the way, there is another level of "auditing" going on when schools are involved. The Office of the State Architect reviews, and inspects, all construction. These folks do not care one wit about costs—often driving up costs to insure that their "standards" are met. People involved with school construction often complain bitterly (but privately) about the interference of the State Architect. Presumably their reports are public domain, but its rare to see then clearly posted on a school district's web-site, when school construction is on-going.

While operational audits don't make a lot of sense when construction is concerned, performance audits do.

(Note--while the PAUSD has been discussed as a response to a poster's question about "what about us?", the numbers comments about "check and balance" need to be applied to every school district using bond money to fund building/refurbishment projects. In this case, it will be interesting to see just how many of these procedures were in place in the Woodside School District, where the alleged improprieties were supposed to have occurred.)


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