School district illicitly garnered $13 million in FEMA funds?
March 27, 2012
The Paso Robles School District is getting a double wave of bad financial news ― not only is the district already facing a $1.59 million budget shortfall, but the federal government may be seeking the return of more than $13 million in disaster relief money the district is accused of collecting illicitly.
Nearly eight years after the San Simeon Earthquake damaged the Flamson Middle School building, the Office of the Inspector General (OIG) is recommending that the Federal Emergency Management Agency (FEMA) ask the district to return $13 million in relief funds.
Paso Robles School Superintendent Kathy McNamara said the district “is working with” the OIG and has responded to all of the issues raised in an audit.
“We believe we have done things properly,” she said Tuesday. Patrick Sayne headed the district at the time of the earthquake and for four years thereafter.
Teachers’ union president Jim Lynette said “any outcome that is detrimental to the district will further erode the ability of teachers to teach. This is ugly.”
Lynett said the audit findings reflect “just another major problem for the district which is the result of mismanagement.” District officials “have rejected several plans” proposed by teachers to help address the budget deficit.
“We have always had great support from the community,” said Lynett, “but with this kind of mismanagement, we might not get that level of support. And I’m not sure how we can avoid a takeover by the state if this goes against the district.”
The OIG recently completed the audit of seven large projects and 14 small district projects resulting from the earthquake, totaling $19.1 million. Federal inspectors concluded that the district “erroneously funded the replacement of the Flamson Middle School building, did not get competitive bids, and as a result possibly overpaid three local contractors for construction, design and engineering work.”
FEMA considers a facility repairable when the “disaster damages do not exceed 50 percent of the cost of replacing the facility to its pre-disaster condition.”
However, in this case, because the district provided inaccurate square footage numbers, the determination was inaccurately made to replace rather than to repair the building. The OIG is asking FEMA to request the difference in repair and replacement costs to be returned to the FEMA and the OIG.
“Our analysis support that the fundamental bases for which this project was approved for replacement were incorrect, thus rendering the entire project ineligible and the improved project aspect moot,” the OIG report says.
In addition, district officials are accused of failing to get competitive bids, preparing a cost analysis or maintaining sufficient procurement records.
“District officials improperly procured three contracts worth $2.7 million for architectural and engineering services, construction testing services, and construction inspections for Project 245,” according to the report.
The district did not use full and open competition, thus FEMA has no assurance that the district paid reasonable prices,” the OIG report says.
The OIG report says that district officials agreed that they did not compete the contracts associated with this project but noted that the three contractors had done work in the past for the district.
“Although the A&E contractor was “pre-qualified” by the district―five years prior to the disaster―to perform work for the district, this does not, and cannot, excuse the district from the requirement to comply with federal procurement rules and regulations applicable to federally awarded FEMA funds,” the OIG reports says.
Superintendent McNamara said she does not believe that competitive bidding was necessary because of work done by the contractors previously for the district.
FEMA has until May 9 to provide a written response to the OIG’s audit. If FEMA agrees with the OIG that $13 million in relief funds should be returned, the district will then be provided a chance to respond.