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.

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Where do these “FEMA funds” really come from?

I guess I’ve got a different take on this. When the earthquake hit, Paso’s downtown including the library, middle school and some privately held buildings (The Acorn Building) were heavily damaged.

I question why FEMA would want money back for replacing a quake-damaged school but not for the other things it doled out money to repair? Let’s face it, a school is entirely more important to a community than a public library, I don’t care if is a Carnegie building. A library could be placed into any office space, but not so a school.

One thing to consider, is that while FEMA NOW says the school should have just been repaired, there is the issue of the safety of school children in the event of aftershocks. I doubt very seriously that the Office of the State Architect, which oversees ALL school construction projects in California, would have even allowed the school district to “make repairs” and call it good.

We have very strict earthquake safety laws in this State. Laws that FEMA doesn’t have to consider when it makes these kinds of rulings. FEMA, as a federal agency doesn’t give a hoot what the state’s laws require. However, the school district most assuredly MUST obey the state laws.

Whetheer that would be a defense in the school district’s favor is debatable.

As for the no-bid contracts, that’s not an unusual circumstance at all. Cities, the County, school districts, etc… do this all the time. It’s called a contract for “professional services” and usually they are only handed out if a job or task can only or best be done by one particular firm. And that fi9rm is usually already under contract to the agency.

With this school project, I think Paso Unified is in trouble because certainly there are more than one engineering and construction firm that could do this work. However, before you lynch the superintendent, consider that even no-bid contracts have to be approved in a public forum by the school board. So while everyone was snoozing away in Paso, the district with the approval of the board of trustees moved ahead with this. Don’t blame the Super, he or she doesn’t build schools without the full consent of the board.

This is part of the entire city implosion…the way that the men that have run this town for the past 20 years from what I read, and for sure the last 6 years I have lived here…the good-ole-boy/girl network and the cronies that have run this town into the ground…especially with the City Council, City Manager, Police Department, Tourist Bureau, Chamber of Commerce and on and on…the rude and criminal way that they treat people that move here from other areas of the country and state are treated like some kind of aliens. The way that the major news papers are run with fluff and cover up, including the very dark and not good for much of anything New Times, Tribune and Paso Robles Press…from the pot holes to the Water Dept to the way they run off events in the town…it all permeates throughout the town…this town should not be broke PERIOD

Several have posed the question of why the bids if McNamara didn’t think she needed them. Perhaps there was a contract with some of the engineers or contractors that read like the following which is a verbatim quote from the Sanitation Districts contract with the Wallace Group provided by its legal council, Shipsey and Seitz.

“John Wallace serves as District Administrator and the Wallace Group serves as District engineer. The Board is aware of its ability at any time to request outside bids in regards to professional services. However because services are separate and distinct from other types of services to the District. strict bidding requirements are not required by Government Code”.

So the way I read this is if your politician buddies don’t wanna question what their buddy is doing regardless of what public opinion is, kiss our asses, were immune from the laws of fair bidding practices and we’ll keep paying our buddy you tax dollars without recourse by you, John Q public..

Doggin, how pray tell, are you somehow equating the SoCo melodrama with the education issues? Is there ANY connection between the two or are you just creating mountains out of molehills?

The point being the possibility of wording in contracts which exempts them from the open public bidding processes nothing more. Consider that Wallace and Seitz have their fingers in most municipalities,service districts etc and from what I hear several school districts. Wallace as I understand is also involved in the FEMA quake repairs in Paso that are subject to the same violations. You’d think if these service providers were honest and on the up and up they’ed know better. But when the fault lies in the municipality hired them,not the service provider, they get to run off with the project funds and we get to repay it back to FEMA with more or our tax dollars.

The thing about the Seitz brothers is that they have this template for the government agencies they handle for things like personnel policies. If you are doing research on a couple of Seitz brothers agencies personnel policies, you have to pay attention because sometimes a lot of the contents is the same–they just change the template for the specific agency.

The SSLOCSD’s personnel policies looks like another Seitz brothers’-originated agency’s personnel policies agency’s but they are different.

The problem also is that, with other agencies, there will be at least some oversight from time to time, depending what board they have at the time. Not so with the SSLOCSD, where there was, at the time of the GJ report, literally no oversight. The three-member “board” was just one big, fat, corrupt rubber-stamp for anything John Wallace wanted.

Doggin, I don’t know if you were following CCN in 2011, so I’ll just say briefly that it was because of CCN’s coverage of the SSLOCSD (Oceano wastewater treatment facility), including the firing of two whistleblowers, massive sewage spills into Oceano homes (and into the ocean), and the complete conflict-of-interest-laden John Wallace-SSLOCSD contracts and agreements, that spurred the SLO Grand Jury to investigate the issue.

Here is the link to an article that talks about the GJ report and gives background:

There are links at the end of the article to other related articles, but if you search (with the CCN “search” feature on the link bar at the top you’ll find many, many more articles.

Here is a link to the GJ Report:

My apologies if you already are aware of the background. I share it with a lot of people because I am a political fiend and find the blatant and transparent corruption, complete lack of oversight by the board, and free rein Wallace had over the no-bid funneling of SSLOCSD work to the vastly overpaid Wallace Group—and then the bald-faced lies and denial once they were caught–absolutely beguiling.

It is actually worse than the City of Bell because at least the City of Bell city council members and attorney weren’t so vilely insulting to the residents they served, and so duplicitous in trying to dodge customers who wanted to attend the meetings. It was like a game trying to track down the meetings as they changed dates and times, as well as locations, with complete disregard for the Brown Act.

Anyway, the whole SSLOCSD investigation by CCN is Political Porn for me. It just doesn’t get much better (except for the City of Bell, of course, and that’s only because there has already been a state investigation and the mayor and other corrupt a**holes have already been arrested and jailed.

To think that, in my life, I lived next door to two such massive scandals that occurred in such small, obscure little towns—it’s like winning the lottery TWICE for people like me.

Sheesh–forgot my main point before I got all sidetracked.

Since the GJ has already said the SSLOCSD policies are unacceptable because of lack of oversight, conflicts of interest, etc., and because the GJ “recommended” they make specific significant changes–it would be really bad management and extremely stupid for a city, especially for a city with Jon Seitz as the backup attorney, to have anything close to that at the SSLOCSD.

I mean, it would be like waving a red flag in front of the GJ.

Ive followed your posts for some time,your always right on IMO. I do have some pretty good connections who share information on what goes on in south county, Im familiar with much of the scuttle butt and have obtained most every document made public. Be nice to share some with you at some point. Im still waiting for the final Notice of Violation the the State is preparing to hand down related the sewage spill at the sewage plant in 2010. This may carry some significant liabilities as I understand. However I do regularly read up on their Board packages where I noticed that he had a couple of his compadres, Mr. Blaksley and Kacho A accompany him to the hearings in Sacramento to help squirm out of trouble. We’ll make sure I keep that in mind next election.

I find the varied backgrounds, and ways that CCN members can add information, absolutely fascinating. You sound like you have developed a good resource base, and that contributes greatly to the discussion.

What I know about the SSLOCSD issues is what I have basically read on CCN, the Trib and SM News.

I have general information from working at local government agencies, and from activities involving unrelated issues that bring additional background to the situation.

I look forward to your discussion of the Notice of Violations. Let’s hope the state doesn’t give them a free pass, or go soft on them like the SLOCo GJ did (IMO).

You’d be hard pressed to find a city in California where this isn’t going on. I’m encouraged by what I’m reading on this comment board. It appears the taxpayers of Paso have had their fill of this thievery, and are ready to take their town back. Today Paso, tomorrow Los Osos and beyond. Tell them we want our money back.

“If a tree falls in a forest and there is nobody around to hear it did it really make a sound?”

“If a news story appears on CalCoastNews and the same story is not on KSBY or the Trib is it real?”

Some how, some way CalCoastNews needs to be known as the QUINTESSENTIAL source for REAL news in SLO county.

Look back at CCN and you will see story after story after hard hitting deep factual story about SLO Couny’s inner workings.

CCN is NOT the TRIB or KSBY with much deeper pockets and very shallow reporting.

The following is totally UNSOLICITED by CCN, but we as purveyors of the truth must ante up and SUPPORT CCN so their quest to keep exposing the truth will continue unencumbered by trivial finacial burden.

So we ALL need to DONATE!

This can be done by clicking the link…

And if you can’t donate directly then direct a business you know to ADVERTISE wih CCN.


I think, for some more conservative (in news choices) people, CCN is still something they don’t want to admit reading.

But because others, like us, read CCN and because we visit other boards where we share information with others, the info gets out, and the fact that it is CCN who broke a story or got a lead to open up the story into more depth–people are realizing that CCN is the REAL real deal.

If they HAVE been OVERPAID, then the money SHOULD be returned to the Feds to be used elsewhere. Isn’t there any CITY in SLO County that IS NOT CORRUPT???


Nor is there a CSD in SLO County that is not corrupt.