Big Bad Bonds™
Clearinghouse Opposing the Coming Deluge
in School and Community College Bonds
in School and Community College Bonds
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As a rule, CBOCs have never performed their oversight function anywhere in the state.
Every rule has an exception, or two. I'll grant exceptions to the West Contra Costa Unified CBOC (which oversees four bond measures) and the Sweetwater Union High CBOC (San Diego, Measure O, 2006). The thing that makes these two CBOCs exceptional is that the oversight began only after huge pay-to-play scandals rocked the districts. While public officials and school bonds cartel members (but I repeat myself) were convicted of crimes in the Sweetwater Union High scandal, no one involved with West Contra Costa Unified has faced criminal charges yet. That situation may be attributable to chaos or corruption within the Contra Costa County District Attorney's office, where District Attorney Mark Peterson was forced to resign on June 14, 2017 as a result of criminal charges involving corruption in office.
As for the rest of the 1200 CBOCs around the state, evidence of corruption has been suppressed. The suppression is due, in part, to the corrupted CBOC members being cheerleaders for the bond program and either willingly or negligently ignoring their duties to the public.
It starts with the selection process. Your district's governing board abdicates its responsibility to the public that it promised in all the resolutions and proclamations leading up to election day. While technically appointing the CBOC members, in practice the entire process is delegated to your district's superintendent (or college president). There has not been a single instance, anywhere in the state, where a governing board has rejected any of the superintendent's recommendations. In all but a very few instances, the governing board is never aware of applicants who the superintendent has rejected.
The problem continues with the first meeting of the CBOC where your district overwhelms an already submissive and compliant CBOC with a dog-and-pony show that makes it perfectly clear that the role of the CBOC is to meet once in a while, listen to more dog-and-pony shows, and rubber-stamp your district's expenditures.
The problem further continues with the so-called auditors, who are almost always your district's regular auditors, who also invariably white-wash both the financial audit and the performance audit. The CBOC, of course, is incapable of understanding the audits and compliantly rubber-stamps those as well.
It won't be easy.
In 2009, the Little Hoover Commission recommended that "the state consider changing the appointing authority for the committee members." Of course, that never happened. Why? Your district doesn't want oversight. It just wants the bond money.
In February 2017, the Commission updated its recommendations for local bond oversight.
2017 Recommendations for Local Bond Oversight
Recommendation 7: The Governor and Legislature should update and overhaul the education code related to the Strict Accountability in Local School Construction Bonds Act of 2000. Specifically,
- ?? Amend statutory code on performance audits to include the effectiveness and results of the bond program.
- ?? Expand the role of Citizens' Bond Oversight Committees in selecting and interacting with bond program auditors.
- ?? Require bond measures proposed to voters under the reduced threshold to include specific project lists.
- ?? Change the appointment authority for members of Citizens' Bond Oversight Committees.
- ?? Require districts to provide a minimal budget for the oversight committees, including a budget to hire independent counsel with municipal bond expertise.
- ?? Require districts to provide a Web presence for Citizens' Bond Oversight Committees to prominently display meeting agendas and reports.
Recommendation 8: Impose sanctions for school and community college districts that fail to adhere to constitutional and statutory requirements of Proposition 39, including preventing the district from adopting future bond measures under the reduced voter threshold.
Source: Borrowed Money: Opportunities For Stronger Bond Oversight
These recommendations aren't radical. In fact, the law already requires districts to do every one of these things. Districts don't because they don't want to. Until there are sanctions, districts will continue their law-breaking ways. Don't hold your breath that the legislature will do anything. After all, the public education lobby virtually runs state government.
The simple answer is: NO!
The legislature established the CBOC by the Strict Accountability in Local School Construction Bonds Act of 2000. The Act has been encoded in the California Education Code as three articles. The first article (15264-15276) imposes requirements and limitations on your district with respect to its use of Proposition 39 to raise money through bonds. The second article (15278-15282) establishes the CBOC. The third article (15284-15288) provides remedies, weak as they are, to the public to hold your district accountable.
There is a legal concept that is recognized at both the federal and the state level called preemption. In general, preemption means that the valid laws of the federal government preempt the laws of the state governments and that the valid laws (statutes) of the state government preempt the laws (ordinances) of local governments. In order to allow local governments some flexibility in an area where state law "preempts the field," exceptions must be explicitly enacted into the statutes. For example, in California, charter cities have powers to override some statutes with ordinances of their own, such as minimum wage or parking ordinances. Those areas of law are explicitly provided for in the statutes permitting the establishment of charter cities. General law cities, on the other hand, must comply with all statutes to which they are made subject. All school and college districts are general law districts subject to the Government Code and the Education Code, among others. The statutes found in the Education Code have preempted the field of local public education. Nowhere in the Act, and more specifically in the second article, will one find authority for a district to establish its own ordinances. Thus, with respect to CBOCs, the state has preempted even the much more narrow field of Proposition 39 use, oversight, and remedies.
The statutes covering the operation of CBOCs are all contained in the second article. The only power given to your district's governing board is that it "shall establish and appoint members to an independent citizens' oversight committee." Elsewhere in the second article, the statutes explicitly impose duties on your district.
Your district's governing board must establish the CBOC (determine the maximum number of members) and it must appoint the members. The CBOC itself is independent of the governing board. While your district has duties toward the CBOC, the CBOC has no duties toward your district. (Outrageously, I've seen some districts demand that CBOC members sign a loyalty oath to the district under the guise of ethics.) All of the CBOC's duties are toward the public. So besides the explicit independent nature of the CBOC, the independent nature is also implicit throughout the second article.
So how is it that every district around the state imposes all kinds of duties on its CBOC? The simple answer is three-fold. The CBOC members are ignorant of the law, your district uses its lawyers and advisors to "train" the CBOC members, and the CBOC members are, overwhelming, carefully selected stooges put in place to rubber-stamp every district action and expenditure. Of course, ignorance of the law is no excuse, but the media-entertainment complex, along with public institutions, has made the average American highly susceptible to being a passive viewer rather than an active participant.
There is another common-sense principle of law that the one making a claim or assertion bears the burden of proof. Make your district prove its assertion. Don't let it try to turn the question back on you. If it asserts it has authority, then it must be able to back it up with statutes.
If you are either a member of a CBOC or a member of the public, you can destroy the house of cards that your district has built by asking it a simple question: What is your statutory authority? Don't take vague statements for an answer. Press for the specific statute that authorizes your district to impose any restriction or duty on a CBOC. If your district uses its lawyer to respond, challenge the lawyer and hold the lawyer to account in the same way. Statutes are specific. They are written. They use terms (always different from common English) that have been defined.
Without understanding the legislative scheme surrounding the CBOC, you will never understand the CBOC's authority and power. It isn't much, but it does have some. In the most kindly view of what the legislature enacted, the CBOC is very much like an independent press organization. This is not subject to debate, it's right in the enabling statute. Your district would rather it be a public relations organization beholden to the district, but that's just wishful thinking.
The following language lays out the authority and power of the CBOC. It is quoted directly from Education Code 15278(b).
That subsection ends by stating the CBOC "shall convene to provide oversight for, but not be limited to, both of the following:" and then cites two constitutional provisions regarding what the expenditures may be used for. Even though the provisions are substantial and specific, note that the CBOC's authority is explicitly NOT LIMITED to those provisions.
It matters little if the CBOC has authority and power, if your district works against the CBOC to prevent it from exercising its authority and power. While the CBOC has no power to require your district to do more than the Act requires, it does have the power to report on the tactics your district uses to nullify or otherwise negatively impact the oversight function.
You're relying on the CBOC to report. One of the your remedies is called a School Bond Waste Prevention Action (15284) to prevent the misuse of bond funds. It is available for both restraining and preventing expenditures. The most effective way to stop misuse is restraint, which means stopping the misuse before the money is spent. In order for the CBOC to report misuse to you, it must know, in advance, what is planned to be spent, not in the abstract, but with specificity. It's very easy to bury misuse of funds when high-level totals are reported. It's much harder, although not impossible, to hide misuse in detailed, transactional expenditure reports.
Below, I've broken down the primary areas over which a CBOC may assert its authority and power.
You'll notice that in the following sections, I presume that the CBOC will have something negative to report or that your district will not like what the CBOC wants to report. That's intentional. Your district will justify anything that it possibly can to spend bond funds instead of general funds. It doesn't matter that those things are prohibited explicitly by Proposition 39. Then there's also the matter of the now prevalent practice of intentionally violating the terms of the Proposition 39 bargain by failing to inform the voters, before they vote, the "list of the specific school facilities projects to be funded" by the bonds. I guarantee you, your district will misuse funds in violation of the constitutional provisions of Proposition 39. It's for the kids, after all. That's the mind-set that the CBOC is up against. Unfortunately, that may be the mind-set of a majority of CBOC members as well.
Create bylaws
The bylaws of any body lay out its procedures and rules for its internal operation. If the CBOC is saddled with bylaws, procedures, or rules controlled by your district, it may as well not meet at all. This is the primary method that your district and its lawyers use to control the CBOC. Since your district has no statutory authority over the CBOC, its actions are void.
Set meeting dates
Your district, most likely, wants to watch its CBOC like a hawk. It sets up meeting dates that are convenient for the staff -- business days during the workday or shortly after the close of the workday.
Set meeting agendas
Your district wants to control the agenda. It sets up a standard agenda that suits its purpose and simply posts it for each scheduled meeting. For one, this is a violation of the Brown Act. The agenda is always the same. The public cannot possibly know what will be discussed or acted upon without doing a lot of digging.
Post agendas earlier than the required minimum
The primary reason that your district posts agendas on the last possible day is to avoid public notice to the greatest extent possible. The Brown Act sets the minimum notice. Also, recognize that there are things that the CBOC may do that are outside the scope of the Brown Act, such as purely internal business. As the lawyers will claim when you ask, the Brown Act only requires that the public be given "inquiry notice."
Request written reports (keep meetings short)
This is, perhaps, the best strategy you can use to get your district to come clean. While you can't demand written reports, you can certainly ask and then report on the failure of your district to provide them. The advantage of written reports is that the reporter has to put it in writing. This also obviates the need for staff or vendors to attend a meeting. If you let your district staff or vendors report orally, the report can always be misunderstood or disputed later. If your district still wants to report orally, that's fine, but the reporters will be much more brief, which keeps your meetings short and on point.
Your district may want to bamboozle the CBOC with irrelevant reports, like status updates, work-in-progress, plans, and other facilities management detritus that the CBOC has no jurisdiction over. The CBOC may be drawn into this irrelevant propaganda because human beings like stories. The district has plenty of stories to tell. Your only authority surrounds expenditures. Expenditures are boring, except to the extent that they expose misuse of funds.
I recently had occasion to examine the Measure A CBOC for Vacaville Unified in Solano County. The CBOC meets monthly. Each month it gets a 60+ page report generated by a computer system designed to generate all kinds of reports. The reports contain charts, use color, and are generally visually pleasing to the eye. The reports include money from the general fund, developers fees, state program funds, and two different district bond funds. The reports are broken down by project, and cover past and future time periods, show budgets and account summaries, and even something claiming to be a Committed Costs Detail Report. With all these bells and whistles, there is not a single report that lists the warrants (checks) that were issued against the Measure A bond funds for any period. This is information-overload-to-avoid-oversight at its best. Do you think anyone on the CBOC asked for all these reports? Do you think anyone on the CBOC knows how to read the reports? Do you think the CBOC reported to the public the summary $600,000+ for district payroll buried in the report? Do you think the CBOC has ever questioned any expenditure?
Request the assistance of counsel
When questioning any expenditure, your district will invariably bring in its hired guns to tell the CBOC that it's permissible. What is the CBOC to do? Unless there is a very committed member with expertise in Proposition 39, a rara avis, the CBOC's only options are to acquiesce or find outside counsel (not necessarily a lawyer). The problem for the CBOC is that it has no money to pay for counsel and your district is not likely to pay, so you're back to acquiescence. Ultimately, the CBOC should never acquiesce. So what can it do? Report the entire dilemma to the public. Once the reporting process has started, however, don't stop on a promise from your district will pay for advice for the CBOC. This is the time to get further concessions from your district.
Create subcommittees
Depending on the amount of money authorized or the speed at which your district spends the money, a CBOC may find itself overwhelmed. Rather than have the CBOC members meet more often, use the concept of subcommittees to delegate work to small (non-quorum) groups of members. For more information about the use of subcommittees, see Robert's Rules of Order Newly Revised, but note that they will be referred to as committees in that book. Supplement the subcommittees with non-CBOC members who have an interest in keeping your district honest. They are likely to be much more willing to help because of pre-existing interests. A subcommittee should only be permitted to make recommendations, which the CBOC will then consider at a meeting.
Appoint external investigative subcommittee
If the CBOC is not getting the kind of cooperation it expects from the district or vendors, it might be prudent to create a subcommittee to investigate why. The reason to appoint an external committee is that the CBOC already likely has a lot to deal with in this situation and it could end up going down rabbit holes instead of fulfilling its mission. If a significant minority of the CBOC are being throttled by the majority, the minority may wish to create an informal subcommittee among themselves to find out why.
One hazard for CBOC members is getting off track. Bond programs are huge and it's easy to succumb to the bright-shiny-object syndrome. Sometimes individual CBOC members and other times the public may get the CBOC off track. You can presume that the public doesn't know the CBOC's limited purpose. The CBOC is not a sounding board for general comment about decisions that are outside of its jurisdiction. When the public does attend CBOC meetings it's often to complain about what your district or its governing board is doing and not about expenditures of bond funds. Shut that down early and often.
Request prospective expenditures for review
Prospective expenditures is likely to be the most contentious area within the CBOC's jurisdiction. The district will likely attempt to withhold information from the CBOC based on vacuous public records exceptions. Don't let your district get away with it. At the very minimum, the CBOC can report to the public that your district is withholding prospective expenditure information.
Clearly, if the expenditure is prospective, the amount is not set in stone. If your district is allowed to get away with withholding information from the CBOC until it is "made public" at a governing board meeting, where it will likely be approved, then the CBOC's mission will be frustrated. There will be no chance the public will know of misuse of bond funds until it has already been either spent or, your district's favorite sand-bagging term, "committed."
Request prospective contracts for review
Besides contracts themselves, there may be other kinds of communications, such as e-mail, memoranda, etc., between vendors and your district that would help the CBOC to understand the nature and estimated amount of the expenditure. It's the nature of the of the expenditure that is most important to the CBOC in the performance of its oversight. Nevertheless, this will be another contentious area, since your district is in the process of negotiating contracts or reviewing bids. These internal district activities can stretch for weeks or months. If your district can hide the nature of the expenditures during this time, the CBOC will be surprised by the expenditure suddenly being approved as a done-deal at a governing board meeting. Your district may choose to redact certain identification or price information, but the bulk of the materials are not protected from the CBOC. The CBOC is not making a public records request, it's requesting review of materials under its own specific statutory authority.
Request checkbook statement for deposits and withdrawals from the fund
Your district will likely take one of two stances with respect to expenditure information. It will either give the CBOC minimal summary reports or it will swamp the CBOC in paper reports. What it will never willingly do is provide you the details of each expenditure, so much the better to hide how the money's being spent.
As pointed out earlier, your district's main purpose is to spend the bond funds as fast as it can for public approval and political gain. Almost all of the facilities management and program management reports, while useful to your district in keeping track of its interests, are of no value to the CBOC. The CBOC's entire mission is to reconcile expenses against the restrictions placed on Proposition 39 funds. If the CBOC ventures to much beyond its mission, your district may perceive that it is trying to manage the whole facilities program. While there are a few areas where the CBOC may look at cost-savings and such, that kind of evaluation will likely fall on deaf ears anyway, because it's highly speculative and your district has broad discretion in making decisions.
Request a checkbook statement for ALL facilities-related expenditures from any fund
This was a new one for me. (It continues to reinforce that my predisposition to trusting people is completely misplaced.)
This actually happened at Washington Unified (Yolo County). The district spent almost $4,000,000 out its general fund and other funds that are not subject to CBOC oversight. Then, in a single transaction, transferred the entire amount out of the bond fund into its general fund for reimbursement to the accounts that had made the payments. It was done at the end of the fiscal year. There was no detail on what all that money paid for. It was just done. The auditor for the financial audit didn't blink an eye in its report that was delivered five months later.
This is a note (an important comment, in auditing parlance) excerpted from the financial audit for the fiscal year ending June 30, 2016.
Transfer from Measure V General Obligation Bonds Fund to other District funds to reimburse the funds for Measure V related project costs.
$3,851,529
The CBOC didn't question it. There was absolutely no oversight. This is the entirety of the only substantive language that the CBOC placed in its annual report (all two pages of it). Most of the language (underlined) is comprised of quotations from Proposition 39.
Conclusion
Based on the Performance and Financial Audits as presented, the Committee has concluded that expenditures have only been "for the construction, reconstruction, rehabilitation, or replacement of school facilities, including the furnishing and equipping of school facilities, or the acquisition or lease of real property for school facilities" and that no funds were used for any "teacher and administrator salaries and other school operating expenses", and in accord with Measure V.
Measure V Citizens' Bond Oversight Committee Annual Report to the Public / December 12th, 2016
In the entire report, there is not a single mention of the amount of bond funds that were expended. How has the CBOC met, in any way, its duty to report to the public? This is compelling evidence that it's a committee of cheerleaders.
The funny thing, if you can call financial fraud funny, is that the CBOC's statement is false. It didn't use the auditor's language. It replaced the hedging language of the auditor's summary with a conclusive statement that ALL funds had been expended in compliance with Proposition 39.
Designate the dissemination methods and content for reports
Throughout this article, a common theme emerges that the CBOC should not leave anything to chance. Your district, no matter how good or bad it is, has a certain level of status and respect in the community. It's perceived as the authority. People, generally, believe it unless they have reason not to. When it comes to reports, the CBOC should separate itself from the district to establish its independence and create its own reputation in the community. A reputation is built up over time. It will take a series of reports before the public generally is even aware that it exists. Start this reputation-building process from the beginning.
Your district will start off trying to make the CBOC its partner or a part of its family. Disabuse it of that idea early on. Everything should be done at arm's length.
Come up with a reporting plan without getting any input from your district. Don't consider any district objections when creating the plan. It needs to be the best plan to fulfill the CBOC's duties. The Act doesn't specifically say what the reports are, but it does state in several places that the reports are for "the public." That clearly includes more than parents. How many times does the public (without a child in school) go to any school or district web site in a year? Zero, unless it has a problem caused by your district. The Act says that your district must provide the CBOC "sufficient resources to publicize the conclusions." Resources, according to any project manager, are people, time, and money. Once the CBOC has come up with its reporting plan to reach "the public," it's ready to negotiate.
Review the materials provided for the audits
The CBOC needs to know a little about how audits work. The auditors are not all-knowing, accounting gods. CBOC members should get a copy of a recent bond financial audit and a recent bond performance audit and read the entire cover letter that the auditor provides. Basically, it's boilerplate with a lot of hedging thrown in to protect the auditor. The major responsibility for the accuracy of the audit is on management, your district. Therefore, it's important to know what your district is providing the auditor. As the modern saying goes, garbage in, garbage out. The problem for the CBOC will be getting its hands on the materials that the auditor is given.
The performance audit is especially problematic because your district will claim everything was spent on voter-approved projects, when in fact, there were no projects for the voter to approve in the measure. The auditor is getting paid by your district, out of bond funds no less, so there is a built-in conflict-of-interest for both your district and the auditor. No one wants the auditor to make negative findings. So guess what? Negative findings are never made.
Review the contracts for the audits
The contracts for an audit predetermine the outcome. A lot can be learned, in advance, from the contract, including the name of the managing auditor. Questions can be raised, even at this early stage. Does the managing auditor have any relevant experience or certifications? What other bond audits has the managing auditor done? Ask for examples. Is the managing auditor on the State Treasurer's approved list? It doesn't need to be a long list, but it can definitely put the auditor on notice that it's being observed.
Create reports for the public
Of all the authority and power that the legislature has granted to the CBOC, the power to report to the public is its greatest power. It's an indirect power in that it relies on your district providing the mechanism and funding to disseminate the reports and it relies on the public to use the reports to put political or legal pressure on your district to correct abuses.
While posting reports on your district's web site is a relatively cost-free dissemination method, it is passive in that it relies on the public to be interested enough to look for the reports. Therefore, it is important to get your district to agree to, early on, the scope of the active dissemination that it will provide for the CBOC. If agreement has not been achieved early, your district will have a litany of arguments against providing any other dissemination methods. Ideally, the CBOC should also get your district to set aside an actual dollar amount specifically for reporting in your district's annual budget.
Have a Plan B for Dissemination
In a perfect world, the CBOC could rely on your district to follow the law. There's an old adage, not a legal principle, but one of force, that says "Possession is nine-tenths of the law." The district possesses both the channels of dissemination and the money to effectuate it. Think back! When your district wanted to get the bond passed, it had no trouble making its case to the public using public resources, regardless of the criminality of that dissemination. (See Education Code 7054.) The amount of money your district spent to get the bond passed is as good a benchmark as any for what an appropriate amount of funding for the CBOC reporting function might be.
I'm not aware of a CBOC ever disseminating its reports via an active method directly to the public. In this era of instantaneous electronic communication, it should be both easy and inexpensive. Facebook, Twitter, and other social media are not direct active methods of dissemination. Direct active methods are postal mail, door-to-door, telephone call, and e-mail.
Designate the content for pages to be placed on your district's web site
Almost all districts mix the CBOC web site with the district's own propaganda web site. DON'T LET THIS HAPPEN. The CBOC's message will be swamped by your district's propaganda and promotional efforts. It also makes the CBOC look like it's just an appendage to your district. The Act requires that your district provide the CBOC with a web site. The Act says "web site," not a page on your district's web site buried under ten levels of menus. This is one case where the CBOC can demand it, so do so. Get agreement that the CBOC will determine ALL content that appears on its web site.
Report Retaliation
Retaliation can come in two predominant forms. Direct retaliation against individuals and indirect retaliation by a technique called slow-walking. Districts are experts at both. Districts deal with all kinds of people -- students, parents, personnel, activists, and reporters. When an individual feels mistreated (legitimately or not) or when an individual simply wants to speak out against a district policy or decision, too many districts now employ dedicated public relations personnel to deal with a "problem" individual. Especially with respect to public records, districts have a team of lawyers that are able, ready, and willing to abuse the law to prevent the disclosure of materials that your district suspects may be used to bring it into disrepute.
Most of the time, your district will have already retaliated against opponents of the bond measure by not placing any opponents on the CBOC. Less frequently, your district will find that it's appointed a CBOC member who has gained undo influence over the CBOC members to the extent that the CBOC actually reports misuse of bond funds.
Congratulations if you've read this far. Your district feeds a lot of misinformation to CBOC members. There are a lot of strategies that CBOC members can avail themselves of. The effective application of knowledge is power.
I can't possibly cover all the situations that may exist, because I don't them all. What I hope you'll take away from this article is a methodology that you can apply to any specific situation that is thrown at you.
When the CBOC has written statutory authority and they have opinions of biased lawyers or advisors, the CBOC can prevail.
Copyright © 2015-2024, Richard Michael. All Rights Reserved.