Audit supports allegations of problems with bond money at City College
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A much-anticipated audit of City College of San Francisco's spending of bond money finds that school officials promised voters more than they could possibly deliver and then didn't allow proper oversight of hundreds of millions of dollars in public funds.
A minority faction on City College's Board of Trustees has for years sought a performance audit of the school's bond projects, which includes $441.3 million authorized by voters during elections in 2001 and 2005. The audit by Sacramento-based MGT of America was released June 4.
The faction, led in large part by longtime trustee Milton Marks, often publicly quarreled with former Chancellor Phil Day over the matter, arguing that Prop. 39, a state ballot measure that passed in 2000 and made it easier for school districts to get voter approval for bond financing, legally required full annual performance audits of its capital spending on new classrooms, laboratories, a gymnasium, and a performing arts center.
But school administrators denied they were necessary or claimed that the cursory, more limited financial audits done each year met the legal mandate. Pressure on Day's administration finally became insurmountable last year as San Francisco's District 12 state Assembly Member Fiona Ma began threatening to have the state conduct its own audit, offering deeper scrutiny and wider disclosure than City College officials were perhaps prepared to stomach.
"My overall feeling is that we appreciate their efforts, accept their findings, and will implement all of the recommendations," a conciliatory Vice Chancellor Peter Goldstein told the Guardian in response to the report.
While mostly mild in its language, the audit shows that the school may have violated state law by granting several small contracts to the same construction companies so City College could avoid the headache of competitive bidding.
The state's Public Contract Code requires that projects costing more than $15,000 go to the lowest responsible bidder through a competitive process, a provision designed to save money for taxpayers. But between 2005 and 2006, the community college entered into seven separate no-bid contracts with one construction firm totaling $83,545 for work at its Cloud Hall facility on Ocean Avenue.
"It's unfortunate that two of the project managers were not aware or did not appreciate the importance of that rule," Goldstein said. "They've been counseled and we don't expect to have any more occurrences of that type."
The auditors found "similar multiple contracts" totaling less than $100,000, Goldstein said where the work should have been combined into one larger contract and approved by the school's independently elected Board of Trustees.
The audit reserved special criticism for a bond oversight committee required by Prop. 39 to watchdog the school's capital spending. The Guardian reported last year that such committees in other districts, for example, West Contra Costa County routinely received full performance audits and met more often than City College's oversight committee (See "Who's following the money?", 07/10/07).
But the group of citizens here, which includes San Francisco Treasurer José Cisneros and former San Francisco Chronicle publisher Steve Falk, who's now head of the San Francisco Chamber of Commerce, has done far less than what the law asks it to do.
The report says that one oversight committee member, who goes unnamed, told the auditors that it wasn't the committee's responsibility to determine how City College actually spends the funds. The auditors also watched former Chancellor Day tell the committee at a January meeting that its reach was limited solely to ensuring that City College complied with certain provisions of the state's Constitution.
That turned out to be totally untrue. "The intent of this law is to provide a broad oversight role for the committees, thereby encouraging cost-effective use of bond funds," the report states.
"Many of these things that are in the report are things that people on the board have been saying all along," Trustee Marks said. "We really shouldn't have had to spend $250,000 for someone on the outside to tell us this."
The original estimate for all of City College's ambitious bond projects amounted to about $539.7 million, and the school has offset many of those costs by securing tens of millions of dollars in matching funds from the state. But as of January, the total cost has ballooned to $968 million. Last year the Guardian reported that the school gutted several projects promised to voters by "reallocating" roughly $130 million from their budgets to save other projects suffering from skyrocketing cost overruns (See "The City College shell game," 07/03/07).
Trustee John Rizzo, who joined Marks in asking for an audit, said he wished the report had done more to explain why many of the projects were poorly planned, leading to millions of dollars in higher costs. He cited as examples the new Mission Campus and a health and wellness center for athletes.
Rizzo told us, "Just from what contractors say and what staff has been reporting, that still needs to be looked at."