AUDIT REVEALS MISMANAGEMENT REPORT: DISTRICT CONSTRUCTION HAD LACK OF OVERSIGHT.

Byline: CONNIE LLANOS  Staff Writer

SANTA CLARITA -- A highly anticipated audit of escalating construction costs revealed mismanagement of funds and lack of oversight in the rapidly growing Hart high school district.

The 30-page report reviewed Wednesday night for the first time by the board of the William S. Hart Union High School District found that the district had too much centralized power in its finance department and no clear delineation of funding sources and expenditures.

The audit was ordered after Rory Livingston, the assistant superintendent of business services, was ousted amid questions of overspending for the renovations of three district campuses, Saugus and Canyon high schools and Arroyo Seco Junior High.

It raised serious questions about the lack of detail in the district's records for construction expenditures.

``Because the funding of each project is unclear, it begs the question of whether the projects were commingled for the purpose of obscuring this very discussion,'' Letty Boggs of Colbi Technologies Inc., wrote in the audit report.

Still no one has been formally accused of any wrongdoing, district officials said.

The audit concluded that original construction budgets presented to the board were incomplete and low-balled, funding sources were combined and dispersed inappropriately and there is insufficient funding for planned projects.

The board briefly discussed the audit behind closed doors because of the potential of a lawsuit involving Livingston. State law allows such legal matters to be discussed in private, Hart Superintendent Jaime Castellanos said.

``There's a lot I know that I can't tell you. I wish I could, but I have to protect the district,'' Castellanos said to reporters after the board meeting.

Castellanos assured that while the audit brought some serious issues to light, he wants the district to look forward.

``This is why I wanted to do this audit,'' Castellanos said. ``Now I can make sure we don't deviate one step from what we need to do.''

Board President Paul Strickland said the board had requested detailed information on construction funding from the finance department but never received it. Strickland specifically cited occasions when Livingston told him the information he was requesting would be overwhelming.

``We would ask for it and he would say that the documents would be 2 to 3 inches thick,'' Strickland said.

Livingston has been unavailable for comment during the course of the audit and its aftermath.

Auditors recommended that the board require that more administrators participate in major projects to better track budgeting and spending, record funding sources and individual projects separately, and open communication during the entire construction process.

The audit was ordered after the three renovation projects peaked at nearly $43 million over budget.

In June, the board agreed to buy out Livingston's contract for $234,000 -- though no payments have been made.

The audit describes seven key points in which ``the district processes and documentation reveal several deficiencies and some serious financial concerns.''

Budgets provided to the board were ``cursory'' and incomplete, the document said. Specifically, the budgets included just hard costs -- the construction spending -- and omitted land costs, soft costs such as architect and engineering fees, and contingency costs usually added to budgets to cover unforeseen costs.

Money was improperly commingled -- funding for new construction was mixed with the money for modernizing the schools, in violation of state guidelines when using state funding.

The audit also highlighted the fact that one administrator oversaw construction. Just last week, the board approved the hiring of two administrators to cover Livingston's former duties.

``You don't have the person ordering the checks writing the checks,'' Boggs explained.

Project funds were improperly supplemented as needed with fees paid by developers for new construction and modernization, the report said. Such developer fees may only be used for schools serving the particular development, and district records do not show sufficient proof the fees were spent appropriately.

Finally, money-saving strategies were ``inadequate or nonexistent for management of projects,'' the report added.

As a result, the district is short on funding and has been forced to drop projects, including plans for performing-arts centers at Canyon and Saugus high schools.

The board will continue to review the findings, and discussion will be scheduled for another meeting.

Board member Gloria Mercado-Fortine said the audit helps answer lingering questions.

``There were certainly areas, which were substantiated in the audit, where we knew that we didn't know how projects were being funded, what the actual costs of project were, and how certain change orders were impacting project budgets,'' Mercado said.

``I definitely concur that some of our business practices need to change, but the question is where was the oversight.''

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