Citing years of poor record keeping, the New Mexico Public Education Department stripped the Española School Board of its financial responsibilities until further notice.
Department Budget and Finance Analysis Bureau officials, on Nov. 17, wrested control of the District’s finances following a two-hour, closed-door meeting with Budget Bureau Director David Craig, Superintendent Eric Martinez, District Finance Director Myrna Garcia and the District’s Attorney Geno Zamora, to name a few.
Following the meeting, the Department released a letter, dated Nov. 17, memorializing the meeting.
It notified the Board and Martinez of the state’s decision to relieve the District of its fiduciary responsibilities.
In the four-page letter, Secretary of Education Hanna Skandera attributes her decision to issues that surfaced during this year’s budget-building process and prior years’ financial reporting.
“Events occurring over the last six months raise serious concerns regarding the fiscal management and accountability of Española Public Schools,” the letter bearing her signature stated. “Multiple issues identified during the FY17 operating budget development and the FY16 actual revenue and expenditure reporting led the PED’s School Budget and Finance Analysis Bureau to conclude there has been improper recording and/or reporting of information of public school funds.”
The takeover comes less than a month after Craig placed the District on financial watch and nearly two-and-a-half months after presumably 1,000 taxpayers with Concerned Citizens for Better Education filed a petition with the Public Education Department.
“We the undersigned taxpayers of the Española School District, Dist. #55, request the New Mexico Public Education Department assume financial responsibility of the Española Public School District and its Board for egregious malfeasance and violation of state laws, rules and regulations,” the petition states.
Under the term of the financial watch, District finance officials must submit monthly revenue, expenditure, tax levy receipts and cash reports, instead of submitting them quarterly, as is customary.
Public Education Department Public Information Officer Robert McEntyre said the Department opted to take action instead of waiting to see how the financial watch worked out because further review revealed an urgency that didn’t exist when Craig issued the Oct. 18 financial watch letter.
McEntyre didn’t elaborate on what changed in the time between Oct. 18 and Nov. 17 that prompted the District to take immediate action.
Board President Pablo Lujan criticized the move because he said the Department didn’t give the District enough time to correct the issues outlined in the Oct. 18 letter.
He wanted to know why Department officials just uncovered the problems, especially if they believed the poor accounting practices date back to 2010.
Unlike Lujan, both Board members Yolanda Salazar and Ruben Archuleta took great satisfaction in the Department’s decision to intervene in the District’s finances.
Archuleta said he supports the measure because during his time on the Board, he has disagreed with many of the District’s purchases.
“I think it was important because we were misusing our funds,” Archuleta said. “I don’t mind spending our money in the classroom, but when you spend thousands on picnic tables and $110,000 on chairs for the basketball team, that isn’t right.”
Martinez refused to comment.
Specifically, the letter cites District finance officials’ failure to reconcile or verify the audited fund balances with the general ledger. Failure to verify that the fund balances were correct, led to the wrong information being submitted to the Department’s analyst for multiple years, going back possibly as far as 2010.
Recently-hired Garcia said in a Nov. 5 interview, that she believes the general ledger discrepancies are the result of adjustments made after the figures were presented to the independent accountant during the annual audit.
“There are concerns on expenditures of how things were paid in the past and that affect this,” she said. “Any time you make changes on your general ledger, it is going to affect all those things. So once you submit those numbers, don’t touch it. I think that is what happened in the past.”
Regulators also took notice of the District’s inability to prepare a budget in compliance with state regulations. Not only was the Fiscal Year 2017 budget late getting to state regulators, it didn’t include all the required paperwork.
While most of the Department’s grievances center around the District’s Business Office, Skandera and her staff didn’t miss the Board’s role in the financial chaos.
Skandera’s letter points to a finding that surfaced on the District’s Fiscal Year 2015 audit, that concluded the Board awarded contracts to two vendors, contrary to state law.
“The FY15 financial audit indicated that the school district also has violated the procurement code for contracting and had issues with the disbursement of cash in the past,” Skandera wrote. “The statutory framework for the operation of a public school places considerable budgetary authority and autonomy on local school boards. Ultimately, it is the local school board that is accountable for operations of the school district.”
Skandera is referring to the Jan. 23, 2014 open-ended contract the Board awarded Enchantment Painting and Fencing, LLC, and J.M. Painting and Drywall, despite neither company including key paperwork, such as contractor’s licenses in their proposal packages.
Additionally, Deputy Secretary of Finance and Operations Hipolito Aguilar expressed concern, in a separate Nov. 17 letter to Martinez, about employees intentionally sidestepping policy to make sure a handful of vendors received work from the District.
“Significant issues have been raised with the way the district manages its procurement processes,” Aguilar wrote. “A number of concerns are also raised with regard to the number of contacts awarded to certain vendors for $4,999, which appear to be a way to avoid Board approval and in total, may exceed the limit required for a procurement to go to formal bid.”
The Department isn’t the only state agency to express interest in the contracts entered into by District officials.
The New Mexico Attorney General’s Office launched an investigation into the District in April, with the issuance of an Inspection of Public Records Act request seeking information dating back to 2010.
The Attorney General’s investigatory scope dates back to the same year, 2010, which is when Department officials suspect the District’s financial issues begin to surface.
Investigators sought information on the District’s finances, including contracts entered into with Conectas, Norteño Magazine and Enviro-Klean, all owned by Joseph and Leanne Martinez-Torres; 2Smooth Marketing, owned by Rio Arriba County Commissioner Barney Trujillo; and Enchantment Painting Landscaping and Fencing, LLC, owned by Jennifer Lopez, who employs and is associated with, David Jason Vigil.
The owners and associates of the aforementioned companies are political allies of Board President Pablo Lujan and Vice President Lucas Fresquez.
Velarde resident Roiba Sanchez, who has been a staunch critic of many Board decisions, said she is pleased the Department took action.
“I think the PED made the right decision and is doing the best they can for the students of Española Valley,” she said. “I think it (the Española Valley) has been neglected and I think there has been some financial decisions made that are effecting all the schools. You can see it in the schools. They don’t have materials, schools are falling apart and our Board members are approving contracts for their buddies.”
Before the Board or District officials can award any more contracts to “their buddies,” they will have to acquiesce to a bit of micro-management, as well as a few systemic changes, but until then, Zamora said all financial decisions will be made by state regulators. They will, in turn, issue a report to the Board, in an effort to keep them abreast of the District’s finances.
To regain budgetary and fiduciary autonomy, District officials must hire a Level II business manager to monitor the finances.
The new official will work with Garcia, who was hired this past summer to replace Jeanette Trujillo. Trujillo was fired by former superintendent Bobbie Gutierrez and was responsible for the District’s finances for most of the time in question.
The pair will be responsible for correcting past audit findings, including making sure the District follows the procurement code and keeps better track of cash disbursements.
That person will also have to provide Department officials with a list of corrective actions and present the District financial reports to state regulators in a timely manner for six consecutive months.
This isn’t the first time the Department has intervened and stunted a school board’s power. The Department took over all of the Questa School Board’s functions in 2012, but that district has since had its decision-making capacity restored.