CCSD’s systemic problem and its expensive consequences, Part 8

In October 2013, the executive director of the administrator union for the Clark County School District was highly agitated.

The reason? A school trustee was offering draft policy guidelines for the school board’s review.

Although the guidelines seemed normal for government officials — requiring them to publicly disclose conflicts of interest — Stephen Augspurger adamanatly insisted that he took great offense at the draft rules.

Augspurger, chief of the Clark County Association of School Administrators & Professional-Technical Employees (CCASA), thought he saw within one draft insulting “insinuations” that one or more district administrators might be doing something improper.

“Specifically,” he told trustees, “if you go to section 12, in 6.04 and read through that language, I hope that you, as I, will take offense to what is being said there.”

Whereupon — standing before the district board of trustees — Augspurger continued through a remarkable seven-minute public diatribe [mp3 recording here] lambasting Trustee Erin Cranor, the most recent editor of the heavily marked-up draft.

Augspurger’s criticisms that day, if examined, appear to largely reflect his own lack of attention to trustees’ actions: For months the board had been making changes in its governance policies to allow stronger fiscal oversight of the district. Part Seven of this series reported that board activity in some detail.

But what was perhaps most remarkable in the union chief’s remarks was that he seemed to object in principle to any board effort to state clear policies against corrupt activity within the district.

Said Augsburger, referring to section 12 of that draft:

Because I think the insinuation there is [that] there is wrongdoing occurring in the Clark County School District. And I think the only logical outcome, by reading that paragraph, is that wrongdoing is being done by administrators.

I think that’s a disservice to the people that I represent.

Multiple years of hidden CCSD administrator corruption

As would soon become public information, however, corruption of significant scope had been ongoing for a minimum of seven years in at least one corner of the district’s central office — under the noses of top administrators.

At the very time Augspurger was addressing trustees, a long-running theft ring was plundering the district under the orchestration of a trusted and effectively unsupervised CCSD administrator, Priscilla Rocha.

As news stories throughout 2014 and 2015 would detail, Rocha, while pulling down a significant district salary, was also operating the theft ring from behind her directorship of CCSD’s Adult English Language Acquisition Services (AELAS) program.

The gang, organized and led by Rocha:

  • Stole tax dollars from the district through bogus purchase orders;
  • Stole district computers and other equipment, then snuck them across the border into Mexico;
  • Stole fees from students who were told their money would purchase dictionaries;
  • Funneled that money into a hidden Rocha bank account;
  • Used the student fees to purchase a hair salon, as well as pay her mortgage and car payments;
  • Billed CCSD for district “ghost” employees who actually worked for Rocha, personally, cutting hair in the salon;
  • Paid members of the ring in other states as CCSD “language tutors” for work they did not do.

When Rocha was finally suspended from her director job in March 2014, she was annually pulling down, according to Transparent Nevada, some $141,000 in salary and benefits. Although some of that income ended with her criminal conviction, she will still receive a taxpayer-funded Nevada PERS pension for life — approximately $71,000 annually.

CCSD internal controls effectively non-existent

The wreckage Rocha left in her wake, however, went well beyond her damage to CCSD finances and hardware inventory.

She had also demonstrated that the district’s internal controls were effectively nonexistent. For one thing, her own immediate supervisors — going up the chain: Dennis Lizotte, Bradley Waldron and Associate Superintendent Edward E. Goldman — had never recognized what their supervisee was doing, throughout the years of the gang’s thievery.

According to Rocha’s indictment, the theft of CCSD money began in 2005 and continued through 2013, sums increasing throughout. In 2009, reportedly, oversight responsibility for Rocha’s department had been transferred to the district’s Student Support Services Division, led by Charlene A. Green, who retired in 2011.

Significantly, Rocha’s misappropriation of equipment and money appears to never have been flagged by CCSD’s extremely expensive SAP Enterprise Resource Planning finance and purchasing modules — implemented for those two divisions over the previous decade at costs of at least $68 million for that period alone.

Improving “internal controls” had been the primary rationale behind the original 2001 commitment of the district — prodded by auditors — to invest in and implement a modern Enterprise Resources Planning (ERP) system.

Instead, according to the district, what brought the years of AELAS looting to light was an old-fashioned whistleblower complaint, which in December of 2013 finally reached the superintendent’s office.

Experts say that well-designed ERP systems minimize the risks of employee thievery and fraud, as well as mere negligence, by integrating best business practices into the system’s design.

Seven years ago, David Sundaram and Max Erik Rohde delivered a paper on the subject at an international workshop on enterprise and organizational modeling.

The paper was titled, “Mal-processes: Explicitly Modeling the Deviant.”

When executing a particular process, a user may intentionally enter incorrect information into the database, or modify the existing data in the wrong way: for example execute an incomplete business process, or execute a wrong branch of the business process, or even create a new branch of a business process that is undesirable. We argue that these situations mostly could be avoided at the design stage, rather than having to dea1 with them as they occur.

Four types of “mal-processes” that need to be addressed at the design stage are highlighted by the authors:

  • Conflict of interests between an organizational unit (here we assume a representative of the unit who is a direct user of the system) and the whole organization.
  • Excessive workloads of the organizational units: as a result a part (or even the whole) of the business process being neglected or being executed in a careless fashion.
  • Very deliberate violation of the normal process because of material, pecuniary and/or immoral incentive/reasons.
  • Organization and/or individuals may adopt mal-processes without realizing they are mal-processes (mal-processes by ignorance).

What the Rocha affair strongly suggests is that the repetitive customization of the CCSD ERP purchasing module during the 2005-2010 period — as demanded by the purchasing and warehousing director at the time, Bramby Tollen — may well have removed important best-business-practice processes that SAP integrates into its default ERP interface.

Technical experts have told Nevada Journal that most of the customization demanded by Bramby Tollen on CCSD’s new system was to make its user interface resemble that of the district’s previous, obsolete, R-STARS accounting system — one with which Tollen had used for years, and thus found comfortable, but one that was intended to be replaced, having been deemed inadequate on multiple grounds.

While CCSD had contractually pledged to adopt the SAP default system and reengineer district management processes to conform to the best business practices designed into the software — Tollen herself having signed many of the contract’s pages — CCSD upper management eventually backed away from that commitment and sided with Tollen, notwithstanding the contract.

Over the protests of the assistant superintendent for business at the time, Keith Bradford, as well as independent implementation consultant Ken Forrest, the customizations demanded by Tollen were approved by then-superintendent Walt Rulffes and then-CFO Jeff Weiler.

Elena Rodriguez-Malfavon — a longtime CCSD employee who worked closely with Bradford and Forrest during the effort to bring the ERP system online — notes that directors of the departments originally planned to be reorganized to exploit SAP’s built-in best-business-practices implementations, had reason to fear, delay and even sabotage a successful SAP implementation.

“I think,” she told Nevada Journal, “that they were trying to secure their jobs.

“I had to work very closely with the payroll and benefits department as they were implementing their SAP modules. The problem was, [with] a lot of these modules, once this automated system worked, the individuals that headed those departments were not going to be as necessary anymore.

“All this knowledge that they held in their mind[s] now was to be transferred into software, making them less essential — as now the software contains the knowledge that previously only the individuals had had,” said Rodriguez-Malfavon.

The Sundaram and Rohde white paper — as well as many other reports from the ERP implementation industry — acknowledged that sabotage and damage of ERP systems by existing employees during the implementation phase is common.

Today, given the incapacity of CCSD’s crippled ERP system to register the Rocha thefts, the need for a serious forensic audit of CCSD’s ERP software, as well as district finances, appears undeniable.

The Rocha matter does not exhaust CCSD’s financial irregularities in recent years, however.

CCSD top administrators hid deficits from the Board of Trustees

Late in the very day that Trustee Erin Cranor had learned of a proposed but controversial new insurance arrangement — Sept. 23, 2013 — CCSD board minutes for a closed meeting show, according to a Las Vegas Review-Journal story, that

[then-district CFO] Jim McIntosh told the board that former Superintendent Dwight Jones, who had resigned four months earlier, had directed Business Benefits to hide the deficit by using reserves to cover it.

While that statement misstated BBI’s actual role in the cover-up, its account of the superintendent’s role was correct.

The news story did not report which CCSD deficit and which reserves were being referenced. However, when Business Benefits, Inc. (BBI), sued CCSD in May 2014, one of the particular complaints itemized seems to have shed explanatory light.

The district, said BBI, had broken its contract with the firm by interfering “with reserves dedicated to payment of premiums” for the health insurance of education-support employees.

In August 2011, continued BBI, its predictive modeling had accurately forecast the size of insurance reserve needed by the health plan for district support employees: $5.5 million annually — a forecast later validated by the actual numbers of CCSD employees enrolled that fall. Additionally, CCSD informed BBI that the district had approximately $30 million standing by in its accumulated insurance reserves.

Afterward, however, top CCSD management changed its mind and “directed BBI to remodel the benefits plan” so that contributions paid by members of the Education Support Employees Association (‘ESEA’) union would be less, while benefits remained the same.

While that change increased the size of the subsidy needed from the reserve account, said BBI, it still was under the $30 million ceiling.

However, continues the complaint:

Upon information and belief, without regard to BBl’s projections and the subsidy requirements necessary to fund employee insurance premiums, CCSD used the insurance reserve funds necessary to subsidize the insurance benefits plan employee contributions to fund Education Support Employees Association (“ESEA”) union member PERS retirement contributions and cost of living salary increases….

Upon information and belief, following discovery of a multi-million dollar deficit as a result of the use of insurance reserves’ funding of ESEA employee benefits and salaries, CCSD’s then-Superintendent Dwight Jones communicated that it should be “buried” in the CCSD budget. As BBl’s duties were to CCSD, BBI did not interfere with CCSD’s proposed solution. (Emphasis added.)

Asked by CCSD to remodel the benefits plan to “make up the deficit,” says the complaint, “BBI provided the requested extra-contractual work.”

But for years thereafter, continues the complaint, CCSD “failed to disclose the true facts relating to the deficit to the Board of Trustees and other interested parties, which resulted in unfair accusations against BBI.”

When two potential witnesses to be called during the BBI-CCSD litigation were deposed — administrators’ union chief Stephen Augspurger and CCSD counsel Carlos McDade — both characterized these accusations against BBI as unfair.

In his deposition, Augspurger — who’d been at the heart of the negotiations, as well as the district’s long-term relationship with BBI — explained notes he had written when speaking with CCSD Chief Negotiator Edward Goldman and DeRosa. “$526” had been the “official” per-ESEA-member contribution, but “$607” had been the actual final contribution. “Picked up by the district because Weiler mucked it up” referred to the per-member difference of $81.

Top CCSD administrators cut and ran

Until suddenly resigning in mid-2013, Jeff Weiler had been CCSD chief financial officer. He left not long after Dwight Jones himself had unexpectedly resigned, halfway through his four-year contract.

The total shortfall hidden from trustees had been $7 million, according to Augspurger’s notes.

For his part, McDade during his 2014 deposition insisted on maintaining that the shortfall had not constituted a “deficit,” because the funds had never been officially designated as “special” or “reserve” funds.

“Again, I don’t characterize them as reserve funds. They were funds. It was money that was in our budget that we had collected. And the money was used, some money, let’s say, was used for — not for health insurance.”

A year earlier, however, CCSD’s new superintendent, Pat Skorkowsky, had very much seemed to still see the “shortfall” as a “deficit.” And he, like Dwight Jones before him, seemed eager to get BBI to somehow help the district out of another, or the same, district “deficit” problem.

According to two different depositions, the relevant scene took place at the office of lawyer and former county commissioner Rory Reid. There, Skorkowsky and his chief of staff, Kirsten Searer, were meeting with Reid and Reid’s client: the owner of BBI, Tim DeRosa.

The meeting — in either September or October of 2013 — had been arranged, said Reid, because he and DeRosa hoped to clear up what they characterized as unfair and damaging allegations about DeRosa and BBI they’d learned were circulating within the district.

Additionally, DeRosa wanted to clarify details of the 2.25 percent commission his firm had hoped to receive on the new 2014 ESEA health plan he’d negotiated with Health Plan of Nevada for the district, a commission which appeared to be roiling district waters.

However, when DeRosa had “presented the document containing the 2.25 percent figure” to Skorkowsky and Searer, according to DeRosa’s sworn deposition, “there was no reaction from any of the participants at that meeting to that figure.”

Instead, both Skorkowsky and Searer, according to DeRosa, skipped very rapidly through the document,

… almost as if — it’s almost as if to glance at the first page, glance at the second page, nod a head and in an acknowledgment and awareness of what was on each page, and then very rapidly move to another issue, which is the deficit that Pat was very, very, very concerned about being repaired. And I could sense that his focal point was truly, “Okay, how about this deficit, can we fix this deficit?” (Emphasis added.)

The real reorganization

Multitudes of stories of financial improprieties circulate unceasingly in the Clark County School District — suggesting that corruption of various levels is either a constant within the district or that the whistleblowing teachers, staff and administrators who share those tales with Nevada Journal, and beg it to investigate, are infected with some sort of mass delusion.

If the reorganization of CCSD mandated by the state and governor in 2015 is to be meaningful, it must also accomplish change on this fundamental level.

Perhaps the district needs an IG — an independent inspector general or auditor authorized to look into every significant complaint and expenditure. For too long, too much of the CCSD administrative apparatus has effectively been answerable only to itself.

Trustee Kevin Child has recognized this and argued for a thoroughgoing forensic audit — to look more deeply into CCSD finances than what is provided by the yearly, often pro-forma, external audits.

“We need to know now rather than later how much the district actually has and what the money has been obligated to,” he has said. “A healthy organization does not fear a close look to make sure it has brought itself up to date on best practices for budget formation and management.”

“If we’re going to turn the district upside-down,” Child remarked in February, referring to the reorganization, “then let’s turn the piggy bank upside down to count the change.”

This story was  updated 6-3-2017 with the addition of new details regarding the early years of Rocha’s misappropriation of funds and also the final location of her department within the CCSD structure. Small language edits were further made for the sake of narrative clarity on 12-19-2020.

Index to the complete, eight-part investigative series.

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Steven Miller is the longtime managing editor of Nevada Journal.



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