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In November of 2016, Superintendent Gundry received an anonymous allegation that DelTerra Real Estate Services, Inc., DBA Del Terra Group fraudulently billed the Alum Rock Union Elementary District for construction and program management services.
The focus of the allegations included:
Due to the serious nature of the allegation, Superintendent Gundry requested that the Fiscal Crisis & Management Assistance Team (FCMAT) conduct an Assembly Bill (AB) 139 extraordinary audit to determine if fraud, misappropriation of funds or other illegal activities may have occurred. FCMAT began its review in December of 2016 and examined district policies, procedures, and internal controls for purchasing and contractual commitments. FCMAT has completed its review and posted the report containing the study team’s findings and recommendations on their website. For the public’s reference, please
visit the report link.
Education Code Section 1241.5(b) permits a county superintendent of schools to review or audit the expenditures and internal controls of any school district in the county if there is reason to believe that fraud, misappropriation of funds, or other illegal fiscal practices have occurred that merit examination. Such an audit is commonly referred to as an AB 139 audit. Under Ed Code, it is not the county superintendent’s responsibility or the responsibility of the auditors to determine that any of these have occurred but rather to determine whether the possibility exists and warrants further investigation.
FCMAT concluded that there is sufficient evidence that fraud or misappropriation of funds may have occurred; therefore, Superintendent Gundry is required to notify the governing board of the school district, the State Controller, the Superintendent of Public Instruction, and the local district attorney and forward the FCMAT recommendation to each of them. Mr. Gundry has completed all of these notifications.
Currently, the school district is financially independent from the County Office running their own fiscal and accounting systems. Superintendent Gundry has recommended to the State Superintendent Tom Torlakson that Alum Rock be brought back into the County Office’s systems. Superintendent Torlakson agreed with the recommendation and the County Office will be supporting the district during the transition.