Education

Sweetwater Drowning in Financial Scandal

Written by Amanda Williams

In the latest installment of the Sweetwater fiscal scandal, there is now evidence that the School District was well aware of the mismanagement months before it was publicly released. A prior audit revealed that the financial trouble is a result of raises that were approved in spring 2017. Attempting to argue their innocence, District officials claim the raises were practical and accounted for, even though the audit indicates the officials were aware that the raises would inevitably result in insolvency within a few years.

At the time, the chief financial officer was supposed to discuss the raises with the District Superintendent, but it remains ambiguous as to whether the Superintendent ever received the projections. Regardless of whether the Superintendent overlooked the plan, Sweetwater board members moved forward and approved the 5.25 percent raises.

As a result, it led to $30 million in overspending, which led to a decrease in transportation, technology, staffing, and teacher planning time. The District officials, of course, claim that the knowledge of the overspending was only apparent in September 2018—a little over a year after the approved raises.

Interestingly enough, back in March 2017, the finance director at the time, Doug Martens, presented the instability of the financial plan to the financial director. He even showed the math as a supplement to the initial numbers. Looking at his data, in light of what subsequently happened, his predictions were extremely close.

The District is required by state law to have an emergency fund. For Sweetwater Union High School District, the fund is expected to be $9 million. But with the raises, Martens highlighted that the District would be without the $9 million for a year—and insolvent within two years. At the end of the 2017-18 school year, Sweetwater was short $4 million and on track for insolvency.

There were some slight discrepancies between Martens’ calculations and the eventual outcome from the 2017-18 school year. Martens based his numbers off a projected 7.25 percent raise, but the District only approved a 5.25 percent raise. However, even removing two percent from Martens’ original calculations, Sweetwater would still have had the present situation and would still go underwater within two years.

Attempting to dispute Martens’ calculations, District officials are claiming Martens did not account for other grants that would remove another 1.5 percent. The removal of the additional 1.5 percent from the calculations, though, only results in the delay of insolvency by a year.

Martens made it look like the District was spending less money so that the raises would appear affordable, which only aggravated the consequences. Moreover, numerous employees caught the miscalculations and voiced their opposition as far back as February 2018. However, the District continues to deny any allegations about knowledge of the miscalculations before September 2018.

Despite the uncertainty of who else was aware of the faulty spending, Sweetwater is definitely in hot water. Two investigations—one by the fiscal crisis team and one by the SEC—will take place, revealing the true gravity of the situation and whether Sweetwater will be charged with financial fraud.

 

Photo by Ian Espinosa