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Portola Valley schools: Audit shows lax oversight

Original post made on Jun 26, 2012

What has emerged from the recent forensic audit of the school district finances overseen by Tim Hanretty is a picture of a spending and accounting system without oversight.

Read the full story here Web Link posted Tuesday, June 26, 2012, 11:00 AM

Comments (18)

Posted by PV Rez
a resident of Portola Valley: Central Portola Valley
on Jun 26, 2012 at 1:18 pm

This is a perfect example of how when the tide goes out, you see who's swimming naked. Simple checks and balances were clearly lacking. Explanations and/or resignations should be forthcoming without further delay! It's not personal and I have genuine empathy for those who at the center of this debacle. But if you made mistakes contributing to this train wreck, it's time to go. Redemption is virtually unattainable, the ire will only grow louder.

Posted by Hang 'em all
a resident of Portola Valley: other
on Jun 26, 2012 at 3:24 pm

PV Rez, you are on to something!

Let's start by demanding that all administration leave, all board members resign, the district auditors reimburse the district, the county finance team that reviews and approves the bdugets resign, county superintendent quit, plus the foundation board, PTO board, site council boards and all the parents who had a chance to volunteer or run for school board and chose to sit on the sideline or worse yet lobby for favors on behalf of their kids. You think these are all bad, stupid, uninformed people? The explanations have started - go to the Woodside and PV board meetings to learn more.

We have a problem, it stems from one individual who was able to deceive two boards, two administrations, two independent auditors, parents, community members and county experts. We are the same community that applauded when they combined the Supt and CBO positions to save money and we all trusted in someone who didn't deserve it

I prefer to be part of solving the problem, not sniping from the sidelines with complaints and no rational solutions (we apparently have PV forum for that)!

Btw, congrats to the almanac for finding a topic that causes people to comment - I expect to see many more articles to support their Pulitzer nomination!

Posted by Agree w/ pv Res
a resident of Portola Valley: Central Portola Valley
on Jun 26, 2012 at 3:54 pm

Although I do not believe that "everyone" should resign, I have to ask the question if the schools are in turmoil (financial), we blame 1 midlevel/high level employee (accused embezzeler/poor manager) and we go on our merry way. There needed to be oversight of the man/position and it falls on auditors/board members. This is a recoverable situation, but will be painful for students. Either folks are not qualifed for this oversight position or were not willing to do it. Either way, they should be embarrassed enough to consider why they won't be fooled a second time or have the ability to deal with other unpleasent issues that may arise. If it were me, I'd move on or make the case why I am staying. I haven't heard much at the meetings or in print.

Posted by Who's in Charge?
a resident of Corte Madera School
on Jun 26, 2012 at 8:50 pm

It is nothing less than ridiculous how the people who were and are in charge (the Board) act abashed and thus innocent. They are the ones, last year, who merged the accounting and Superintendent position. Now, they want credit for reversing their previous work?

They are supposed to be providing oversight which did not happen.

I don't think it is any way mean-spirited to say that resignations from the school board are appropriate, and the new members and those remaining should look for a fresh approach as this is just a symptom of what doesn't work.

Posted by POGO
a resident of Woodside: other
on Jun 26, 2012 at 8:58 pm

The parties can point fingers but the blame belongs to all of them.

If the allegations are true, shame on Mr. Hanretty who is a criminal. But Mr. Hanretty reported to the board who is supposed to provide oversight. They are responsible for failing to implement even the most basic financial controls. Would you hold the board of directors of a company in the private sector responsible if they were equally delinquent?

There is no excuse for this lack of oversight.

Now, we should focus on solutions... but not forget how this happened.

Posted by curious
a resident of Woodside School
on Jun 26, 2012 at 9:34 pm

just curious (and no flame intended). If someone wants to cheat and does so, and then reports false info or no info as it appears to be in this case, what exactly would/should the board do differently? They have to make decisions based on the information that is presented. The charges in Woodside happened with a Superintendent, CBO and board 4-5 years ago, should the Woodside board resign as well since they didn't catch this for 5 years?

Seems like we are collectively judgemental and convinced that our opinions are correct, even though none of us know as many facts as we should. I'm guessing the reality is more complex..

Posted by tom94301
a resident of another community
on Jun 26, 2012 at 10:18 pm

When can you trust another human being? In Mr. Hanretty's case, it took me about a month to discover that I could not trust him. Not sure why it took others so much longer. Of course we all should presume innocence for now.

Posted by Menlo Voter
a resident of Menlo Park: other
on Jun 27, 2012 at 7:48 am


if the board was being presented NO information then they are guilty of gross negligence as it is their responsibility to provide oversight. If they were being presented with no iformation they should have been demanding that information for review.

Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Jun 27, 2012 at 8:19 am

Peter Carpenter is a registered user.

My opinion as to the facts is limited by what has been made public but my opinion about the responsibility of elected officials needs no other fact than they took the California Oath of Office which includes "that I will well and faithfully discharge the duties upon which I am about to enter."

The buck stop with the board - if they did not know then they were responsible for not insisting that they be better informed.

And what actions have the board taken to ensure that, going forward, that they are fully informed?

Posted by POGO
a resident of Woodside: other
on Jun 27, 2012 at 9:29 am

My point is that if this happened to a private sector company, we would be railing against the board for being asleep at the wheel.

And so it is for this school board. It is THEIR JOB to oversee the Superintendent. These alleged crimes didn't take place over a short weekend - there is a long and consistent pattern of problems with this individual.

Posted by Alfred Parent
a resident of Woodside School
on Jun 27, 2012 at 11:24 am

I am unprepared to find fault with the respective boards. The entire purpose of annual audits is to certify that the financials are consistent with those which have been publicly presented. I have perused the most recent couple of audits during Hanretty's tenure and in my opinion there is not a clue, not a hint that any untoward accounting would be a possiblity.

Of course the audits also include what appears to be pretty standard language qualifying the scope of what is being certified. Perhaps the boards or their counsel could be faulted for not having that scoping language reviewed.

A sincere question to Peter: you seem certain that equivalent malfeasance did not occur during your tenure on the Fire District Board. What specific controls did your organization have in place and what specific actions did you as a board member undertake which gives you this degree of confidence? I wasn't at the PV Forensic Audit presentation, but I am extremely dubious of the reported auditor's proposal that the separation of Superintendant responsibilty from that of CBO would somehow precluded the abuse that occured. Once you get a key person in the position to be able to forge documents and invoices you are going to have a vulnerability. Hanretty's authority was limited to his Asst. Superintendant duties when his Woodside abuses occurred and escaped scrutiny at that time.

That said, my impression is a positive one of the PV board attempting to get out in front of this and presenting the financials transparently, including prominently posting the complete content of the forensic audit on its website. Note to Woodside Board: where is the equivalent Forensic Audit of the Woodside district? When will there be a meeting equivalent to the PV board/community meeting with a presentation of the audit details? All I've heard so far is a very qualified statement that currently the WESD does not have evidence of actual missappropriation to Hanretty's direct benefit.

That said, I remain very skeptical that the very first case of Hanretty's actual misappropriation is the one that was caught even though he has had significant budget responsibilities for more than a decade. I just think it very unlikely that somebody wakes up after 12 years on the job and says, after acting ethically for all of this time, today the lure of embezzling is just too great to resist. Just to be clear though I say this without any actual evidence.

But I do have some questions about the PV audit:

1) As I read the audit, FY 2001 remains unreviewed because any all financial documents are missing. You have got to be kidding me that this is allowed to stand by itself. As I understand it, PV was at the 3rd year of $17.5M construction bond/project that was directly overseen by Hanretty during this time. Given that the abuses that are known to have occured have been primarily in conjunction with construction projects, this would be where I would want to start looking, not where I would want to end. Is there going to be any followup?

2) WRT to the disbursements from the PV solar project, two of the most significant amounts were to the project architect and unqualified disbursements to the school's IT contractor. I don't wish to unfairly heap scrutiny on likely innocent parties, but both of these itemizations cause me concern. As previously discussed Hanretty and the architect had a concurrent personal project relationship along with the school project. The potential for abuse seemed limited when I thought we were talking about just the architect's direct charges to the district, but as the audit points out, the architect was receiving the "customary" 15% markup for overseeing specific sub-contractor items. Something like 2/3'rds of the amount disbursed to the architect fall into this class, and as the audit points out this amount was disbursed directly to the architect rather than properly being disbursed directly to the subcontractors. Has a full review of each and every one of these invoices been undertaken?

3) WRT the school's technology contract vendor, I also want more details to be fully assured that this was always an arms length transaction. The fact that unqualified disbursements occured from the solar project without anything more than an invoicing of "technology infrastructure" seems exceedingly unreasonable to me. Again, I want to clarify that I have no specific evidence of abuse here, but I would think both parties would want to fully vett this relationship to move forward into the future. Moreover, am I being just too paranoid when I note the coincidence that Hanretty was raised in Marin, and the technology contractor shares that identity in its name?

There's more, but this is long enough for now....

Posted by Peter Carpenter
a resident of Atherton: Lindenwood
on Jun 27, 2012 at 12:11 pm

Peter Carpenter is a registered user.

Auditors perform to a certain minimum standard but can and should be DIRECTED to go beyond that standard. It is up to the board involved to set the standard.

ALL of the public and non-profit boards on which I have served required our auditors to examine exactly the types of transactions which occurred in this case and they also required random audits of financial transactions not normally reviewed. It is ludicrous to suggest that private dealings with an agency contractor by a CEO or COO would not be subject to audit.

" Once you get a key person in the position to be able to forge documents and invoices you are going to have a vulnerability. " It is a serious board fault to allow ANY one individual to complete any financial transaction without a second signature and any auditor that signs off on such a practice is guilty of malpractice.

Posted by Board Responsibilities
a resident of Corte Madera School
on Jun 27, 2012 at 2:22 pm

I agree with the posters who are indicating some burden of responsibility lies with the school board. They actually authorized the realignment of the administrative structure to create a dual accountant-superintendent position. The did not conduct adequate audits or even exercise common sense financial awareness- where was all the extra money coming from for technology, consultants, and staff?

Furthermore, they chose a non-educator to head the school district, authorized and approved very rapid and disruptive changes in the program structure at the school, and have given a rubber stamp to a change for the sake of change approach. Remember, the school is Distinguished and top ranked according to common school ranking systems. What is the problem the board is trying to "fix"?

Overall, it very much seems like a group of people "playing school." They (the board and their administration) seem to have gotten too caught up in day-to-day teaching when their actual job is to provide oversight, general direction, and let the professional teachers keep on teaching...

Posted by POGO
a resident of Woodside: other
on Jun 27, 2012 at 6:33 pm

Part of any audit committee (read: school board or corporate board of directors) is to ask the auditors the difficult questions.

Audits ROUTINELY examine transactions from origination to approval to delivery to payment, especially large transactions. By doing this, the auditors trace who ordered the service or product, who approved it, who received it and who paid for it. It is a lack of financial controls if employees can order a product, approve the purchase order, receive it and pay for it. When the same person performs all of those functions, it isn't a big red flag, it is a HUGE red flag.

Sometimes, especially in small organizations, this is unavoidable. When that happens, the audit firm - at the explicit direction of the board - digs deeper into those large transactions and views the asset and questions the vendor. As I said, this is ROUTINE.

That didn't happen here.

Posted by Really?
a resident of Portola Valley: Los Trancos Woods/Vista Verde
on Jun 27, 2012 at 7:33 pm

I was at the meeting where the auditor gave his/her report. It was very general and in my opinion needs to be much more fully fleshed out. What was shocking to me was a 1.) how few people were there--I went early as I thought it would be flooded with people; 2.) how few people had questions. There were just 4 people who asked questions; 3.) how short the meeting was--I think there needs to a long community meeting and all questions should be answered or at least allowed to be asked. 4.) when someone from the audience (who did identify herself) countered the statement by the board president that "no one up here (meaning the school board, the interim Superintendent who was then hired that night as the Superintendent, the county personnel) was here when this all happened" she was summarily told to stop talking. It was actually pretty shocking. The now Superintendent was the Asst Superintendent at the time of Mr. Hanretty's tenure. And what was the MOST shocking is that there seems to have been NO oversite for YEARS of anything financial at the school district. This went way beyond this current school board. It was actually practically impossible to believe that the Lane trust, the receipts for the various school improvement projects etc. have NEVER been overseen. This town was just waiting for a sociopath to pick them off just like he did Woodside. The fact (is it) that no one believes the Hanretty did any more than has been discovered when it was clear from the auditor that they don't really have many receipts for any work, the the Lane loans to the teachers are spread throughout their personnel files and that Hanretty had exaggerated how much the teachers took out of that $200,000 pot. When asked where the rest of the loan money went the auditor said it was a "phantom" accounts receivable to the district. I'm sure it was "phantom" but since there was NO accounting, how do we not know Mr. Hanretty or his partner has a beautiful home in Mexico or Hawaii or Tahoe that none of us know about. It all was so sketchy that I thought it was almost like a silly television program---wealthy little town gets taken to the cleaners by someone that as Alfred Parent says "just couldn't resist" after 12 years as an administrator? Are you kidding me? Clearly there is more since both Woodside school district and Portola Valley are out $2 million and no one knows where it went. Maybe Woodside had better records.

What was also disturbing was when the woman from the Sequoia school district explained what it took (going through 4 entities) to secure a loan for any California school district, I thought but wait in Woodside he borrowed another million without anyone's approval. And when the question was asked if he never put the proper receipts through the county to pay for the project that as one of the board members pointed out "the solar panels are there." Didn't any of the 4 entities who approved the loan (the school Board being one of them) notice that there weren't any real receipts, just sloppy accounting shown for them. And the the proper channels weren't gone through? How come they can approve a loan and then no one asks where the money went.

Finally (and like Alfred I have more but will stop) I find it hard to believe that this group of school Board members who all have one might say have extreme financial success in their own lives would allow themselves to be hoodwinked like this when their own houses were built. Hard to believe when one of them said "I have no expertise in this area." Really? When you were building your home you never looked over receipts? Don't know what they look like? Wouldn't have questioned expenditures that weren't quite clear? I find that hard to believe.

All that said, it's impossible to beat a sociopath at their own game. Look at Woodside with all that oversight, but once again not really. Everyone I've ever asked about this said "Tim's too nice a guy, he'd never do anything wrong. He just didn't want to deal with all this red tape that goes on in school districts." Wow. This is really sad. I say we need to have more answers, a long discussion where people can get all their questions answered, and obviously a double signature process and audits every year--I don't know if anyone else noticed, but there AREN'T yearly audits in this school district!

Posted by priorities
a resident of Portola Valley: other
on Jun 27, 2012 at 9:17 pm

We are all in this for the children. The children need to see and learn from the adults in the community. We all need to participate in creating a positive school environment. One where administrators/board members demonstrate they care about the education of all students by being approachable, supportive of students/teachers/parents, honest, positive, responsible.... Right now the negative energy is palpable by all including the children. There are people in high positions who don't connect, don't follow policy, don't follow through, promote favoritism, do not know how to lead, and create a divisive environment.
There has been an investigation and reflection with blame on one person. We need to take a closer look at all members of this working unit- Instead of promoting from within why are we not demanding to open all admin/board positions and have a outside/impartial group hire the best candidates for the job. That may mean the current admin/board, but we don't know what is possible if we don't open ourselves to all possibilities/options.

Posted by Matt R.
a resident of Woodside: Skywood/Skylonda
on Jun 28, 2012 at 11:22 am

Matt R. is a registered user.

For anyone who looks at the details, it's pretty obvious that there has been very lax oversight in our district for many, many years. I too fall into that camp as I thought "The PV schools are great! We all cut checks to go above and beyond! We have a Foundation that helps channel the money! Everyone cares and tries to create the best environment for the kids!" I trusted that all was good and I was wrong. Only when things got "outed" did I learn of the magnitude of the problems. Once I learned that, I chose to take the time to somewhat self-educate via the available documentation, and was shocked to learn that there have been problems for years.

No one can deney that lax oversight has been a chronic problem for much longer than it's comfortable for many to admit. No one can deny that many cooks in this kitchen made a particularly awful meal. But to some extent, this is all known now. While it would be nice to have tons of "I'm so sorries!" and falling on swords, really that's not the point. What is the point is how do we go forward here?

Internal controls: S. Lepley is putting in the accounting infrastructure that should have been there all along. That's the best that can be done (for money managment oversight) absent a time machine. Auditable processes will be in place that will significantly reduce the chance that a lone actor can screw the pooch are a much needed improvement.

Input mechanisms: While not yet final, there are discussions about hot to implement a Budget Committee internal to the PVSD structure to help get a more broad and representative group of voices to give the Board input about priorities and concerns, as well as to be more effective in communicating to the varied interests and the community at large about why specific actions were or were not taken. Others in the community are "self-assembling" to create a group where the sea of single voices can be aggregated to form a more coherent voice (backed by numbers) to allow imprved communication with the district. Both of these bode well for a more responsive system that is more representative of the actual desires of the community while recognizing the contraits of the current financial situation, policy and regulation. This is all good as well, and frankly, past due, but then there's that pesky problem of the time machine again.

That leaves one of the questions about what additional lessons can be learned by digging deeper into the details of the past? One of the prime motivators I see for looking backwards is the possiblitiy of recovering money. How much money would we have to be able to recover to justify the effort? I personally have no clue. Another is about what we can learn about past worst practices so that we can avoid those and implement best practices. But to be frank here, I think we already know what we need going forward (at least with regards to money): Competitive bidding for expensive items; Internal budget controls; Inpvroved oversight, both internally and externally.

This is all about the money and handling it responsibly. I'm pretty confident that we're actually on a good path here.

The next big item to tackle isn't about money: It's about confidence and/or priorities. Many are no longer confident that our community can trust that we all collectively have a system that works for running the schools. This isn't just about the board, it's about everything from the board, the superintendants office, and the support of the community. It's easy to point fingers at others, but we, the community, also failed to take a good look at what was happening, placing trust (or just plain apathy) inappropriately and hoping for the best.

Right now, if each parent put in about $2300 per student, we'd have the deficit paid off and the reserves rebuilt. That's a lot of money, above and beyond what we give to the foundation each year. But it's not such a shocking number as to be undoable. But I'm pretty sure that many are like me, and won't even consider giving that amount unless my confidence in responsive governance is restored.

I don't think that most of the backward-looking questioning about specific expenses will yeild much fruit. We paid for (mostly) what we paid for, and if it wasn't something we should have bought, I don't see how we can return it. The governance that we elected (the board) did what they did with the management team that we all know about, and decisions were made. We hold the board accountable at election time, and we hold the managment accountable via the hiring process.

Personally, I'm looking for more constructive ways that we can build a better future. How can I contribute to an improved process going forward? (And yes, constructive criticism is one of those tools that I think is fair game.) If we fail to create a positive future, I'm pretty sure some (maybe many) will just give up and put thier kids in private schools... There are many in the district that can afford to do that. Then we have even less students and the finances get even worse...

That's it for now....


Posted by A. Parent
a resident of Woodside School
on Jun 29, 2012 at 1:37 pm

Kudos to your thoughts for PV, Matt.

Wrt Woodside, a few points I'd like to add/reiterate:

1) Where is Woodside's forensic audit from the period covering Hanretty's rein? From everything I have heard of the Board's priorities, it is committed to improving communication and transparency. I suggest posting this result and following up with a community / board discussion as has happened in PV would be valuable.

2) When the WES modernization bond was approved in 2006, a bond oversight committee was appointed (as was legally required). The last report from the committee is listed as June 5, 2007, with a concluding statement that a final report is anticipated in 2008 after undertaking of a final fiscal and construction audit. I do not see any additional followup. Were any additional meetings held? Was a final report issued? Did a final audit ever take place?

As I understand it, the WES board approved a construction completion loan at their Oct or Nov 2008 meeting in the amount of approximately $600K to be repaid over 6 years. One day later after this meeting, Mr. Hanretty is apparently alleged to have taken out a $2.6M loan for a period of 21 years. As I understand it, taking out this loan allegedly required creating a fraudulent / forged document. I for one would be very interested in hearing the details of how this was believed to be accomplished. I would like to make certain that no one individual has the authority to actually sign of on school indebtedness going forward.

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