Portola Valley schools: Budget crisis to lead to better oversight policies


This is an expanded version of an article published earlier.

Already struggling to address a projected deficit of $854,000 in the next school year, the Portola Valley School District has gone into high gear to try to cover an additional, unexpected shortfall estimated at more than $500,000 after auditors late last month found evidence of possible misappropriation of funds.

Failure to shore up the budget by June could lead the district into receivership and a takeover by the state, district officials announced last week.

The financial crisis, which has caused shock waves throughout the school community, comes on the heels of the January resignation of former superintendent Tim Hanretty, who has since been charged with three felony counts that include misappropriation of public funds -- allegations of misdeeds that stem from his earlier employment with the Woodside School District.

In an attempt to avoid going into receivership, the district is seeking a $500,000 loan from the San Mateo County Office of Education, a request expected to be heard by the county board of education on June 6.

School board members also will be "looking at all of our options" for spending cuts to balance the 2012-13 budget by June 30, school board President Scott Parker said.

In addition to possible funding misappropriations, which involved the spending of at least $400,000 of funds earmarked for the district's solar panel project on inappropriate purchases, the financial irregularities uncovered by auditors called in after Mr. Hanretty's resignation include underestimated costs of employee benefits, according to the district.

The exact figures and the trail of money movement in the district's budget are not yet determined, with the district's interim finance official Mark Bonnett, a team of forensic auditors, and a county-appointed finance expert scrambling to make sense of a budget that was crafted and overseen by Mr. Hanretty, who since 2010 had served a dual role as the district's superintendent and its chief business official.

At least one report, that of county-appointed fiscal expert Sandra Lepley, is expected to be completed at the end of the week, according to county Superintendent of Schools Anne Campbell, who was superintendent of the Portola Valley district before moving on to the county office.

Mr. Hanretty's attorney, Mike Markowitz, said he's advising his client not to comment about the situation. Reached last week, Mr. Markowitz said he hadn't been made aware of the development in the Portola Valley district, and that Mr. Hanretty would be ill-advised to comment on something "that might be even remotely related to the current (Woodside district) case."

The preliminary hearing for that case is set for May 24 in Superior Court. Mr. Hanretty has pleaded not guilty to the charges, but the case makes him "a target," Mr. Markowitz said. "If a quarter falls on the floor and disappears, it will be his fault."

What happened

Although not all the facts are in, auditors and Mr. Bonnett, the interim financial officer, have concluded that at least $418,000 of the money allotted to pay for solar power for the district's two schools was spent inappropriately on technology equipment, contracted staff, and general operating costs, district officials said.

Diverting the funds puts the district's $1.5 million federal subsidy for the completed solar panel project, authorized in 2010, in jeopardy, they said.

The district held a community meeting on May 2 to explain the information available at the time, and in a PowerPoint report revealed that in addition to the solar project-fund diversion, "employee benefits have not been recorded/tracked according to generally acceptable accounting principles."

The district had budgeted only $2.1 million for health and welfare benefits, although the actual costs for the year appears to be $2.6 million, the report said.

It also revealed that the district has "been spending beyond our means for at least the past two years.

"We have been covering general expenses by obtaining credit and loans that solve immediate problems but add to ongoing financial challenges."

Policy changes ahead

Community members attending the May 2 meeting voiced concerns about the type of cuts that might be made to school programs as a result of the shortfall, and questioned how the school board, which must approve budgets and sign off on annual audits, could have been unaware of the spending and budgeting irregularities now being uncovered.

Board President Parker told the Almanac that the board's practices that constituted "financial oversight were not any different from the best practices of school boards" in general, but "obviously, there's going to be discussion of future oversight ... and talk about enhanced controls."

For one thing, the board is certain to separate the positions of superintendent and financial official, "giving direct oversight to the superintendent of the financial person," he said. Mr. Hanretty had been serving in both capacities since his 2010 appointment as superintendent. He had been the chief finance official when he was assistant superintendent before that time, serving under Ms. Campbell.

The district is seeking recommendations for better oversight from the county's financial adviser and the forensic auditors, the district report said. Also, auditors in the future will present their annual reports directly to the board; before this year's audit report, the superintendent presented an audit summary to the board, Mr. Parker said.

The district will hold another community meeting at 9:30 a.m. Tuesday, May 15, in the school district annex. The board will also hear an update on the situation at its regular meeting at 5 p.m. Wednesday, May 16.


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Posted by Hmmmm
a resident of Portola Valley: Los Trancos Woods/Vista Verde
on May 8, 2012 at 12:17 pm

What continues to baffle me is that two very financially sophisticated communities, Woodside and Portola Valley, were both taken in by Hanretty. I know many of the people involved in the Portola Valley schools work. They are very sophisticated, upright, honest, very educated and good people. When I've been asking after Hanretty's problems in Woodside came to light about his work in PV, to a person they voice something like "there's no way Tim did that here and no way that he profited from what happened in Woodside." Someone who can dupe this many people in these two towns, with parent involvement at the level it is in both towns, makes me think this man has some sort of personality disorder. To have leveraged this level of power in both districts, that he had total control of finances is shocking. No oversight? Twice? Wow. It's also impossible to believe that he didn't profit in some way. Why would he take the chance again in PV when he knew he was being investigated in Woodside? We have not learned all there is to know. I know the bright and sophisticated folks in charge of PV schools will take care of this tilting ship, but some other work needs to be done not just about how to change oversight, but to change the sight of choosing someone that could do this kind of damage. Although, there is no way that normal folks can beat a sociopath at his own game.

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Posted by Hmmmm2
a resident of Woodside: other
on May 8, 2012 at 12:42 pm

+1 !!!!!!!!!

Well said.

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Posted by for the record
a resident of Woodside: Woodside Hills
on May 8, 2012 at 2:46 pm

Sociopath seems a bit extreme a term, given that not all the information is in. But one thing that is known but that Hmmmmm has lost sight of: He didn't know he was being investigated in Woodside at the time he would have done his creative accounting in PV. The investigation of the Woodside case didn't begin until late last year. Misappropriation of the solar panel funds happened well before that, so he had no idea an investigation would be undertaken. Not sure what happened with the employee cost underestimation, but the auditors haven't even been able to figure that one out yet.

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Posted by Concerned citizen
a resident of Portola Valley: other
on May 8, 2012 at 8:18 pm

Why didn't auditors, human resources, and others in position of responsibility working with Mr Henretty see this? And what about our previous superintendent, now running this investigation for the County, who recommended Mr Henretty to the position she vacated?

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a resident of another community
on May 8, 2012 at 9:52 pm

I was amazed at how much money Tim was able to muster for the seemingly endless new positions- writing specialist, supplemental teachers, redundant teachers to satisfy parent desires for choice, and the endless stream of technology.

I guess this answers that amazement in a down to earth way.

Perhaps Tim needed to be liked or approved of so badly that he had to spend to gain approval.

I think the district night want to administer psychological screening to present and future admin- it certainly has been hiring some oddballs lately!

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Posted by Westridgian
a resident of Portola Valley: Westridge
on May 9, 2012 at 8:32 am

Whatever happened to innocent until proven guilty? This seems to be a heaping of blame on someone who was an employee of the two Boards and the Superintendents--Anne Campbell and Dan Vinson(now deceased..Hmmm.) (Portion removed, terms of use.)

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Posted by Parent
a resident of Portola Valley: Westridge
on May 10, 2012 at 9:20 pm

Dear PVTEACHER, It saddens me that you don't seem to have much respect for your employer. It might be interesting for you to know that many in the community are concerned for a district that has provided a quality education for many children and what is happening is tragic. If you truly are a teacher, your message concerns the community more about the lack of professionalism from a teacher. My guess is that you are a teacher because of your references to writing specialists, etc. that more of an "insider" would know. Something you might consider instead of throwing barbs at your employer: parents are curious about what the teacher's union is doing to participate as a partner with the district to come up with ways to reduce expenses. I'm sure you have heard many parents and community members are discussing ways to help with additional revenues. The District has also clearly indicated a need to reduce expenses and has started this process with the Board meeting on Wednesday with the unfortunate reductions in classroom aides. However, the teacher's union has been very quiet. This would be the best time for the union to come to the table as a partner ready to roll their sleeves up and be part of the solution. Union leadership: any thoughts on this? It takes a team.

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Posted by susan smith
a resident of Woodside: Skywood/Skylonda
on May 11, 2012 at 10:29 am

School finance, funding cycle variations (local, state fed) and a dramatically different Sttate sacool accounting system make school boards rather clueless to the actual inner workings of a school business system. The multi-layers of government funding, and their extrememe and unpredictable slowness to pay or refund pools of money spent because law required, make this situation rather common in schools. La Honda Pescadero had a nefarious Super and the county did nothing to go after or charge him, but same type of issues. If citizens are concerned, look to the school boards you elect to keep track of this sort of thing. How financially capable are they in this school accounting system? We have only ourseleves and our government to blame.

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Posted by whataboutanne?
a resident of Portola Valley: Los Trancos Woods/Vista Verde
on May 11, 2012 at 4:08 pm

I don't think that Anne Campbell is leading the investigation----I believe that honor belongs to the D.A. However, it does make you wonder at the level of trust that has been betrayed in this situation. I believe Anne to have been honest and forthright, but why was she satisfied by only having a summary of the budget presented to her, rather than the actual audit each year? This enabled Mr. Hanretty to mix and match funding even before he was made superintendent.

Tim clearly had everybody fooled. I wonder if Woodside is aware that he remodeled his house in 2007 (during his tenure there), using the same architect that did both the Woodside Elementary Remodel and that is listed doing numerous "repairs" at Corte Madera School? Conflict of interest, I would think.

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Posted by susan smith
a resident of Woodside: Skywood/Skylonda
on May 13, 2012 at 8:07 am

re. whataboutanne, if I made six figures, and my partner did too, and we had no children, we would remodel our house. too. You appear to be mud-slinging.

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Posted by s&s's parent
a resident of Portola Valley: Central Portola Valley
on May 26, 2012 at 10:00 am

[Portion removed] who knows exactly what happened for now and the first thing on all of our minds should be, doing everything in our power to assure the same level of education for the future that our children have had so far. Our school and children are far ahead of many other schools around the bay and I for one want to keep it that way, it's the closest thing any public school is to being a well run private school in terms of education and especially technology.

Sorry, but further commenting on this topic has been closed.

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