A newly released audit of Stockton Unified School District found substantial evidence of fraud, misappropriation of funds and other possibly illegal fiscal practices.

The Fiscal Crisis and Management Assistance Team, a state agency that works with California’s education agencies to identify and resolve financial and operational problems, had conducted an “extraordinary audit,” which is a comprehensive examination of the fiscal issues of the school district.

The FCMAT report recommended that the San Joaquin County superintendent notify the governing board of SUSD, the state controller, the state superintendent of public instruction, and the county district attorney about the possible findings of fraud and possible violations of the state’s Brown Act laws regarding public meetings.

“Make no mistake, any attempt to commit fraud on the backs of our children will be prosecuted to the fullest extent of the law,” said San Joaquin County District Attorney Ron Freitas in a news release after the audit was released. “Our children are our most important resource. Their education, and the environment in which they learn, is one of my most pressing priorities.”

“Make no mistake, any attempt to commit fraud on the backs of our children will be prosecuted to the fullest extent of the law.”

Ron Freitas, San Joaquin County District Attorney

Stockton Unified School District serves almost 40,000 students.

According to the report, the governing board is required to notify county superintendent Troy Brown of its proposed actions within 15 days of receiving the audit report findings.

One of the findings from a 2021-22 county Civil Grand Jury report on the district was that its “projections indicated that there would be a budget deficit of more than $30 million in fiscal year 2024-25.”

Read the Fiscal Crisis and Management Assistance Team’s full extraordinary audit report on the Stockton Unified School District. (Image via FCMAT)

The report said if the deficit happened, it could prompt layoffs and the elimination or reduction of student programs.

In May 2021, a district employee had met with members of the San Joaquin County Office of Education (SJCOE) to discuss concerns about “procurement irregularities in a contract with IAQ Distribution Inc.”

IAQ Distribution Inc. is a distributor of indoor air quality monitoring and disinfection devices.

Three months later, another employee reached out to the county office with similar concerns, the FCMAT report stated.

Early last year, the SJCOE had requested that the state agency conduct the extraordinary audit after the SJCOE received allegations of possible fraud, misappropriation of funds or other illegal fiscal practices at the district.

The total estimated cost of the study was $50,000, according to the report.

Victoria Franco is a reporter based in Stockton covering San Joaquin County for Bay City News Foundation and its nonprofit news site Local News Matters. She is a Report for America corps member.