8/15/08

Teachers unions in toxic political spill

Related story: "The 28 labor-states"

Audit finds questionable political spending

Over the past two years, the Teachers Association of Long Beach (CA) appears to have used general fund money for political expenses and may have spent at least $110,000 more on its election campaigns than union leaders had authorized, according to an audit obtained by the Press-Telegram.

The California-based audit firm Hemming Morse Inc. was hired by the statewide teachers union - the California Teachers Association - to investigate allegations of fiscal mismanagement at its Long Beach chapter.

The CTA assumed control of the Long Beach union last October amid a leadership controversy that pitted TALB President Michael Day and then-Executive Director Scott McVarish against some members of the union's board of directors seeking McVarish's ouster.

McVarish announced his resignation from TALB in February.

The audit, unsealed as part of a lawsuit, analyzed TALB finances to determine whether the union properly managed the funds earmarked for election campaigns in 2006 and 2008.

The union spent funds on behalf of school board candidates in 2006 and 2008 and on Long Beach City Councilwoman Gerrie Schipske's successful run for council two years ago. Schipske works for TALB as the union's attorney.

The audit found that:

Political expenses appeared to have been paid with money designated for the union's general operations, and not from separately maintained accounts reserved for political causes.

The amount of campaign spending appeared to have exceeded the totals approved by the union's two governing bodies.

Loans for campaign expenses were taken out by the union and repaid in ways that apparently had not been approved by union leaders.

Barbara Kerr, whom CTA placed in charge of TALB as trustee in October, said that the union has addressed the problems in the audit through new policies and procedures.

"We have taken care of all of those issues," she said.

Use of accounts questioned

TALB maintains separate accounts for union operations - its general fund - and for its political affairs. Teachers can choose not to have their dues spent on political causes.

But auditors found that TALB appeared to have used $39,629 from its nonpolitical accounts for campaign purposes, according to a copy of the audit, which was based on the firm's review of financial documents and employee interviews.

Of that total, $10,667, which had been designated for bargaining expenses, apparently was spent on political items such as postage, a banner, campaign photography, legal services and other purchases, the auditors concluded.

They concluded that the money should have been allocated to the union's separately maintained political fund.

Because union members designated specific amounts of their dues for politics, the use of TALB's financial resources for political activities "would be considered a misappropriation of funds," auditors concluded in their written findings.

Also part of the $39,629 total was a nearly $29,000 check from TALB general funds made out in August of 2006 to attorney Fredric Woocher for the payment of legal fees. An invoice from Woocher's law firm did not specify the exact purposes of the legal services that were provided, according to the auditors.

Citing information provided by McVarish, auditors reported that the money may have been for Woocher's work defending TALB-backed school board candidates David Barton, Michael Shane Ellis and Jim Deaton in a lawsuit in 2006.

The lawsuit filed against the candidates centered on a "blueprint speech" TALB provided the candidates for their campaign in an effort "to revamp the district," auditors wrote.

TALB paid for the legal expenses in that lawsuit, the audit stated.

Woocher represented Ellis and Barton in defending them against the two lawsuits, filed by groups of registered voters, challenging the accuracy of the candidates' submitted ballot statements in 2006.

It's unclear if that is the same litigation referred to in the audit.

If Woocher's invoice was for legitimate legal expenses relating to the campaign, the money should have been allocated to the union's political accounts, auditors concluded.

Barton, Deaton, Ellis and Woocher could not be reached for comment Friday.

Union President Michael Day, who in 2006 was on the TALB board and was co-chair of the union's political action committee, said that after the audit the expenses were reviewed by CTA-affiliated experts.

Those experts concluded that some of those monies were for member communications and legal services that were legitimate general fund uses, he said.

When asked whether Woocher's legal work on behalf of candidates would be considered political spending, Day said, "I don't have that information in front of me."

Kerr said the problems were resolved.

"Members know that they have the option to be involved in political action or not," she said. "They do know that, and the problems were fixed."

But Dale McVey, a TALB board member whose lawsuit led to the unsealing of the audit, questioned Day's response, especially the legal work Woocher's firm allegedly performed for candidates.

"Obviously, general funds were used for (the political action committee), which violates the rights of the members to decide whether they wanted to participate in political activities are not," he added.

The audit, which covered the fiscal years 2006 and 2007, did not find any apparent irregular expenditures during this year's school board elections, in which TALB backed two unsuccessful candidates.

Amounts scrutinized

Auditors also raised concerns about whether the 2006 campaign spending had exceeded what was authorized by the TALB Board of Directors or the union's Representative Council, a policy-making body made up of teachers elected at school sites.

Both the board and the Representative Council under TALB rules weigh in on financial affairs of the union.

Citing a review of the minutes of a January, 2006 TALB board meeting, auditors concluded that the board had approved a $380,000 budget for the 2006 election campaigns.

But TALB ledgers showed that at least $490,305 was spent on the 2006 campaigns, about $110,000 over the approved budget amount, according to the audit report.

TALB campaign finance filings with the state show an even greater amount of union campaign spending for the 2006 election: $543,481, the auditors found. That total is more than $53,000 greater than that shown in the union's general ledger and about $163,500 over what the board budgeted in January for the 2006 races, Hemming Morse staff concluded.

Auditors "did not see approval of the additional expenses in the (TALB) board minutes or Representative Council minutes," auditors concluded in their written findings.

Day said he was not aware at the time of any overspending and said he doesn't believe that the overspending was done knowingly.

"We spent more than was budgeted," said Day, adding that procedures now have been improved. "That's it. How was it done, I just don't have the particulars in front of me."

Some unaware of spending

TALB board member Dale McVey, whose lawsuit led to the unsealing of the audit, said that board members were kept in the dark about campaign spending.

Despite asking for them, board members were not presented with budgets for the political action committee activities or accounts of political spending, McVey said.

Board members not serving on the political action committee often were not even told the times and locations of the committee meetings, he said.

"They were held outside TALB offices in secret places, and we had no idea where they were," McVey added.

McVey, a strong critic of Day and McVarish, alleged that the overspending was too large not to be purposeful.

He also alleged that the excess amounts were kept from the board and Rep Council.

McVarish, who could not be reached for comment, has denied any wrongdoing during his tenure at TALB.

It shows a total lack of accountability for our senior staff and executive officers, because they bypassed the board (and) the Rep Council," McVey added. Loan repayment criticized

Auditors also scrutinized three loans that TALB took out in 2006 for campaign expenses, totaling $318,000, according to the report.

Those loans were secured with money set aside in the general fund. Overall, $345,856 in restricted general funds was used as collateral, a practice Hemming Morse criticized.

Such political loans "should not be secured with funds from the general fund as that restricts cash ... necessary for the payment of the ongoing operations of TALB," auditors wrote in the report.

It appears that the loans "did not receive adequate approval prior to being executed," the auditors concluded after reviewing minutes of Board of Directors and Representative Council meetings.

Minutes of a September 2006 Rep Council meeting indicate that the first two loans, totaling nearly $250,000, "were taken out without proper Representative Council approval," auditors wrote.

The minutes, which understated by about $20,000 the total amount of the first two loans, indicate that the Rep Council did not vote to approve the loans.

Auditors noted that the third loan - for $70,000 - was executed before the TALB board voted to approve the loan in a special meeting on April 24 of 2006.

In addition, auditors did not find evidence that that either the board or the Rep Council approved using general fund money as collateral for the loans.

Auditors also criticized the method by which portions of the loan were repaid.

Hemming-Morse noted that in late 2006, the union began assessing teachers $6 per month for a special political fund dedicated to supporting the union's 2008 political campaigns. The union apparently paid off a portion of the 2006 loans by using a political fund that had been earmarked for the 2008 political races, auditors found.

Kerr said that such problems, like all those pointed out in the audit, have been fixed.

Day said that at the time he thought that proper procedures were followed.

"There might have been problems with our procedures and some of the ways that we deal with our finances," he said. "But through the audit and through a lot of work, we rectified a lot of those problems, or virtually all of those problems."

When asked how funds earmarked for the 2008 campaign could have been used to pay off the 2006 loans, Day said that he did not have information immediately available to answer the question.

Audit controversy

Kerr said in her communications with members she did not tell them specifically of the audit's findings that general fund money may have been spent for political purposes.

Kerr said that teachers, including members of the Rep Council, were told that the audit had found that mismanagement occurred and that the problems have been fixed due to new procedures and policies.

"The membership was kept informed," she said.

The TALB board of directors has not made a decision on publicizing the audit's contents, as the document mentions individual employees and therefore contains personnel information that is not appropriate to disclose, she said.

But TALB board member McVey said that members have the right to see details of the audit, such as the political spending issues.

"It's the members' association," he said. "It's the members' money ... Of course they have every right to know."

McVey obtained a court order unsealing the audit as part of lawsuit he and other board members filed last year demanding TALB financial documents and a union membership list.

(presstelegram.com)

No comments:

Related Posts with Thumbnails