Cultivating Health, Education and Culture
August 28, 2009 Dear MACSA Supporters and Friends, This letter provides critical information and MACSA’s plans to move forward. As you all know, we have been eagerly waiting for the release of the Santa Clara County Office of Education’s external audit of MACSA’s use of teacher pension plans conducted by the Fiscal Crisis and Management Assistance Team (FCMAT). As promised in our August 11th Funders Meeting, we are sharing the report in its entirety the same day it was made available to us. We encourage you to read the whole report and would like to share a summary of the report. Allegations 1. Both Charter High Schools, El Portal Leadership Academy and Academia Calmecac, failed to forward approximately $400k in employee deductions to the designated retirement agencies for a period in excess of one year. 2. The employer portion also had not been forwarded to the designated retirement agencies. 3. MACSA used the retirement contributions to pay operating costs. FCMAT Findings FCMAT found evidence of apparent illegal fiscal practices and misappropriation of funds: 1. Failure to make timely retirement system payments is an illegal fiscal practice. 2. Failure to set the funds aside in a trust and instead, use the funds to pay for operational costs is a misappropriation of funds. Recommendations FCMAT requests that MACSA review the Findings and Recommendation in the report. It is further recommended that MACSA immediately pay all past due PERS and STRS, including any interest or penalties that have been accrued. FCMAT, in accordance with Educational Code 42638(b), has notified the state controller, Superintendent of Public Instruction, and the local district attorney. The report, on page seven, states that: “MACSA staff further indicated that all current and past due PERS and STRS contributions have been paid for employees of the El Portal Leadership Academy. All past due contributions have not been paid for employees of Academia Calmecac.” Currently, MACSA owes $175,455.38 to Academia Calmecac and is in dialogue with East Side Union High School District officials regarding a continued repayment plan. MACSA’s Board and staff are taking these findings very seriously, and are taking immediate steps to rectify past practices that have led to the current situation. In the coming weeks, MACSA will provide an official response to the FCMAT report. While the reason for the misuse of these funds was the lack of revenue to meet operating expenses, we hold ourselves fully accountable for rectifying the situation as well as ensuring that this practice has been stopped and will never occur again. To that end we have already begun the process of restructuring MACSA, focusing on operating as a sustainable organization going forward.
130 N. Jackson Avenue, San Jose, CA 95116 Phone: 408.928.1122 www.macsa.org
Furthermore, it is important to state that the employees responsible for making these past fiscal decisions are no longer with the organization and a new management structure has been implemented. In addition, MACSA has: • Fully repaid PERS/STRS to Gilroy Unified School District (GUSD) for El Portal staff • Engaged in conversations with East Side Union High School District regarding the remaining balance of $175,455.38 for Academia Calmecac • Closed and relinquished both charter schools • Appointed a new Interim CEO effective July 1st, 2009 • Conducted an agency-wide analysis of systematic weaknesses and areas of improvement • Reduced our workforce by 42% and our annual budget by 46% • Outsourced our payroll services to ADP, which is now responsible for payroll, direct deposits, year end W-2s, as well as MACSA’s tax deposits and tax filing • Currently assessing MACSA assets for liquidation • Selected Berger/Lewis Accountancy for our fiscal year 08-09 audit • Overhauled and implemented new Board policies and procedures • Initiated agency programs analysis and internal controls evaluation We understand that we are facing current as well as future challenges, and it is important to remember that for the past 45 years MACSA has been a champion in providing critical services to the community. Our organization provides instrumental services to the most underserved and underrepresented population in Santa Clara County. MACSA strategically locates programs in highrisk communities that lack positive alternatives to teen pregnancy, gang activity, violence, academic failure/school attrition, juvenile delinquency, and substance abuse. Our work is embedded in the East Side communities of San Jose and Gilroy as well as Morgan Hill. During the 2007-2008 fiscal year, MACSA served over 10,000 unduplicated clients, and 52,000 duplicated clients. Our mission allows us to serve many subpopulations within our community ranging from infants to youth to seniors. Our work impacts thousands of lives annually, and we remain firmly committed to serving our community even as we endure this critical transition in our agency’s history. We are enduring a difficult time, and have taken immediate and decisive steps to move forward. We know it will be a long road ahead of us and, with your support, we stand committed to continuing to provide vital services to our community. Sincerely,
Maria Elena De La Garza Interim Chief Executive Officer MACSA
Louis H. Rocha, Jr. Board President MACSA