Rancho Santiago taps firm to lead forensic audit of $8M account held by vendor
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Rancho Santiago Community College District officials have selected an accounting firm to conduct a forensic audit into an off-books account — held in the district’s name by a third-party insurance vendor — that accrued $8 million without board members’ knowledge.
Trustees in a regular meeting Monday approved, in a 4-1 vote, contracting with Houston-based firm Weaver & Tidwell, LLP, bypassing the top recommendations of a selection committee for what one board member described as possible conflicts of interests involving the vendor in question, Cerritos-based risk pool operator Alliance of Schools for Cooperative Insurance Programs (ASCIP).
Phil Yarbrough, a longtime trustee who chairs the district’s fiscal and audit review committee, chaired Monday’s meeting in the absence of Board President Daisy Tong. Trustee Tina Arias Miller was also absent.
Yarbrough suggested the district abstain from considering the top firm recommended by the selection committee, North Dakota-based Eide Bailly LLP, which currently provides annual audit services under a three-year contract with Rancho Santiago CCD.
That firm in 2019 acquired Vavrinek, Trine, Day & Co., which had formerly served as an annual auditor for both ASCIP and for the district. In 2012-13, Vavrinek audited both entities without revealing that Rancho Santiago, at that time, had nearly $1.3 million in an interest-bearing risk management deposit fund held by ASCIP, a public joint powers authority.
The fund comprises dividends, or rebates, amassed by public school district risk pool members during periods in which premiums paid into the pool exceed claims paid out by the insurer.
Kept off the books, and outside the awareness of elected officials, a risk management fund held for Rancho Santiago CCD by a risk pool operator quietly accrued millions — until people started asking about it.
And while ASCIP audits include a line item indicating the entirety of the fund, no breakdown of how much of it belongs to individual districts appears to be accounted for in its audits, nor by member districts.
“Eide Bailly is compromised because they [as Vavrinek Trine, Day & Co.] did the audits for ASCIP,” Yarbrough said Monday. “And so they knew this money was there, and they did our audit and didn’t tell us.”
Trustees Yarbrough and Zeke Hernandez recommended the district hire Weaver & Tidwell to conduct the forensic audit, but at least one board member expressed hesitation.
Trustee David Crockett inquired about the ranking system employed by the selection committee, assembled by Rancho Santiago Chancellor Marvin Martinez. That body created a rubric to generate scores and ranked Eide Bailly first among eight bidding firms, while Weaver & Tidwell ranked fifth.
“The score was lower, so I’m confused,” Crockett said during Monday’s meeting. “If I’m looking at the data and the folks who are professionals and taking this seriously and going through their process, and [Weaver & Tidwell] came up toward the bottom. Why would they be better, in your view, if they had a lower score?”
As stakeholders of the Orange County community college district probe a decades-long relationship with the Alliance of Schools for Cooperative Insurance Programs, the names of two now-retired administrators keep popping up.
Trustee John Hanna said he had no assumptions about what the forensic audit of the fund might find and wondered why none of the top three recommendations of the selection committee were considered.
Yarbrough said Weaver & Tidwell had historical experience investigating school district finances in California and its staff were knowledgeable about California Education Code. He further explained that the committee’s second-ranked firm, CliftonLarsonAllen LLP, could also be perceived to have conflicts.
The Minneapolis-based entity in 2017 acquired another accounting firm, Vicenti, Lloyd & Stutzman, which the Pilot learned in 2023 had previously employed individuals with connections to ASCIP and a Hawaii-based subsidiary it created in 2005 — Captive Insurance for Public Agencies (CIPA).
CIPA’s board of directors comprises mostly retired school district administrators, two of whom, vice chancellors John Didion and Peter Hardash, served at Rancho Santiago for decades, and others with ties to Vicenti, Lloyd & Stutzman.
Many of those administrators served in positions related to the procurement of insurance but did not disclose their CIPA service in public meetings and staff reports related to that procurement, the Daily Pilot reported in September.
Representatives of Eide Bailly did not respond to requests for comment; ASCIP attorney Robert J. Feldhake, who currently serves on CIPA’s board of directors, refused to comment for this story.
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