A $7 million fund kept off the books for years by Rancho Santiago Community College District administrators may have violated multiple state and local regulations, a forensic audit has concluded.
Current district trustees were unaware until recently about the existence of the fund, essentially rebates kept for the district by its insurance carrier with the knowledge of district administrators. The fund was not included in the district’s yearly budget and not regularly reported as an asset in the state-required annual audit. Nor was it fully disclosed to the Rancho Santiago board, the audit said.
Longtime Trustee Phillip Yarbrough accused staff of keeping the fund secret from the board.
“We were deceived. They lied to us,” Yarbrough said. “It does beg the question, ‘Is there something else going on?’ “
Chancellor Marvin Martinez, who arrived in 2019 at the Santa Ana-based district, responded that current staff never hid anything and he believes the same is true for previous administrators. Martinez said it is difficult to believe that in the nearly 30 years that the fund has existed, staff and board members never talked about it.
“The accusations made by one of our trustees are unfounded, are reckless and not accurate at all,” he said. “There’s nothing that’s been hidden. Everything is documented.”
The audit, completed March 14 by the Weaver forensic accounting firm, found no evidence that the money was misspent, but some trustees are calling for further investigation.
Yarbrough said how the money was spent is not the issue. “You’ve got an account, you’ve got to disclose it. It’s public funds,” he said.
Trustee Zeke Hernandez added: “The board is a public entity that was kept unaware. The board needs to commit to putting 100% attention to this. … Indecision is in the air right now.”
The Rancho Santiago district is managed by seven trustees and operates two campuses, Santa Ana College in Santa Ana and Santiago Canyon College in Orange.
At the center of the controversy is the Cerritos-based Alliance of Schools for Cooperative Insurance Programs (ASCIP), a joint powers authority that provides liability, property, workers’ compensation, health benefits, and school construction insurance to school districts.
Since 1997, the alliance has given regular rebates to the district, which had the option of taking the money or keeping it in a fund held by the alliance. The fund amounted to $7.2 million at the time it was taken out by the district in 2024. Quarterly reports were sent to top administrators at the district, including John Didion, former vice chancellor for human resources, and Peter Hardash, former vice chancellor for business operations.
The audit shows that money from the fund was used for various district expenses, such as $1.1 million to settle a lawsuit by an administrative assistant who was fired while she was on approved medical leave, $1 million to buy and install emergency blue phones on the district’s campuses and nearly $2 million to balance the 2019-20 budget.
Barry Resnick, a former negotiator for the faculty union, said the rebates were kept secret from the union, while the district cried poverty in negotiations.
“Why not benefit the employees?” Resnick said. “What they did was take the excess premiums and do whatever the heck they wanted to.”
The practice of keeping the rebates stored with ASCIP was approved by Didion and Hardash and continued after their retirements, Didion in 2016 and Hardash in 2020, according to the audit.
Didion and Hardash both served on committees with ASCIP at the time they worked for the district, and made decisions about the fund, which the audit considered an apparent conflict of interest.
Didion took a position in 2017 with a Hawaii-based subsidiary of ASCIP, Captive Insurance for Public Agencies, after his retirement. Didion was hired as managing director at a monthly salary of $8,000. He is now president of the subsidiary and Hardash is a director there.
Didion could not be reached for comment and Hardash did not reply to an email seeking comment.
Auditors noted that the ASCIP fund earned higher returns than if the money had been disbursed back to the district. Board policy required the funds be put in the Orange County investment pool or as directed by trustees.
The fund was first mentioned to the board in a 2018 memo from former Chancellor Raul Rodriguez, according to the audit. However, the memo implied that the fund was held within the district and not offsite with ASCIP, said the audit. The fund wasn’t fully disclosed to the board until October 2023.
The report said it appeared district staff, by not reporting the money in yearly audits, did not follow budget accounting practices in the state Education Code and district policy. The administration of the fund also appeared to violate about a dozen state and administrative codes for such things as investing and reporting assets, the audit said..
Auditors recommended that rebates be reported to the board and paid directly to the district. The audit further recommended the board place restrictions on how the rebates are used and place guardrails on staff involvement with outside organizations, to remove any conflict of interests.
Martinez said he has hired a law firm to determine whether any laws were broken by the fund’s administration.