Laguna Beach board vows further review after audit finds years of health-benefit overpayments

The Laguna Beach Unified School District Board of Education moved on Oct. 9 to refer an independent audit of employee health-benefit payments to regulatory and compliance agencies and to press for further investigation after public commenters, union representatives and board members raised concern that the district paid more than it should have under contract terms.

At the start of the meeting, Board President Perry reported that, in closed session, the board authorized the president and the superintendent, in consultation with the new chief business officer, to "refer the audit report by Michael Bishop and Associates to agencies of regulation and compliance jurisdiction if necessary." The board recorded votes in open session: Member Malcheski and Member Kelly opposed the referral; Members Morgan and Hills and President Perry voted in favor.

Several public speakers urged additional action. Yankee Han, a Laguna Beach resident with years of audit experience, said the district's audit confirmed the district paid in excess of its obligation and urged the board to have “either the current broker or an independent benefits consultant dig into the information on why did this overpayment occur.” Another commenter said the Michael Bishop report identified roughly $1.3 million in overpayments since 2021 and recommended a forensic investigation to determine who knew what and when.

Union representatives told the board the public tone of some board communications had harmed staff morale. Thesa, speaking for classified staff, called recent board statements “inflammatory, misleading, and deeply inappropriate” and said employees felt targeted. CSEA and other union speakers urged the board to focus on accountability without penalizing workers who did not set benefits policy.

Administrators and budget staff described the financial picture during the business-services presentation later in the meeting. Budget Administrator Raymond Lee said total premiums for medical, dental, vision and life were roughly $6.0 million for the year, with employees contributing about $0.5 million; that yielded a net district cost of about $5.5 million. Superintendent Dr. Glass and staff explained the auditors had flagged that employee contributions had not been set in accordance with the collective bargaining agreement for covered years, which increased the district's net cost relative to what it would have been if CBA terms had been followed. Administrators said that, had the contract been followed, the district's net cost might have been roughly $5.0 million rather than $5.5 million.

Board members pressed administration on next steps. Dr. Glass said the district's immediate priorities are (1) to transmit the unaudited actuals to the county and state for the annual audit, (2) to commission legal and forensic review as recommended in the audit report, and (3) to work with bargaining units on remedies that avoid penalizing employees. Several board members and public commenters urged recovering funds "if they can be recovered" and recommended a targeted forensic audit and legal review to determine whether any action beyond recovery is warranted.

The board did not adopt final corrective measures on Oct. 9; it certified the 2024-25 unaudited actuals (a separate procedural vote) and directed staff to present recommended next steps, including possible forensic accounting and legal options. The district and its auditors will report back during the external annual audit process, which staff said will be completed and presented to the board in January 2026.

The board's next regular meeting is scheduled for Oct. 23, 2025, when members may take further action based on staff recommendations and audit findings.