The AllHere Wreck: What Your Board Should Learn Before the Next Vendor Comes Knocking
July 6, 2026
The FBI served search warrants at LAUSD headquarters on February 25 of this year. By February 27, the superintendent was on paid leave. By May 19, the district’s top academic chiefs had departed. By June, the CEO of AllHere — a company that had secured a $6.2 million AI chatbot contract with the district — had been charged with securities fraud, wire fraud, and aggravated identity theft.
I don’t tell you this story to scare you. I tell you it because the board that approved that contract voted 5-2, and the two members who voted no cited something your board may be missing: a procurement framework.
Here’s what happened. Months before the board ever saw the AllHere contract, the company’s CEO and a consultant — a close friend of the superintendent — met privately with district leaders. No RFP. No competitive bidding. No board oversight. By the time the contract hit the board agenda, the relationship was already built, the deal was already wired, and the trustees were left with a single-source vendor and a take-it-or-leave-it choice.
The board took it, 5-2. The two dissenting members — the only two who asked for vendor due diligence — were overruled. The district paid roughly $3 million of that $6.2 million before AllHere collapsed in June 2024. And now the FBI wants to know who knew what, and when.
Let me be clear about what was at stake. The original contract was $6.2 million, not the $22 million that some early reports claimed. And even at $6.2 million, the board approved it without requiring competitive bidding, without a vendor financial stability check, and without a contingency plan for what happens if the vendor fails. Every startup fails eventually. The question is whether your board has a plan for when it does.
This is not a failure of individuals. It is a failure of systems. And until your board has the right systems in place, you are one vendor visit away from being the next headline.
Four Governance Failures the AllHere Case Exposes
1. No procurement framework. The board had no established process for what a vendor must provide before a contract reaches a vote — no RFP documentation requirement, no financial health check, no independent cost-benefit analysis. The AllHere contract was approved without competitive bidding despite being a single-source deal worth millions. A procurement framework would have caught this before it reached the boardroom.
2. Zero board AI literacy. How many members of your board could evaluate an AI vendor’s proposal and ask the right questions about data privacy, algorithmic bias, and vendor solvency? Most boards don’t have that expertise. They approve AI contracts based on staff recommendations, and staff recommendations are only as good as the information staff received. If no one on the board can independently assess an AI proposal, the board is approving blind.
3. No accountability triggers. The $6.2 million AllHere contract had no intermediate milestones that would have forced the board to revisit its decision before $3 million had been spent. No quarterly performance review. No enrollment or usage benchmarks. No clause tying payment to measurable student outcomes. The board wrote a check and walked away.
4. No escalation pathway. When AllHere began to show signs of trouble — missed deadlines, product delays, the first rumblings of financial instability — there was no formal mechanism for board awareness. The trustees who voted for the contract learned about its failure the same way the public did: from the news.
This Is Not an LAUSD Problem. It’s a National Problem.
The CSBA released AI Procurement Task Force guidance in December 2025 — a framework specifically designed to help boards ask the right questions before approving AI contracts. EdCircuit followed in April 2026, declaring procurement oversight a “core governance responsibility” — not a technology issue, a governance one.
State boards of education are moving, too. NASBE has documented that state boards are transitioning beyond advisory AI guidance toward binding policies with oversight requirements. At the same time, the national conversation about board AI literacy is accelerating: the Gallup/Walton Family Foundation reported in May 2026 that 82% of teachers have received no formal guidance on AI use. If the people closest to students haven’t been trained, how many board members have?
The gap is real. Most mid-to-large US districts are piloting AI tools. Few have board-approved AI governance models with oversight, review cycles, and escalation paths. The pilots are running. The governance is not. That’s a gap the next AllHere will walk right through.
Four Things Your Board Can Do This Month
1. Set clear AI goals before you approve any AI contracts. What student outcome is this technology supposed to improve? How will you measure it? If the vendor can’t answer those questions in writing, before the contract is signed, the answer is no.
2. Build procurement gates — with a $100K tiered review. Any AI contract over $100,000 should trigger: competitive bidding, independent financial health screening of the vendor, a data privacy and security audit, and a contingency plan for vendor failure. Below $100,000, require at minimum an RFP trail and board notification.
3. Invest in board AI literacy — 90 minutes is enough. You don’t need to become a machine learning engineer. You need to know what questions to ask. A single 90-minute board training session on AI procurement — what to look for, what to flag, what to demand — is the difference between informed governance and blind approval.
4. Install monitoring with escalation triggers. Every AI contract should include: quarterly performance benchmarks, a board-visible dashboard of vendor health indicators, and an automatic escalation pathway that brings material issues to the full board within 48 hours.
Don’t wait for the FBI to find the gap in your governance.
The AllHere case isn’t unique. It’s the version of the story that made the news because the FBI showed up. There are dozens of similar stories unfolding in districts across the country right now — AI contracts signed with startups that won’t survive the school year, procurement processes that don’t exist until something goes wrong, boards that approve technology they don’t understand and can’t oversee.
Your board has a choice. You can read this newsletter, nod along, and hope it doesn’t happen in your district. Or you can call a board meeting this month and start building the procurement framework you should have had yesterday.
The next vendor is already in your inbox. What’s your board’s answer when they call?
This is the first of two pieces this month on AI governance. Next week: “Your District Has AI. Does Your Board Have a Governance Plan?” — a practical framework for building the governance infrastructure your AI investments require.
Your next move. Build your board’s AI procurement framework in one working session. Go to effectiveschoolboards.com/sessions to schedule a facilitated board workshop on AI governance — covering procurement gates, vendor screening, board AI literacy, and escalation protocols. Reply AI and I’ll send you the AI Procurement Governance Toolkit — a downloadable template with board-level contract review checklists, due diligence questions, and conflict-of-interest screening protocols, directly informed by the AllHere case.