1 COUNTY OFFICE FISCAL OVERSIGHT WORKSHOP October 25, 2006 Presented in partnership with CCSESA, FCMAT and BASC.

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  • COUNTY OFFICE FISCAL OVERSIGHT WORKSHOP

    October 25, 2006

    Presented in partnership with CCSESA, FCMAT and BASC

  • COUNTY OFFICEFISCAL OVERSIGHT RESPONSIBILTIES

    Deborah L. SimonsDirector, Division of Business Advisory ServicesLos Angeles County Office of Education

    Susan Birch Grinsell, CPAAssistant Superintendent of Business ServicesHumboldt County Office of Education

  • What well coverAn Overview of County Office Fiscal Oversight Responsibilities

    Whats New in Fiscal Oversight

    Feedback from the Field on the New Criteria and Standards

  • Overview of County Office Fiscal Oversight

  • Why County Office Fiscal Oversight?

    Increasing Number of State Bailouts

    Lack of Authority to Intervene

    Keep Local Problems from Becoming State Problems

    Inappropriate Use of Long-term Debt

    Inordinate Delays in Budget Adoption

  • What is AB 1200?Legislation Became Law in 1992

    Established Fiscal Crisis and Management Assistance Team (FCMAT)

    Increased County Office Intervention Authority

  • What is AB 1200? (continued)Crisis Prevention vs. Crisis Management

    Multiyear Fiscal Solvency Analysis

    Disclosure of Collective Bargaining and Other Multiyear Obligations

    Tighter Deadlines/Increased Penalties

  • What is AB 1200? (continued)State Criteria and Standards/Milestones for Measurement of Fiscal Health

    County Office Fiscal Advisor with Stay or Rescind Authority

    State Take-Over in Extreme Situations

  • How Do County Offices Implement Fiscal Oversight?

  • Levels of County Office Intervention

    Day-to-Day Monitoring and Review of Fiscal Reports

    Discussions/Meetings

    Letters/Board Presentations

    Qualified Certification/Not a Going Concern

  • Levels of County Office Intervention (continued)

    Negative Certification

    Fiscal Advisor

    Plus

    AB 139 Audits

  • Levels of State InterventionState Loan

    Trustee

    May stay or rescind actions of Board and Personnel Commission

  • Levels of State Intervention (continued)Administrator

    Assumes rights and powers of Board

    Board becomes advisory only without compensation/benefits

    District superintendent automatically leaves

    Other high level management can be fired

  • Ongoing Monitoring Analytic review of:

    Budgets

    Interim Reports

    Unaudited Actuals

  • Ongoing Monitoring (continued)Collective Bargaining Disclosures

    Independent Audits/Audit Exceptions

    Expenditures/Cash Flows

    Annual Financial and Attendance Reports

  • Ongoing Monitoring (continued)Analyses Using County Office Data Bases

    Contact with District Staff

    FCMAT Predictors of School Agencies Needing Assistance

    Newspaper Articles

    Comments from FCMAT, CDE, auditor, other districts, community, etc.

  • Taking Action Based on Financial Analysis

    Conditional Approval/Disapproval of Budgets

    Change of Interim Certification to Qualified/Negative

    Declare District as Not a Going Concern

    Prepare AB 139 Reports on Districts with Fiscal Issues

    Assign Fiscal Expert/Advisor

    Notify Board of Concerns About Proposed Collective Bargaining Agreement

  • Taking Action Based on Financial Analysis (continued)

    Notify District of Fiscal Impact of Negative Fund Balances, Declining Enrollment, Audit Findings, Low Cash Balances, etc.

    Conduct AB 139 Audits of Districts with Potential Illegal Fiscal Practices

    Conduct a Study of the Financial and Budgetary Conditions of the District

    Direct the District to Submit a Plan for Addressing Its Adverse Fiscal Condition

  • Impact of Fiscal Oversight Duties on County Offices

  • Impact of Fiscal Oversight Duties on County Offices

    White Hat of Service

    Black Hat of Mandated Solvency

    Bankruptcies Reality vs. Legislative Perception

    Until 2004, Penalty of 40 Percent for Failure

    Attempt at Uniform Application

    Broad Intervention Powers Scaled Back

  • Impact of Fiscal Oversight Duties on County Offices (continued)

    Impact of State Loan on County Office

    SPI may review quality of county superintendent fiscal oversight of district

    SPI may assume county superintendents fiscal oversight duties

  • Common Reactions to County Office Intervention

  • Common Reactions to County Office Intervention

    Denial

    Staff Fired or Leave

    Distrust of Fiscal Data

    Appeals to CDE/Lawsuits

  • Common Reactions to County Office Intervention (continued)

    Media Attention

    Political Attention

    Chaotic District Board Meetings

    Union Pressure

  • Keys to Successful Fiscal Oversight

    District

    Good financial practices

    Ongoing communication with County Office

  • Keys to Successful Fiscal Oversight (continued)

    County Office

    Knowledgeable staff with understanding of district operations

    Ongoing communication with district

    Understand the big picture

    Proactive review

  • Feedback from the Field on the New Criteria and Standards

  • BackgroundAB 2756Purpose: Help identify districts that are developing financial problems before the problems become severe

  • AB 2756District health indicatorsSpecified comparisons and reviews to be included

    Clear definitions/guidelines for financial certifications

    Comprehensive review and assessment of the financial conditions of districts

    FCMAT Predictors of School Agencies Needing Intervention

  • AB 2756 (continued)SPI Committee to Revise Standards and Criteria

    Timeline for the workNovember 2004SBE approval June 2005Implemented with 2006-07 Budgets

  • AB 2756 (continued)Committee representatives SBECDECCSESA (BASC)CTAACSADOFSCOFCMAT

  • Information GatheringCOE CBO List Serve provided by FCMAT

    Six questionsAbout 14 COEs responded Full responses are in your packets

    Statistical DataSummary from 7 COEs is also part of your materials

  • Information Gathering ResultsOverall impressions were similar

    North to South

    Large to small COEs

  • What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike?Advantages

    Good informationDistrict administration and board

    Consistent wording of the standards from a positive perspective

    Automated features of the software

    One-page summary of district health

  • What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike? (continued)Concerns:

    Time consuming to prepare

    Collect and enter data

    Length of the report (23 pages) was intimidating for boards

    Information from districts was incomplete

    Not Mets did not always indicate fiscal instability

  • What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike? (continued)Concerns

    Stigma of Not Mets

    Specific Criteria/Standards or data elements Long term commitmentsBase Revenue Limit changes (NSS)Salary and Benefit breakout by 3 groupsTotal health benefit costs

  • Was the software easy for the districts to use?Yes (mostly)

    Some difficulty in navigating

    Difficult to read & distinguish between sections

  • Were the reports easy for the districts to use?Yes (mostly)

    Certification page was a good recap

    Some boards questioned Not Mets - but not allPresentation styles differed widely

  • Were the reports easy for the districts to use? Areas of confusion

    ADA and enrollment for charter ADA, County ADA, declining enrollment and NSS

    Inter-fund transfers to cover operating deficits related to other fundsDM match Contributions to capital project reserves

    Independent position control: good or bad

  • From your particular COE perspective, how useful was it in helping you meet your oversight responsibilities? How did it make your oversight responsibilities more difficult?Helpful

    More information

    Validated information that some COEs already requested

    Districts took it more seriously/more thoughtfulMore reasonable assumptionsProvided better information

  • From your particular COE perspective, how useful was it in helping you meet your oversight responsibilities? How did it make your oversight responsibilities more difficult? (continued)Helpful

    Certification page was a useful tool

    Quality control$3.3 million error in a revenue projection

  • From your particular COE perspective, how useful was it in helping you meet your oversight responsibilities? How did it make your oversight responsibilities more difficult? (continued)Difficulties

    Districts completed the form incorrectlyCOE staff assistance

    Number of Not Mets for NSS

    Prior year information needed to be audited for accuracyPrior to trend analysis

  • Was there a high percentage of either a Met or Not Met criteria/standard that was not helpful for you or the school district in assessing its fiscal conditions?7 counties responded210 school districts12 ROPs

    Of the three criteria for population estimatesADA projections were best5% - 17%

    Enrollment projections had an overall higher % of Not Met5% - 29%

    ADA to enrollment ratio had the overall highest % of Not Met18% - 50%

  • Was there a high percentage of either a Met or Not Met criteria/standard that was not helpful for you or the school district in assessing its fiscal conditions? (contd)Projected change in RL for budget compared to subsequent two years

    8% - 41%Large COLA in 2006-07

    Projected salaries/benefits to total expenditures

    25% - 71%Again, may reflect the size of the 2006-07 COLA

  • Was there a high percentage of either a Met or Not Met criteria/standard that was not helpful for you or the school district in assessing its fiscal conditions? (contd)Consistent projection for other operating revenues and expenditures

    Generally very high25% - 100%

    Required Deferred Maintenance included in the budget

    0% - 18%

    Required RRMA included in the budget

    6% - 60%

  • Was there a high percentage of either a Met or Not Met criteria/standard that was not helpful for you or the school district in assessing its fiscal conditions? (contd)Deficit spendingSoftware only measures decreases in fund balanceConsistent range

    23% - 50%

    Overestimated projected ending fund balance

    6% - 50%

    Overestimated projected reserves

    Generally very low0% - 33%

  • Was there a high percentage of either a Met or Not Met criteria/standard that was not helpful for you or the school district in assessing its fiscal conditions? (contd)Information was also collected from some on the supplemental information

    Areas with consistently high yes responses:Long-term commitmentsPost employment benefitsOpen status of labor agreementsContributionsIndependent position controlDeclining enrollmentUncapped health benefitsChange of CBO or Superintendent

  • Is there something else you would like to share about the process or the documents?Things should get easierFirst year implementation

    Training for district staff was effectiveCDE and COE

    Training for school boards is needed

  • Is there something else you would like to share about the process or the documents? (continued)Software could be more user friendly

    Yes/no buttons once pushed couldnt be cleared w/o deleting the document, etc.

    Hitting the Enter key relocated the cursor somewhere other than the next data field

  • Is there something else you would like to share about the process or the documents? (continued)Long term commitment test related to General Fund revenues

    Not always correlative

    COPs, GO bonds and CFDs

  • Next Steps Coordination with CDE

    Did non-compliance mean districts were facing fiscal problems?

    Technical softwareUser friendly formattingTechnical software cleanupElectronic linkage of current year budget and multi-year projections Coordination of RRMA and Deferred Maintenance

  • Next Steps (continued)Coordination with CDE Clarifying language/explanations necessary to be sure interpretation is consistent throughout the stateTotal Health Benefit CostsIncludable ADA

    Next round - Interim Reports!

    Collect the same type of data

  • Any Questions?Thank you

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