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

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<ul><li><p>COUNTY OFFICE FISCAL OVERSIGHT WORKSHOP</p><p>October 25, 2006</p><p>Presented in partnership with CCSESA, FCMAT and BASC</p></li><li><p>COUNTY OFFICEFISCAL OVERSIGHT RESPONSIBILTIES</p><p>Deborah L. SimonsDirector, Division of Business Advisory ServicesLos Angeles County Office of Education</p><p>Susan Birch Grinsell, CPAAssistant Superintendent of Business ServicesHumboldt County Office of Education</p></li><li><p>What well coverAn Overview of County Office Fiscal Oversight Responsibilities</p><p>Whats New in Fiscal Oversight</p><p>Feedback from the Field on the New Criteria and Standards</p></li><li><p>Overview of County Office Fiscal Oversight</p></li><li><p>Why County Office Fiscal Oversight?</p><p>Increasing Number of State Bailouts</p><p>Lack of Authority to Intervene</p><p>Keep Local Problems from Becoming State Problems</p><p>Inappropriate Use of Long-term Debt</p><p>Inordinate Delays in Budget Adoption</p></li><li><p>What is AB 1200?Legislation Became Law in 1992</p><p>Established Fiscal Crisis and Management Assistance Team (FCMAT)</p><p>Increased County Office Intervention Authority</p></li><li><p>What is AB 1200? (continued)Crisis Prevention vs. Crisis Management</p><p>Multiyear Fiscal Solvency Analysis</p><p>Disclosure of Collective Bargaining and Other Multiyear Obligations</p><p>Tighter Deadlines/Increased Penalties</p></li><li><p>What is AB 1200? (continued)State Criteria and Standards/Milestones for Measurement of Fiscal Health</p><p>County Office Fiscal Advisor with Stay or Rescind Authority</p><p>State Take-Over in Extreme Situations</p></li><li><p>How Do County Offices Implement Fiscal Oversight?</p></li><li><p>Levels of County Office Intervention</p><p>Day-to-Day Monitoring and Review of Fiscal Reports</p><p>Discussions/Meetings</p><p>Letters/Board Presentations</p><p>Qualified Certification/Not a Going Concern</p></li><li><p>Levels of County Office Intervention (continued)</p><p>Negative Certification</p><p>Fiscal Advisor</p><p>Plus</p><p> AB 139 Audits</p></li><li><p>Levels of State InterventionState Loan</p><p>Trustee</p><p>May stay or rescind actions of Board and Personnel Commission</p></li><li><p>Levels of State Intervention (continued)Administrator</p><p>Assumes rights and powers of Board</p><p>Board becomes advisory only without compensation/benefits</p><p>District superintendent automatically leaves</p><p>Other high level management can be fired</p></li><li><p>Ongoing Monitoring Analytic review of:</p><p>Budgets</p><p>Interim Reports</p><p>Unaudited Actuals</p></li><li><p>Ongoing Monitoring (continued)Collective Bargaining Disclosures</p><p>Independent Audits/Audit Exceptions</p><p>Expenditures/Cash Flows</p><p>Annual Financial and Attendance Reports</p></li><li><p>Ongoing Monitoring (continued)Analyses Using County Office Data Bases</p><p>Contact with District Staff</p><p>FCMAT Predictors of School Agencies Needing Assistance</p><p>Newspaper Articles</p><p>Comments from FCMAT, CDE, auditor, other districts, community, etc.</p></li><li><p>Taking Action Based on Financial Analysis</p><p>Conditional Approval/Disapproval of Budgets</p><p>Change of Interim Certification to Qualified/Negative</p><p>Declare District as Not a Going Concern</p><p>Prepare AB 139 Reports on Districts with Fiscal Issues</p><p>Assign Fiscal Expert/Advisor</p><p>Notify Board of Concerns About Proposed Collective Bargaining Agreement</p></li><li><p>Taking Action Based on Financial Analysis (continued)</p><p>Notify District of Fiscal Impact of Negative Fund Balances, Declining Enrollment, Audit Findings, Low Cash Balances, etc.</p><p>Conduct AB 139 Audits of Districts with Potential Illegal Fiscal Practices</p><p>Conduct a Study of the Financial and Budgetary Conditions of the District</p><p>Direct the District to Submit a Plan for Addressing Its Adverse Fiscal Condition</p></li><li><p>Impact of Fiscal Oversight Duties on County Offices</p></li><li><p>Impact of Fiscal Oversight Duties on County Offices</p><p>White Hat of Service</p><p>Black Hat of Mandated Solvency</p><p>Bankruptcies Reality vs. Legislative Perception</p><p>Until 2004, Penalty of 40 Percent for Failure</p><p>Attempt at Uniform Application</p><p>Broad Intervention Powers Scaled Back</p></li><li><p>Impact of Fiscal Oversight Duties on County Offices (continued)</p><p>Impact of State Loan on County Office</p><p>SPI may review quality of county superintendent fiscal oversight of district</p><p>SPI may assume county superintendents fiscal oversight duties</p></li><li><p>Common Reactions to County Office Intervention</p></li><li><p>Common Reactions to County Office Intervention</p><p>Denial</p><p>Staff Fired or Leave</p><p>Distrust of Fiscal Data</p><p>Appeals to CDE/Lawsuits</p></li><li><p>Common Reactions to County Office Intervention (continued)</p><p>Media Attention</p><p>Political Attention</p><p>Chaotic District Board Meetings</p><p>Union Pressure</p></li><li><p>Keys to Successful Fiscal Oversight</p><p>District</p><p>Good financial practices</p><p>Ongoing communication with County Office</p></li><li><p>Keys to Successful Fiscal Oversight (continued)</p><p>County Office</p><p>Knowledgeable staff with understanding of district operations</p><p>Ongoing communication with district</p><p>Understand the big picture</p><p>Proactive review</p></li><li><p>Feedback from the Field on the New Criteria and Standards</p></li><li><p>BackgroundAB 2756Purpose: Help identify districts that are developing financial problems before the problems become severe</p></li><li><p>AB 2756District health indicatorsSpecified comparisons and reviews to be included</p><p>Clear definitions/guidelines for financial certifications</p><p>Comprehensive review and assessment of the financial conditions of districts</p><p>FCMAT Predictors of School Agencies Needing Intervention</p></li><li><p>AB 2756 (continued)SPI Committee to Revise Standards and Criteria</p><p>Timeline for the workNovember 2004SBE approval June 2005Implemented with 2006-07 Budgets</p></li><li><p>AB 2756 (continued)Committee representatives SBECDECCSESA (BASC)CTAACSADOFSCOFCMAT</p></li><li><p>Information GatheringCOE CBO List Serve provided by FCMAT</p><p>Six questionsAbout 14 COEs responded Full responses are in your packets</p><p>Statistical DataSummary from 7 COEs is also part of your materials</p></li><li><p>Information Gathering ResultsOverall impressions were similar</p><p>North to South</p><p>Large to small COEs</p></li><li><p>What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike?Advantages</p><p>Good informationDistrict administration and board</p><p>Consistent wording of the standards from a positive perspective</p><p>Automated features of the software</p><p>One-page summary of district health</p></li><li><p>What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike? (continued)Concerns:</p><p>Time consuming to prepare</p><p>Collect and enter data</p><p>Length of the report (23 pages) was intimidating for boards</p><p>Information from districts was incomplete</p><p>Not Mets did not always indicate fiscal instability</p></li><li><p>What was the feedback from school districts in your county? What was their overall impression and what did they specifically like/dislike? (continued)Concerns </p><p>Stigma of Not Mets</p><p>Specific Criteria/Standards or data elements Long term commitmentsBase Revenue Limit changes (NSS)Salary and Benefit breakout by 3 groupsTotal health benefit costs</p></li><li><p>Was the software easy for the districts to use?Yes (mostly)</p><p>Some difficulty in navigating</p><p>Difficult to read &amp; distinguish between sections</p></li><li><p>Were the reports easy for the districts to use?Yes (mostly)</p><p>Certification page was a good recap</p><p>Some boards questioned Not Mets - but not allPresentation styles differed widely</p></li><li><p>Were the reports easy for the districts to use? Areas of confusion</p><p>ADA and enrollment for charter ADA, County ADA, declining enrollment and NSS</p><p>Inter-fund transfers to cover operating deficits related to other fundsDM match Contributions to capital project reserves</p><p>Independent position control: good or bad</p></li><li><p>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 </p><p>More information</p><p>Validated information that some COEs already requested</p><p>Districts took it more seriously/more thoughtfulMore reasonable assumptionsProvided better information </p></li><li><p>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</p><p>Certification page was a useful tool</p><p>Quality control$3.3 million error in a revenue projection</p></li><li><p>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</p><p>Districts completed the form incorrectlyCOE staff assistance </p><p>Number of Not Mets for NSS</p><p>Prior year information needed to be audited for accuracyPrior to trend analysis</p></li><li><p>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</p><p>Of the three criteria for population estimatesADA projections were best5% - 17%</p><p>Enrollment projections had an overall higher % of Not Met5% - 29%</p><p>ADA to enrollment ratio had the overall highest % of Not Met18% - 50%</p></li><li><p>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</p><p>8% - 41%Large COLA in 2006-07</p><p>Projected salaries/benefits to total expenditures</p><p>25% - 71%Again, may reflect the size of the 2006-07 COLA</p></li><li><p>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</p><p>Generally very high25% - 100%</p><p>Required Deferred Maintenance included in the budget</p><p>0% - 18%</p><p>Required RRMA included in the budget</p><p>6% - 60%</p></li><li><p>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</p><p>23% - 50%</p><p>Overestimated projected ending fund balance</p><p>6% - 50%</p><p>Overestimated projected reserves</p><p>Generally very low0% - 33%</p></li><li><p>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 </p><p>Areas with consistently high yes responses:Long-term commitmentsPost employment benefitsOpen status of labor agreementsContributionsIndependent position controlDeclining enrollmentUncapped health benefitsChange of CBO or Superintendent</p></li><li><p>Is there something else you would like to share about the process or the documents?Things should get easierFirst year implementation</p><p>Training for district staff was effectiveCDE and COE </p><p>Training for school boards is needed</p></li><li><p>Is there something else you would like to share about the process or the documents? (continued)Software could be more user friendly</p><p>Yes/no buttons once pushed couldnt be cleared w/o deleting the document, etc.</p><p>Hitting the Enter key relocated the cursor somewhere other than the next data field</p></li><li><p>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</p><p>Not always correlative</p><p>COPs, GO bonds and CFDs</p></li><li><p>Next Steps Coordination with CDE</p><p>Did non-compliance mean districts were facing fiscal problems?</p><p>Technical softwareUser friendly formattingTechnical software cleanupElectronic linkage of current year budget and multi-year projections Coordination of RRMA and Deferred Maintenance</p></li><li><p>Next Steps (continued)Coordination with CDE Clarifying language/explanations necessary to be sure interpretation is consistent throughout the stateTotal Health Benefit CostsIncludable ADA </p><p>Next round - Interim Reports!</p><p>Collect the same type of data</p></li><li><p>Any Questions?Thank you</p></li></ul>