MINUTES OF THE MEETING OF THE DISTRICT FINANCE COMMITTEE

January 28, 2013

3:30 pm – 5:30 pm

  1. The meeting was called to order at 3:30 pm by Mr. Spitz.
    In attendance were:
  2. Committee Members Mr. Spitz, Mr. Frank, Mr. Sternshein, Mr. White, and Mr. Young
  3. Staff members Dr. Woods and Dr. Murakawa-Leopard
  4. Visitor Mr. Safier
  1. The agenda was reviewed. Mr. Young moved to approve the agenda, and Mr. White seconded the motion. The motion passed with a unanimous vote.
  1. There was no public comment.
  1. The minutes of the December 17, 2012, and January 14, 2013, meeting were reviewed. Mr. Young moved to approve the minutes, and Mr. Frank seconded the motion. The minutes were approved.
  1. Budget Update

The City and District have agreed in principle to a revenue enhancement for the 12-13 fiscal year. This agreement includes a $1.25M enhancement to the JPA – a one-time enhancement of funds for a three year increase in access to school facilities – along with a $1M advance on developer contributions that are written into the developer agreement for the 9900 Wilshire project, and $600K out of the fund previously designated as a “turf reserve.” In addition to this $2.85M contribution, an additional $600K will be contributed from the turf reserve fund if a corresponding match is made through the District’s fundraising entities, making the total potential increased revenue $4.05M. These funds must be spent to maintain current program (there is no agreement from the City to place these funds into the reserve).

The Committee recommended that District staff seek additional information to confirm the legalities, the reliability of the revenues, and potential liability involved as the agreements become formalized to ensure that they are properly formed and that funds can be booked appropriately. The Committee asked that this concern be expressed to the Board and the Superintendent.

Should these funds be received, it will leave the District with a 12-13 surplus but an ongoing structural deficit in 13-14 and 14-15. It was also pointed out that oil revenues will end in 2016. Current revenue is approximately $100,000 per year. This is down from approximately $700,000 in previous years; there was an accounting issue that has been addressed. Additional detail will be provided at a future meeting.

Because this agreement provides one-time revenue but does not allow the District to reduce its operations to address the deficit and the long-term picture, some Committee members expressed concerns about accepting it. The agreement provides a “bridge” and gives the District a year to determine a plan for increasing revenue (e.g., a parcel tax, additional fundraising avenues, etc.). There are some similarities between this year and last year, when one-time settlement funds were received.

The certificated layoff timeline was reviewed. It was pointed out that if there are potential increased costs (e.g., the possibility of hiring someone to work on PR), these will need to be offset by corresponding reductions in expenditures, and that the time for long-term planning is now.

The committee expressed the need for the agreements to be finalized and formalized before March 15 certificated layoff decisions are made.

  1. BHEF Overview – TABLED
  2. Auditor Selection/Contract Recommendation

Moss Levy Hartzheim has been our auditor with the same partner (Hadley Hui) for the past three years. We can extend the contract for one or two years or put out a request for proposals. The Committee expressed that the current company is close by and has done a very competent job within a very low budget ($26,442). In 2011-2012, Moss Levy Hartzheim was lower than firms such as Vincente, VTD, and Christie White. Ms. McCabe provided a list of auditors being used in Los Angeles County. Culver City paid $41825 to Christy White Accountancy, Baldwin Park paid VTD $52,000, Santa Monica paid Christy White $50,980, South Pasadena paid Moss Levy Hartzheim $30,604, Bellflower paid Moss Levy Hartzheim $31,050, and Garveypaid Moss Levy Hartzheim $23,976.

Mr. White recommended that staff be directed to negotiate with the incumbent auditor to make a proposal to extend their term for two years. Mr. Young seconded. The committee supported this recommendation unanimously.

  1. Reports and Updates
  1. Fundraising/Revenue Enhancement Update
    BHEF will be kicking off a fundraising drive asking families to contribute $1000 per student on an annual basis. A concern was raised that the public has not been adequately educated about the issues the District is facing, and that this will inhibit fundraising efforts. A fact sheet has been developed to try to explain these issues. It was pointed out that there is currently a 60%-40% split between state aid (including property taxes) and local contributions. It was suggested that outreach include the district’s email list as well as Dr. Goldberg’s email list and BHEF’s email list; it was also suggested that there be outreach to the press.
  1. “Adopting” the District

This was in reference to the idea of reaching out to the local business community for ongoing support.

  1. Internal Audit Draft Scope

Staff recommended that a potential auditor not be someone who currently works with or previously worked with the district and be someone with experience with school business as well as with the Associated Student Body. This language must be embedded in the RFP. It was suggested that the internal auditor might not be a CPA firm and that it might be useful to look for someone not currently associated with a firm. The scope should include two kinds of written reports – project reports (e.g., our investigation and findings related to ASB at BHHS) and a quarterly report summarizing their activities over that period. This should be presented to the Board and/or, if the Board is agreeable, to the DFC.

  1. Business Procedure Manual Update

The Los Angeles County Office of Education Commercial Claims Document Checklist was distributed to the Committee, and it was explained that this checklist is being used to inform all procedures. The manual is 70% completed and will be complete and provided to the Committee within a month.

  1. Real Property Quarterly Update

A quarterly report showing revenues and expenditures was distributed. Approximately $1.62M has been expended, including $1.54 for asset acquisition and $0.088 on operations, with approximately $1.59 in revenue for asset acquisition and $0.047 in operational revenue.

  1. Attorneys’ Fees Quarterly Update

A quarterly report showing revenues and expenditures was distributed. Just under $1M has been spent to date this year, with approximately 75% going to Measure E related expenses.

  1. Other Matters
  1. CAB’s have been discussed negatively in the press. An LA Times article was discussed, as was the District’s Town Hall meeting. An article in the BH Weekly described unanswered questions as a result of the Town Hall meeting. It was suggested that this was the result of a failure to adequately explain the inadequacy of current facilities as the compelling reason for the need to accelerate bond funding as well as a failure to respond immediately to faulty criticisms (specifically, allegations of unknown overall liability of an unreasonable cost of retirement) related to the plan to support the Bond through a plan that included 50% CAB’s. Some information has also been released regarding currently proposed legislation. A recommendation was made that the Committee meet with Keygent to obtain relevant data that will allow the Committee to craft a statement that, with Board approval, could be distributed to the community. This would be an explanatory statement to the community exposing the CAB financing of Measure E bonds as originally approved by the voters, and explaining the District’s planned revision in concert with proposed state legislation. Mr. Spitz and Mr. Young were asked by the Board President to provide assistance with this matter, and this suggestion is being made in response. Dr. Murakawa-Leopard will contact Keygent to set up a meeting within the next two weeks.
  1. A committee member had a conflict with the March 25, 2013, meeting date, and the committee agreed to move that meeting to March 18, 2013.
  1. Public Comment

Mr. Safier expressed an opinion that a portion of the JCI settlement should be transferred to Measure E. These funds have not been transferred, and no Board direction has been given. A question was raised regarding whether this was contractually appropriate, particularly if the funds were related to construction costs.

Mr. Safier also asked whether BHEF funds in excess of $600,000 can be set up in reserve for future years.

Mr. Safier additionally asked about the implications of the City contribution for the multi-year projection.

Finally, Mr. Safier asked about the implications of reversion to Revenue Limit, particularly regarding the Board’s decision to eliminate interdistrict permits.

  1. Future meeting dates are calendared for third Mondays except as noted – January 28, 2013 (4th Monday); February 25, 2013 (4th Monday); March 18, 2013; April 22, 2013; May 20, 2013; June 17, 2013; July 15, 2013
  2. Mr. Young moved to adjourn the meeting at 4:48 pm. The motion was seconded by Mr. Frank and approved unanimously.