January 14, 2019 Board Meeting Part 3
[00:00:00] So we're going to reconvene and we'll start with Miss Hughes is report.
Good evening. So in front of you see the finance or accounting information for General on fun only. So for this one we have to item that help in a trust. The first one is a fun violin so last for the last biennium we base our budget on 7.8 Burien from the state revenue. And then later on the final number came in at two point eight point two billion.
So therefore we have more higher payment at the end come from the say funding formula. Also, we have some additional. No informed our local property tax and then we have slightly increase in the student head count. So therefore our [00:01:00] ending fund balance is higher than the estimate from the beginning it Resort now poised five million in set up a for 7, so that's is seven hundred eighty two thousand more.
an order. Adjust set that we have. Is that the bottom line we have Pearl Reserve holding from the. Begin from the adopted first chart we estimate to have to avoid a million in our poll results. The actual number come in is 4.1. So that's it two hundred ninety. Ninety eight thousand different between the estimate and actual.
So this is just a reserve holding to help with the future for right so for the. And infant bar and S Op 2 and 30 years. What Dow / Reserve is [00:02:00] 5.8 and with pearls Reserve in 0.9.  So I will stop here and see if you have any question before I move forward.
I have a question. I don't know if Now's the Time or during the audit presentation time, but I recall reading something about the purse reserved being added into the general. Budget and that just that's an maybe I'm recommended accounting practice rather than holding it out, which was fine. But are we still been able to kind of line item that so we know that that's its intended purpose.
Okay, so we don't just have to lump that into them. General fund our okay. Yes. So when we did the budget for 1819, we put to employ a million per reserved under special Revenue fund. And then for this year [00:03:00] our auditor recommend that we should move that into general fund where it belong so for 3.8 million 2.9 Million in general fund.
The placeholder for / future reserve and then we have 800 something that we give we have to keep it under deaf services for the UIL. Yeah. So when we combine all of that is 4.1 million.  We did receive, you know, just some communication from Michael Wilfong it OD that said it would have been fine.
Special Revenue, so it wasn't that the practice was violating anything that other districts do that and it's fine to do that. But we've made a shift we want to transition with new Auditors and do things in a way that align with that and so we're going to go ahead and make that shift.
[00:04:00] So in October Miss Hughes, you gave very informative presentations regarding purrs and there was a brief discussion about the employer incentive fund the governor's employer. Isn't it fun? We're with a 25% match for local jurisdictions to pay down their pers ual. And I just wondered I understood that we might revisit it.
We might have Piper. Jaffray provide information. Just looking at the risks and the benefits and I'm wondering if this is an opportune time to revisit it potentially so that we could lower our ual beginning in July 20. Yes, thank you for your question. So at we at you know that in 2009, I'll dictate how the / born site account with / we went out for [00:05:00] 42 million dollar and over the last few years with the input tray go up and down the bar and of that values now is 33 million.
So with the 33 million that we have in the Sun. And decide our California / the ual that we have based on 2016 17 is 110 million. So purple come up with some policy and procedure. They say that minimum employer can deposits into. Decide a cow was it a second side a Kelsey 25,000 because we already have the first sight account with them in 2009.
So now if we want a second side account with them then the minimum deposit is 25,000 and [00:06:00] imagine is there are three way of matching either. Three hundred thousand five percent of our outstanding new Al with a 5% of 110 is 5.5 million or 25% of whatever we put in the. Side account so for example, if we put in 4 million 25% will be 1 million.
So between three hundred thousand 1 million or five point five. I think the maximum we get from them is about 300,000 match if we do 4 million and then they also have a policy that any employer public employer with the quitter you. Out at least two hundred percent of payroll how to priority to apply for those site account with the we qualify for that is because [00:07:00] the total payroll back in 2016-17 is about 46 million and our you a else is 110.
So 46 divided by 110 is about 230 percent. So we qualify for to apply for this one. Also, if we thinking about this one, the deadline will be December 31st of 2019 and it must be cash. We're not allowed to borrow any money from other fund. Also, we need to understand that if we put the money in the site account it cost money for the administrative costs and then.
May you teach our 2500 for the first year and then one times one thousand per year after that the borchardt reduce the price to 1500 for the first year and then 500 for each year [00:08:00] after that. So all of the money that Pro Bowl receive from the side of California public employer, they will give it to Oregon investment councils for investment.
Town. Now you make the assumption that into a rage for learn on this site account will be 7.2% We nervous about it, right because the last year the interest rate that earn on First Sight accounts is 1.85. So yes, yes. So what there are some sun 47.2 actually few months ago they met. Some friend of 7.5 that you reviewed out to 7.2 so we know of us for Clifford who's making that assumption.
Oh boy. It says that Piper. [00:09:00] Jaffray assuming that's what I learned. That's the Oregon first board s a couple up there, right? And so, okay well, I can talk about later, but I'm curious to know how they arrive them at that number, but I'll save that for him down the road. Yeah. Okay. So that's a very much basic information about side account that I have.
I would like to set a work session to go and do deep detail about a poor bone inside a cow if you would like to do so with that. I would like to invite our audit emitter. I read on to form the auditor companies to come and present a comprehensive annual financial report for us before we wrap that up.
I think just what we would advise is it if you'd like this to be a topic where we kind of we go through this, you know allowing some. Question and answer and then look at the options ahead. Let's put it down as if the board would like you let us know if you want to as a [00:10:00] topic whether you want it before we go into budget committee session so that you have some of that information then you need to let us know so we can slow down and just deal with this Spurs and Senate Bill 1566, and there's a lot of.
Provisions in their their stipulations, there's criteria and we would would probably schedule Carol Samuels from Piper. Jaffray to come because it's it's incredibly complex and we would feel you'd want that kind of outside consultation as well. So I'm seeing at least two board members nodding their heads.
Is there some consensus among the board that this would be a useful work session. If it's something we would consider utilizing then yeah, I would need more information at work session would be great.
Let's do that. Hey, we would then work with our chair and vice chair to set up a date for that. I just wanted to take a moment to thank [00:11:00] miscues for there was very responsive very through. Thank you.
Did I stand in the right spot? Or do you want me to go over there?  Good evening. Again. My name is Sabina Arredondo. I'm managing partner with Wilcox hard on doing company and where the district Auditors this year. It's our first year auditing the district. Before I begin, I like to thank dr.
Ludwig and song The Doug and their staff. They did a great job of providing the information to us throughout the audit process. The first year is always we have lots of questions. We don't know the district. We don't know how the district operates and they provided us with all the information and they gave us all that we need in order to perform our opinion.
So thank you very much for your work. Since it's our my first presentation to the board, I like to explain a little bit about the audit [00:12:00] process. But as I'm going through this weed if you have any questions or any comments or anything, please let me know and I'll make sure I stop and answer those at that time.
We began the audit. Believe it or not in the first week in July where we spend the week here at the district and we call that the get-to-know-you time is where we review The District's internal controls. We also review how they you operate. Your day-to-day operations is it's an important step in our audit process.
We cannot develop our audit plan without this and without the knowledge of how you do your business as a district. So some of the things that we do at that time is we. Select the sample of transactions and walk it through who authorizes those transactions who approves them. Where are they posted in your GL and so forth.
We also select the sample of employees [00:13:00] and how they're approved and played throughout your system we review. Bank reconciliations how we are receipts accounted for in your in your accounting system who were who opens the mail and so forth. So it's an important step because when we develop our audit plan is based on the risks that we see as we are at your District after that we head back to our cubby holes and can be and we start developing our audit plan.
And we then came back to The District in October where we actually tested or audited the district numbers some of the the process or audit steps that we take. We review your bank reckons the bank reconciliation the bank statements and we confirm with financial institutions those Bank balances to make sure what song Lee and her staff are telling me is what you actually [00:14:00] have on file what the financial institution has on file.
We also confirm with OD the district receives a major portion of your Revenue through OD so we confirm with OD all the receipts that were turned over to the district. We also confirm property taxes with your two counties that you receive funds from. Other things we talked to at Ernie's. We talked to the different staff here.
So one of the things that you will notice in our procedures as we try to get as much information. Outside of the business office to verify what they're giving us is what actually other sources have we like them. We trust them but as Auditors we work for the board and we need to report to the board.
So we we get that information and we verify it and we tested the numbers they providing to us. Once we're done with that step of the audit [00:15:00] process the fieldwork time. We then form our opinions as an auditor and there are three you have I believe everybody had a chance you got the comprehensive annual financial report and then you're also have a report to the board of directors in that report.
There are three sets of opinions that belong to us. I remind boards that everything else in the in the comprehensive financial report is representation of management. Our job is to provide an opinion on those financial statements. The first opinion. I want to refer this this evening is on page one and through three and that's its is our audit opinion on the financial statements.
I saw Auditors we can give three types of opinions the highest level of opinion we can give us an unmodified opinion. We did our [00:16:00] doorsteps and everything was in good order. It's typically referred to as a clean opinion the other opinion type of opinion we can give us a modified opinion. There was an area that didn't meet generally accepted accounting principles.
And then there's an adverse opinion which there was multiple areas that didn't make generally accepted accounting principles. We on the bottom page of pay on the bottom of page one under the opinions paragraph We have issued a clean opinion and unmodified opinion and you will read in our opinion the financial statements referred to above resent fairly in all material respects, which I believe is what.
The board expects wants to make sure that the business office is providing to you because you're a municipality in the state of Oregon. You're also we're also to require to review certain items and those are listed.  [00:17:00] You know, you're looking at me. No, those aren't page 97 and 98 of the. Annual financial report.
and you will see all the items that were required to test where the funds with the positive of public funds with financial institutions. And so forth it list all the items there. The district was in compliance with all the items, except we found one violation and it had to do with the budgets over expenditures of Appropriations, and that's listed there for your review.
We're required to report that to you and also the Secretary of State taught its division because you're legally adopted Appropriations is what sets your legal limits of spending and any time you go over that that's about that's a violation according to State regulation. So that's there for your your review and the review of [00:18:00] Oregon secretary of state.
So. The other because the district receives over 750,000 dollars in federal funds were also required to do a what's called a single audit a uniform audit. We're required to test the compliance with those federal grants. We're not required to audit every single Grant. We're required to audit certain grants that meet a certain threshold this year.
We audited the school nudge lunch program. And we have because it's one of your major programs that have has a lot of compliance issues with it or eligibility and how you could get the funding and that those reports are found on page 101 through 104 of the financial report and we have issued an unmodified opinion.
So there was no findings on the on those on the federal grants this year. So [00:19:00] we have three opinions in the financial statements. We issued an unmodified opinion on the financial statements themselves on the state regulations. We found everything to be in good order except one violation and on the budget side and then on your federal programs, we issued I clean unmodified opinion.
There is over a hundred. There's a hundred and eight pages here with a lots of numbers. I always like to point a couple financial statements to two boards. Just so that that I think are important for you to look at the take that back. I think every everything in this is very important as soundly Doug and everybody who spent a lot of time preparing and and helping us draft this Pages 14 and 15.
Of the financial statement report, you have the statement of net position and statement of activities that reason I even bring that [00:20:00] up in that financial statement report is that that's full accrual. It includes all your assets all your liabilities and that includes your fixed assets capital. Your long-term debts your bonds your purse liabilities and so forth where it's that's a little different than some of the financial statements reports that you get on a monthly basis because those are found on page 16 and 18 of the annual report financial report there.
You will find that the general fund ended the year with 9 million 5 hundred sixty nine thousand eight hundred and thirteen in your fund. And then it will have that's the amount that you use to your budgets and so forth. So and that's based on the modified accrual. It does not include your fixed assets.
Your long-term debt is just your current [00:21:00] assets and your current liabilities. So those are a couple of the financial statements. I like to point out. The last one is the notes to the financial statements are very long and they include a lot of standard language for school districts and that are required by generally accepted accounting principles, but I would do want to point out on page 46 there is a prior period restatement.
And that one has to do there was a a new accounting principle adopted this year by the district required to be adopted as Gatsby 75, which is other post-employment benefits and there was various items because we're a new audit firm. We're required to take a look at your 6:30 financial statements at 6:30 17 financial statements and and are sure ourselves that we agree with them numbers coming forward and as you can [00:22:00] see from that financial statements, there was various areas there that.
that as we looked into the financial records we. Recommending certain adjustments to the district beginning fund balance and your statement of net position one of which is that purse that reserve it was originally in the 630 16 year was reported as part of the general fund in the 630 17 year. It was moved over to the.
Purrs Reserve fund fun 225 a sub-account fun. But as we looked as strongly and I looked at the fund the revenue that comes through to that fun. It's coming from charges to other funds and there's a it can be reported as a purse reserved within your financial within your accounting software, but when it gets reported [00:23:00] in.
Your financial statements. It must be rolled up into the general fund. And so rather than reporting it here and then consolidating it again with your general fun song Lee and I discussed it and I think the proper place for it is in the federal and the in your general fund. There's a Gatsby it's a standard that comes along.
It's got to be 54 that sets out all the requirements of what qualifies as a. Stand-alone fun versus that combine fun and so as we looked at that in the actual language on that the determination was to consolidate it with the general fund. So that's there as well as an explanation for you. I've given you a lot.
I know so you have any questions on this. I'm sure you do I missed you said look at the financial report and 14 and 15 40. Yeah 40. What's the [00:24:00] next 16 and 18 are the the other two pages? Okay. Thank you. Those are your budgetary basis account financial statements? That should should. I agree with the accounting that you're getting from from the business office.
Thank you.  So regarding the over expense budget over expenditure were procedures and it had to do with internal controls were. Remedies discussed to address that in the future. Yeah, we discussed that one of the things that needs to happen is sometimes when you're doing your budget you start your budget process today right for your 1920 budget year.
So time, sometimes you're thinking you're getting certain funding and or you're not getting enough funding. So you said your your Appropriations at a certain level? Down the road you get more [00:25:00] funding and you want to expand your programs you want to spend more one of the things we discussed with the business office that what needs to happen is an amendment needs to be brought up to the board for board approval during that to account for any additional expenditures that you want to make so that's that's the solution to that budget violation is is a thorough review.
Through and it's May normally we discussed reviewing it through May so that by the June your final June meeting there would be a resolution brought up to the board for approval. Question about that it's there isn't there a dollar amount though that it's not any expenditure over a dry. There's a certain dollar amount that you must exceed prior that would require board approval.
Otherwise, yeah, that was my question. So the way it is is the but you can you can shift things within your your function, right? But if [00:26:00] you want to increase your appropriate a year appropriated amount in your support services it you need to bring it. It needs to be brought up to the board for approval it needs to be approved and if but if you want to go to a supplemental budget is a 10 percent or above.
Yeah, yeah. Okay, cuz I it is that ten percent I think is what Chelsea and I are thinking about because I thought was like something like 10 percent of our budget like you could spend without having to come to the board for additional approval but it sounds like you're saying anything that's above and I'm just kind of curious.
What what accounting rules principles are you relying on? It's the art. It's the Oregon state regulations that then we have to report back to the organ Secretary of State. I can it's or RS 295. That sets the rules there. So there's there's two sets if any appropriation and you have to be [00:27:00] over if you want to increase your preparations more than 10 percent.
It has to be through a supplemental budget. But if if you want to increase any other one above that, okay, I think that's the difference is it is creating a supplemental budget that we then go through the budget review process exactly versus being able to spend that without. Additional board approval to understand during that difference.
I am I guess I'm not understanding what the supplemental budget is if we would exceed our budget any any budgetary line items by more than 10% of what we budgeted. We would have to come back to the board and create a supplemental budget and then you need to have public here. It's kind of like a budget process expenditures were not 10%.
That is correct. There were not 10% Appropriations language. So what he's saying is that 10% rule that you is that you and I are thinking about [00:28:00] has to do with triggering an additional budget process. So so we don't have to go through that additional budget process unless we tend to spend more than 10 percent.
However, we as a board do need to approve Rick any additional expenditures that exceed. What we budgeted however killer there's you know, there's a we could do it all at once at the end of the school year, you know just to kind of true up. Yeah, the 10% rule is whether you have to go through the budget process the supplemental budget process with public hearings and they're certainly there's other requirements.
And then it's if you're going to spend over the appropriated amount which is the legal limit of expenditures you can make as an organization. That's the legal and so if. Ten thousand dollars above even though immaterial as that may seem to the district your size. It becomes a budget.
In which case the district theoretically could make because I see the for [00:29:00] example, one of the violations was an additional expenditure around support services. So those are decisions often. They're making sort of on the ground to respond to. Needs that are coming up. So they would have the Liberty to make those decisions and do additional hires.
But by the end of the fiscal year would need to present to us at those decisions have been made and the board would have a discussion and directed the reality the way it happens is as you go through the experience. Sometimes you you need to hire to address a need in your in your store. Student services and then it is reviewed throughout the year.
And then the way you correct this over expenditures long as there's a fruit by the board prior to your June 30th. Yes. So inspired our planning for this command years is we will sit down with each principal and Department director at the beginning of the bar chart and go through lighter. Let's do a year up their actual expenditure and see how they spend compared with their budget [00:30:00] because sometime.
When we show the actual expenditure, it showed a Triumph that have a spin so it will better provide them with the idea of how to come up with a budget line item for this coming year and then throughout a year at least quarterly. We will sit down with them and go through the actual versus budget if they.
You know flow to sip man and then they only have two amount of spending then we give them a warning to stop this kind of thing. And if it was come to worse than we you their contingency money to cover fun to cover the function that over the but just in start-up flat it over the budget at the end of the school year.
The we've had opportunities lots of opportunity to talk about what happened and you know, when we do these monthly reports you do get you know budget adjustment [00:31:00] updates in going back and figuring out what we knew about this. Why did it show up? There was just a Miss in June of coming before you with a budget adjustment and saying we have the money for this was here.
We should have just. Come in June and said we've got one more to show you where we did it an adjustment and in talking with the previous CFO and looking at why did it show up? And what happened? That's that's what that was. So the processes are in place with our business team who I would like to acknowledge and thank for being here Teresa, raise your hand and Caitlin.
Becky so thank you. They work a lot in part on this.
So that so those processes are in place and there's a deep understanding of that need to do that. This was a Miss in June around one area where we knew we had [00:32:00] wanted to invest more in special education funding and support students and we needed to do that last budget adjustment documentation. Bring that to you.
That was a mess.  Certainly is a good a good I mean you spent more money and in the schools and so yeah, it's it's a good mistake that there was going to be one. Mr. Wu's mentioned that you shared this information with the state. What do they do with this information? What I've seen that is very sometimes they completely ignore it.
They don't communicate I've seen letters when there's a trend. This is the audits division the Secretary of State all this Division if there's they see a trend at a district time and time again with the same violations you as a board might get a letter and say hey, what are you doing to fix this issue?
And then if there's a required response [00:33:00] to fix it going forward and you know, if we got any response in this situation to. Particular instance. No, there's no I haven't heard anything and I just was filed. I believe we it was submitted to the the or Secretary of State about the 20th of December. So and in your your this process from start to finish any other concerns besides this what we just talked about in the processing you found that you should know about that.
Yeah about yeah. Yeah, you have a report to the board. And so in that report, there's three page 3 of that report to the board looks a little different. It's not as thick as the other one and there. There are two recommendations that we have brought up to the business office attention and management and they're there for your review.
One of them is the average daily membership. The [00:34:00] way Oregon funds schools has based on folks sitting in the everyday at this and so you need to track daily membership of students and. And so we're recommending that the district review attendance procedures to require teachers to confirm attendance records for each period this is at the high school level it has to do with sometimes teachers were if you are required to log in but it had been missed and when we ran the actual reports there were some that had not been.
Login in to accept all the students being present and your software if you don't log in it defaults to all students being there. So the other one is on computer controls and that has to do with the student your accounting. A student control sarees the accounting software. One of the things that we do [00:35:00] is Auditors is we review behind the scenes how much access do people have what ability do they have to initiate transactions to approve them?
To actually consummate the transactions and what we noticed is folks in the business office may have the same rights as other folks in there that we feel you need to review to make sure or the business office needs to review to make sure that the people using the software have the right access to them.
We understand as we say in this comment that. We in order to have the perfect internal control. You would have to have one person do one thing versus another person to another thing and it's cost prohibitive. So we just want to bring this up to make sure that your that every that the business office is Vigilant and there's compensating controls to [00:36:00] make sure that there's no transactions getting through without their without their knowledge.
So those are the two other recommendations that will brought up. On that board report there. Pages four and six I'm just going to briefly mention is required Communications from the audit auditor to the to to the organization and those deal with was management difficult to deal with where they opinion shop and getting like what I have to say so they went got other accounting for Stewart agree with them.
Did they not provide us with the information on a timely basis and so forth because if they were difficult to deal with. It would be good for the boards to know that right there. I'm happy to report the none of that happened. So but we're required to communicate those to you and they're found they're and are in a report.
So that's all I have unless there's some additional questions.  Thank you for your [00:37:00] work and thank you for the business office for your work with auditor and for preparing the annual financial report. I had thoughts, but mainly I had an overwhelming feeling of appreciation for your work.  Thank you.
I just like to thank our new auditing firm Wilcox Arredondo have been an absolute pleasure to work with their team came in they were. Kind and curious and deeply respectful and right away acknowledged the hard work of our staff and we're flexible and their time and generous in their affirmations to our team.
And we're just so appreciative additionally. Mr. Arredondo has made himself so available to our new CFO and [00:38:00] are still relatively new superintendent who has lots of questions. And so patient and just generous with his time as well to meet with with us over and over again, and we're really looking forward to a long partnership with this this firm.
So thank you very much. I had a question for either. Dr. Ludwig or misuse about the two comments that Wilcox Arredondo made I guess one is do you is that valuable input with regard to the average daily membership and the segregation of Duties in the business office? And secondly are we started a process or have you finished the process to fix those things?
Yeah, and that is part of the process as they give us that feedback before this meeting even and so some of that is our software and taking a look at where their places were and it's not unusual for software to have default categories or to remind staff that even though they know there's a default category one thing to still [00:39:00] login and.
Document and so those conversations have already happened at the school site where those couple of incidences that occurred. So there's conversation the macro level of an already at the micro level and then in terms of the segregation of Duties computer controls, I believe those are already you can speak to that but we've already had those conversations.
Yes. So for Dropout function in the business office is like 700 pages. Listen now, you know how picked up our function connected ivation. So I'm working closely with our senior accountant and on I also reaching out to Vicky Robinson. She is the induction for the news business manager for mobile apps for so so after me and my senior accountant work together to.
Seven secretary that Duty then we would like to send a final [00:40:00] recommendation to the obstacle for ryoga final recommendation.  If
you define ual.
Thank you.
Stupid like always having you last and behind schedule. Mr. Woodley, but welcome and welcome to the long range planning committee. We appreciate your work and your presence here tonight.
David while you're getting ready, could those of you who are long range planning committee, raise your hands so some of our school board not members may not know who's here tonight. So we have Kim Jordan in the back Grady Nelson Doris Whaler you're my missing. Okay, and then David Lake. [00:41:00] Thank you, and thank you.
Thanks. Nice to visit with you. Again. It seems like a number of months since I've been here back in my notes. It's been since.  last summer so stated. My name is David. Like I've been asked to represent the long range planning committee tonight in presenting this much material in conjunction with Tim Woodley and the district planning team.
To the school board in the spring of 2018 the board requested that the long range planning committee and District planning staff undertake an update of the district's long-range Flint long-range plan a process. Commenced that time to undertake you to accommodate that request the members of the committee who are here tonight have been introduced in addition to those [00:42:00] members.
We have Mike Jones Kent Wyatt Sammy nada. And Chelsea's played her really significant role over the last many months and her role as liaison with the committee. So tonight an updated plan is being delivered to you as I have served on this committee for a number of years improvements are made each time.
The plan is updated and let me just articulate a few that have been improved upon this year over past first. There was a detailed discussion about and debate about the methodology for determining school capacity a key component in the planning process. Second was a more in-depth conversation about student population projections.
third a detailed analysis of and discussion about school reuse options including a [00:43:00] discussion with the community on that topic before the plan was. Finalized and presented to you for that detailed consultation with other school districts and subject matter experts on various aspects of school design curriculum changes in future educational needs that we're all accomplished prior to the completion of the plan.
I trust you will find this plan and the supporting documentation thorough and formative. And I hope and we hope thought-provoking. So Tim has prepared a quick brief synopsis of the plan that you've got some time to read it and a working session scheduled. So we're going to go into a lot of detail.
So I'll turn the time over to Tim and let him provide that synopsis and if you have questions during or after that, please if you had mentioned [00:44:00] three. You mentioned some areas and I'm just trying to look at your table of contents or last thing that I heard you say was Community use of facilities.
Where would I find that? No, I was not referencing Community use of facilities, but Community input on options for the the future use of existing school facilities. So we.
Any other questions before I