Strategic Growth Plan - Bond Accountability

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State Allocation Board Bond Oversight for K-12 School Facilities Programs

I.     INTRODUCTION

State Allocation Board

The State Allocation Board (SAB) is responsible for determining the allocation of state resources (proceeds from State General Obligation Bond Issues (SGOB) and other designated State funds) used for the new construction and modernization of local public school facilities. The SAB is also charged with the responsibility for the administration of the School Facility Program (SFP), the State Relocatable Classroom Program, and the Deferred Maintenance Program. The SAB is the policy level body for the programs administered by the Office of Public School Construction.

The SAB is comprised of the Director of Finance, the Director of General Services, the Superintendent of Public Instruction, three members of the Senate, three members of the Assembly and one appointee by the Governor.

OFFICE OF PUBLIC SCHOOL CONSTRUCTION

The Office of Public School Construction (OPSC), as staff to the SAB, implements and administers the School Facility Program (SFP) and other programs of the SAB. The OPSC is charged with the responsibility of verifying that all applicant school districts meet specific criteria based on the type of funding which is being requested. The OPSC also prepares recommendations for the SAB's review and approval.

It is incumbent on the OPSC staff to prepare regulations, policies and procedures which carry out the mandates of the SAB, and to work with school districts to assist them throughout the application process. The OPSC is responsible for ensuring that funds are disbursed properly and in accordance with the decisions made by the SAB.

The OPSC prepares agendas for the SAB meetings. These agendas keep the Board members, school districts, staff and other interested parties apprised of all actions taken by the SAB. The agenda serves as the underlying source document used by the State Controller's Office for the appropriate release of funds. The agenda further provides a "historical record" of all SAB decisions, and is used by school districts, facilities planners, architects, consultants and others wishing to track the progress of specific projects and/or availability of funds.

REPORTING REQUIREMENTS

The SFP was enacted by the passage of the Leroy F. Greene School Facilities Act (Senate Bill 50) in 1998. The enactment of the bill envisioned providing funding via state assistance in the form of a full and final grant to the school districts to fund their capital facility projects (which include new construction, modernization and rehabilitation of their schools). This program envisioned many self certifications and few documents in order to secure a state grant. Since the grant was matched it also provided local control to the communities on how these monies were to be spent. To counter the self certifications and state grants, SB 50 provided the SAB strong accountability authority to audit expenditure reports and district records in order to assure that funds received under this act are expended in accordance with program requirements (Education Code 17076.10). The OPSC was also commissioned with the responsibility of conducting the SFP progress and expenditure audits. The OPSC’s oversight responsibilities focus on verifying that a project funded through the SFP progresses in a timely manner, applicable state laws and program certifications are followed, and expenditures made by school districts to comply with the Education Code Sections 17072.35 and 17074.25 and Regulation Sections 1859.77.2 (new construction) and 1859.79.2 (modernization).

II.     SAB AUTHORITY

The SAB is the statutorily-empowered board that is responsible for determining the allocation of the proceeds from SGOB issues intended for the construction and modernization etc. of California’s public school facilities. Pursuant to Government Code Section 15490, the SAB is granted specific authority to make apportionments and disbursements under the provisions of each voter approved bond act.Additionally, the SAB is responsible for establishing policies and regulations for the programs authorized under each bond act and administered by the OPSC.

III.     SAB/OPSC’S ROLE: BOND AND CASH MANAGEMENT

The OPSC, as staff to the SAB, is responsible for ensuring that funds apportioned by the SAB are disbursed properly and in accordance with decisions made by the SAB.Also, the OPSC is responsible for maintaining adequate cash balances in each bond fund to meet the needs of the school districts without incurring excessive bond interest expenses to the program. Government Code Section 53600.3 authorizes governing bodies or local agencies or persons authorized to make investment decisions with care, skill, prudence, and diligence, including, but not limited to, the general economic conditions and the anticipated needs of the agency, to safeguard the principal and maintain the liquidity needs of the agency.

The OPSC is responsible for meeting the funding needs of eligible school districts and making recommendations to the State Treasurer’s Office (STO) for loans and projections of school funding needs. The STO is responsible for developing a prudent plan and marketing strategy for selling SGOB that meets the capital outlay needs of the State. In order to do this, agencies that administer programs funded by SGOB acts are required to provide expenditure projections to the STO on a regular basis. The following reports are submitted to STO on a regular basis by the OPSC, acting as staff to the SAB:

  • 12 Month Cash Flow Projections (for each PMIA loan request).
  • 18 Month Cash Flow Projections (for all bond acts with unissued bonds) due in July.
  • 3 Year Cash Flow Projections (for new bond acts and resolution renewals).

The SAB generally apportions bond funds on a first in first out basis whenever possible.Consistency with regard to how bond funds are apportioned by the SAB allows management to make reasonable assumptions regarding cash flow. Further, the OPSC is responsible for fund reconciliation and reporting for each bond fund at the end of each fiscal year.

IV.     OPSC’S – PROGRAM ACCOUNTABILITY

Fund Release

School districts that receive SFP apportionments from the SAB have 18 months from the date of the apportionment to request that the funds be released. If a district fails to submit a fund release request to the OPSC within 18 months of the SFP apportionment by the SAB, the entire SFP apportionment will be rescinded without further SAB action (Education Code Section 17076.10(d) and Regulation Section 1859.90). This requirement is a successful measure to ensure that the projects move forward for the intended purpose and within the time frames provided for in the statute.

Annual Reporting Requirements

School districts are required to submit an Expenditure Report (Form SAB 50-06 and a Detailed Listing of Project Expenditures) to the OPSC within one year after receiving the initial fund release for a project. Subsequent expenditure reports are due annually until the project is completed (Education Code 17076.10(a) and Regulation Section 1859.104). This allows OPSC to ensure accountability for the projects post fund release and also ensure that the funds are spent in accordance with the project approvals as required by statute.

Substantial Progress

A school district that received a SFP fund release must also comply with substantial progress requirements by indicating that the district has accomplished a significant amount of the actual construction work for which an apportionment was granted. It should be noted that certain projects may require evidence of progress at more than one point in the project’s life cycle. This occurs when a project receives advance funds for the design and/or purchase of a school site prior to receiving final construction funding. Evidence of progress is due for each phase of the project as applicable within 18 months from the date the related funds were released (Education Code 17076.10(b) and Regulation Section 1859.105).

If it has been determined that Substantial Progress has not been made, the OPSC will make a recommendation to the SAB that a finding be made that could result in a rescission or a reduction of the project to the cost incurred (Education Code 17076.10(b) and Regulation Section 1859.105). This is a successful measure to track the projects’ progress. This also ensures that the OPSC can verify that the funds are being used for its intended purpose as required by statute.

Expenditure Audit

If a school district has complied with the expenditure reporting requirements and the substantial progress requirements, the OPSC accounting and audit staff tracks the fund release dates and district expenditure report dates to determine when a project is ready for a final Expenditure Audit. An expenditure and program compliance audit is performed on completed SFP projects. These audits are performed within the prescribed time frames provided in law. Verification of the eligibility of expenditures made and the amounts reported is one facet of the OPSC audit. The audit also verifies information relating to the district’s share, state’s share, interest earned, and savings, etc. The audit review consists of verifying the various program certifications (e.g. validate approvals, bidding process, etc.) by the district were made appropriately (Education Code 17076.10(c) and Regulation Section 1859.106). This also includes post occupancy reviews ensuring that the project was built as approved by the SAB. This ensures that the OPSC can verify that the funds are being used for its intended purpose as required by statute.

Material Inaccuracy

School districts that are unable to substantiate SFP certifications may be subject to material inaccuracy penalties upon a finding by the SAB. >The district shall be prohibited from self-certifying project information for a period up to five years from the date the SAB made the material inaccuracy finding for the project. In addition, if an apportionment was made, the district shall be required to repay any state funds received that are related to the false certification plus interest (Education Code 17070.51 and Regulation Sections 1859.104.1, 1859.104.2, and 1859.104.3). This measure ensures that there are safeguards of the taxpayers’ bond monies and there are no inappropriate uses of the funds by the districts.

Financial Hardship

Financial hardship (FH) assistance is available for those school districts that cannot provide all or part of their funding share of a SFP project. There are specific criteria that must be met in order to qualify for FH assistance as required by SFP regulations and laws. The OPSC conducts a thorough analysis of the districts’ financial records to ensure that they meet the requirement and truly need to receive state assistance. This measure ensures that there are safeguards of the taxpayers’ bond monies and there are no inappropriate uses of the funds by the districts.

V.     PUBLIC INFORMATION – TRANSPARENCY

As a State entity, the OPSC prides itself on keeping its stakeholders apprised of all SFP funding issues affecting the school districts and the general public. The OPSC provides easily assessable, up-to-date information regarding the activities of specific school projects, statistics of bond funds accountability, status of bonds funds, as well as regulations and law changes that affect the school communities in a variety of venues. The following is a general overview of some of the methods used to provide information to our stakeholders and the general public:

State Allocation Board

The SAB meets monthly, in a publicly noticed meeting, to apportion funds to the school districts, act on appeals, and adopt policies and regulations as they pertain to the programs administered by the SAB. All of these items are posted regularly on the OPSC’s Web site.

State Allocation Board Implementation Committee

The SAB Implementation Committee is an informal advisory body established by the SAB to assist the Board and the OPSC with policy and legislation implementation. The Committee membership is comprised of various state agencies and stakeholders representing the school facilities community.

The SAB Implementation Committee meets monthly, in a publicly noticed meeting. Agendas for the meeting contain an overview of the items scheduled for discussion; as well as, items of suggested regulatory changes for potential implementation to the existing School Facility Program or processes. All of these items are posted regularly on the OPSC’s Web site.

Resources of Information and the OPSC’s Web Site

The OPSC offers a variety of services and means to ensure that the stakeholders are well informed and have easy access to all the process and program information. In addition, the OPSC also provides a variety of reports to the legislature, the SAB and other interested parties on a regular basis. These tools allow interested parties access to statistical and current information; such as:

  • Annual Report – Each year the OPSC provides the Legislature a report that gives an overview of the office’s activities including financial summaries of all programs administered by OPSC, program accountability, and statistical information of the funds disbursed.
  • School Facility Program Statistical and Fiscal Data – The SFP Statistical and Fiscal Report is issued and updated every month. The information contained in the report provides an overview of bond fund usage. The report also provides information regarding the number of new classrooms built or modernized and the number of children appropriately housed in these facilities.
  • OPSC Workload Lists – The OPSC Web site contains a variety of workload lists that can be accessed to provide information on the processing status of a school district’s project, current information of school districts' available eligibility and the status of project fund releases.
  • OPSC/Department of State Architect (DSA)Project Tracker – The OPSC and the DSA collaboratively developed a Project Tracker. The Project Tracker is an interactive Web site that allows interested parties to track a project’s progression through the approval process among the various State agencies by using a district/project specific identification number.
  • Advisory Action Newsletter – In an effort to provide up-to-date information, the OPSC produces a monthly Advisory Action Newsletter which is posted on the OPSC Web site. The newsletter alerts readers to any new laws, regulations and changes that could affect them.
  • Variety of Resources – As an example, the OPSC conducts Statewide workshops and outreach meetings on a continuous basis to assist school districts with their SFP needs. There are additional resources available on the OPSC’s Web site that include SFP regulations and guidebooks.

These examples are just a sampling of the many resources available and accessible to provide information and accountability of the workings at OPSC.