Napa Community College District Report

Fiscal Health Risk Analysis April 5, 2022 Napa Community College District Michael H. Fine Chief Executive Officer Fiscal Health Risk Analysis Contents About FCMAT ..................................................................................................3 Introduction ......................................................................................................5 Background ...............................................................................................................5 Study and Report Guidelines ................................................................................5 Study Team ................................................................................................................6 About the Analysis .........................................................................................6 Fiscal Health Risk Analysis ..........................................................................8 1. Annual Independent Audit Report ...............................................................................8 2. Budget Development and Adoption ..........................................................................8 3. Budget Monitoring and Updates .................................................................................9 4. Cash Management ........................................................................................................10 5. Collective Bargaining Agreements ............................................................................11 6. Intrafund and Interfund Transfers...............................................................................11 7. Deficit Spending ..............................................................................................................11 8. Employee Benefits ........................................................................................................12 9. Enrollment and Attendance ........................................................................................12 10. Facilities ..........................................................................................................................13 11. Fund Balance and Reserve for Economic Uncertainty .......................................13 12. General Fund – Current Year ....................................................................................14 13. Information Systems and Data Management .......................................................14 14. Internal Controls and Fraud Prevention .................................................................15 15. Leadership and Stability .............................................................................................16 16. Multiyear Projections ...................................................................................................16 Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 1 Fiscal Health Risk Analysis 17. Non-Voter-Approved Debt and Risk Management ...............................................16 18. Position Control ..............................................................................................................17 Total Risk Scores, All Areas ..................................................................................17 Key to Risk Score.....................................................................................................17 Summary ..........................................................................................................18 Recommendations .......................................................................................23 Appendix ........................................................................................................25 Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 2 Fiscal Health Risk Analysis About FCMAT FCMAT’s primary mission is to assist California’s local K-14 educational agencies to identify, prevent, and resolve financial, human resources and data management challenges. FCMAT provides fiscal and data management assistance, professional development training, product development and other related school business and data services. FCMAT’s fiscal and management assistance services are used not just to help avert fiscal crisis, but to promote sound financial practices, support the training and development of chief business officials and help to create efficient organizational operations. FCMAT’s data management services are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and inform instructional program decisions. FCMAT may be requested to provide fiscal crisis or management assistance by a school district, charter school, community college, county office of education, the state superintendent of public instruction, or the Legislature. When a request or assignment is received, FCMAT assembles a study team that works closely with the LEA to define the scope of work, conduct on-site fieldwork and provide a written report with findings and recommendations to help resolve issues, overcome challenges and plan for the future. Studies by Fiscal Year 90 80 70 60 50 40 30 20 10 0 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 FCMAT has continued to make adjustments in the types of support provided based on the changing dynamics of K-14 LEAs and the implementation of major educational reforms. FCMAT also develops and provides numerous publications, software tools, workshops and professional learning opportunities to help LEAs operate more effectively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) division of FCMAT assists the California Department of Education with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS). CSIS also hosts and maintains the Ed-Data website (www.ed-data.org) and provides technical expertise to the Ed-Data partnership: the California Department of Education, EdSource and FCMAT. FCMAT was created by Assembly Bill (AB) 1200 in 1992 to assist LEAs to meet and sustain their financial obligations. AB 107 in 1997 charged FCMAT with responsibility for CSIS and its statewide data management work. AB 1115 in 1999 codified CSIS’ mission. AB 1200 is also a statewide plan for county offices of education and school districts to work together locally to improve fiscal procedures and accountability standards. AB 2756 (2004) provides specific responsibilities to FCMAT with regard to districts that have received emergency state loans. In January 2006, Senate Bill 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. On September 17, 2018 AB 1840 was signed into law. This legislation changed how fiscally insolvent districts are administered once an emergency appropriation has been made, shifting the former state-centric system to be more consistent with the principles of local control, and providing new responsibilities to FCMAT associated with the process. Since 1992, FCMAT has been engaged to perform more than 1,400 reviews for LEAs, including school districts, county offices Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 3 seidutS fo rebmuN Fiscal Health Risk Analysis of education, charter schools and community colleges. The Kern County Superintendent of Schools is the administrative agent for FCMAT. The team is led by Michael H. Fine, Chief Executive Officer, with funding derived through appropriations in the state budget and a modest fee schedule for charges to requesting agencies. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 4 Fiscal Health Risk Analysis Introduction Background The citizens of Napa County passed a bond in 1941 to establish Napa Junior College as part of Napa Union High School District. In 1962 another bond was passed, which allowed the college to buy land and build a new college campus. At that time the college renamed itself Napa College. In 1982, Napa College changed its name to Napa Valley College. Napa Valley College opened its Upper Valley Campus in St. Helena in fall 1994. The district primarily serves the residents of Napa County but self-identifies as a destination college and serves students from surrounding counties, with most out-of-county students coming from neighboring Solano Coun- ty. The district offers various educational programs and services, including two-year degrees, certificates, and university transfer programs, to approximately 4,000 students. In October 2021, the California Community Colleges Chancellor’s Office requested that FCMAT assist the district by conducting a Fiscal Health Risk Analysis, with additional focus on cash flow management, and identify wheth- er appropriate and sufficient financial information is shared in a timely manner with trustees. Study and Report Guidelines FCMAT visited the district on November 29, 2021, to conduct interviews, collect data and review documents. Follow-up interviews were conducted on Zoom on January 10 and 11, 2022. This report is the result of those activities and is divided into the following sections: • Fiscal Health Risk Analysis • Summary FCMAT’s reports focus on systems and processes that may need improvement. Those that may be functioning well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Associated Press Stylebook, a comprehensive guide to usage and accepted style that emphasizes conciseness and clarity. In addition, this guide emphasizes plain language, discourages the use of jargon, and capitalizes relatively few terms. Study Team The study team was composed of the following members: Michelle Giacomini Carolynne Beno FCMAT Deputy Executive Officer FCMAT Intervention Specialist Cambridge West Partnership, Inc. Laura Haywood FCMAT Consultant FCMAT Technical Writer Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 5 Fiscal Health Risk Analysis About the Analysis FCMAT has developed the Fiscal Health Risk Analysis (FHRA) as a tool to help evaluate a community college district’s fiscal health and risk of insolvency in the current and two subsequent fiscal years. This tool also is used to assess a community college district’s ability to develop and execute a sustainable financial plan for the cur- rent and two subsequent fiscal years. The scope of the FHRA is based on data captured within 90 days from the signing of the contract between FCMAT and the district. The FHRA includes 18 sections, each containing specific questions. Each section and specific question are includ- ed based on FCMAT’s work since its inception; they are the common indicators of risk or potential insolvency for districts that have neared insolvency and needed assistance from outside agencies. Each section of this analysis is critical to an organization, and lack of attention to these critical areas will eventually lead to a district’s failure. The greater the number of “no” answers to the questions in the analysis, the higher the score, which points to a greater potential risk of insolvency or fiscal issues for the district. Not all sections in the analysis, and not all questions within each section, carry equal weight; some areas carry higher risk and thus count more heavily toward or against a district’s fiscal stability percentage. For this tool, 100% is the highest total risk that can be scored. A “yes” or “n/a” answer is assigned a score of 0, so the risk percentage increases only with a “no” an- swer or with an unanswered question. Identifying five-year historical trends in the areas of enrollment, staffing, salary and benefits, and revenue, including information on how each contributes to obstacles and issues early on, is critical to maintaining fiscal health. Multiyear planning, risk assessment, and cash flow projections will enable a district to better understand financial objectives and strategies to sustain a high level of fiscal efficiency and overall solvency. A district should consider completing the FHRA annually to assess its own fiscal health risk and progress over time, espe- cially if it is at risk or in fiscal distress. Score Breakdown by Section Because the score is not calculated by category, category values provided are subject to minor rounding errors and are provided for information only. 1. Annual Independent Audit Report 0.0% 2. Budget Development and Adoption 4.9% 3. Budget Monitoring and Updates 2.0% 4. Cash Management 3.9% 5. Collective Bargaining Agreements 1.0% 6. Intrafund and Interfund Transfers 1.0% 7. Deficit Spending 0.0% 8. Employee Benefits 0.0% 9. Enrollment and Attendance 1.8% 10. Facilities 0.0% 11. Fund Balance and Reserve for Economic Uncertainty 0.0% 12. General Fund – Current Year 4.1% 13. Information Systems and Data Management 2.9% 14. Internal Controls and Fraud Prevention 3.9% Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 6 Fiscal Health Risk Analysis 15. Leadership and Stability 3.1% 16. Multiyear Projections 2.0% 17. Non-Voter-Approved Debt and Risk Management 0.0% 18. Position Control 5.7% Score 36.4% Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 7 Fiscal Health Risk Analysis Fiscal Health Risk Analysis For Community College Districts Date(s) of fieldwork: 11/29/2021, 1/10/2022, 1/11/2022 District: Napa Valley Community College District 1. Annual Independent Audit Report Yes No N/A 1.1 Has the independent audit report for the most recent fiscal year been completed and presented to the board by the statutory timeline of December 31? . . . . . . . . . . . ✓ ☐ ☐ 1.2 Was the district’s most recent independent audit report free of material findings? . . . . . ✓ ☐ ☐ 1.3 Has the district corrected all audit findings from the current and past two audits? . . . . . . ☐ ✓ ☐ The 2020-21 audit report contains a repeat finding regarding the lack of documentation on Student-Centered Funding Formula (SCFF) data. 1.4 Can the district correct prior year audit findings without affecting its fiscal health (e.g., material apportionment or internal control findings)? . . . . . . . . . . . . . . . ✓ ☐ ☐ 1.5 Does the district issue a request for proposal for audit services every 3 - 5 years? . . . . . ✓ ☐ ☐ 2. Budget Development and Adoption Yes No N/A 2.1 Does the district develop and use written budget assumptions and multiyear projections that are reasonable, clearly articulated, and aligned with the signed state budget and the Student-Centered Funding Formula (SCFF)? . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ Prior to the most recent budget developed by the interim chief business official (CBO), the district used only budgeted revenues and expenses and has not used historical actuals for budget projection. This compromises the accuracy of the multiyear projection and may have an adverse impact on financial decision-making. SCFF elements were not included in the budget assumptions or projections. 2.2 Does the district use a budget development method other than a prior-year rollover budget, and if so, does that method include tasks such as review of prior year estimated actuals by major object code and removal of one-time revenues and expenses? . . . . . . . . . ☐ ✓ ☐ Prior to the most recent budget, the district used a prior-year rollover budget for 4000’s and 5000’s expenditure categories. Historical actuals were not used for budget development. The budget development process should be improved to use budget values and assumptions that are relevant to the current external and internal conditions. 2.3 Does the district use position control data for budget development? . . . . . . . . . . ☐ ✓ ☐ Position control is not part of the budget development process. Prior year budgets are rolled over with percentage increases to salaries and benefits to develop the budget. Planning discussions with regard to adding new positions do not occur between human resources and the budget office, and extra assignments do not require board approval. 2.4 Are clear budget development processes codified in Board Policies and Administrative Procedures? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 8 Fiscal Health Risk Analysis 2.5 Does the budget development process include input from faculty/staff, administrators, the governing board, and the budget advisory committee in accordance with the district’s documented planning model? . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 2.6 Does the budget development process include a calculation of the SCFF with reasonable assumptions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ There is no evidence that an SCFF calculation was used or presented as part of budget development. 2.7 Does the district budget and expend restricted funds as authorized by the funding source before expending unrestricted funds? . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 2.8 Does the district have a documented policy and/or procedure for evaluating the proposed acceptance of grants and other types of restricted funds to assess their congruency with the institution’s strategic plan and the potential multiyear impact on the district’s unrestricted general fund? . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district is working on adopting and establishing procedures on evaluating the acceptance of grants, but nothing is adopted at this time. 2.9 Are expected revenues more than or equal to expected expenditures in the district’s adopted budget (budget is not dependent on carryover funds to be balanced)? . . . . . . ✓ ☐ ☐ 2.10 Has the district refrained from using negative or contra expenditure accounts (excluding appropriate abatements in accordance with the Budget and Accounting Manual (BAM)) in its budget? . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 2.11 Does the district adhere to a board-adopted budget calendar that includes statutory due dates, major budget development tasks and deadlines, and the staff member/ department responsible for completing them? . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The board of trustees does not approve a comprehensive budget calendar. 3. Budget Monitoring and Updates Yes No N/A 3.1 Are actual revenues and expenses consistent with the most current budget? . . . . . . . ✓ ☐ ☐ 3.2 Are budget revisions posted at least quarterly in the financial system? . . . . . . . . . ✓ ☐ ☐ 3.3 Are clearly written and articulated budget assumptions that support budget revisions communicated to the board at least quarterly? . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The interim CBO stated in the documentation provided that “The budget development values and assumptions for 2021-22 were not created or presented to the board of trustees.” 3.4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs before the next financial reporting period? . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 3.5 Does the district include the interim CCFS 311Q reports on board agendas? . . . . . . . . ✓ ☐ ☐ 3.6 Has the district addressed any budget-related deficiencies identified in the most recent Accrediting Commission for Community and Junior Colleges (ACCJC) accreditation report? . . ✓ ☐ ☐ 3.7 If a college in the district has been notified that it is on an enhanced monitoring or watch-list status based on the college’s ACCJC Annual Fiscal Report, have the district and college(s) taken steps to address the issues of concern identified by the ACCJC? . . . . . . ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 9 Fiscal Health Risk Analysis 3.8 Does the district’s enterprise software system include hard budget blocks that prevent the processing of requisitions or purchase orders when the budget is insufficient to support the expenditure? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ The system is capable of hard budget blocks that prevent the processing of requisitions or purchase orders when the budget is insufficient to support the expenditure. The district reported it does not use the technology. 3.9 Does the district encumber and adjust encumbrances for salaries and benefits? . . . . . . ✓ ☐ ☐ 3.10 Are all balance sheet accounts in the general ledger reconciled each quarter, at a minimum? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 4. Cash Management Yes No N/A 4.1 Does the district balance all cash and investment accounts with bank statements monthly? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ Prior to the interim CBO arriving in late summer, the district was not balancing all cash accounts with monthly bank statements. 4.2 Are outstanding amounts in the cash and investment account reconciliations less than one year old, or if older, have a resolution? . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ There are outstanding warrants in the reconciliations that date back to 7-16-2014 and no evidence of a resolution to clear these warrants. 4.3 Are accounts held by the county treasurer reconciled with the district’s and county office of education’s reports monthly? . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ Prior to the interim CBO arriving in late summer, the district did not reconcile accounts with the county office of education monthly. 4.4 Does the district comply with its county treasurer and/or county office of education’s requirements for balancing accounts? . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district did not balance accounts monthly. With the assistance of the interim CBO, it is now meeting the requirements. 4.5 Has the district had a positive cash balance at the end of the month during the most recent 12 months? . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ Based on the information from the district that it did not have a positive cash balance at the end of each month, the county office of education intervened, and an emergency loan was issued to the district for payroll in October 2021. The newly hired interim CBO evaluated all accounts and decided the district could have swept all available fund balances (restricted and unrestricted) and would have made the October payroll without the loan from the County Treasurer. 4.6 Does the district forecast its cash receipts and disbursements at least 18 months out, updating the actuals and reconciling the remaining months to the budget monthly to ensure cash flow needs are known? . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 4.7 Does the district have a plan to address cash flow needs during the current fiscal year? . . . ✓ ☐ ☐ 4.8 Does the district have sufficient cash resources in its other funds to support its current and subsequent two fiscal years’ projected obligations in those funds? . . . . . . ✓ ☐ ☐ 4.9 If interfund borrowing is occurring, does the district comply with Object Code 7300 requirements in the BAM? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 10 Fiscal Health Risk Analysis 4.10 If the district is managing cash in any funds through external borrowing, such as a TRANS, has the district set aside funds for repayment attributable to the same year the funds were borrowed? . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 5. Collective Bargaining Agreements Yes No N/A 5.1 Does the district quantify the effects of collective bargaining agreements and include them in its budget and multiyear projections? . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 5.2 If the district has conducted a pre-settlement analysis and identified related costs or savings, if any (e.g., statutory benefits, and step and column salary increases), for the current and subsequent years, has it identified ongoing revenue sources or expenditure reductions to support the agreement? . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district did not conduct a presettlement analysis for the current and subsequent years. 5.3 In the prior three years has the district settled all new employee compensation costs (salary, benefits, load factoring, etc.) in the bargaining agreements at or under the funded cost of living adjustment (COLA)? . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 5.4 If settlements have not been reached, has the district identified resources to cover the estimated costs of settlements? . . . . . . . . . . . . . . . . . . . . . . . ☐ ☐ ✓ 5.5 Has the district settled with all its bargaining units for at least the prior two years? . . . . . ✓ ☐ ☐ 5.6 Has the district settled with all its bargaining units for the current year? . . . . . . . . . ✓ ☐ ☐ 6. Intrafund and Interfund Transfers Yes No N/A 6.1 Does the district have a board-approved plan to eliminate, reduce or control intrafund transfers from the general fund unrestricted subfund to the general fund restricted subfund? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 6.2 Does the board approve any intrafund transfers (contributions/encroachments) from the unrestricted general fund prior to occurrence? . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ No evidence exists of a process for the board to approve any intrafund transfers. 6.3 If the district has deficit spending in funds other than the unrestricted general fund that create instability, has it included in its multiyear projection any transfers from the unrestricted general fund to any resulting negative fund balance (e.g., interfund transfers)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 6.4 If any interfund transfers were required for other funds in either of the prior two fiscal years, and the need is recurring in the current year, did the district budget for them at reasonable levels? . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 7. Deficit Spending Yes No N/A 7.1 Is the district avoiding a structural deficit in the current and two subsequent fiscal years? (A structural deficit is when ongoing unrestricted expenditures and contributions exceed ongoing unrestricted revenues.) . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 7.2 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending? . . . . ☐ ☐ ✓ 7.3 Has the district decreased deficit spending over the past two fiscal years? . . . . . . . . ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 11 Fiscal Health Risk Analysis 8. Employee Benefits Yes No N/A 8.1 Has the district completed a recent actuarial valuation to determine its unfunded liability under Governmental Accounting Standards Board (GASB) other post-employment benefits (OPEB) requirements? . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 8.2 Does the district have a plan to fund its liabilities for retiree health benefits? . . . . . . . ✓ ☐ ☐ 8.3 Does the district have a multiyear plan to fund its projected employer contributions to CalSTRS and CalPERS? . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 8.4 Has the district followed a policy or negotiated a collectively bargained agreement to limit faculty banked hours? . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 8.5 Within the last three years, has the district conducted a verification and determination of eligibility for benefits for all active and retired employees and dependents? . . . . . . . . ✓ ☐ ☐ 8.6 Does the district track, reconcile and report employees’ compensated leave balances on the balance sheet? . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 9. Enrollment and Attendance Yes No N/A 9.1 Has the district’s enrollment been increasing or flat for the current and two prior years? . . . ☐ ✓ ☐ The district has experienced declining enrollment for the past seven fiscal years. In 2014-15 the college produced 5,669 full-time equivalent students (FTES). By 2019-20 the total was 4,638. In 2020-21, FTES dropped to 4,021. 9.2 Does the district monitor and analyze enrollment, weekly student contact hours (WSCH) and full-time equivalent students (FTES) data at least monthly through the second reporting period (P2)? . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 9.3 Does the district track historical WSCH and FTES data to establish future trends? . . . . . . ✓ ☐ ☐ 9.4 Do colleges within the district maintain a record of WSCH or FTES that is reconciled monthly at the college and district levels at least through the second reporting period? . . . ✓ ☐ ☐ 9.5 Do the colleges within the district have and utilize an electronic enrollment management and class scheduling program? . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 9.6 Are the district’s enrollment projections and assumptions based on historical data, demographic trend analysis, high school enrollments, community participation rates and other industry standards, in addition to any board policies that limit enrollment? . . . . . . ✓ ☐ ☐ 9.7 Do the institutional research staff and business/fiscal staff agree on enrollment and FTES predictions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 9.8 Has the district verified that the colleges’ comprehensive enrollment plans address the funding elements of the SCFF? . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district reported it lacks a comprehensive enrollment plan. 9.9 Does the CEO annually approve academic productivity goals that correspond to the estimated SCFF resources? . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district reported the CEO does not annually approve academic productivity goals that correspond to the estimated SCFF resources. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 12 Fiscal Health Risk Analysis 10. Facilities Yes No N/A 10.1 Does the district have sufficient and available capital outlay and/or bond funds to cover all contracted obligations for capital facilities projects? . . . . . . . . . . . . . . . ✓ ☐ ☐ 10.2 Does the district properly track and account for facility-related projects? . . . . . . . . ✓ ☐ ☐ 10.3 Does the district use lecture classrooms for at least 48 or 53 hours per 70-hour week as defined by the Board of Governors (BOG) policy on Utilization and Space Standards? . . . ✓ ☐ ☐ 10.4 Does the district use laboratory classrooms for at least 27.5 hours per 70-hour week as defined by the BOG policy on Utilization and Space Standards? . . . . . . . . . . . ✓ ☐ ☐ 10.5 Does the district include facility needs (maintenance, repair and operating requirements) when adopting a budget? . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 10.6 Has a quantitative Facilities Condition Index assessment been conducted sometime in the last three years through the Foundation for California Community Colleges? . . . . . . ✓ ☐ ☐ 10.7 Does the district have a five-year scheduled maintenance plan? . . . . . . . . . . . ✓ ☐ ☐ 10.8 If the district passed a Proposition 39 general obligation bond, has it met the requirements for audit, reporting, and a citizens’ bond oversight committee? . . . . . . . ☐ ☐ ✓ 10.9 If the district has passed a Proposition 39 general obligation bond or a parcel tax and it has received any legal challenges or program audit findings concerning the use of those funds, has it addressed those complaints and/or findings? . . . . . . . . . . . . ☐ ☐ ✓ 10.10 Is the district following a facilities master plan that was developed within the last 5 - 10 years? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 10.11 Has the district improved its capacity to load ratios from prior year on the required annual CCCCO Space Inventory Submission? . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 10.12 Is the district following an Americans with Disabilities Act (ADA) transition plan that was developed within the past 5 - 10 years? . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 11. Fund Balance and Reserve for Economic Uncertainty Yes No N/A In this section, all questions refer to the unrestricted general fund (URGF).. 11.1 Does the district have at least a 5% Reserve for Economic Uncertainty in the current year? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 11.2 Did the district’s adopted budgets for the subsequent two years include at least a 5% Reserve for Economic Uncertainty? . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 11.3 Does the district have at least a 5% Reserve for Economic Uncertainty in its budget projections for the two subsequent years? . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 11.4 If the district’s budget projections for the subsequent two years do not include at least a 5% Reserve for Economic Uncertainty, does the district’s multiyear fiscal plan include a board-approved plan to restore at least a 5% Reserve for Economic Uncertainty? . . . . . ☐ ☐ ✓ 11.5 Is the district’s projected unrestricted general fund budget stable or increasing in the two subsequent fiscal years? . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 11.6 If the district has unfunded or contingent liabilities or one-time costs, does the unrestricted general fund balance include any dedicated reserves above the recommended minimum 5% reserve level? . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ☐ ✓ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 13 Fiscal Health Risk Analysis 12. General Fund – Current Year Yes No N/A 12.1 Does the district ensure that one-time revenues do not pay for ongoing expenditures? . . . . ☐ ✓ ☐ The district’s budget development values and assumptions lack written procedures/ processes addressing that one-time revenues do not pay for ongoing expenditures. Additionally, it appears that Higher Education Emergency Relief Fund (HEERF) dollars, which are one-time, are part of future revenue projections. 12.2 Is the percentage of the district’s general fund unrestricted budget that is allocated to salaries and benefits and instructional service agreement expenses at or below 85% for the three prior years as reported by the CCCCO? . . . . . . . . . . . . . . . . ☐ ✓ ☐ The three prior years’ salaries and benefits do not appear to be at or below 85%. Based on district provided data, the percentage of the district’s general fund unrestricted budget is as follows: fiscal year (FY) 2017-18 = 87%, FY 2018-19 = 86%, FY 2019-20 = 87%. 12.3 Is the district in compliance with the Fifty Percent Law (Education Code Section 84362)? . . . ☐ ✓ ☐ The district’s 2020-21 fiscal year end closing reflected 41%, which does not comply with the Fifty Percent Law. 12.4 Is the district at or above its Full-Time Faculty Obligation Number (FON)? If the district is over its FON, is the overage reasonable? . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district’s fall 2021 FON is 72.4, and total contract faculty is 111.4, which resulted in the district being 39 over the FON as of fall 2021. 12.5 Does the district either ensure that restricted dollars are sufficient to pay for staff assigned to restricted programs or have a plan to fund these positions with unrestricted funds? . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 12.6 Is the district using its restricted dollars fully by expending allocations for restricted programs within the required time? . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 12.7 Does the district consistently account for all program costs, including maximum allowable indirect costs, for each restricted resource? . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 13. Information Systems and Data Management Yes No N/A 13.1 Does the district use a human resources system and position control system that is integrated with the financial reporting system? . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district lacks an integrated human resources and position control system that is tied to the financial reporting system. 13.2 Does the district have emergency electrical backup and data recovery systems? . . . . . . ✓ ☐ ☐ 13.3 Are enrollment management and budget development systems integrated? . . . . . . . ☐ ✓ ☐ The district lacks an integrated enrollment and budget system. 13.4 If the district is using a separate financial system from its county office of education and is not fiscally independent, is there an automated interface with the financial system used by the county office of education? . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 13.5 Does the district conduct regularly scheduled evaluations of the security measures that protect student and employee personal information? . . . . . . . . . . . . . . . ☐ ✓ ☐ The district lacks a security plan for regularly scheduled evaluations that protect sensitive information. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 14 Fiscal Health Risk Analysis 13.6 Does the district use reports from its integrated systems to validate the supplemental and success outcomes funded in the SCFF? . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district lacks a process to ensure annual supplemental and success awards are validated. 14. Internal Controls and Fraud Prevention Yes No N/A 14.1 Does the district have controls that limit access to and include multiple levels of authorizations within its financial system? . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 14.2 Are the district’s financial system’s access and authorization controls reviewed and updated upon employment actions (e.g., resignations, terminations, promotions or demotions) and at least annually? . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 14.3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored? a. Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ b. Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ c. Cash management . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ d. Budget monitoring and review . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ e. Purchasing and contracts . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ f. Payroll . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ g. Human resources . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ h. Associated student body . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ i. Warehouse and receiving . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 14.4 Are beginning balances for the new fiscal year posted and reconciled with the ending balances for each fund from the prior fiscal year? . . . . . . . . . . . . . . ✓ ☐ ☐ 14.5 Does the district review and clear prior year accruals by October 31? . . . . . . . . . . ✓ ☐ ☐ 14.6 Does the district reconcile all suspense accounts, including salaries and benefits, at least each quarter and at the close of the fiscal year? . . . . . . . . . . . . . . . ☐ ✓ ☐ Only suspense account policy was submitted as evidence; no reconciliation report was provided to FCMAT. 14.7 Has the district reconciled and closed the general ledger (books) within the time prescribed by the county office of education? . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district’s 2019-20 books were closed in the summer of 2020-21. 14.8 Does the district have processes and procedures to discourage and detect fraud? . . . . . ☐ ✓ ☐ No processes or procedures exist to discourage and detect fraud at the district. 14.9 Does the district maintain an independent fraud reporting hotline or other reporting service(s)? . . . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district lacks an independent fraud reporting hotline or other reporting services. 14.10 Does the district have a process for collecting and following up on reports of possible fraud? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ The district lacks a process for collecting and following up on reports of possible fraud. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 15 Fiscal Health Risk Analysis 14.11 Does the district have an internal audit department or dedicated staff? . . . . . . . . . ✓ ☐ ☐ 15. Leadership and Stability Yes No N/A 15.1 Does the district have a chief business official who has been with the district more than two years? . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ The CBO left the district in June 2021 and a permanent replacement began work in February 2022. 15.2 Does the district have a chief executive officer (CEO) who has been with the district more than two years? . . . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ The CEO left the district in December 2021 and the position is currently unfilled. 15.3 Does the CEO meet with all members of the administrative cabinet weekly? . . . . . . . ✓ ☐ ☐ 15.4 Is training on financial management and budget provided to district, college and department administrators who are responsible for budget management? . . . . . . ✓ ☐ ☐ 15.5 Does the governing board review and revise policies and administrative regulations at least annually? . . . . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ While the district works on a regular review cycle, no process exists to review and revise board policies and administrative regulations annually. 15.6 Are newly adopted or revised board policies and administrative regulations formally implemented, communicated and available to staff? . . . . . . . . . . . . . . . . ✓ ☐ ☐ 15.7 Is training on the budget and governance provided to board members at least every two years? . . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 15.8 Is the CEO’s evaluation performed annually and according to the terms of the contract? . . . ✓ ☐ ☐ 16. Multiyear Projections Yes No N/A 16.1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards, including CCCCO and ACCJC? . . . . . . . . . . . ✓ ☐ ☐ 16.2 Did the district use the SCFF with multiyear considerations to help calculate its multiyear projections? . . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The multiyear projection does not consider the calculation of the SCFF. 16.3 Does the district use its most current multiyear projection when making financial decisions? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ No evidence was provided that a multiyear projection has been used to make financial decisions. 17. Non-Voter-Approved Debt and Risk Management Yes No N/A 17.1 Are the sources of repayment for non-voter-approved debt (such as certificates of participation (COPs), bridge financing, and bond anticipation notes (BANS)) predictable and stable, and not from the unrestricted general fund? . . . . . . . . . . ✓ ☐ ☐ 17.2 If the district has issued non-voter-approved debt, has its credit rating remained stable or improved? . . . . . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 17.3 If the district is self-insured, does the district have a recent (every two years) actuarial study and a plan to pay for any unfunded liabilities? . . . . . . . . . . . . . . . . ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 16 Fiscal Health Risk Analysis 17.4 If the district has non-voter-approved debt (such as COPs, bridge financing, BANS, TRANS and others), is the total of annual debt service payments no greater than 2% of the district’s unrestricted general fund revenues? . . . . . . . . . . . . . ✓ ☐ ☐ 18. Position Control Yes No N/A 18.1 Does the district account for all positions and costs (position control)? . . . . . . . . . . ☐ ✓ ☐ The district does not account for all positions and costs. 18.2 Does the district analyze and adjust staffing based on enrollment? . . . . . . . . . . . ☐ ✓ ☐ The district does not analyze and adjust permanent staffing based on enrollment. 18.3 Does the district reconcile budget, payroll and position control regularly, meaning at least at budget adoption and quarterly reporting periods? . . . . . . . . . . . . . . ☐ ✓ ☐ The district does not reconcile budget, payroll, and position control regularly. 18.4 Does the district identify a budget source for each new position before the position is authorized by the governing board? . . . . . . . . . . . . . . . . . . . . . ☐ ✓ ☐ The district does not identify a budget source for each new position before the position is authorized by the governing board. 18.5 Does the governing board approve all new positions and extra assignments before positions are posted? . . . . . . . . . . . . . . . . . . . . . . . . . . .☐ ✓ ☐ New positions are included in the annual unit planning and budgeting process and are presented in the tentative and final budget. Extra assignments are handled at the management level, and the college does not seek governing board approval before the extra assignment is offered. 18.6 Is the approval of hiring staff using categorical or other restricted dollars subject to adequate program funding? . . . . . . . . . . . . . . . . . . . . . . . ✓ ☐ ☐ 18.7 Do managers and staff responsible for the district’s human resources, payroll and budget functions meet regularly to discuss issues and improve processes?. . . . . . . . . . . ☐ ✓ ☐ Only human resources staff meet regularly within the department, but not with payroll or the budget staff. Total Risk Score, All Areas 36.4% Key to Risk Score High Risk: 40% or more Moderate Risk: 25-39% Low Risk: 24% and lower Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 17 Fiscal Health Risk Analysis Summary FCMAT was requested to identify the district’s specific risk rating for fiscal insolvency, with additional focus on cash flow management and whether appropriate and sufficient financial information is shared in a timely manner with trustees. This report includes findings from the FHRA after observing policies and procedures, reviewing financially related data and documentation and holding interviews with key personnel. In addition to the findings described in the FHRA, FCMAT identified additional challenges facing the district. These are described below. Fiscal Health Risk Analysis The FHRA score is 36.4%, which indicates a moderate risk of fiscal insolvency if operational changes are not made. This score calculation is based on several factors as outlined in the FHRA. The score does not consider nuances related to a district such as Napa Valley CCD that is community supported, so several additional factors must be considered to understand the risks that are discussed below. Community Supported (Basic Aid) In the simplest terms, a district is community supported when the local property taxes collected for the commu- nity college district are larger than the college would receive if the district was funded under the Student-Cen- tered Funding Formula (SCFF). Although districts may go into and out of community supported status from year to year, which is further explained below, the district is currently community supported. Given this status, the district needs to better understand how operating revenue is captured, the need for in- creased minimum reserves and how a district such as Napa Valley CCD in the early stages of being community supported must plan for cash flow needs. The first primary unrestricted general fund revenue is received at the district late in the fall semester. Therefore, the district must maintain a larger reserve (cash on hand) that will be adequate to pay all bills until revenue is received in late fall. It is common for districts to obtain a tax and revenue anticipation note (TRANs) loan during the first several years of becoming community supported to ease the transition until a larger reserve is estab- lished. The district did issue a TRANs in prior years due to cash flow needs, but due to turnover in key positions the TRANs was not requested in spring 2021. A cash flow analysis was not developed in summer 2021, resulting in the district obtaining an emergency loan for $3.7 million from the County Treasurer because it could not make payroll in October 2021. After a thorough analysis in January 2022, the interim CBO found that the district could have consolidated and transferred all available resources (districtwide) from all unrestricted and restricted funds to make the October payroll. The loan was paid back to the County Treasurer once tax revenues were received. It also is common for a district to transition in and out of community supported status or even fall out entirely. This is due to several factors such as enrollment, cost of living increases, property tax base shifts, and the fund- ing formula for California community colleges. The district is in the early stages of being community supported and should focus on the areas below until it has less of a chance of returning to the system’s funding formula. Student-Centered Funding Formula (SCFF) The SCFF is the formula used in the California Community Colleges system for districts that are not community supported. Although the district does not currently receive revenue based on the elements of the SCFF, that could change if enrollment increases or cost of living increases occur due to inflation. For example, current year and next year’s proposed cost of living adjustment (COLA) equals more than 10%, exceeding property tax increases. If the new funding rates (based on COLAs) along with enrollment (FTES) returning to 2014 levels are achieved, the district may fall out of community supported status. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 18 Fiscal Health Risk Analysis Enrollment Management The college lacks an enrollment management plan. In general terms, enrollment management brings together activities related to recruiting, funding, retaining and replacing students as they move toward, within and away from the college. Each activity includes several processes and best practices. During interviews the general response to this topic was that the district’s basic aid status means classroom efficiency and improved enroll- ment are not necessary. Regardless of this status, the purpose of the community college district is to serve the community and meet its educational needs. The enrollment management plan is the primary document used to drive conversations related to enrollment and student outcomes and achievement, and to ensure the college is serving the students within district boundaries. A college strategic enrollment management plan should, at a minimum, articulate a goal to establish college and subunit targets for the following: • FTES • Efficiency — weekly student contact hours (WSCH) per full-time equivalent faculty (FTEF), or FTES per FTEF • Economy (cost per FTES) • Effectiveness (SCFF-funded successful student outcomes) Fifty Percent Law The Fifty Percent Law requires a district to spend at least 50% of the current expense of education (CEE) directly on classroom expenses. For every dollar saved in the numerator (classroom expenses) of the CEE, noninstruc- tional expenses are supposed to be reduced accordingly. The district closed out the 2020-21 fiscal year and did not meet the requirements of the Fifty Percent Law. The district certified the CCFS-311 annual financial status report with only 41% of the CEE expended on the numerator. Since the district is community supported, the pen- alty for not expending 50% of the CEE on classroom expenses is in question. The Chancellor’s Office is working with the district on the next steps to resolve the issue. Findings Fiscal Staffing During the last two years the district has encountered higher than normal turnover in key administrative services positions. Turnover in the chief business officer (CBO), director of fiscal services, payroll and purchasing posi- tions created several challenges. These challenges include the district recently being placed on enhanced fiscal monitoring by the Accreditation Commission for Community and Junior Colleges (ACCJC). During late summer 2021, the district retained the assistance of an experienced CBO. The interim CBO was able to provide insight to these challenges and training and guidance to the newly hired director of fiscal services. During the fall, the interim CBO was able to catch the district up on prior year reporting, close the 2020-21 books, and develop the 2021-22 annual budget. Although substantial progress was made, traditional participatory governance process- es and institutional conversations did not take place according to statutory deadlines. At the time of this report, a permanent CBO has not been hired. When the CBO position is filled and as the director of fiscal services gains experience, policies and procedures will need to be adopted for budget development. A more conservative approach to budget development should be considered until an experienced team is in place given the complexity of community supported funding. The Government Finance Officers Association has set up budget best practices that are a good starting point. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 19 Fiscal Health Risk Analysis District Size and Scope The district serves a small student population compared to most California community college districts. Fund- ing is based primarily on total full-time equivalent students (FTES). The larger the district, the more it can take advantage of economies of scale and provide additional services, program offerings, etc. The smaller districts do not have this leeway and must decide what services and programs they can offer. Current enrollment in the district is below 4,000 FTES, which is in the bottom 10th percentile of the community college system. The district implemented a hiring freeze in the summer of 2021, which is still in effect and should continue ex- cept for any essential position. The district should be cautious in determining the level of educational opportuni- ties and support services it can provide to the community. Any comparisons of program offerings, compensation levels, community services and other factors should include only CCC districts of similar size that provide similar services. Any attempt to align salaries, benefits, programs of study or increased support services with larger districts will create fiscal stress. Trend Data The chart below compares a seven-year trend in enrollment, staffing, salary and benefits and revenue as it re- lates to the unrestricted general fund. The chart clearly identifies large drops in enrollment during the five-year period prior to the COVID-19 pandemic. Enrollment dropped again during the 2020-21 fiscal year. During the same period, classroom efficiency also dropped from 13.94 FTES per each FTEF to 10.97 FTES per FTEF, which is far below the community college standard of 17.50 FTES per each FTEF. This calculation is a key metric for beginning the development of the annual budget. FTES/FTEF goals are also a key component of the enrollment management plan. The average class size increased slightly during the same period classroom effi- ciency dropped. This could be due to higher than normal release time. Classroom efficiency and average class size trends should run parallel. In addition, according to the fall 2021 faculty obligation number (FON) report provided to the state Chancellor’s Office, the district FON (the number of faculty the state expects a district to retain) was 72.4. The district, howev- er, retained 111.4 full-time faculty. Exceeding the FON requirement costs the district approximately $82,000 for each position above the requirement ($82,000 is the 2020 California community college system average cost difference between delivering a teaching load with a permanent full-time faculty member versus utilizing adjunct instructors). These 39 positions equal approximately $3.2 million. During the same period of time, enrollment dropped by 29%. Outside the classroom, management positions increased by 53%, professional staff increased by 13% and confidential positions increased by 61%. These increases while the number of students decreased and the Fifty Percent Law was missed by 9% in 2020-21 are evidence the district is not following CCC standards or best practices related to comprehensive fiscal planning. The expense data also suggest a larger than normal amount of time and effort from categorical management activities is being charged to the unrestricted general fund. Charging compensation to the unrestricted general fund for effort tied to categorical programs has impeded the district’s ability to meet its financial obligations. This practice should be minimized to help the trustees understand how and why funds are spent districtwide. The trend data related to the unrestricted general fund expenditures identifies a 28% increase in total compen- sation (salary and benefits). Pension reform continues to play a large role in increases in total compensation with increases in California Public Employees’ Retirement System (CalPERS) at 141% and California State Teachers’ Retirement System (CalSTRS) at 105% during this period. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 20 Fiscal Health Risk Analysis NVCCD : Enrollment/Staffing/Salary & Benefits/Revenue Comparison - Unrestricted GF ONLY 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 7 Year Summer 48.61 100.77 64.02 97.84 69.90 62.08 13.24 Primary Terms Noncredit 426.03 438.84 389.44 320.91 336.56 215.69 53.71 -87% Noncredit Primary Terms CDCP 18.94 13.89 11.99 5.77 6.24 0.00 0.00 Primary Terms ISA's Subtotal 493.58 553.50 465.45 424.52 412.70 277.77 66.95 -86% N PPrroodduucceedd Summer 508.04 540.64 473.28 484.25 461.42 507.27 392.89 A FFTTEESS Primary Terms Credit 4,584.87 4,405.69 4,287.08 4,161.17 3,790.99 3,728.26 3,453.12 -25% Credit Primary Terms Special Admit 82.51 90.41 80.64 104.21 101.47 125.20 108.48 P Primary Terms ISA's A Primary Terms Incarcerated Subtotal 5,175.42 5,036.74 4,841.00 4,749.63 4,353.88 4,360.73 3,954.49 -24% V TToottaall 55,,666699..0000 55,,559900..2244 55,,330066..4455 55,,117744..1155 44,,776666..5588 44,,663388..5500 44,,002211..4444 --2299%% Average Class Size (annual) 22.26 22.42 22.62 22.75 22.30 22.60 23.23 4% A Efficiency FTES/FTEF (semester) 13.94 13.28 13.43 13.80 11.80 12.01 10.97 -21% L Section Count 1,906.00 1,802.00 1,755.00 1,692.00 1,592.00 1,587.00 1,328.00 -30% L Contract (full-time)* 73.44 78.28 73.27 77.59 80.53 83.62 82.04 12% E All Teaching Overload 11.48 9.68 11.50 11.59 16.72 19.27 20.10 75% FTEF Y SSttaaffffiinngg Non-Contract (part-time) 87.87 84.72 83.99 76.48 78.36 72.34 73.40 -16% Management 23.35 23.85 22.05 31.80 32.55 34.90 35.75 53% Unrestricted C Staff 102.03 103.22 98.05 99.59 102.67 110.56 114.90 13% Gen Fund FTE O Confidential 7.75 7.75 5.75 7.75 12.75 12.75 12.50 61% Salaries Subtotal 21,640,202 21,770,828 23,167,446 24,093,144 25,749,016 27,200,713 27,248,966 26% L CalPERS (w/o on-behalf) 917,434 1 ,140,317 1 ,398,724 1 ,604,132 2 ,069,317 2 ,354,341 2 ,214,377 141% L UUnnrreessttrriicctteedd CalSTRS (w/o on-behalf) 1 ,223,103 1 ,135,022 1 ,384,073 1 ,573,330 1 ,933,862 2 ,321,848 2 ,510,826 105% GGeenneerraall FFuunndd E SSaallaarryy && BBeenneeffiittss Benefits Health Insurance 3 ,446,916 3 ,461,761 3 ,283,964 3 ,754,746 2 ,668,234 4 ,002,798 2 ,943,383 -15% G Other Benefits 1 ,719,880 1 ,363,162 1 ,454,170 1 ,506,313 1 ,559,144 1 ,613,122 1 ,686,641 -2% Subtotal 7 ,307,333 7 ,100,262 7 ,520,931 8 ,438,521 8 ,230,557 10,292,109 9 ,355,227 28% E 4000 Supplies 965,242 988,107 673,197 799,153 705,937 750,036 411,573 -57% UUnnrreessttrriicctteedd 5000 Other Operating 4 ,734,301 5 ,268,954 5 ,636,134 6 ,372,026 5 ,717,023 6 ,084,292 4 ,791,812 1% GGeenneerraall FFuunndd 6000 Capital Outlay 275,252 279,399 595,769 590,094 551,155 620,410 398,988 45% EExxppeennsseess 7000 Other Outgo 1 ,093,597 1 ,135,810 904,769 1 ,258,049 - 1 8,029 2 ,052,713 88% Subtotal 7 ,068,392 7 ,672,270 7 ,809,869 9 ,019,322 6 ,974,115 7 ,472,767 7 ,655,086 8% TToottaall 3366,,001155,,992277 3366,,554433,,336600 3388,,449988,,224466 4411,,555500,,998877 4400,,995533,,668888 4444,,996655,,558899 4444,,225599,,227799 2233%% *Full-time teaching faculty 3/4/22 12:26 PM /Users/lhaywood/Desktop/Napa CCD - 8132/Napa Valley CCD Enrollment_Staffing_SalaryBenefits_Revenue Comparison 111021 112421HR Staffing Info (2).xlsx Napa Valley College Multiyear Budget Actuals/Projections (2019-20 to 2023-24) The chart below shows five years of budget information for the district starting with actual (final) budget num- bers from the 2019-20 fiscal year and includes a revision to the current year 2021-22 budget (as of December 5, 2021) and two years of budget projections. The more recent budget numbers (actuals and projections) show an improvement in the district’s fiscal condition compared to the more dire fiscal picture of 2016-17 through 2018- 19. However, FCMAT is concerned that the district relies on one-time COVID-19 relief funds in the current year and the two budget year projections. NAPA VALLEY COMMUNITY COLLEGE DISTRICT Pre-Audit Revised Projected Projected Audited Per CCFS-311 Adjusted Budget Budget Budget FY 2019-2020 FY 2020-2021 FY 2021-2022 FY 2022-23 FY 2023-24 Revenues Total Revenues 44,620,281 44,118,284 4 5,006,171 46,192,493 47,613,868 Expenditures Total Salaries 27,200,713 27,248,967 2 7,854,349 27,891,102 28,763,143 Total Employee Benefits 10,292,109 9,355,227 9 ,892,489 10,821,541 11,319,336 Total Books and Supplies 7 50,036 4 11,488 356,387 3 63,515 3 70,785 Total Other Operating Supplies 6,084,292 4,791,812 5 ,233,355 5,338,022 5,444,783 Capital Outlay 6 20,412 3 98,988 322,750 3 29,205 3 35,789 Total Other Outgo 1 8,029 2,052,712 1 ,236,897 1,285,119 1,335,221 Total Expenditures 44,965,591 44,259,194 4 4,896,228 46,028,503 47,569,057 Increase/(Decrease) in Fund Balance (345,310) (140,910) 109,943 1 63,990 4 4,811 Beginning Fund Balance 3,964,326 3,619,018 3 ,478,108 3,588,051 3,752,041 Ending Fund Balance $ 3,619,016 $ 3,478,108 $ 3 ,588,051 $ 3,752,041 $ 3,796,852 Fund Balance Amount as a Percentage of Total Expenditures 8.05% 7.86% 7.99% 8.15% 7.98% Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 21 Fiscal Health Risk Analysis Revenue Concerns Other Financing Sources (One-time COVID-19/HEERF III Funds) The district has built into its current-year funding roughly $1.1 million in HEERF III (COVID-19 federal relief) funds. The district received HEERF III funds for institutional support totaling $3,740,511. The district plans to continue to use $1.1 million of these funds in the 2021-22 and 2022-23 fiscal years to support its unrestricted general fund budget. Using one-time funding for ongoing costs presents a challenge to the district in future years once these funds are gone because it has relied on one-time funds to support ongoing expenses. These ongoing expens- es are projected to increase each year, but revenues to support these expenses regarding the COVID-19 relief funds are not. Property Taxes The 2021-22 property taxes are estimated to increase by 2.7% over the prior year, with district budget projec- tions showing increases of 3.1% in the 2022-23 budget year and 3.4% in the 2023-24 budget year. These projec- tions are reasonable. However, given that property tax revenues make up over 85% of the district’s total unre- stricted revenue, lowering the property tax revenue estimates to a more modest 2.5% annual increase would guard against the possibility of overprojecting this large revenue source. Student Fees Student fee revenues are estimated at $2,044,879, which equals the funding received in 2020-21. Given the dis- trict’s continuing decline in credit FTES enrollments, the ability to collect fees at the same level as the prior year may not be realistic. In addition, the two years of budget projections (2022-23 and 2023-24) retain the same lev- el of expected revenues for student fees, which again may be overstating this revenue source given past credit FTES enrollment declines. Expenditure Concerns The increase in personnel in management (nine positions added) and faculty (four positions added) during the 2017-18 fiscal year should be reviewed because enrollment had been declining for several years. Based on conversations, these personnel increases coincided with the transition to community supported status. The consensus was the district would receive additional revenue regardless of the student population served. In the simplest terms, these statements are correct. Unfortunately, these decisions played a large part in creating the cash flow issues the district now faces because of the way revenues are received. Ongoing expenditures are estimated to increase at a rate higher than the ongoing revenue increases. As point- ed out in the revenue section above, the district relies on one-time COVID-19 relief funds to support ongoing expenses in the unrestricted general fund. In the projected budget years, the district should look to reduce ongoing expenditures at least equal to the amount of the one-time funds. Salary and Benefits Expenditures Underestimated The two projected budget years’ salaries are built on a simple increase from the prior year’s base salaries and then increased by 3% for faculty and administrators and 4% for staff. This method of budgeting does not account for employees who may have their base salaries increased due to either step and column or longevity entitlements. Salary costs for management and staff positions in the 2022-23 budget year have been reduced by 5%. This recognizes that the district will experience salary savings for these two employment classifications in the budget year. This same reduction does not occur in the budget projections for 2023-24. The district will continue to struggle with an accurate forecast of its budgeted salaries and corresponding benefits until it dedicates resources to implement position control as part of budgeting. Understanding salary Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 22 Fiscal Health Risk Analysis and benefit costs is critical to the budgeting process and implementing position control will allow the district to forecast them more accurately. Other Post-Employment Benefits (OPEB) The district provides certain current and past employees with medical benefits upon retirement. This benefit is provided to all staff assuming they meet certain service requirements (e.g., worked 15 years, retirement age). The number of employees eligible to receive OPEB is 548; 226 are retired employees currently receiving the benefit and 322 are active employees eligible for the benefit. The district has set aside funds over the past several years in its OPEB trust fund to pay for future retiree health benefits. According to the latest actuarial report dated October 20, 2021, the district OPEB liability as of June 30, 2020, was $40,400,349. The district’s OPEB trust contained $3,096,647 per the report. The report shows premiums rising (pay-as-you-go costs) from $1.3 million to $1.8 million per year over a 10-year period ending in 2028. The district spends 4% of its annual budget on retiree medical costs. That cost is estimated to increase as more of the 322 active employees begin to retire. The district is one of the remaining few in the community college system that offers some form of retiree health benefits. As the district hires new employees and continues to provide this benefit, its future costs will continue to grow, consuming a larger share of the district’s budget. This trend could impact the district’s ability to recruit and retain needed talent. District Governance and Communication District governance practices have hindered the development of the standard policies and practices adopted in other California Community Colleges. Reported deliberations and delays from constituent groups and past admin- istrators have resulted in an inability to complete policy and procedure review and development. This situation has inhibited progress in several administrative areas including the budget deliberation and development process. Based on a review of board agendas, information packets, and interviews with board members, while minimum statutory financial reporting and adoption requirements were met, the governing board did not have sufficient information at meetings to make basic finance related decisions and overly relied on oral statements by the presi- dent and CBO. Trustees reported they felt they were being shielded from receiving negative fiscal information. During the late summer 2021 the ACCJC issued a letter to the district placing it on enhanced fiscal monitoring. This is based on previously submitted annual fiscal reports to the ACCJC. The president did not forward the enhanced fiscal monitoring letter he received from the ACCJC as required. The trustees eventually received the letter through informal channels. The district lacks an established presentation calendar for key reports and annual studies. Standardized re- ports that are delivered based on a predetermined calendar give all board members the opportunity to better understand the information presented. At a minimum, the board should review decisions made during budget committee meetings. In addition, oral reports do not give the trustees an opportunity to use multiyear trends for critical areas such as enrollment and staffing in their analysis. For example, in previous years the district had relied on TRANs loans to meet cash flow needs until the first tax revenues arrived. Best practice would be to present a cash flow analysis (which is required to receive a TRANs loan) to the board in a public meeting, using a standardized format, during the same month each year. This did not happen in the summer of 2021 and a TRANs loan was never considered. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 23 Fiscal Health Risk Analysis Recommendations The district should: 1. Ensure that it continues to monitor cash and present the analysis to the board regularly so that short term needs are met through allowable borrowing (e.g., TRANs, county office, county treasurer, other funds). 2. Continue to fill key fiscal positions (CBO, etc.) and provide training for the director of fiscal services. 3. Continue a hiring freeze of all other positions until revenues and expenses are balanced and a healthier reserve is established. 4. Increase the reserve to at least two months of operating expenses because of the district’s status as community supported. 5. Adopt a more conservative approach to budget development until an experienced team is in place and a solid understanding of the nuances related to operating as a community supported district is gained by all constituent groups. 6. Establish comprehensive position control (preferably automated) that directly informs budget development. 7. Develop a strategic enrollment management plan where classroom efficiency standards and student outcomes are the main focus. 8. Trend revenue projections based on the district being funded though both the SCFF and community supported estimates. Include this analysis in every budget presentation so constituents can better understand how the district receives revenue. 9. Establish an annual presentation schedule on key reports (sample included in the appendix) and topics such as enrollment, student outcome trends, and fiscal information. Focus on creating standardized reports that include multiyear trends that all constituents will recognize and gain understanding of over time. 10. Ensure that board members receive required information that allows them to be responsible to all district residents and ensure that public funds are spent appropriately and legally. 11. Ensure that board members engage in monthly study sessions to facilitate their understanding of fiscal related reports and presentations. Include the participation of cabinet members in these study sessions. 12. Align faculty, management and professional staffing levels to the current student population served. 13. Conduct a time and effort study for categorical programs, and charge salaries and benefits appropriately. 14. Establish a procedure that one-time funds will only be used for one-time expenses. 15. Adopt a board policy that a plan must be brought to the board when one-time funds will be used for ongoing costs, with other funding sources identified to be used for expenditures when one-time funding ends. 16. Establish a plan to fund the district’s OPEB liability. 17. Ensure that at least 50% of the current expense of education (CEE) is spent directly on classroom expenses to comply with the Fifty Percent Law. Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 24 Fiscal Health Risk Analysis Appendices Appendix A Sample Presentation Calendar January • FUSION Energy Use • Program Review • Institutional Learning Outcomes (ILO’s) February • Nonresident Tuition Fee/Capital Outlay Fee • Approval of Quarterly Financial Status Report District/Auxiliary Quarterly Financial Reports • Governor’s Proposed Budget March • First Principal Apportionment (P-1) • Base, Outcomes, Supplemental (SCFF) • ACCJC Annual and Fiscal Reports • Enrollment Update • Annual Distance Education Update April • Resolution of Encumbrance of Funds for the Following Fiscal Year • Actuarial Study of Retiree Health Liabilities Under GASB 74/75 May • Quarterly Financial Status Report • Resolution for Year End Budget Adjustments • Resolution for Year End Balancing Transfers June • Adoption of the Gann Appropriations Limit • Adoption of the Tentative Budget • Approval of the Five-Year Construction Plan Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 25 Fiscal Health Risk Analysis • Final Project Proposals (FPPs) • Initial Project Proposals (IPPs) • Governor’s May Revise Budget • Cash Flow Analysis August • Chancellor’s Office Tax Offset Program (COTOP) September • Public Hearing - Education Protection Account • Adoption of Education Protection Account Funding and Expenditures • Public Hearing – Final Budget • Adoption of the Final Budget • Equal Employment Opportunity (EEO) Certification October • Annual Financial and Budget Report (311) • Student-Centered Funding Formula metrics • FUSION Space Inventory • Enrollment Update November • Approval of Budget Development Calendar • Quarterly Financial Status Report • District and Foundation Independent Audits • Prop 39 Bond Independent Audit December • Election of Board Officers • Approval of Authorized Signatures and Authority • Appointment of Authorized Agents • Approval of Board Meeting Dates and Times • Sub-Delegation Authority for Holiday Break Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 26 Fiscal Health Risk Analysis Other Items Requiring Board Approval: Board Minutes Employee appointments and separations Employment contracts Faculty tenure approval New faculty and staff positions Bargaining unit agreements Approval of payroll, purchase orders, contracts and commercial warrants Transfers of appropriations (budget transfers) Budget modifications Formal bid approvals Disposal of surplus property Bond contract agreements Construction change orders Notice of completions Piggybacks and surplus property (including CMAS) Other post employee benefits) – actuarial Instructional program revisions New instructional programs Approval of academic calendar Increase/decrease in student fees Board policy revisions and additions Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 27 Fiscal Health Risk Analysis Appendix B Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 28 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 29 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 30 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 31 Fiscal Health Risk Analysis Nov. 2, 2021 Fiscal Crisis and Management Assistance Team CCCCO re Napa Community College District 32