Palmdale Elementary School District Report

Palmdale School District Transportation Review March 8, 2012 Joel D. Montero Chief Executive Officer Fiscal crisis & ManageMent assistance teaM March 8, 2012 Roger D. Gallizzi, Superintendent Palmdale School District 39139 North 10th Street East Palmdale, CA 93550 Dear Superintendent Gallizzi: In July 2011, the Palmdale School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement to provide a review of the district’s transportation program. Specifically, the agreement states that FCMAT will perform the following: 1. Conduct a review of the transportation services contracted through a private vendor operator including drivers, routing and maintenance while maintaining four full time equivalent positions for the Transportation Department. 2. Evaluate the Transportation Department’s organizational structure and its integration with the district’s contracted vendor operator and provide recommendations regarding best practices to improve the operational efficiency. This report contains the study team’s findings and recommendations. We trust that this information will be beneficial to all concerned. On behalf of FCMAT, we appreciate the opportunity to serve you and extend our thanks to all the staff of the Palmdale School District for their cooperation and assistance during fieldwork. Sincerely, Joel D Montero Chief Executive Officer FCMAT Joel D. Montero, Chief Executive Officer . . 1300 17th Street - CITY CENTRE, Bakersfield, CA 93 . 301-4533 Telephone 661-6 . 36-4611 Fax 661-63 . 6-4647 422 Petaluma Blvd North, Suite. C, Petaluma, CA 94952 Telephone: 707-775-2850 Fax: 707-775-2854 www.fcmat.org Administrative Agent: Christine L. Frazier - Office of Kern County Superintendent of Schools i TABLE OF CONTENTS Table of contents About FCMAT .........................................................................................iii Introduction ............................................................................................1 Background ......................................................................................................1 Executive Summary ........................................................................3 Findings and Recommendations .....................................................7 Organizational Structure and Staffing ....................................................7 Routing, Scheduling, and Operations ...................................................11 Contract Compliance and Review ..........................................................17 Finance ............................................................................................................21 Appendix ................................................................................................27 PalMdale school district ii TABLE OF CONTENTS Fiscal crisis & ManageMent assistance teaM iii ABOUT FCMAT About FCMAT FCMAT’s primary mission is to assist California’s local K-14 educational agencies to identify, prevent, and resolve financial 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 and efficient operations. FCMAT’s data management services are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and share information. 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 local education agency 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 92/93 93/94 94/95 95/96 96/97 97/98 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* 10/11** *Projected **Actual PalMdale school district seidutS fo rebmuN FCMAT also develops and provides numerous publications, software tools, workshops and professional development opportunities to help local educational agencies operate more effec- tively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) arm of FCMAT assists the California Department of Education with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS) and also maintains DataGate, the FCMAT/CSIS software LEAs use for CSIS services. FCMAT was created by Assembly Bill 1200 in 1992 to assist LEAs to meet and sustain their financial obligations. Assembly Bill 107 in 1997 charged FCMAT with responsi- bility for CSIS and its statewide data management work. Assembly Bill 1115 in 1999 codified CSIS’ mission. AB 1200 is also a statewide plan for county office of education and school districts to work together locally to improve fiscal procedures and accountability standards. Assembly Bill 2756 (2004) provides specific responsibilities to FCMAT with regard to districts that have received emergency state loans. iv ABOUT FCMAT In January 2006, SB 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. Since 1992, FCMAT has been engaged to perform nearly 850 reviews for LEAs, including school districts, county offices of education, charter schools and community colleges. The Kern County Superintendent of Schools is the administrative agent for FCMAT. The team is led by Joel D. Montero, Chief Executive Officer, with funding derived through appropriations in the state budget and a modest fee schedule for charges to requesting agencies. Fiscal crisis & ManageMent assistance teaM 1 INTRODUCTION Introduction Background The Palmdale School District is located in the high desert region of eastern Los Angeles County and serves more than 21,000 students, making it the fourth largest elementary school district in California and one of the largest in the nation. The district covers approximately 77 square miles and serves students in 15 K-6 schools, five K-8 schools, four 7-8 intermediate schools and one early childhood education center. Palmdale became a city in 1962 and voters approved it as a charter city in November 2009. With affordable housing, Palmdale has become a bedroom community for people who work in the San Fernando Valley and the greater Los Angeles metropolitan area, and it remains the fastest growing city in Los Angeles County. In July 2011, the district entered into a study agreement with FCMAT to perform the following: 1. Conduct a review of the transportation services contracted through a private vendor operator including drivers, routing and maintenance while maintaining four full time equivalent positions for the Transportation Department. 2. Evaluate the Transportation Department’s organizational structure and its integra- tion with the district’s contracted vendor operator and provide recommendations regarding best practices to improve the operational efficiency. Study Team The study team was composed of the following members: Debi Deal, CFE Tim Purvis* FCMAT Fiscal Intervention Specialist Director of Transportation Los Angeles, CA Poway Unified School District Poway, CA John Lotze FCMAT Technical Writer Michael Rea* Bakersfield, CA Executive Director West County Transportation Agency Santa Rosa, CA *As members of this study team, these consultants were not representing their respective employers but were working solely as independent contractors for FCMAT. PalMdale school district 2 INTRODUCTION Study Guidelines FCMAT visited the district on October 26 and 27, 2011 to conduct interviews, collect data, review documents and inspect facilities. This report is the result of those activities and is divided into the following sections: I. Executive Summary II. Organizational Structure and Staffing III. Routing, Scheduling and Operations IV. Contract Compliance and Review V. Finance Fiscal crisis & ManageMent assistance teaM 3 EXECUTIVE SUMMARY Executive Summary The Palmdale School District’s transportation program is contracted to a vendor operator, Student Transportation of America (STA). The district owns the buses and the transportation facility; STA provides bus drivers, bus aides, mechanics, dispatchers and other operations staff, including management oversight. While the contract has changed over the last ten years, the district has not enforced specific service requirements or validated and enforced the duties and responsibilities of each entity. District transportation staff does not verify invoices for payment, and FCMAT identified numerous billing errors that are costing the district additional funds. Transportation funding from the state is projected to further decline and includes midyear trigger language that will result in an additional reduction of $42 per average daily attendance (ADA) for Los Angeles County in fiscal year 2011-12. Although funding was not reduced in 2010-11, deficits of 4.46% in 2009-10 and 15.38% in 2008-09 were applied to the transporta- tion program funding. Because of continued budget reductions from the state, declining student enrollment and increasing operating costs, the district will be required to review all transporta- tion programs and services to increase operational efficiencies and reduce costs where possible while still maintaining safe, quality programs for students. The district recognizes that its contribution from the unrestricted general fund to transportation operations is high. The base funding for school transportation was capped during the 1982-83 fiscal year based on reported costs from each school district. The district has a lower than average reimbursement rate, which indicates that expenses reported to the state in 1982-83 were low. Following the base year, the state slowly reduced the percentage of funding for transportation, though it periodically made cost of living adjustments. The following table illustrates the historical contributions from the district’s unrestricted general fund to sustain the transportation program: Encroachment Increase Column 2 Column 1 Column 3 Fiscal Year HTS SD/OI 2009-10 $ 1,559,941.90 $ 410,484.21 2010-11 $ 3,237,265.07 $ 661,731.60 Increase $ 1,677,323.17 $ 251,247.39 Percentage Increase 107.52% 61.2% Accounting for district transportation program costs from year to year shows large differences in actual expenditures because some transportation-related charges are posted to other programs in the general fund, and the programs to which the charges are posted vary from year to year, resulting in lack of consistency. Routing, Scheduling and Operations Routing and Scheduling STA staff performs routing and scheduling for severely disabled and/or orthopedically impaired (SD/OI) students, and district staff performs routing and scheduling for regular home-to-school transportation even though the contract clearly assigns all responsibility for routing and sched- uling to the contractor. PalMdale school district 4 EXECUTIVE SUMMARY The district’s contract with STA was recently extended to June 30, 2013. The contract language states that the contractor is responsible for routing and scheduling both regular home-to-school transportation and SD/OI student transportation. In addition, STA is required to maintain the district-owned buses. Many of the buses are old and need to be replaced, yet the mechanics do an excellent job of maintaining them. The California Highway Patrol (CHP) has given STA its highest grade for school bus maintenance. STA transports the district’s students to and from 25 schools using 63 routes. The school bus routing and schedules are efficient and operate on the schools’ three different bell schedules. This allows most regular home-to-school and SD/OI bus routes to serve three separate schools in the morning and in the afternoon. Having adequate time between the bell schedules allows for high bus use and efficient use of drivers. Safety Plan and Board Policies Board policies, administrative regulations and safety plans have not been updated to reflect changes that have occurred over the last several years. Safety plans may need to include require- ments from the California High Patrol and the California Department of Transportation. The district’s safety plan is several years old and includes the prior transportation contractor’s phone number. The district needs to update its safety plan annually. Fleet Condition and Replacement The district has 93 school buses. These include 59 Type I buses, which are large coach-type school buses and larger special education buses, and 34 Type II buses, which are the smaller special education buses. The district operates 42 routes for severely disabled and orthopedically impaired students (SD/OI) and 21 regular home-to-school routes, covering 77 square miles. Many of the district’s buses are quite old. For example, approximately 73 percent are more than 10 years of age. The district should establish a bus replacement schedule to ensure that it is in compliance with current regulations and to encourage STA to continue using the district buses. The contract with STA requires newer buses if STA’s buses are used, which would increase the district’s costs. Fuel The district purchases diesel fuel and stores it in its underground fuel tank at the district’s trans- portation facility. The fuel pump is on and unlocked at all times. Drivers are expected to record the amount of fuel they pump into the vehicle on a log sheet. However, the log sheet is not audited. Unregulated access to the fuel pump raises the possibility of theft. The daily log sheets should be reconciled with the bus fleet usage monthly. Contract Compliance and Review A random review of contractor invoices for monthly service indicates that the district’s trans- portation department management approves invoices for payment without proper evaluation or verification of charges in accordance with the contract. Deviations from the contract language have been the practice for a number of years and have resulted in additional costs to the district. A comparison of driver time cards to the time billed for specific days and routes revealed that some time cards did not reconcile with the billing statement. According to the contract, an agreed standard for the amount of time is to be billed for each route during the first two weeks of Fiscal crisis & ManageMent assistance teaM 5 EXECUTIVE SUMMARY school, after which new route standards are to be established. These new route standards should be the basis for new billing time for each route, but this process has not been followed. An analysis of the billing statement and confirmation by STA management indicate that the district is billed by the minute for each route and day. This practice is not in accordance with the contract’s terms and conditions. School bus aides are used on 27 special education bus routes and billed to the district at $13.06 per hour. Like bus drivers, aides are employees of STA; however, the STA contract does not indicate who pays for aides or what rates to charge. A pricing sheet dated September 7, 2011 has been signed by STA management but not by a district official, and it does not list the hourly rate for bus aides. The number of aides is very high for the size of the operation. Some aides are assigned to specific students because of the student’s Individualized Education Program (IEP), but many are assigned by the transportation department without approval from the business department. Finance According to district projections for 2011-12 compared with 2010-11, state revenue, unrestricted general fund contributions, salaries, benefits and other services are projected to double or triple in some categories. Individual object categories show large variances over the previous year. For example, the unre- stricted general fund contribution is projected to increase for home-to-school transportation by $3,362,555, and another $26,429 in special education transportation. Revenue in special education transportation shows an increase in state funding of $487,053 over the previous year which is overstated. The revenue in this category was estimated to be the same as the previous year, but will be reduced due to the “trigger” cuts imposed by the governor in December 2011. Once adjusted, the encroachment will increase by more than $500,000 for special education transportation. PalMdale school district 6 EXECUTIVE SUMMARY Fiscal crisis & ManageMent assistance teaM 7 ORGANIZATIONAL STRUCTURE AND STAFFING Findings and Recommendations Organizational Structure and Staffing The transportation department has four full-time equivalent district-level positions: director II, assistant director, transportation technician and administrative assistant. The main duties and responsibilities for each position are detailed in each job description and are summarized as follows: Director II – Transportation Services • Plan, organize, direct and administer the activities and operations of the district’s school bus transportation system and crossing guard programs; • Responsible for the safe, timely and efficient transportation of students; • Establish departmental policies and procedures; • Establish and monitor bus schedules and routes; • Monitor availability of school buses to meet program needs; • Supervise, direct, train and evaluate departmental personnel; • Administer and monitor departmental budget and authorize expenditures; • Supervise and monitor departmental compliance with various licensing and certification requirements for both personnel and vehicles. Assistant Director of Transportation • Develop and maintain school bus routes and schedules; • Process student discipline reports, work with other district staff to resolve student discipline problems and/or special needs by attending parent conferences or student IEPs; • Provide and maintain records of route standards and pupil population for billing; • Provide field supervision and assistance for school bus drivers, investigate and report school bus accidents, student discipline and other areas related to pupil safety; • Provide training for special education drivers. Administrative Assistant • Type and proofread a wide variety of reports, letters, memos and statistical charts; • Screen office and telephone callers and respond to complaints; • Compile data for special projects; • Maintain calendars and schedules of activities; • Perform general clerical work. PalMdale school district 8 ORGANIZATIONAL STRUCTURE AND STAFFING Transportation Technician • Plan and maintains route schedules for special education students; • Confer with school officials, parent and appropriate transportation of special education students; • Install video equipment including cameras and LED bars; • Transfer 8 mm film to VHS tapes for school site viewing and files; • Verify and review tapes for conformance with established regulations and driver procedures; • Perform general clerical work. According to staff and a written summary provided by the district, the above positions’ official job descriptions do not reflect the duties and responsibilities being performed. Current district job descriptions do not correlate with the responsibilities of Student Transportation of America (STA), the contracted provider of the district’s student transportation, specified in the negotiated contract. For example the job description for the assistant director indicates that developing and maintaining school bus routes and schedules is a district respon- sibility, but the contract states this is the contractor’s responsibility. Training special education drivers and planning and maintaining route schedules for severely disabled and orthopedically impaired (SD/OI) students are also listed in district job descriptions but specified as contractor responsibilities in the contract. The district needs to ensure that the job descriptions accurately reflect the transportation employees’ current duties and responsibilities relative to the contract with STA. The assistant director of transportation spends a majority of work time supervising, training and monitoring the crossing guards districtwide. Staff reported that there are 64 crossing guards. The staff listing for crossing guards indicates that there are 51 crossing guards, including permanent and substitute employees, assigned to approximately 90 intersections (staggered bell schedules allow one crossing guard to work at more than one location). The crossing guards were originally supervised by the transportation field supervisor, but this position was eliminated and replaced by the assistant director position and the supervisory duties transferred to that position. According to the job descriptions, this supervisory function should be under the oversight of the department director. The crossing guard program is large and time- consuming. It would benefit the district to evaluate the need for a director or assistant director level position to oversee this program and determine whether the transportation field supervisor position or site administrators would be better suited for this task. The crossing guards are district employees, and the program is funded entirely by the district. It is common for cities to provide funding for employing and overseeing crossing guards through a mutual agreement with a local school district. However, an arrangement with the city of Palmdale a number of years ago shifted this responsibility to the school district. This is problem- atic because the city is responsible for determining which intersections require crossing guards in accordance with California Department of Transportation standards, but it passes to the district the burden of hiring and funding crossing guards. Many municipalities throughout the state are facing the same financial challenges as school districts and are reducing their funding for crossing guard programs and the number of crosswalks staffed. Negotiating with city officials could help the district find a reasonable and safe way to scale back this program and thus reduce costs. Fiscal crisis & ManageMent assistance teaM 9 ORGANIZATIONAL STRUCTURE AND STAFFING The assistant director’s salary and benefits are being charged entirely to the pupil transportation program, but the portion of this individual’s work that is attributable to the crossing guard program is not a pupil transportation cost and should be changed to the unrestricted general fund. School districts of similar size to the Palmdale School District that use a contracted provider for routing and scheduling typically have one district employee at the director level who monitors the contract, ensures compliance with state standards and performs related clerical work. Because district staff provide routing and oversight for home-to-school transportation and maintain a large crossing guard program, additional staffing is needed for these functions. If STA conducted the routing and the district retained responsibility for the crossing guard program, the transportation department could be adequately staffed with a director of transportation and a transportation field supervisor position. If the district decides that it is best to provide its own routing and scheduling, one additional full time equivalent position (FTE) would be needed to adequately perform these duties, for a total of three district transportation employees. Recommendations The district should: 1. Ensure that transportation personnel’s job descriptions indicate the appro- priate duties and responsibilities, in correlation with the service provider contract. 2. Evaluate the need to have a director or assistant director oversee the crossing guard program, and determine whether the transportation field supervisor position would be better suited for this task. 3. Negotiate with the city to find a reasonable and safe way to scale back the crossing guard program. 4. Charge to the unrestricted general fund the portion of the assistant director’s salary and benefits that is attributable to managing crossing guards. 5. Reduce transportation department staffing to two FTEs: a director of trans- portation and field supervisor, if it chooses to have STA perform all routing and scheduling in accordance with the current contract terms. If the district elects to perform all routing and scheduling, it should alter the contract and hire one additional transportation employee to perform this task, resulting in a total of three transportation employees. PalMdale school district 10 ORGANIZATIONAL STRUCTURE AND STAFFING Fiscal crisis & ManageMent assistance teaM 11 ROUTING, SCHEDULING AND OPERATIONS Routing, Scheduling and Operations Routing and Scheduling The district operates 21 daily home-to-school bus routes and 42 routes for severely handicapped and orthopedically impaired students (SD/OI), covering cover 77 square miles. Special educa- tion students who have individualized education programs (IEPs) that require transportation are transported in smaller buses; other students are transported in larger buses. Efficient routing and scheduling can be assessed by determining the average number of students riding each bus route. Palmdale has an average of 95.5 students riding each home-to-school route and 17.2 students riding each SD/OI route. Both of these averages are higher than statewide averages for the same types of riders, indicating that the district’s bus routes are highly efficient and cost effective. A major contributor to this efficiency is the fact that the district uses three different bell sched- ules at its schools. Bells schedules differ slightly at each school but all approximate the schedule below: School Groups Beginning Bell Dismissal Bell Group 1 8:00 a.m. 2:00 p.m. Group 2 8:30 a.m. 2:30 p.m. Group 3 9:00 a.m. 3:00 p.m. Having three different beginning and dismissal bell times allows most home-to-school and SD/ OI bus routes to provide service to three schools in both the morning and the afternoon. The separation in bell schedules allows the district to achieve very high bus use and provides for efficient use of both drivers and buses. Having three different bell schedules is rare; most school districts find it difficult to have even two different bell schedules. However, Palmdale has dense student population centers, which makes it possible for a bus to fill up quickly, travel the short distance to or from school, then proceed to the next route. The district’s transportation program was much larger in the past. Approximately five years ago, to reduce costs, the district increased its nonservice zones, commonly referred to as walking distances, from 1.0 to 1.5 miles for elementary school students, and from 1.5 to 2.0 miles for junior high school students. This is common practice for any district when schools are closed and student attendance boundaries are adjusted. According to staff, this change resulted in a 50% reduction in bus routes, which was a significant reduction in service and related costs; however, this could not be supported by the TRANS data as demonstrated in the table below. The district also eliminated mid-day kindergarten transportation two years ago which may explain the reduc- tion in routes and ridership for regular home-to-school transportation. FCMAT reviewed the district’s Annual Report of Pupil Transportation Home-to-School and Severely Disabled/Orthopedically Impaired (TRANS) data for school years 2006-07 through 2010-11. The district reported the following information for regular home-to-school transporta- tion and transportation of SD/OI students: PalMdale school district 12 ROUTING, SCHEDULING AND OPERATIONS TRANS Report, 2006-07 through 2010-11 Fiscal Year HTS Routes HTS Students HTS Students with IEP SD/OI Routes SD/OI Students 2006-07 56 2,999 999 10.8 175 2007-08 59 2,865 1,007 18 186 2008-09 41 3,178 493 19 404 2009-10 39 2,572 583 22 219 2010-11 45 3,010 519 18 347 The district had its highest number of routes and students with IEPs during the 2007-08 school year; however, the highest number of students transported using regular home-to-school trans- port was during 2008-09, and the highest number of SD/OI students was in 2008-09. This data demonstrates that increasing the walking distances and eliminating mid-day transportation for kindergarten students did not necessarily reduce total ridership. During 2009-10, the number of routes and ridership for home-to-school decreased while the number of routes increased for SD/OI students even though the number of SD/OI students decreased. The data suggest that the transportation department reduced some routes that were not necessary, resulting in fewer bus routes and lower transportation costs in 2009-10. Following the 2009-10 school year, 6 routes were added for home-to-school for an increase in student ridership of 438 students; 4 routes were decreased for SD/OI even though the number of SD/OI students increased by 128. The data reported on the TRANS shows inconsistent trends in routes and ridership from year to year. The district should review the data for accuracy and evaluate the underlying causes for significant variations. School closures often result in increased ridership as students who previously walked to school become eligible for school transportation because they live farther from their new school. Wildflower and Tamarisk elementary schools closed in 2010-11, and Mesa Junior High School closed before the 2011-12 school year. These closures may account for some of the increase in total ridership. No new routes were added to accommodate the closure of these three schools. The district’s Administrative Regulation 3541 has not been updated to indicate the revised walking distances (nonservice areas) created approximately five years ago. The district’s contract with STA states that routing and scheduling is the contractor’s responsi- bility, but this has not been the practice for a number of years. Instead, STA performs the routing scheduling for SD/OI student transportation and the district performs regular home-to-school transportation routing. The transportation technician position is dedicated for home-to-school routing even though STA’s responsibility for this task is factored into the negotiated contract cost. Safety Plan and Board Policies Education Code section 39831.3 requires that a school district that provides home-to-school transportation also adopt a transportation safety plan. The plan must be available at each school site for CHP inspection upon request and must be updated periodically to reflect changes. Newly enrolled students who will require transportation services must also receive this safety informa- tion. The district’s transportation safety plan was last revised on May 2, 2000 and has out of date references and contact information, including the business and emergency telephone numbers for the district’s previous transportation provider. Neither the safety plan nor related board policies have been updated to include changes that have occurred in the district. Fiscal crisis & ManageMent assistance teaM 13 ROUTING, SCHEDULING AND OPERATIONS Special Education Transportation Requests The district office receives requests for transportation for SD/OI students from the special educa- tion department and forwards them to the transportation department. The requests are then forwarded to STA for routing and scheduling. The requests received are timely and have all the necessary information. However, there is no evidence that all requests that are supported by an Individualized Education Program (IEP) are being reviewed by the business office for inclusion in the budget. Field Trips The district processes approximately 450 field trip requests each school year. The transportation department office receives all field trip requests from the schools. A trip request must be approved by a school site administrator and by the budget office before being sent to the transportation department. Approved field trip requests are forwarded to STA for scheduling. The contract with STA states that six buses and drivers must be available for field trip service during the school day in case field trips conflict with regular bus route times. The district recently purchased six new buses designated and reserved for field trips. Fleet Condition and Replacement The district owns 93 buses. These include 59 Type I buses, which are large coach-type school buses and/or larger special education buses, and 34 Type II buses, which are the smaller special education buses and have a shorter life span. Many of the Type II buses are quite old as demon- strated in the table below: Fleet Inventory Statistics Years Total Buses Type I Type II Over 20 years 39.79% 37.29% 44.12% 15 to 20 years 15.05% 6.78% 29.41% 10 to 15 years 18.28% 15.26% 23.53% 5 to 10 years 7.53% 10.17% 2.94% 0 to 5 years 19.35% 30.5% 0% Total Buses in Each Category 93 59 34 The contract stipulates that STA will employ mechanics, drivers, dispatchers and other opera- tions staff. The most recent contract was dated July 1, 2008 through June 30, 2011 but has recently been extended through June 30, 2013. Older buses require more maintenance and repair. Because STA is responsible for maintaining the buses, this aged fleet places a burden on the contractor. At times the district has agreed to have the contractor purchase the bus at salvage value rather than repair it. Mechanics use out-of- service buses for parts and do a good job of keeping the fleet in good repair. The district’s contract with STA requires that STA have a much newer fleet if STA’s buses are used. Specifically, if STA buses are used, the contract requires that: Special Education Buses shall be equipped with air conditioning and passenger restraint systems (seatbelts) and shall be not older than 1998 model year nor have more than 25,000 miles on the odometer; transit school buses shall not be more than six (6) model years old. Further, at no time during this agreement shall any special education PalMdale school district 14 ROUTING, SCHEDULING AND OPERATIONS bus be more than eight (8) model years old, nor any transit more than nine (9) years old. This contract language is from the contract #03/04 –T01 from the 2003-04 fiscal year. The district should update the language to represent the correct model year. The contract has no such requirements limiting the age of district-owned buses. Although the district has been able to replace some buses recently, it has no comprehensive bus replacement plan. It is anticipated that this will be an issue in future transportation contract negotiations because of the high costs associated with maintaining and repairing older buses. A reasonable bus replacement program is needed, especially for the older special education buses. School districts in California must comply with the California Air Resources Board’s (CARB’s) truck and bus regulations regarding particulate matter emissions. Buses with a gross vehicle weight rating (GVWR) of more than 14,000 pounds must have particulate matter exhaust filters that reduce harmful elements of diesel emissions. In general, one third of the district’s fleet must be in compliance with this regulation by January 1, 2012, the second third of the fleet by January 1, 2013 and the remaining buses by January 1, 2014. District transportation staff is familiar with this requirement and have received some grants from local air quality districts to retrofit some buses. Each unit costs approximately $20,000. The California Highway Patrol’s (CHP) Motor Carrier Division annually inspects each bus, vehicle maintenance records, drug and alcohol testing documentation and driver training records. The CHP produces a report called the Terminal Grade, which rates the carrier in several compliance areas to ensure that the school buses are in compliance with all laws and regulations. The carrier in this case is STA. The CHP has issued STA a rating of “satisfactory,” which is the highest grade possible. Fuel The district purchases fuel for the buses in accordance with the current contract. Fuel is stored in district-owned underground fuel tanks and used by the contractor for pupil transportation. The fuel pump is always on and every bus driver employed by STA is required to fuel their own bus. Drivers can fuel at nights or on weekends with unlimited access In addition, the district has some diesel-fueled lawn mowers. There is a log sheet to record the fuel pumped, and this it is compared to the metering system daily. However, the log sheet and the metering system do not always match, and there is no process for reconciling the fuel use documentation when this occurs or for determining accountability. The district has no internal control procedures to ensure that fueling is monitored and accounted for. This creates an opportunity for fraud and misappropriation of assets. STA employees are required to fuel STA-owned buses at an off-site location for non-school activities, but it is not clear how the fuel costs are separated when these same buses are also used for school transporta- tion. The district would benefit from internal controls, processes and procedures to ensure that unauthorized fuel use cannot take place, as well as a procedure to investigate differences between the metering system and the log sheets. Fiscal crisis & ManageMent assistance teaM 15 ROUTING, SCHEDULING AND OPERATIONS Recommendations The district should: 1. Revise Administrative Regulation 3541 to include current non-service zones. 2. Require STA to perform all routing and scheduling, or negotiate a lower cost to support the district position currently dedicated to this task. 3. Immediately review and update its transportation-related board policies, administrative regulations and safety plan with current information. 4. Ensure that the business office reviews and approves all requests for transpor- tation of SD/OI students that are supported by an IEP. 5. Develop a comprehensive bus replacement plan. 6. Ensure compliance with CARB’s truck and bus rule. Ensure that it has sufficient funds to cover the cost of installing required emission-reducing equipment in case grants are not available. 7. Implement internal controls, processes and procedures to ensure that unau- thorized use of fuel does not occur. 8. Establish a procedure to investigate differences between the fuel metering system and the fuel log sheets. 9. Improve fuel security and accountability by reconciling log sheets monthly. 10. The district should review the accuracy of the TRANS data and evaluate the underlying causes for significant variations. 11. The district should update the contract language to represent the oldest special education bus model year when using STA buses. PalMdale school district 16 ROUTING, SCHEDULING AND OPERATIONS Fiscal crisis & ManageMent assistance teaM 17 CONTRACT COMPLIANCE AND REVIEW Contract Compliance and Review FCMAT received a contract between the district and STA that ended June 30, 2011. The contract contains numerous items that have been struck out. FCMAT requested the most current executed contract; however, the district was unable to locate the contract or a current pricing sheet that extends the contract from July 1, 2011 to June 30, 2013. STA produced a pricing sheet dated September 7, 2011 titled “2010-11 Revised Pricing Schedule.” This document was prepared by STA but does not have an approval signature from an authorized school district official. FCMAT based its review on these documents and, as previ- ously indicated, found that some elements of the contract are not being followed. FCMAT also reviewed a random sample of records to test the accuracy of the most current invoice from STA. A review of three time card records revealed that the billing is not being prop- erly verified by the district and/or compared with driver time cards or daily route logs. FCMAT compared the sign-in and sign-out times in the route log to the billing statement and found several inaccuracies. For example, route 13 on September 23, 2011 shows 7 hours 55 minutes for billing time versus 6 hours 18 minutes for arrival and departure time, a difference of 1 hour 37 minutes. The lack of proper record-keeping and reconciliation is costing the district much needed funding. The invoice for $134,886.03, dated October 10, 2011, was signed by the assistant director of transportation and marked “OK to pay.” The assistant director confirmed that the invoice was not verified or reviewed for accuracy. The business office pays STA invoices without verification that the transportation department has reviewed the billing. The transportation department needs to verify the contractor’s billing statements against the original time records to ensure that each contractor invoice is accurate and can be authorized for payment. In addition to these discrepancies, it is apparent that the contract language has not been followed. The contract requires that a standard route time be established for every route for the first ten days of school. After the tenth day, the district and the contractor will re-establish standard route times for each route, and these will not vary without mutual agreement. An analysis of the billing statement and confirmation by STA management indicate that the district is billed by the minute for each route and day. This practice is not in accordance with the contract’s terms and condi- tions, and may have resulted in significant overbilling and thus significant additional costs. The district uses 27 school bus aides, 25 of whom are each assigned to a specific special educa- tion student or to assist with the entire bus. Two aides are assigned to home-to-school routes for kindergarten students. Most of the SD/OI aides are assigned through a student’s IEP, but the remainder are assigned administratively by the transportation department at the request of STA. The district has an exceptionally large number of bus aides for the number of SD/OI students it serves. In addition, although the school bus aides are STA employees and are billed at a rate of $13.06 per hour, the transportation contract contains no mention of bus aides, their responsibili- ties or the rates to be charged. The district and STA have no justification or formal approval process for the placement of and billing for school bus aides. STA has recently indicated that the contract rates should be increased by the state cost of living adjustment (COLA) for the current year. The contract states that annual rate adjustments will be effective July 1 and will be based on the “revenue limit COLA provides [sic] California Schools for that year.” Revenue limit COLAs in recent years have had large deficit factors applied. The statutory COLA for the current fiscal year is 2.24%; however, the deficit factor of 19.754% PalMdale school district 18 CONTRACT COMPLIANCE AND REVIEW eliminates the statutory COLA and provides flat funding. Therefore, no adjustment to the current rate is warranted. As previously noted, the contract states that STA will perform all bus routing and scheduling, yet the district has provided home-to-school routing and scheduling for a number of years. STA rents a portion of the district’s transportation facility for $122,000 per year and pays a pro-rata share of the facility’s maintenance costs, not to exceed 5% of the gross rent, which has never been increased. The rental agreement places some responsibility on STA for repair and maintenance, but this element of the contract is vague and does not clearly delineate each party’s responsibility for repairs and maintenance of the facility. District staff reported that the district has rarely charged STA liquidated damages for late bus routes but has charged them for some late field trips. Monitoring bus service and charging liqui- dated damages as allowed by the contract terms would benefit the district. The district will either rebid the contract or extend the current contract with STA after June 30, 2013. Based on FCMAT’s review, the district would benefit from revising the following elements of the contract: • Establish district-authorized limits for base rates charged for each route and the authorization process to use when unusual situations might warrant an increase. • Clearly articulate the process for approving and placing school bus aides, as well as pricing for hourly labor costs. • Establish the cost for facility rent, with annual increases. • Clearly define which maintenance and repair items will be charged to the contractor, along with annual limitations, if any. • Stipulate that costs for damages to the transportation facility will be charged directly to the contractor. Recommendations The district should: 1. Acquire a current copy of the executed contract with STA and price sheet. 2. Ensure that the business office instructs the transportation department regarding how to verify the contractor’s billing statement against the original time records to ensure that each contractor invoice is accurate and can be authorized for payment. 3. Establish standard route times and ensure that each route is billed the base rate for the nearest hour, in accordance with the contract. 4. Investigate the total potential overbilling by STA as a result of billing by the minute. 5. Ensure that it conducts the proper approvals and has pricing sheets for the placement of and billing for school bus aides, and ensure that this is fully documented in the contract. Fiscal crisis & ManageMent assistance teaM 19 CONTRACT COMPLIANCE AND REVIEW 6. Monitor STA’s service, and charge liquidated damages as appropriate. 7. Consider including amendments to the future contract as listed above. PalMdale school district 20 CONTRACT COMPLIANCE AND REVIEW Fiscal crisis & ManageMent assistance teaM 21 FINANCE Finance California’s school transportation programs have been underfunded for many years. Prior to 1977, the state fully reimbursed school districts for their reported school transportation costs, but the state slowly decreased funding from 1977 through the 1982-83 fiscal year, when funding was capped based on the reported costs from each school district. The district has a lower than average reimbursement rate, which indicates that the district’s actual expenses reported to the state in fiscal year 1982-83, when the rate was set, were low. Following the base year, the state slowly reduced the percentage of funding for this program, though it occasionally made cost of living adjustments. As school transportation costs have increased and the state revenue that supports the program has decreased, school districts have experienced larger general fund contributions to transportation year after year. In recent years, transportation funding has continued to decline because of state budget cuts and deficits that have been applied. The current state and federal budget crisis has severely decreased funding for education, with the transportation categorical program receiving the largest percentage reduction. The state reduced transportation funding by approximately 20% from fiscal year 2008-09 to 2009-10. During this time, the cost of fuel, supplies and parts increased along with the cost of health and welfare benefits. As program costs increase and the revenue to support the program decreases, the district will continue to experience substantial contributions from the unrestricted general fund. The district’s transportation funding for the current fiscal year, after applying the deficit of 19.835%, is $57,586 for home-to-school transportation and $243,790 for transportation of SD/ OI students. Another round of budget cuts targeted at transportation will reduce the 2011-12 funding even further. The most recent estimates are that the state’s midyear “trigger” cuts for transportation will be $42 per average daily attendance (ADA) countywide for Los Angeles County. To report transportation cost information to the state, districts are required to use the Standardized Account Code Structure (SACS) software. This software generates several different reports that are issued to the California Department of Education (CDE) annually. The trans- portation report (Form TRAN) is generated automatically using the district’s financial data and its unique information about number of school buses and mileage. The tables below show data from the district’s financial system for home-to-school and SD/OI transportation for fiscal years 2009-10 through 2010-11: PalMdale school district 22 FINANCE Reported Financial Data Form TRANS 2009-10 and 2010-11 2009-10 2010-11 Difference HTS Actual Actual Actual State Revenue $57,582.00 $57,763.00 $181.00 General Fund Contribution 1,559,941.90 3,237,265.07 1,677,323.17 Total Revenue $1,617,523.90 $3,295,028.07 $1,677,504.17 Salaries & Benefits $376,179.63 $397,288.29 $ 21,108.66 Supplies 311,803.94 427,426.38 115,622.44 Interfund (137,647.53) (107,766.08) 29,881.45 Other Services 1,090,736.95 2,577,410.50 1,486,673.55 Communications 458.34 668.98 210.64 Total Expenditures $1,641,531.33* $3,295,028.07 $1,653,496.84 2009-10 2010-11 Difference SD/OI Actual Actual Actual State Revenue $243,770.00 $244,539.00 $769.00 General Fund Contribution 410,484.21 661,731.60 251,247.39 Total Revenue $654,254.21 $906,270.60 $252,016.39 Other Services $654,254.21 $906,270.60 $252,016.39 Total Revenue $654,254.21 $906,270.60 $252,016.39 *Revenues and expenditures for this fiscal year do not balance to the district’s financial reports. Most notable from the above data is the significant increase the district has experienced in program expenditures, causing an increase in the unrestricted general fund contribution to both home-to-school and SD/OI transportation. The greatest increase is in expenditures for other services that almost doubled from 2009-10 to 2010-11. It would benefit the district to determine why these costs increased so significantly. The TRAN reports transportation information and cost data to the state are is used to justify state funding. If the approved costs are less than the revenue received, the state will reduce the revenue to the level of the costs. As long as the district’s costs for home-to-school and SD/OI transportation are higher than the state revenue for each program, the approved apportionment will remain the same and funding will not be lost. According to transportation department staff, home-to-school transportation has an average ridership of 2,006 regular education students on 21 routes and 724 special education students on 42 routes. The staff allocates costs from the contractor’s billing according to a formula developed by the transportation director. In addition, the transportation department receives information from the special education department regarding severely disabled or orthopedically impaired students who should be reported in the SD/OI column, as well as those students who are non-severely disabled and can be reported on the home-to-school column of the TRAN report. However, staff members do not clearly understand why they are doing this. Training could help staff gain a complete understanding of how to correctly report costs and student data. The information reported in the TRAN reports for fiscal years 2009-10 and 2010-11 is summa- rized in the tables below: Fiscal crisis & ManageMent assistance teaM 23 FINANCE TRAN Actual Data, HTS, 2009-10 through 2010-11 TRAN Actual Data Reported 2009-10 2010-11 Number of Routes 39 45 Number of Students 2,572 3,010 Number of Miles 570,999 514,567 Cost Per Mile $3.01 $2.01 Cost Per Student $668.87 $344.09 Revenues $57,582.00 $57,763.00 Federal ARRA Funds - $987,384.27 Expenditures $1,641,531.33 $3,295,028.07 Federal ARRA Funds - $987,384.27 Encroachment $1,559,941.90 $3,237,265.07 Percentage of State Revenues to support Expenditures (Not including ARRA funds) 3.51% 1.75% TRAN Data, SD/OI, 2009-10 through 2010-11 TRAN Actual Data Reported 2009-10 2010-11 Special Education Special Education Number of Buses 22 18 Number of Students 219 347 Number of Miles 221,622 210,175 Cost Per Mile $3.09 $0.275 Cost Per Student $3,130.86 $166.37 Revenues $243,770.00 $244,539.00 Expenditures $654,254.11 $906,270.60 Encroachment $410,484.21 $661,731.60 Percentage of State Revenues to support Expenditures 37.26% 26.98% According to the TRAN report, the total number of students transported increased by 566, or 20.27%, but the contribution from the general fund increased by 107.52% for home-to-school transportation and by 61.20% for transportation of SD/OI students. The accounting office indicated that transportation-related charges are posted to various other programs within the general fund. Because the accounting method is not consistent from year to year, actual data shows large variances and is distorted. The following table shows all programs that had transportation charges in 2009-10 compared with 2010-11 coded to the transportation function but in other resource categories. PalMdale school district 24 FINANCE Actuals Fiscal Year Fiscal Year Variance Year-to- By Resource 2009-10 2010-11 Year 00000 $11,658.61 $9,029.58 $(2,629.03) 07394 $1,702,763.10 $- $(1,702,763.10) 30100 $99,887.13 $63,089.99 $(36,797.14) 33100 $6,834.00 $6,834.00 33130 $ - $884,674.26 $884,674.26 33150 $7,735.00 $7,735.00 33190 $108,189.62 $108,189.62 33200 $7,500.00 $(7,500.00) 58100 $2,274.90 $(2,274.90) 65000 $ 330.00 $89.76 $(240.24) 70900 $ 136,810.14 $231,872.46 $95,062.32 72300 $1,641,531.33 $3,295,028.07 $1,653,496.74 72400 $654,254.21 $906,270.60 $252,016.39 Grand Total $4,257,009.42 $5,512,813.34 $1,255,803.92 It is best practice to post home-to-school and SD/OI costs in resources 7230 and 7240, and to use interprogram account codes, to reallocate non-home-to-school and non-SD/OI transporta- tion costs to the correct program in accordance with the California School Accounting Manual (CSAM). If the district determines that the charges in the table above were posted incorrectly; the state TRAN report will also need to be corrected to show the actual costs for both home-to- school and SD/OI transportation. During the 2010-11 school year, 347 SD/OI students were required to be transported because it is considered a related and necessary service for them to access educational opportunities and is thus required by the Federal Individuals with Disabilities Education Act (IDEA) in accord with the student’s IEP. In addition, 519 non-severely disabled special education students have IEPs that include transportation and thus ride home-to-school routes. California does not require the transportation of regular education students; however, the district chooses to transport 2,491 regular education students under its board’s Administrative Regulation 3541, which specifies the district’s transportation zones. FCMAT compared the district’s actual transportation data reported on the TRANS reports from resources 7230 and 7240 with its budgeted data for fiscal years 2009-10 and 2010-11. This information is shown in the tables below. Fiscal crisis & ManageMent assistance teaM 25 FINANCE Financial Comparison Budget to Actuals for Resource 7230 – Home-to-School Transportation, and Resource 7240 – Special Education Transportation 2009-10 2010-11 Resource 7230 - HTS Actual Budget Actual Budget State Revenue $ 57,582.00 $ 71,000.00 $ 57,763.00 $ 57,604.00 Encroachment 1,559,941.90 1,649,944.00 3,237,265.07 1,750,921.00 Total Revenue $ 1,617,523.90 $ 1,720,944.00 $ 3,295,028.07 $ 1,808,525.00 Salaries & Benefits $ 376,179.63 $ 369,480.00 $ 397,288.29 $ 385,025.00 Supplies 311,803.94 300,000.00 427,426.38 300,000.00 Interfund (137,647.53) (86,960.00) (107,766.08) (89,483.00) Other Services 1,090,736.95 1,137,324.00 2,577,410.50 1,211,733.00 Communications 458.34 1,100.00 668.98 1,250.00 Total Expenditures $ 1,641,531.33 $ 1,720,944.00 $ 3,295,028.07 $ 1,808,525.00 2009-10 2010-11 Resource 7240 - SD/OI Budget Budget Actual Actual State Revenue $ 243,770.00 $ 270,000.00 $ 244,539.00 $ 243,864.00 Encroachment 410,484.21 464,833.00 661,731.60 229,387.00 Total Revenue $ 654,254.21 $ 734,833.00 $ 906,270.60 $ 473,251.00 Other Services $654,254.21 $664,833.00 $ 906,270.60 $ 473,251.00 Capital Outlay 0.00 70,000.00 Total Expenditures $654,254.21 $734,833.00 $ 906,270.60 $ 473,251.00 The budget data in the tables above do not include actual expenditures in other general fund resources, especially in fiscal year 2010-11. The district’s budget for the current fiscal year shows extremely large increases in several expenditure categories compared to fiscal year 2010-11. 2010-11 2011-12 HTS Actual Budget State Revenue $ 57,763.00 $ 172,812.00 Encroachment $ 3,237,265.07 $ 6,599,820.00 Total Revenue $ 3,295,028.07 $ 6,772,632.00 Salaries & Benefits $ 397,288.29 $ 1,188,966.00 Supplies $ 427,426.38 $ 1,243,350.00 Interfund $ (107,766.08) $ (47,325.00) Other Services $ 2,577,410.50 $ 4,385,391.00 Communications $ 668.98 $ 2,250.00 Total Expenditures $ 3,295,028.07 $ 6,772,632.00 2010-11 2011-12 SD/OI Actual Budget State Revenue $ 244,539.00 $ 731,592.00 Encroachment $ 661,731.60 $ 688,161.00 Total Revenue $ 906,270.60 $ 1,419,753.00 Other Services $ 906,270.60 $ 1,419,753.00 Total Expenditures $ 906,270.60 $ 1,419,753.00 PalMdale school district 26 FINANCE According to the district projections above, state revenue, unrestricted general fund contribu- tion, salaries, benefits and other services are projected to double or triple in some categories. The change in each category, based on the actuals from the fiscal year 2010-11 to the 2011-12 budget, show large variances in the transportation resources. For example, encroachment is understated in SD/OI but increases drastically in HTS; state revenues are overstated in HTS by at least $115,049 and another $487,053 in special education transportation, and other services has increased by $2,321,463 total for both programs. It would benefit the district to review its budget for the current fiscal year and analyze its projec- tions for accuracy. Recommendations The district should: 1. Determine why costs in the service areas indicated have increased so signifi- cantly. 2. Provide training for staff so they have a complete understanding of how to report costs and student data correctly. 3. Ensure that home-to-school and SD/OI costs are posted in resources 7230 and 7240, and that interprogram account codes are used to reallocate non- home-to-school and non-SD/OI costs to the correct program in accordance with the CSAM. • If charges have been posted incorrectly, also correct the state TRANS report to show the actual costs for both home-to-school and SD/OI programs. 4. Review its budget for the current fiscal year and analyze its projections for accuracy. Fiscal crisis & ManageMent assistance teaM 27 APPENDIX Appendix A. Study Agreement PalMdale school district 28 APPENDIX Fiscal crisis & ManageMent assistance teaM 29 APPENDIX PalMdale school district 30 APPENDIX Fiscal crisis & ManageMent assistance teaM 31 APPENDIX PalMdale school district 32 APPENDIX Fiscal crisis & ManageMent assistance teaM 33 APPENDIX PalMdale school district 34 APPENDIX Fiscal crisis & ManageMent assistance teaM