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STANDARD IIID: Financial Resources



Financial resources are sufficient to support student learning programs and services and to improve institutional effectiveness. The distribution of resources supports the development, maintenance, and enhancement of programs and service. The institution plans and manages its financial affairs with integrity and in a manner that ensures financial stability. The level of financial resources provides a reasonable expectation of both short-term and long-term financial solvency. Financial resources planning are integrated with institutional planning.




DESCRIPTION:

For the fiscal year (FY) final (adopted) budget 2006/2007 revenue and expenditure totals by major fund categories are found in the Final Budget Fiscal Year 06/07 as follows (3D.1):

  REVENUES EXPENDITURES
Unrestricted General Fund 10:
(Including other financing sources uses net)

$24,302,847 $24,302,847
 
Instructional Equipment/TTIP (Fund 24) 148,697 148,697
Parking Fund (Fund 26) 158,000 219,306
Categorical Restricted (Fund 27) 5,749,479 5,749,479
 
Total General Fund 29,007,048 29,068,354
Total Funds 72, 34, 21, 60, 92 3,469,400 21,364,830
Total Fiduciary Funds 47, 48, 66 1,979,638 1,965,316
 
Total All Funds (For memorandum only) $34,374,712 52,317,126
 
Net Change in Ending Fund Balance   (17,942,414)
 
Beginning Fund Balance   28,477,907
 
Ending Fund Balance   $10,535,493

See attached Table III D 1 for a synopsis of FY 02/03 through FY 06/07 revenues and expenditures.  More detailed data on revenues and expenditures can be found in the district's annual budget and annual audit reports.

Over the period FY 02/03 - FY 06/07 both the Total General Fund revenues and expenditures rose modestly despite budget problems at the state level.

The district's total expenditures (including capital and fiduciary funds) have fluctuated significantly across individual budget years because of substantial inter-year differences in facilities construction.

The modestly rising total general fund totals of revenues and expenditures shrouds the fact that some sub-fund totals have changed significantly over this period. For example, the state allocation of some district revenue sources has declined (e.g. Deferred Maintenance, Human Resource Development Advisory Committee (HRDC), Partnership for Excellence) while employee health benefits expenditures and emergency infrastructure repairs have risen.

With the advent of the state fiscal crisis, the district responded proactively to avoid what otherwise could have been a serious college budget crisis. This contravenes the view expressed in the 2000 accreditation report that based upon past history the district was ill prepared to effectively and collegially deal with a financial crisis (3D.2). In response to the uncertainty of state funding the district established an Expenditure Reduction Task Force in January 2003 (3D.3, March 11, 2003 Board agenda item 11(b)). The task force identified a cumulative $1.2 million in expenditure reductions (annually, about 3 percent of General Fund 10 expenditures) for FY 02/03 and FY 03/04. This allowed the district to redeploy revenue to sustain and enhance its mission.

The district initiated and voters approved Measure E, a $108 million general obligation bond. Proceeds from this bond issue were used to eliminate all of the district's remaining long term lease revenue bond debt (3D.1, p. 39), $3.9 million in principal was re-paid and a cumulative total of $.71 million in future interest expense was eliminated. Sixty-four million of the bond issue will be used to refurbish and update the district's infrastructure, management information system, buildings, and grounds. Upon completion, it is anticipated that what would otherwise have been significant future infrastructure repairs have also been eliminated from future general fund expenditures.

With regard to the escalation of health benefits expenditures, the district re-negotiated employee benefits in FY 03/04 to contain the impact on the budget. All full-time employees and some part-time classified employees have the choice between four health plans. Three plans are fully paid for by the district; any increases in the premium (over the base year) of the most expensive fourth plan are equally split between the district and the employee for employees hired before fall 2003 and fully paid by the employees hired after fall 2003.

To guide the annual budget process the Board has established operating budget standards (3D.1, p. 11). The annual budget guidelines list each year's selected new and in-process initiatives for educational improvement and mission enhancement.

The district recognizes that effective budget management requires not only containing and prioritizing expenditures but also managing revenues. Most of the total General Fund revenues are derived from the number of full time equivalent students (FTES) the district serves. FTES rose only slightly until this year, when it rose dramatically, although the district's population has grown significantly (3D.1, p. 1). As part of its operating budget standards, the district actively pursues state funded growth revenue. To enhance growth revenue, the district established a College of Choice Task Force to recommend strategies to attract district resident students who now choose to enroll in out-of-district colleges (3D.4). The district has implemented a noncredit program to broaden its range of services to the community. This new program should also enhance revenue. The district monitors its participation in the South Bay Regional Public Safety Consortium to receive its fair share of the allocated FTES. The district manages its schedule of classes to support and enhance student enrollment. The district engages in various advertising and outreach programs to enhance growth. Students are surveyed to identify scheduling and program preferences (3D.5). Revenue and services are also enhanced through agency grants (See Table III D 2).

For the period FY 02/03 through FY 06/07, the district, in most years was able to adopt balanced final budgets while pursuing new mission enhancing initiatives each year. Intra-year management of revenues and expenditures has resulted in modest additions to the General Fund 10 ending balance each year. For FY 06/07, the estimated General Fund 10 unrestricted reserve is about $1,985,562 or about 8.17 percent (3D.1, p. 28).

The district has no long-term debt except for retiree health benefits. Calculation of the actuarial liability is now complete (3D.6). To help fund this liability, the district is a member of a retiree health benefit program along with a number of other California community colleges. The actuarial study determined the district's overall liability to be $4.5 million (3D.6) and the district has already transferred over $3.2 million (71 percent of the total) to this program in order to provide resources to pay for the existing retiree health benefit obligations in the future. Although the district continues to pay for the immediate year costs of retiree health benefits by allocating current year budget funds, the Final Budget includes a 1.25 percent charge on all payroll expenditures to fund future retiree health benefit obligations.

The budget building process uses the following general guidelines for prioritizing budget requests (3D.1, p.11, and attachment B, p.1):  Primary priority is given to identifying the level of necessary ongoing expenditures to sustain the district's current level of operational services. Subsequent priority is given to selecting new initiatives to enhance the mission by reviewing the various objectives listed in the Strategic Plan (3D.1, p.11, and attachment B, p.1) and selecting from among them those particular objectives to implement in the current year's budget. As described below, these selected objectives become the central component of each year's budget guidelines. Each year's budget guidelines list the current year's objectives for instructional and other institutional enhancement (3D.1, attachment B).


  1. The institution relies upon its mission and goals as the foundation for financial planning.
  1. Financial planning is integrated with and supports all institutional planning.

DESCRIPTION:

The district relies on its mission statement and various plans which support the mission when developing its financial plans. The process is governed by Board policy (3D.7, Board Policy 1200).

The district's mission statement is as follows: "In an environment that nurtures creativity and intellectual curiosity, Gavilan College serves the community by providing a high quality learning experience and preparing students for higher education, technical and public service careers, life-long learning and participation in a diverse global society" (3D.7, Board Policy 1200).

The Educational Master Plan, Facilities Master Plan, the Technology Plan, and the Five Year Full Time Faculty Hiring Plan provide the goals from which the district derives its multi-year Strategic Plan. The Strategic Plan lists specific objectives intended to enhance the achievement of the district's mission. This in turn informs the budget guidelines (3D.1, attachment B).

The unimplemented and the continuing multi-year objectives in the Strategic Plan and other district plans yield a "list" of potential new initiative options from which, subject to available funding, the current year's budget guidelines are developed (3D.1, appendix B). The process of prioritizing and selecting among these potential initiatives occurs annually when the budget guidelines are developed. Historically, the multi-year financial consequences of selecting an initiative are discussed, but not incorporated formally into a multi-year financial plan. In 2004, the district generated a multi-year projection of Fund 10 for FY 04/05-FY 07/08 which incorporates likely future plan initiatives (3D.8,FY 04-05 / 05-06 / 06-07 / 07-08).

The district's Educational Master Plan provides the broad context for implementing the mission. The Educational Master Plan is augmented by the Facilities Master Plan and the Technology Plan (3D.9, 3D.10, 3D.11). Recently, the district also adopted a Five-Year Full-Time Faculty Hiring Plan (3D.12). Historically, the district maintained a separate Capital Construction Plan and a separate Deferred Maintenance Plan. The content of these plans is now merged into the Facilities Master Plan. District plans are considered "living documents" which undergo periodic review and revision.

For example, voters approved a general Measure E obligation bond in March 2004 ($108 million) for modernization of district facilities, a new management information system, purchase of land for additional college sites, repayment of existing district long-term debt, and other objectives specified in the bond documentation (3D.1, Exhibit 8). The Facilities Master Plan was revised to incorporate the bond issue projects, and continues to be updated as the district implements Measure E. The current Board-approved Facilities

Master Plan includes the following four major documents (3D.10):

  1. Measure E Bond Program Facilities Master Plan
  2. Facilities Master Plan Appendices
  3. ADA Transition Plan
  4. District Facilities Master Plan

Board policy regarding budget development is as follows:  Each year, the president of the college presents to the Board a budget, prepared in accordance with Title 5 and the California Community Colleges Budget and Accounting Manual. The schedule for presentation and review of budget proposals complies with state law and regulations and provides adequate time for Board study. Budget development meets the following criteria:  the annual budget supports the District's master and educational plans, budget projections address long-term goals and commitments, and budget planning supports institutional goals and is linked to other institutional planning efforts (3D.13, Board Policy 6200, Administrative Procedure 6200).

Typically, once a new initiative is in operation, it is budgeted in subsequent budget years as an on-going expenditure if on-going expenditures are necessary to sustain the objective (for example, telephone registration). While achievement of the prior year's budget guidelines is part of the Board's discussion in selecting the coming year's guidelines, a formal report on the status of prior initiatives has not been produced since FY00/01.

The preliminary initiation, development, and prioritization and selection of the annual budget guidelines begins with its link to the Strategic Plan. Then the Board Budget Committee, in consultation with the president and the vice president of administrative services, refines the budget guidelines.

These initial guidelines are submitted to the President's Cabinet, Board and college Budget Committees, and the President's Council for review and comment. Upon adoption by the Board of Trustees, these budget guidelines govern that portion of the budget building process which involves new initiatives.

EVALUATION:

The college meets this standard. The district's budget process conforms to district policy. The specific goals and objectives of district plans are integrated into the budget guidelines and provide the primary guidance for new initiatives in the district's financial planning. However, the formal reporting on the status of prior budget guidelines was terminated in FY 02/03. As district plans evolve, the new and revised goals and objectives are subject to available funding and Board approval, incorporated into the district's financial plans.

PLAN:

None


  1. Institutional planning reflects realistic assessment of financial resource availability, development of financial resources, partnerships, and expenditure requirements.

DESCRIPTION:

The revenue projections and the budget guidelines are reviewed by the President's Cabinet which then establishes budget assumptions that cost-center managers employ when building initial budget expenditure requests. Cost center managers receive prior and current year budget and actuals to facilitate budget building. The district also holds budget building workshops for the cost center managers.

The process for developing budget expenditure requests depends upon the category of the expenditure. Large capital projects are incorporated into the budget once the external funding source(s) are available. The Vice President of Administrative Services and the president are the lead developers of the capital budget in conjunction with the Board Facilities Committee, the President's Council, the college Health, Safety, Facilities, and Grounds Committee, and the President's Cabinet.

Excluding large capital projects, labor costs are the largest component in the budget, and therefore the most important part of budget development. The process begins with all cost center managers receiving prior and current year budget-to-actual employee data, relevant labor contract information, and budget assumptions. The labor costs are separated into three categories: 1) "permanent" on-going staff, 2) "non-permanent" staff, and 3) "potential new permanent staff". Cost-center managers verify the staff data, and submit potential labor budgets that take into account such things as expected retirements, re-assignments, negotiated labor contracts, stipends, new grants, new hires, etc. These labor budget recommendations also include potential new staff positions as provided for in the budget guidelines (Category #3 above).

Historically the "non-permanent" part-time faculty budget has been the most difficult labor category to accurately forecast and manage. For example, the use of substitutes is based on short-term needs and enrollment fluctuations and varies in forecasting from year to year.

Managers are also responsible for budgeting equipment and supplies. In the case of instructional supplies, the instructional area deans assess needs in consultation with department chairs who in turn consult with their faculty. In the case of instructional equipment, the vice president of instruction meets with the area deans and department chairs to establish equipment funding priorities. Non-instructional cost managers similarly consult with their employees to develop equipment and supply requests.

As with all expenditures, concern is given to the impact on education. For example, with regard to this year's equipment requests, one million dollars of Measure E proceeds are earmarked for new computers for faculty and students over the next three (3) years. The first priority is to upgrade the computers used by students in the math and writing labs and the Computer Place (3D.11).

Budget requests move up the chain of command from cost center managers and deans to the vice presidents who, in consultation with managers, amend these requests and forward them to the vice president of administrative services for incorporation into the tentative budget. This tentative budget is reviewed by the Board Budget Committee, the college Budget Committee, and the President's Council.

The tentative budget is subsequently updated (usually, after the state budget is adopted) and reviewed by the President's Cabinet, the Board Budget Committee, the college Budget Committee, and the President's Council to generate a Final Budget which goes to the Board for review and adoption.

Once adopted, the current year budget can be amended by the Board per Board policy (3D.14, Board Policy 6250, Administrative Procedure 6250).

EVALUATION:

Even under the best of circumstances, creating a budget is inherently fraught with uncertainty since a budget is an estimate of the unknowable future. To generate a best estimate of expenditures, budgeting looks to the past for guidance about the probable future. The budget process begins while the current year is still in progress and barely half complete and with the prior year "actuals" only estimated until the district "closes the books" and the auditors complete their report. To generate best estimates of revenues, budgeting, in part, depends on state funding. Yet, the process begins when the ink on the governor's budget proposal is barely dry, and that proposal can change significantly before a final state budget is passed.

Within this context, district budgeting and fiscal management has achieved admirably realistic and consistent results. For example, the FY 04/05 General Fund 10 "net change in ending fund balance" was budgeted as a modest loss of $66 thousand. The actual "net change..." was a modest gain of $248 thousand. The net difference between budget and actual is $314 thousand or less than 1.6 percent of General Fund 10 expenditures.

The budget process is collaborative, includes prioritized educational initiatives based upon planning objectives, and occurs within the context of retaining a healthy unrestricted reserve. The Board's target is 10 percent or a minimum of $1.5 million (3D.15, Administrative Procedure 6305) for unanticipated emergencies.

The process is, however, inherently imperfect; mistakes in budget building or budget management occur. The district is usually able to respond with intra-year strategies to recoup or minimize the error(s). The district then proceeds to redesign the budget development and/or management procedures to avoid repetition of the error.

Year end "actuals" which are typically about equal to the year's budgeted amounts belies the intra-year budget traumas that can occupy managers. Some intra-year budget "problems" are, by their very nature, intractable e.g. actual enrollment vs. enrollment projections. More typical are one-time events that are rectified by subsequent changes in the budgeting process. For example, the mid-year comparison between the FY 04/05 budgeted and the mid-year actual adjunct faculty expenditures indicated a 30 percent overage in adjunct budget expenditures which was a 2.5 percent overage in Fund 10. Proactive expenditure management of other expenditure categories offset the overage by year end. This overage would have been recognized and addressed earlier if budget to actuals were compared and analyzed more frequently by managers.

While mistakes do happen, the 2000 Accreditation Self Study identified two problems that contributed to the adjunct overage: (1) an archaic and user-unfriendly Management Information System (MIS), and (2) inadequately trained budget managers (3D.2).

The district is currently replacing the Management Information System (MIS) with a fully integrated and user-friendly Enterprise Resource Planning system (ERP). District hiring criteria for managers does include budget development and budget management experience in the job announcements. The district does currently provide in-house computer and manager training for new managers and refreshers on an as-needed basis for existing managers. It also holds workshops for managers on budget development and management. However, the adjunct budget overage implies that not all managers are trained adequately or prioritize items appropriately.

PLAN:

  • In addition to its budget workshops, the district will review the training needs of its managers, and continue to improve the linkage between supervisors, deans, human resources, business services, and payroll.

  1. When making short-range financial plans, the institution considers its long-range financial priorities to assure financial stability. The institution clearly identifies and plans for payment of liabilities and future obligations.

DESCRIPTION:

In the normal course of business, district decisions have financial consequences that extend beyond the current budget year. Examples include multi-year capital projects, multi-year labor contracts, retiree health benefits, multi-year leases, long-term debt obligations, structures and grounds maintenance, liability exposure, multi-year grants, etc. Additionally, the institution must each year conform to existing, revised, and new federal, state, and local guidelines and laws which have multi-year expenditure consequences, e.g. Title 9, OSHA, Fire Marshal Regulations, Field Act, etc. Moreover, district educational programs described in the current college catalog imply a contractual obligation between the district and its currently enrolled students to continue to fund these programs beyond the current year.

Expenditure priorities are governed by the budget guidelines that derive from the district's Strategic Plan, Technology Master Plan, and Facilities Master Plan. After the budget guidelines are adopted, the vice president of administrative services builds a preliminary (tentative) budget by estimating revenues and expenditures for the upcoming year.

Expenditures are estimated by identifying the level of necessary ongoing expenditures to sustain the district's current level of operational success in meeting the college mission; and selecting additional new initiatives to enhance achievement of the college mission.

The process of prioritizing and selecting among these potential initiatives is an annual process, with input from all constituent groups on campus. The vice president of administrative services gleans initial conservative estimates of revenue projections from the governor's preliminary state budget, enrollment projections, Chancellor's Office guidelines, awarded grants, and projected federal funding. Funding for capital projects is based upon state funding and bond issues.

Historically, the multi-year financial consequences of new initiatives have been discussed, but not incorporated formally into a multi-year financial plan. In 2004, however, the district generated a multi-year projection of Fund 10 (FY 04/05-FY 07/08) which incorporates likely future plan initiatives (3D.8, FY 04-05 / 05-06 / 06-07 / 07-08).

Budgeting and purchasing, including multi-year contracts, are governed by several sections of the Board Policy Manual (3D.16, Board Policy 6300, Administrative Procedure 6300, Board Policy 6330). Board Policy 6300 reads in part: "The district fiscal management shall:  Provide … determination of revenue prior to making short-term and long-term commitments" (3D.16, Administrative Procedure 6300). The district's participation in the Retirement Health Benefits JPA is an example of long term planning. The college has already funded 71 percent of the projected retiree health benefits liabilities as determined by a GASB actuarial valuation (3D.6).

The vice president of administrative services assures that all scheduled and contingent liabilities are incorporated into the budget and that the institution can afford potential multi-year obligations before entering into new contracts. In accordance with accounting principles, the district maintains schedules of liabilities and incorporates multi-year obligations into the budget building process. Other multi-year obligations such as negotiated labor contracts are similarly incorporated into each year's budget. In anticipation of the mandatory implementation of Governmental Accounting Standards Board (GASB) 45, the district has already established a contingent reserve of $3.2 million for retiree health benefits (Fund 92) and has verified an estimated actuarial liability (3D.1, p. 39). In addition, the final budget includes a 1.25 percent charge on all payroll expenditures to fund future retiree health benefit obligations. The district recently discharged the last of its long-term bond liabilities.

EVALUATION:

The district plans for and has successfully discharged its past financial obligations. The district maintains a healthy reserve and has already created a separate reserve for its contingent retiree liabilities. However, historically, the district has under-funded infrastructure maintenance. If it had not successfully passed its recent bond issue, it is quite possible that infrastructure decay could have threatened the continuity of the district. The panacea of the bond issue must not obscure the need for the district to more realistically assess and budget its long-term maintenance obligations in order to assure long term sustainability of the institution. There is a similar need to budget for the implementation and subsequent maintenance of the Enterprise Resource Planning system. The district is way ahead of other district's throughout the state in setting aside contingency funds for future retiree health benefits and in doing something currently to add to the contingency fund for current employees when they retire.

PLAN:

  • The district must plan to include realistic levels of funding for implementation and subsequent maintenance of the Enterprise Resource Planning system and for other post-bond infrastructure and facilities maintenance.

  1. The institution clearly defines and follows its guidelines and processes for  financial planning and budget development, with all constituencies having  appropriate opportunities to participate in the development of institutional  plans and budgets.

DESCRIPTION:

The timing of budget development is governed by the budget calendar. All college constituents from the Board to students as well as the general public have the option to participate in budget development through the Board Budget Committee, college Budget Committee, and through cost center managers, or by direct query to the Board or district managers. Cost center managers consult with their constituents. The budget and financial reports, including the budget calendar, are, by law, public documents. They are distributed, reviewed, and approved at open Board meetings, at Board and college Budget Committee meetings, and at the President's Council.

Periodic meetings are held with managers and administrators to review their budgets. Budget updates are typically presented to all staff on mandatory flex (staff development) days (twice per year). The district publishes its final budget and its audit report and copies are available at the administrative services' office. In addition, a Citizens' Oversight Committee has been established to assure that the district adheres to the requirements of the Measure E bond enacted by the voters in 2004.

EVALUATION:      

The college meets this standard. Financial planning allows for input from all college constituents, and financial information is readily available to all who are interested. In both spirit and action, the district treats financial data and the process of developing financial plans transparently.

PLAN:

None.


  1. To assure the financial integrity of the institution and responsible use of financial resources, the financial management system has appropriate control mechanisms and widely disseminates dependable and timely information for sound financial decision-making.
  1. Financial documents, including the budget and independent audit, reflect appropriate allocation and use of financial resources to support student learning programs and services. Institutional responses to external audit findings are comprehensive, timely, and communicated appropriately.

DESCRIPTION:

The district has consistently met the requirement that 50 percent of general fund expenditures be used for instruction. In fiscal year 04/05, the district was just over 50 percent at 50.09 percent. The district realized that this is too low and in November 2005 developed a Five-Year Full-Time Faculty Hiring Plan (3D.12). In Fiscal Year 2006-07, five new faculty will be hired. If funding is available, the plan is to hire five more faculty each of the next four years.

Over six million dollars are spent on services that support student learning such as:

EOPS $725,000
DRC $1,970,000
Financial Aid $2,400,000
MESA, TRIO, Title V $750,000
Matriculation $268,000
Health Services $80,000

In FY 99/00 (3D.17) there were five audit findings:

  1. A current equipment inventory listing was not available for review.
  2. During testing of cash disbursements procedures it was noted that several disbursements did not have the proper authorization.
    Corrective action: The director of business services now prepares a listing of all programs by fund. Each program has two employees that are authorized to disburse funds from the program. The listing is updated each year (and more frequently if there is a change in signing authority) and distributed to the business office staff (purchasing, cashier, accounts payable, payroll, accounting) and to all deans.
  3. The district's policies and procedures related to the maximum amount of vacation that an employee can accrue had been exceeded by various employees.
    Corrective action: One employee that had an excessive vacation accrual was paid out by the end of the FY 2001. The district also implemented a monthly review of all leave balances. Managers assure that their employees do not exceed their maximum vacation accrual.
  4. Receipts for use of credit cards are not always submitted to the accounting office on a timely basis.
    Corrective action: This is now closely monitored and those that have violated this privilege have had their credit cards revoked.
  5. The payroll department has the ability to both hire new employees and process payroll.
    Corrective action:  The college began to separate these functions, assigning payroll and employee records to different employees.

In FY 00/01 (3D.18) there were three audit findings:

  1. A current equipment inventory listing was not available for review.
  2. The payroll department has the ability to both setup new employees and process payroll.
    Corrective action: These functions have been separated, with payroll a function of the business office and hiring/maintenance of employee records done by human resources.
  3. Receipts for the community education program were not promptly turned into the business office for processing and depositing.
    Corrective action: The business office and community education have worked together to account for all daily cash receipts. If receipts are not turned in on time the cashier notifies the director of business services. The director of business services then contacts the community education director to determine the problem and to develop a solution.

In FY 01/02 (3D.19) there was just one finding. A current equipment inventory listing was not available for review. The district contracted for a fixed asset inventory. In May 2001 an inventory listing was also implemented for both audio-visual and MIS equipment. In November 2002 the district had a report prepared that developed a capital asset system to comply with the requirements of GASB statement 34.

For fiscal years ending 6/30/03 (3D.20), 6/30/04 (3D.21) and 6/30/05 (3D.22) there were no findings representing reportable conditions, material weaknesses, and instances of noncompliance related to the financial statements that are required to be reported in accordance with Governmental Auditing Standards. This was also the same in regards to federal award and state award findings. There were also no reportable findings in the 6/30/04 and 6/30/05 Measure E bond audit.

The district provides timely corrections to audit exceptions and management advice based upon the availability of staff and financial resources. Usually, the district can correct the problem immediately. However, some solutions are complex. For example, when the auditors identified a "separation of duties" exception because the payroll officer was creating new employees and maintaining employee records, it did take several years before human resources was finally able to assume these functions. In the interim, the district did respond by separating the functions of payroll and employee file creation and maintenance between different employees within the business office.

With the implementation of GASB 34 in 2002, colleges had to develop a fixed asset inventory. Up to this time, most educational institutions did not make this a priority. The district is now in conformity with GASB 34 in accounting for and depreciating of fixed assets.

The vice president of administrative services assures that district accounting conforms to standard accounting practices. Once the budget is adopted for a given year, the vice president of administrative services must approve all subsequent budget transfers and revisions. These checks ensure the proper allocation of funds. All budget transfers and revisions are also submitted to the Board of Trustees for action.

Purchase orders must have the approval of an administrator, which provides accountability on the use of funds. The assigned administrator's signature on the purchase order certifies appropriate use and availability of funds. All financial records are also subject to an independent audit each year. Business office personnel respond to all audit findings in a timely manner.

EVALUATION:

The college meets this standard. The budget is monitored for compliance with standard accounting practices. The vice president of administrative services and the director of business services direct this process. Financial records are audited and the audit report is published annually. For the last several years, the auditors have had no exceptions or recommendations.

PLAN:

None


  1. Appropriate financial information is provided throughout the institution.

DESCRIPTION:

All district constituent groups are represented on the college Budget Committee and the President's Council. Students, faculty, classified, and managers report back to their constituent groups and in turn bring their concerns to the committee. A mid-year review is presented in February of each year. This is an opportunity to discover problems and resolve them as the spring semester begins. The annual financial audit is also presented to the Budget Committee, as well as the Board Budget Committee, and full Board of Trustees at an open meeting.

Appropriately detailed financial information is available to support institutional management and planning on a timely basis. The annual budget development follows a budget calendar. The budget calendar, the budget guidelines, the adopted final budget, and college Budget Committee minutes are posted on the district intranet. Committee minutes and attachments provide information on budget development, financial planning, and fiscal condition (3D.23).

Twice annually, on staff development days, all employees receive a state-of-the-budget update. Account managers have on-line access to their budget(s), encumbrances to date, and remaining funds available through secure access to the district's accounting system. New account managers receive training in using the system, and on an as-needed basis, help is provided to all account managers through administrative services.

District expenditures are listed on attachments to the board agenda. Board agendas and minutes are accessible through the district's website. Questions about district finances can be directed to college Budget Committee members, the director of business services, or the vice president of administrative services. The audit report is published annually and is reviewed by the college Budget Committee, the Board Budget Committee, the President's Cabinet, and the full Board.

EVALUATION:

The District follows the budget calendar and delivers a timely final budget. Changes to the budget follow Board Policy. Financial information is widely available throughout the institution.

As noted during the 2000 accreditation (3D.2), the current online accounting system, Reflections, is a user-unfriendly command line system. Some program managers believe that the institution is too slow in processing purchase orders, posting encumbrances, updating balances, and paying some invoices. The district is in the process of selecting new hardware and user-friendly software in its purchase of a fully integrated Enterprise Resource Planning system. With appropriate training and support these problems should be alleviated.

PLAN:

  • The Annual Financial Audit will be available on the district website. Quarterly reviews of budget versus actual expenditures will be done starting in late FY 06/07.

  1. The institution has sufficient cash flow and reserves to maintain stability, strategies for appropriate risk management, and realistic plans to meet financial emergencies and unforeseen occurrences.

DESCRIPTION:

The ending balances of unrestricted funds for the past three years are as follows:

Year Ending Actual District Reserve as a Percentage of
Expenditures and transfers out.
6/30/03 7.42%
6/30/04 8.36%
6/30/05 9.51%

The district has access to cash in the County Treasury and to Tax Revenue Anticipation Notes (TRANS) should the need arise. The district has also established a commitment to a reserve of at least $1.5 million.

About $9 million of a $21 million budget for FY 05/06 was received through the monthly state apportionment. Another $11 million was received from San Benito County and Santa Clara County for the district's share of property taxes while student enrollment fees account for about $1 million. The district has not had a cash flow problem for at least five years.

The district is self-funded through a number of Joint Powers Agreements (JPA's). The district has sufficient insurance to cover its needs for standard insurance occurrences. Like most education institutions, the district is not insured for earthquakes, other catastrophic events, or terrorist events.

The district's goal is to have a reserve of at least $1.5 million and has maintained such a reserve for the past three years. The district monitors cash flow daily and "excess funds" are invested short term by the county treasurer. Specific reserves exist for several contingencies, including self-funded insurance, facility repairs, and emergencies. In 2004, the district was able to pay off two series of revenue bonds through the passage of Measure E.

The district participates in the Northern California Community College Pool (NCCCP) JPA for worker's compensation claims and the Bay Area Community College District (BACCD) JPA for a variety of liability and property claims. In addition, the district is a member of the Retiree Health Benefit Program JPA.

The district monitors workplace safety through the shared use of a safety officer from the NCCCP. The district has developed safety programs, plans, guides, and training sessions to protect students and employees. The Health, Safety, Facilities, and Grounds Committee has lead responsibility for assessing health and safety risks and recommending corrective actions.

The district maintains and periodically updates a schedule for "repair and maintenance" projects and budgets these items based on prioritization, with health and safety being the highest priority. The district provides employee health benefits subject to negotiations and provides mandatory accident insurance to students.

EVALUATION:

The college meets this standard. The district's use of insurance and self-insurance JPA's provides adequate insurance protection and periodically reviews its claims history. The district maintains a minimal contingent reserve for self-funded property insurance claims.

The 2006/07 budget projects an unrestricted general fund reserve of $1,985,562. This reserve (8.17 percent) substantially exceeds the minimum five percent mandated by the state. The target goal is ten percent of the unrestricted general fund.

PLAN:

None


  1. The institution practices effective oversight of finances, including management of financial aid, grants, externally funded programs contractual relationships, auxiliary organizations or foundations, and institutional investments and assets.

DESCRIPTION:

Managers that are responsible for grants, financial aid, and other categorical funding are required to stay within their allocation. The director of business services is responsible for drawdown funds for the Federal Work Study Program, SEOG, PELL, TRIO, Title V and HSIAC grant from HUD.

Most managers of restricted programs monitor their expenses very closely. The director of business services will alert the manager if there is a potential problem but it is up to the managers to watch their programs on an ongoing basis. If the director of business services can not get the problem resolved with the manager then contact with the dean or vice president over that program may be necessary.

Designated administrators are responsible for their area budgets and for following proper program guidelines. Under the supervision of the vice president of administrative services and the director of business services, the business office personnel oversee the disposition of all district funds including financial aid, externally-funded programs, contractual relationships, grants and other categorical programs. The Gavilan College Educational Foundation is a separate accounting entity, but is audited as part of the annual district audit.

All funds, including grants, are reviewed for compliance with federal, state, and local laws and regulations. District funds are invested with the Santa Clara County Investment Pool. The Foundation's Board of Directors governs foundation investments.

EVALUATION:

The college meets this standard. The institution, under the supervision of the vice president of administrative services, practices effective oversight of finances. Department chairs, directors, and deans sign purchase orders and budget transfers to ensure compliance with grant or contract requirements and verify fund availability. The financial aid director oversees the disbursements for the financial aid program. For the last three years, the district auditors have reported no finding representing reportable conditions, material weaknesses, or instances of non-compliance.

PLAN:

None


  1. All financial resources, including those from auxiliary activities, fundraising efforts, and grants are used responsibly in a manner consistent with the missions and goals of the institution.

DESCRIPTION:

Special funds are reviewed on a rotating basis, one year it maybe EOPS and DRC, the next year Title 5 and admissions and records. This is in addition to our regular audit of our financial statements. Outside agencies may also audit programs. There have been no audit findings for state or federal award programs for the last five years.

Auxiliary activities support the programs and services of the district. Funds from student clubs and athletic booster clubs are kept separate from the General Fund and processed through the Associated Study Body Fund (ASB). The Gavilan College Educational Foundation is an auxiliary of the district with its own Board of Directors. Its fund-raising efforts provide scholarships and general support for students and district programs.

The cafeteria is contracted to an outside vendor; the district receives ten payments per year from this contract. The golf course is also contracted out. The district receives one supplemental payment in addition to the monthly lease payment that is a percentage of the golf course receipts. The bookstore contract with Follett Stores is based upon a percentage of sales. Payments are received on a quarterly basis.

EVALUATION:

The college meets this standard. ASB Clubs and athletic boosters are kept separate from the General Fund and processed through the ASB bank account. These funds continue to support district activities. A local CPA firm maintains the records of the Gavilan College Educational Foundation.

PLAN:

None


  1. Contractual agreements with external entities are consistent with the mission and goals of the institution, governed by institutional policies, and contain appropriate provisions to maintain the integrity of the institution.

DESCRIPTION:

Contract agreements must follow Board Policy guidelines as established under Board Policy 6340 and Administrative Procedure 6340 (3D.24). The primary Measure E contractual agreements are with the project manager, Kitchell CEM, and the architects, BFGC Architectural Services. The district has also hired Cedar Enterprises to oversee the multi million dollar Enterprise Resource Planning system project. There are also various small contracts that are under the oversight of the vice president of administrative services. All contracts specify that they can be terminated when Gavilan College's required standards of quality have not been met. All contracts are reviewed by legal counsel.

Institutional policies and procedures govern all contractual agreements with external entities. The vice president of administrative services monitors agreements to ensure that the integrity of the contracts is maintained.

EVALUATION:

The college meets this standard. The vice president of administrative services monitors and reviews all contractual agreements to ensure that institutional policies and procedures are followed. Contracts are reviewed to ensure that there are no negative impacts to the district before they are forwarded to the Board for approval. The district employs an independent construction manager to oversee all major construction projects.

PLAN:

None


  1. The institution regularly evaluates its financial management processes, and the results of the evaluation are used to improve financial management systems.

DESCRIPTION:

The district has an annual external audit. The preliminary review analyzes internal control procedures and discusses processes. Internal controls are scrutinized, as is the organization of overall fiscal operations. The vice president of administrative services periodically reviews the system and recommends improvement.

The institution reviews it processes periodically. This year the budget was revised. Instead of meeting with all the managers at once, four workshops were scheduled; one for each major division. It was felt that breaking the workshops into four smaller groups would provide a more comfortable setting to foster more interaction, participation, communication, and create a greater understanding and review of budget issues.

EVALUATION:

The college meets this standard. The vice president of administrative services and the director of business services review the annual audit report and current fiscal operations and make recommendations for improvement. The district is aware of the necessity to upgrade training and reporting so that the financial accounting system is more user-friendly and effective.

PLAN:

None

             

TABLE III D 1

Synopsis of Actual or Final Budget 2002/2003 to 2006/2007

 
             
       

Final Budget                       

             
 

Total

Total

Total Other

Total

Net Change

Ending

 

Revenues

Expenditures

Financing

Expenditures

 

Balance

     

Sources

Including

   
     

(Uses) Net

Total Other

   
       

Financing

   
             

Actual FY 02/03

           
             

     Unrestricted General Fund 10

$19,717,725

$17,297,559

$(4,237,299)

$21,534,858

$(1,817,133)

$1,666,310

             

     Total General Fund

25,168,935

23,912,657

(3,151,700)

27,064,357

(1,895,422)

2,054,454

             

     Funds 72, 34, 21, 60, 92

2,493,611

2,441,500

3,151,700

(710,200)

3,203,811

4,203,076

             

     Total Fiduciary Funds 47, 48, 66

2,045,846

2,032,682

0

2,032,682

13,164

305,949

             

     Total All Funds for Memorandum Only

29,708,392

28,386,839

0

28,386,839

1,321,553

6,563,479

             

Actual FY 03/04

           
             

     Unrestricted General Fund 10

$20,226,133

$18,347,192

$(1,833,899)

$20,181,091

$45,042

$1,711,352

             

     Total General Fund

25,552,125

25,099,995

(541,775)

25,641,770

(89,645)

1,964,809

             

     Funds 72, 34, 21, 60, 92

34,033,116

8,452,113

541,775

7,910,338

26,122,778

30,325,854

             

     Total Fiduciary Funds 47, 48, 66

2,270,660

2,243,677

0

2,243,677

26,983

332,932

             

     Total All Funds for Memorandum Only

61,855,901

35,795,785

0

35,795,785

26,060,116

32,623,595

             

Actual FY 04/05

           
             

     Unrestricted General Fund 10

$20,857,876

$19,014,000

$(1,594,965)

$20,608,965

$248,911

$1,960,264

             

     Total General Fund

26,924,349

26,194,815

(195,854)

26,390,669

533,680

2,498,489

             

     Funds 72, 34, 21, 60, 92

4,706,844

4,060,130

(304,146)

4,364,276

342,528

31,168,423

             

     Total Fiduciary Funds 47, 48, 66

2,282,414

2,230,480

0

2,230,480

51,934

384,865

             

     Total All Funds for Memorandum Only

33,913,607

32,485,424

0

32,485,424

1,428,183

34,051,778

             

Budget FY 05/06

           
             

     Unrestricted General Fund 10

$21,687,317

$20,197,893

$(1,464,126)

$21,662,019

$25,298

$1,552,679

             

     Total General Fund

26,279,562

26,629,189

(130,720)

26,759,909

(480,347)

1,861,521

             

     Funds 72, 34, 21, 60, 92

4,108,530

6,154,155

130,720

6,023,435

(1,914,905)

29,079,079

             

     Total Fiduciary Funds 47, 48, 66

1,992,354

1,981,813

0

1,981,813

10,541

411,296

             

     Total All Funds for Memorandum Only

32,380,446

34,765,157

0

34,765,157

(2,384,711)

31,351,896

             

Budget FY 06/07

           
             

     Unrestricted General Fund 10

$24,302,874

$22,869,498

$(1,433,376)

$24,302,874

$0

$1,985,562

             

     Total General Fund

29,007,048

28,986,980

(81,374)

29,068,354

(61,306)

2,130,725

             

     Funds 72, 34, 21, 60, 92

3,388,026

21,364,830

81,374

21,283,456

(17,895,430)

8,078,039

             

     Total Fiduciary Funds 47, 48, 66

1,979,638

1,965,316

0

1,965,316

14,322

326,728

             

     Total All Funds for Memorandum Only

34,374,712

52,317,126

0

52,317,126

(17,942,414)

10,535,493

TABLE III D 2

Competitive Grantsmanship at Gavilan College

Current Projects:

Title V Hispanic Serving Institutions Cooperative Grant, due March 2006

National Science Foundation Talent Expansion (STEP), due September 2006

Nursing expansion, Career Technology COCCC (SB70), due April 2006

Hispanic Institutions Assisting Communities (HUD-HSIAC). U.S. Department of Housing and Urban Development, $600,000 over three years, due June 2006

Mathematics Engineering Science Achievement (MESA) $81,500 + Matching annually

Funded Projects:

Federal TRIO Student Support Services, $1.07 million over four years (2005-2009). October 2005. (Submitted August 31, 2004)

Kaiser Permanente Foundation, Increasing Success and Supply of Qualified Nursing Students via an Online Anatomy Laboratory, $50,000, November 2004

Centers for International Trade Development, Statewide Leadership, February 2004, $152,000 annually

Grant: EdShare, Web-based curriculum for Student Financial Aid Responsibility, $120,000 over 3 years

Grant: Community Technology Center; Breaching the Digital Divide, Hispanic Institutions Assisting Communities (HUD-HSIAC), $600,000 over three years, (2002-2005); October 2002, U.S. Department of Housing and Urban Development (100 points)

Grant: Federal HSI Title V Collaborative with Hartnell College, $2.9 million over five years ($1.4 million Gavilan share), (2002-2007), August 2002

Grant: Biotechnology Regional Economic Development Center, State of California (EDNET), $800,000 over five years, June 2002, (2002-2007)

Grant: Integrating Multimedia video with Web-based Information Competency courses, Fund for Instructional Improvement, State of California, $65,000, June 2002

Grant: Wireless MobiLan Technology Laboratory for MESA (Math, Science, Engineering Achievement), $100,000, June 2001. Hewlett Packard Corporation

Grant: Federal TRIO Student Support Services, April 2001, $1.2 million over four years (2001-2005)

Last modified: February 4, 2007
Gavilan College Red Diamond 5055 Santa Teresa Boulevard Red Diamond Gilroy, CA 95020 Red Diamond (408) 848-4800