facility funding management & compliance · patty paulsen. managing director, program admin ....

APRIL 13-16, 2016

Facility Funding Management & Compliance

THESE MATERIALS HAVE BEEN PREPARED BY CALIFORNIA FINANCIAL SERVICES THEY HAVE NOT BEEN REVIEWED BY STATE CASBO FOR APPROVAL, SO THEREFORE ARE NOT AN OFFICIAL STATEMENT OF CASBO

2016 CASBO ANNUAL CONFERENCE & CALFORNIA SCHOOL BUSINESS EXPO 2

Major Components of the District’s School Funding Program

PRESENTERS

Marcus BattleAssociate Superintendent for Business ServicesEast Side Union HSD(408) [email protected]

Patty PaulsenManaging Director,Program Admin California Financial Services(916) 780-7800 [email protected]

Steve GaldVice PresidentCalifornia Financial Services(949) [email protected]

Lori IsomAssistant Superintendent, Business ServicesCentral School District(909) [email protected]

mailto:[email protected]





Major Components of the District’s School Funding Program

1. Multiple Revenue Sources

3. Extended Building Period

G.O. Bond Authorization State Eligible Matching Grants Developer Mitigation Revenues Interim Local Revenue Sources

Modernization Projects Expansion Projects New School Construction Projects Technology Projects

Multiple Project Phases Typical 8 to 15 Year Program Building

Period

COMPONENTS OF A SCHOOL FACILITIES PROGRAM

2. Multiple School Projects


CHANGE IS THE ONLY CONSTANT


PROPOSITION 39 BONDREQUIREMENTS

Citizen’s Oversight Committee Reports

Performance Audits Independent Audit Disclosures Board Project Status Updates

STATE MATCHING GRANTSREQUIREMENTS

Project Expenditure Reports Project Progress Reports Project Information Worksheets OPSC Closeout Audit

What are the Primary School Funding ProgramFunding Components Ongoing REQUIREMENTS?COMPLIANCE REQUIREMENTS

TAX EXEMPT FUNDINGREQUIREMENTS

IRS Tax Exempt Requirements SEC Continuing Disclosure Reports Notices of Significant Events Arbitrage Rebate Monitoring

FINANCING DOCUMENTREQUIREMENTS

Tax Certificate Requirements Indenture Compliance Debt Service Planning


RE

QU

IRE

ME

NT

Default under the financing documents; Potential downgrade by the rating agencies; Potential increased interest costs; Potential loss of investor tax exemption; Potential fines and penalties; and Potential inability to issue tax exempt funding programs in the

future.

Failing to Meet Tax Exempt & Reporting Compliance

Bond Requirements

Failing to Track & Planfor Bond Arbitrage Rebate

By not setting aside positive arbitrage, the District may have a potential liability against its General Fund or other local funding sources imposed by the U.S. Treasury;

Potential loss of tax exemption and related lawsuit costs; and Potential IRS consequences & penalties.

Failing to Follow State Grant Requirements

Failure to meet OPSC regulations may result in full or partial loss of grants;

Lack of filing State expenditure reports properly and on time mayresult in State grants being revoked or reduced;

Failing to comply with budgetary, expenditure and revenue restrictions results in the loss of financial hardship status, local funds or future grants.

CONSEQUENCES FOR NON-COMPLIANCE


YOUR SCHOOL FACILITIES TEAM

YOU

STAKEHOLDERS

CONSTRUCTIONTEAM

LEGALCOUNSEL

FUNDINGADVISOR

District Counsel Bond Counsel Tax Counsel

Municipal Financial Advisor State Funding Expert Developer Revenue Expert SEC Disclosure Expert

Construction Manager Program Manager Facilities Department

Governing Board Superintendent

and Cabinet Citizen's Oversight

Committee


ACTIVE MANAGEMENT CYCLE

3. IMPLEMENT

2. VALIDATE

4. EVALUATE

1. PLAN


EAST SIDE UNION HIGH SCHOOL DISTRICT SCHOOL FACILITIES PROGRAM

East Side Union High School District26,760 StudentsSan Jose, CA

Total Projects = 650 School Sites = 15 Program Term = 20+ Years

Amounts Funding Components$1,000,000,000 G.O. Bonds

$124,000,000 State Matching Grants$27,400,000 Development Revenue

$1,151,400,000 Total Program Amount


TOTAL SCHOOL FUNDING REVENUE

Central School District4,600 Students

Rancho Cucamonga, CA

Amounts Funding Components$31,000,000 G.O. Bonds (2008)35,000,000 G.O. Bonds (2014)6,859,000 State Matching Grants5,555,000 Development Revenue

$78,414,000 Total Program Amount

CENTRAL SCHOOL DISTRICT SCHOOL FACILITIES PROGRAM

Total Projects = 135 School Sites = 7 Program Term = 25+ Years


What are the Primary REPORTING and TRACKINGComponents of a Multi-Year School Funding Program?

To effectively manage yourSchool Facilities Programyou need to be able toaccurately record, track,integrate and report on allof the information thatmakes up your programincluding:

HALLMARKS OF EFFECTIVE SCHOOL FACILITIES PROGRAM MANAGEMENT

Revenues Budgets

Contracts/ Encumbrances Expenditures


THINGS TOREMEMBER

KEYS TO EFFECTIVEMANAGEMENT


Identify All Current and Future Revenue Sources

Understand Limitations and Reporting Requirements for Each Revenue Source

Create Revenue Allocation Plans That Support Your Objectives

Check Compliance Before Implementing

Adjust Plans as Changes Occur

REVENUES

Each Revenue Source Has Unique Requirements

Prop. 39 Limits the Use of G.O. Bonds to the Project List

The Use of Bond Proceeds May Have Tax Implications (i.e. Useful Life)

When in Doubt Use the Most Restrictive Revenue First


THINGS TOREMEMBER



Breakdown Budgets by OPSC Categories and SAC/Object Code Level

Review Budgets with Funding and Construction Teams to Confirm Validity

Tie Funding Source to Specific Budget Items

Create Multi-Year Project Budgets

Track and Adjust Budgets Through Close Out

BUDGETS

Many Projects are Really a Combination of Projects for the Purpose of Matching Revenues

Don’t Forget the Soft Costs and Contingencies (Project and Program)


THINGS TOREMEMBER



Track Contracts Track Purchase Orders Track Change Orders Scan and Retain All: Request for Proposals Evidence of Bid Results Contracts Notices to Proceed Approved Change Orders Notices of Completion

CONTRACTS/ENCUMBRANCES

You Will Need a System for Encumbering Funds with a Multi-Year Contract

When a Single Contract Covers Multiple Projects Split the Purchase Orders Out for Proper Reporting

When Storing Documents You Will Need a Way To Retrieve Them By Project, Vendor, Funding Sources, Etc.


THINGS TOREMEMBER



Track Expenditures Cumulatively

Track Expenditures by OPSC Categories SAC/Object Code

Track Expenditure By Contractor/Vendor/ Warrant

EXPENDITURES

If You Want to Be Able to Organize Expenditures By a Characteristic You Must Use It In Your Expenditure Tracking Methodology

A Robust Expenditure Tracking Methodology Will Make Fixed Asset Calculations Much Easier


What are the Primary School Funding ProgramFunding Components Ongoing REQUIREMENTS?

CASE IN POINTRESPONDING TO AN IRS EXAMINATION


What are the Ongoing REQUIREMENTS forEACH Tax-Exempt Funding Component?

Per the Tax Certificate under EACH Bond Series and related tax exempt funding component, a schooldistrict must implement methods to quickly and efficiently retrieve and produce the following types ofdocumentation on an ongoing basis:1. Basic Records Relating to the Bonds Bond financing documents Legal opinions Consultant contracts Closing analyses

2. Documentation Evidencing the Expenditure of Bond Proceeds Bond expenditures - By each Bond funding component issued Bond expenditure details - A cumulative history of each Bond component’s expenditures by expenditure cost

categories such as site acquisition, site development, inspection, testing, architect costs, constructionmanagement, equipment, labor compliance, interim housing, etc.

District General Ledger Reports and Fiscal Agent statements and records Request for Proposals Contracts Purchase orders Warrant documentation

TAX EXEMPT FINANCINGCOMPLIANCE REQUIREMENTS


4. Documentation Evidencing Sources of Payment and Security for BondsThis documentation must be maintained for each Bond funding component issued for the entire 30 to 40-year repayment term: Payment securities and pledge agreements Ad valorem tax requirements Legal documents

5. Documentation Pertaining to the Investment of Bond Proceeds

3. Documentation Evidencing Use of Bond Financed PropertyThe District must comply with the following Bond financed property FEDERAL compliance requirements under the 25 to 40-years term of each Bond funding component issued: Public Joint-Use Agreements Private Joint-Use Agreements Disposal or sale of property financed with Bond funds while Bonds remain outstanding Useful life expectancy – School project expenditures using Bonds by useful life expectancy i.e. technology,

equipment, landscaping, etc.

This documentation pertains to the investment of the proceeds for each Bond funding component issued:

Arbitrage rebate rate restrictions Yield reduction payments A cumulative history of G.O. Bond investment earnings under each Series issued Utilization of Investment Earnings

What are the Ongoing REQUIREMENTS forEACH Tax-Exempt Funding Component? (Cont.)

TAX EXEMPT FINANCINGCOMPLIANCE REQUIREMENTS


What are the Primary School Funding ProgramFunding Components Ongoing REQUIREMENTS?

STEPS TO TAKE WHEN YOU RECEIVEAN IRS AUDIT LETTER

1. Don’t Panic, If You Have Your System in Place You Will Be OK

2. Contact Your Bond/Tax Counsel3. Request a 60 Day Extension4. Develop a Plan of Action and

Timeline to Complete the Requests for Information

5. Assign Responsibilities for each Item on the Request for Information



REQUESTED ITEM

“Please provide a description of the financed property. Include a listingof the facilities or assets financed with bond proceeds including thedate(s) acquired or placed in service and the total cost of each asset.”

EXAMPLE IRS REQUEST ITEMSAND RESPONSE RESOURCES

PROGRAM COMPONENTBudgets and Expenditures

KEYS TO SUCCESS Strategic Revenue Allocations Budgeting by Objects Code Cumulative Expenditure Tracking by Object Code



REQUESTED ITEM

“Provide contracts, bids – if applicable, for the items listed below (list ofvendors) to verify the type of expenditure and/or if Issuer complied withthe California Contract Public Code…..”

EXAMPLE IRS REQUEST ITEMSAND RESPONSE RESOURCES

PROGRAM COMPONENTContracts/Encumbrances and Expenditures

KEYS TO SUCCESS Scan and Retain All… Cumulative Expenditure Tracking by Contract/Vendor


What are the Primary REPORTING and TRACKINGComponents of a Multi-Year School Funding Program?FINAL PIECE OF ADVICE

Don’t Go It Alone “I wish to have as my epitaph: Here lies a man who was wise enough to bring into his service men who knew more than he.” – Andrew Carnegie