001now and transition to a program now called VFA. VFA is not an acronym for anything. Um, everybody asks every time we present. It was the name of the company that created uh VFA. It's a capital planning software that is now owned by Gordian. They're a very large uh corporation that own a lot of things that relate to building management, facilities planning, facility management. So that's what VFA is. It's a capital planning software. All right. So it uses RS means which is a construction cost data database. And interestingly, VFA or excuse me, Gordian also now owns RS Means. It's used in the construction industry across the nation and probably even worldwide. And what it does is it provides dollar amounts for equipment components and also labor costs. and it's updated on an annual basis by a
002lot of people researching throughout the United States. So, we actually use data that is made specifically for Denver, Colorado that helps estimate what components or equipment would cost if we replaced it. One thing about VFA and one of the reasons we transitioned is it's way more robust than our previous software. it. We can now track our playgrounds and irrigation and landscape scoreboards. You can see all the items on there that cost Lab didn't have that now we have entered into the VFA program. It helps to have a more accurate dollar amount. So, that's that's a great thing for us. Um, one of the other differences is in cost lab we tracked most everything just by a light fixture, a doorork knob, things like that. It wasn't systembased. And what we're doing now is somewhat of
003a more systembased approach. So the whole HVAC system is tracked as a system where prior we only had say for instance rooftop units in and it didn't include the duct work and all the parts and pieces that go together for a heating and ventilation system. Some of our things are still tracked by individual but a lot by systems. That helps us again to have a more accurate number. Okay, Molly. So, what the transition means for us, um, we've been building this software for two years. We feel like it's pretty good. It's never going to be perfect, but what because there are so many new things in it and we're tracking it differently. We have a little bit of a different met methodology. our deferred maintenance cost is a lot more and our replacement value of
004our buildings is more and our deferred maintenance excuse me our FCI has gone up which means it's showing that our buildings need more work. So in 2024 we reported a 14% FCI with a renewal cost of 190 million which we is deferred maintenance and a retotal a total replacement cost of our buildings as 1.325 billion using VFA this year this is the first time we're reporting with it we have a 20% FCI a deferred maintenance of 440 million so you can see a huge difference and then a total replacement cost of 2.1 billion. So our replacement value of our facilities has gone up, has doubled and our deferred maintenance has pretty much tripled. So you can see the big difference of using a different system that has more capabilities and that is more robust and
005that has a different meth methodology. This is Bob Keeler. Just a a quick question. Is this going to impact future budgets, >> and that might not be a question for you, but >> um well, it's it's going to it's going to weave into what Molly's going to talk about now, I think, of how we're going to address some of that. So, go ahead, Molly. >> Yep. So, as you know, in board policy 2.5.2, to um there is a measure in there that says what's highlighted on the screen. The superintendent and board shall not allow the projected cost of deferred maintenance to exceed 10% of the total value of the district facility replacement costs. Well, as you can tell with our new methodology, with the factors that Margie explained, the fact that we have more items
006in the database than we once did, meaning it's a more accurate picture of our replacement costs, the fact that um just like costlab and others, it goes it compares against RS means for construction costs and that construction costs are greatly inflated year-over-year. um and that we don't see that going down anytime soon. And then that that it's the systembased method versus an individual component. So instead of what is the cost to replace an RTU, it's what is the cost to replace the HVAC system with X number of RTUs and you know all of the different components of that system. Because of those three, we do not anticipate being compliant at 10% again because our methodology is now different. And I would like to share more accurate to actual. So with that, this is just some
007historic how we have uh I've gone back to every 2.5 report and I pulled out the percentage as it relates to that highlighted statement in the policy and as you can see we are um trending up back in 2022 um and even with costlab we were three years with costlab um above uh the 10% allowance and now we are going to probably level out around that 20 in there and we'll probably um be in a different trend path for bond renewal dollars. I do want to share that um and this is important to note that one of the the number one way we address deferred maintenance. Um that is not like emergent life safety things those get addressed through cap reserve fund but for items that need planned for renewal or to replace because of
008age of life or whatever um those really are part of bond. That is how we finance that. And so we do are in a current bond as you know here is what we anticipate in the first column you see the year and the second is the annual bond deferred m maintenance investment. So we do expect our deferred maintenance to take care of like for example in 2026 $30.8 million of our deferred maintenance through our bond fund and plan. Um but at the same time everything out in our other buildings is aging right and and um they are going to new things will become deferred that weren't today. So we're also planning in that same year to take care of 30 million but we are going to raise um our annual deferred maintenance costs by 77.5
009and that's just a projection um based from our system. So as you can see the point of the slide is that as we take care of deferred maintenance aging still happens right and so we have we have this kind of balance to strike. So other districts, we've asked by the board to look at other districts. Other districts do not have this singular line of reporting 10%. They don't have any sort of percentage. I've checked um the and most of them have just a annual reporting requirement around deferred maintenance and then a recommendation that comes from that. Um the board wishes to explore they have shared with us they wish to explore changes to this. um they expressed they want to set a policy we can comply with. They don't want uh you know multi-year non-compliance
010to continue. They want to align language. Um and really what that means is if you look at the bullet underneath the bottom it says to align language using renewal or defer maintenance but not both. because it looks like um somewhere in our reporting a few years back we had chosen renewal as the word the new kind of reimagined word for deferred maintenance. I will share that we we asked LRPAC we did this presentation with them. We asked them their opinion and they they shared they would prefer deferred maintenance. It's plain, it's simple, it's understandable. Renewal can be a lot of things. So that is the path forward we're going there. And then create a policy that is not overly burdensome. Um preliminary discussions with the board included like I said choosing either renewal or deferred
011maintenance and we we plan to choose deferred maintenance per LRAX recommendation. Um we're going to move they want to move away from a percentage to more robust reporting option and that is yet to be determined. We're going to need to show them some um recommendations and then explore feasibility uh system and staff limitations if we include magnitude of risk. What that means is that they were thinking like it might be nice for our deferred maintenance to not be a lump sum but maybe to be in categories of priority and or risk. Um we are currently exploring if that is possible going back to the not uh creating a policy that will be overly burdensome. We want to be able to use the system we implemented um and we want to make sure this is a
012function it can actually um do. So just FYI on that. So now questions to you. We really are just here that given this background, do you have any suggestions for the board about what to do with this highlighted statement that we see as through the changes we've explained today um a potential for non-compliance in future years if we don't change it to something that more aligns with our methodology? >> I'll open it up. >> Hey Molly, thank you so much for all of this information. and it I really appreciate this comparison point as as Margie knows I've been on this while and been watching this. So, um, couple of questions. Um, I didn't quite glean using the new system with VFA and all of the new more robust and accurate reporting costs. What are we
013at right now on the deferred maintenance? Like if we were just straight percentage and I know that like today we have this crazy thing but deferred maintenance I just wanted to see where we are at. Thank you. 20%. >> So I just flip back in this deck to the 20% of plant replacement value. So our deferred maintenance is 440 million out of a total replacement cost of 2.1 billion. >> And that's the 20%. So you're essent it's the double part. Okay. Got it. Um, I do I do think that exploring some different reporting methodologies. I mean, I liked the idea of the categories, right? Because there's going to be some things that are significantly more important than, you know, others, but at the same time, there's there's some questions about how you would categorize what
014is important. So, I I can see the the challenge there. Um I I do think it would I would love to see some of the different options that you guys suggest, but I I do think that um it was interesting to see that there were different counties or different districts that did not have this policy. Um, if you were to based on the condition of the buildings, you guys know this better than we do, if you were to put a percentage on it, I mean, do you have any thoughts on what the percentage should be to be more accurate and reflective? I mean, maybe 10% is just I mean, it's just too low and not accurate now that you have the more accurate reporting. Sorry, I'll quit rambling. >> No. Uh, we appreciate that. And
015yes, that has been discussed a lot and actually um our classified association, our maintenance team, uh they were interested in just kind of like, well, can we just change it to a more realistic percentage because then it helps keep the funding in buildings to help with um these deferred maintenance items and not always having to to wait for a bond. I will tell you that the board is just not wanting an arbitrary number. So, it may take some time to figure out where we level off to and what might be appropriate and based on how we do it. It's hard to compare that number. There's not like an industry number because everybody does this methodology different with different softwares. They include different items. They exclude different items. Like Jeffco for example with their 140 buildings
016or whatever they have, they're all on spreadsheets and they do not have all of the items in there for maintenance calculation that we do. Um so it's hard to compare apples to apples. Margie, any feedback on that that I didn't share? >> No, I agree with you. I um and just so people know, we we know of three other two other districts in Colorado that use the same system and the state of Colorado uses it in the capital construction division to track all of the school districts in the state for their facility condition. So, we know it's a pretty good system, but but it's hard to find a comparison kind of metric that isn't super subjective because it could be all over the board depending on what each district thinks. So, it we're we're thinking
017about it. I'm working with my team to look at how we could provide some categories and priorities through the system. So, just know that we are talking a lot about it and and thinking through it. >> So, I I have a a couple of questions. One, with the uh upcoming tear down and rebuild of Thornton High School, will that have a significant impact on the deferred maintenance? So that's one and I guess the other is just thinking out loud, you know, rather than a percentage. I really appreciate the idea of bucketing these things in terms of criticality and maybe instead of a percentage, it's like this is endangering the life, the safety of the students. No, we're not going to have that. That's going to be covered. And you just work down from there. And
018that's how you present. It's like, are we addressing safety issues? Are we addressing then then just move down the list rather than a flat percentage. As a accountant, I like that, but I can understand where that is not feasible and you don't want to have a number that's not attainable. Uh, but I think you can use metrics outside of a percentage that ensure that the deferred maintenance is actively being worked on and those that are most critical are being addressed. >> I can address the Oh, sorry. I was just going to address the um deferred maintenance for Thornton High. >> Please do. >> Currently, it's 39 million. So that number will go away and some of Bowman will go away as well because we're demoing part of it. So just FYI on that piece. Go
019ahead. >> That's helpful. Um Margie, thank you. And Robert, I'm I really appreciate your insight there and actually gave me just kind of a thought. What if you kind of do something similar to the IT department with school uptime um capabilities? I mean, I know that it's not, you know, maybe not quite a great metric simply because there's other parts and pieces to that, but I mean, maybe student impact time or something to that maybe. I don't know. >> I like that. I like that. >> Yeah. And we have that as part of 2.5. I don't have that policy in front of me, but I it's one about um making sure that our buildings are open for 99% of the instructional time or above. Um so we do have something similar maybe that you're on
020to something there. I did take that note so we can see how those two could interplay. >> Yep. But I I I really think Robert, you're on to like the you're you're spot on, sir. Love it. >> Thank you. >> I have Excuse me. >> You can call me Bob. I just put Robert on there for whatever reason. So, >> I'll remember that. >> I had a quick question. Um, going back to when you said that there the new system tracks by system. Um, and you mentioned things like the air ducts. Were we not tracking air ducts and stuff? So, is that something new from before or I'm I'm just curious as to how the the SIS track move to the system could have bumped it up as much if we were everything was itemized
021out separately and now it's kind of combined together. Maybe I'm just not understanding the way >> that's that's a great question and we so two really a really important thing about these softwares is they're not an inventory, right? So there was with the resources we have and the staffing we have, there was no way for us to put every single component in. So we didn't have duct work or other little things here and there that are considered a full part of a system. The way that VFA is built is it considers the entire system that our staff would have not been able to put parts and pieces together. It's kind of complicated. So there were things that weren't in there. Um that now because it's systembased they are. And I do want to mention that
022we're testing right now. How are we going to change the data in VFA after a bond project? So we're doing a mock takeoff and entry of data because let's say on a school we we replace three rooftop units and that's all that needs replaced. So how you can't show the system is completely updated, right? So it's there's interesting decisions we have to make about how do we now show that we've taken care of some of it, but some of the system is still considered deferred. So it's pretty complex. But to I think it was Kristen, right, that was talking. Um, we did not have everything in and now some things are still by part like by a thing if you will like doors versus systems. The big things that are in by systems are HVAC
023uh fire alarm is a more robust um plumbing system. So it varies between not every single thing is in as a system. So I hope that >> so in so in general there are some things that are being included now that were not being included before. Okay. >> Yes. And a lot site related. There weren't site things in costlab. We couldn't even put them in. >> Gotcha. Thank you. >> You're welcome. >> Marky another question. And I was excited to see that it integrates with the construction data and such cuz then you're kind of getting like near real time updates and plus two parts and construction you you know what's going on. Um, are you are you just sheer morbid curiosity, does this track to like a specific model like you would know what that
024model would take for, you know, a fire alarm system or something like that. Just if it's that detailed, curious. >> Oh, you mean like if equipment has a new like like new models of equipment? Is that what you're asking? >> No. Um, essentially like for example, if you um, and I'm going to do this only because it's what I know, you have a fire alarm system that's a silent night system and you like you know what the parts that go into that silent night system as opposed to just in general fire alarm system parts. >> Oh no, it does not track by systems. It is by a specific manufacturer. It is a fire alarm system. >> Got it. Thank you. Did that answer your question? >> Yep. >> Okay. >> Any other feedback before we
025turn the meeting back to you guys? We appreciate your time and the feedback and I will share the feedback thus far that you've given is aligned with LRPAC aligned with the board. So I the next steps that would we would have is that we have created a subgroup that um met once already to start looking into how to create some recommendations and then we'll be taking those back to LRPAC um to determine what gets presented to the board. >> Yeah, I I'll throw one thing out there. When I worked at the state auditor's office, we did a or I did um a piece of one of the performance audits on the state fair um state fair authority and their building maintenance. Um and I I tried to pull it up. I didn't find it. And
026the criteria we used was um based on state architect standards for building condition. And then you've get you get poor, less than poor, good, all of that stuff. I I don't know if that might be something, but when you were talking about it, it made me think of that and figured I'd throw that out there. >> Great. Thank you. >> And Molly, I recognize we didn't answer. It's Rob, right? Sorry. I Is it Rob or some Robert? Rob. >> Bob. Bob. >> Bob. Sorry, I missed what you said. I know you asked about a budget question. I don't know that we can answer but it that's a large so that would be like an Aaron and Nina and because that's a whole general fund question. >> Yeah. >> Uh no idea >> bond bond planning
027is a whole another thing. So it would impact how we plan a bond but it taking more money from general fund is way out of my wheelhouse without a doubt. Well, thank you very much all for letting Margie and I come. Uh, thanks for your feedback and uh, we'll keep Aaron and Gina in the loop. >> Molly, thank you so much. And, uh, great questions all. And now we'll we'll go right into the the next piece where we'll talk about internal monitoring for 2.4. And I have about oh 20 minutes before Phil will come on. So, this is going to be Aaron speed talking, so this should be fun. Um, and I know that we have we have discussed some of these pieces before, and I think that uh that will allow us to move
028somewhat um somewhat easily through this particular presentation. But please, as always, uh, stop me if you have questions. As part of internal monitoring 2.4, the superintendent is required to produce a a report on a quarterly basis to the board on the financial conditions and activities of the district. That is what in 2.4 is overall. Then that feeds into your monitoring report, your overall monitoring report to the board at the end of the year. And this of course is always on on I can't call it board docs anymore. Um, if you now go to the board's uh website, you will see that in the board's website, it now has agendas and and meeting minutes directly on the board's website. This is different. It's a different change. Uh, used to be board docs. Uh, we are now
029just straight in. So going under our district under leadership and then under leadership the board of education and then off to the left side you'll see agenda and minute meetings minutes meeting minutes. Uh so then you'll see the agendas and and work stay sessions uh for each of our board meetings kind of specifically to internal monitoring report 2.4. We do it first with uh of course with just a a PowerPoint presentation. You can see this PowerPoint presentation even with the cover is just 11 pages where we set the we we set the definition for them again of 2.4. We set um the then major components and these these major components we come straight out of come straight out of the policy and what Gina and I have done is is to make sure that that
030we're covering in in a highlight area sort of area for the board and James you'll certainly recognize a lot of these pieces from your time uh OS. So the first piece is just monitoring of the fund balance and the reserves. There's very specific policies in 2.4 that deal with that. Um both reserves for restricted fund balance and specific purposes. uh certain uh risks and then um and then the board's overall um unassigned fund balance which is no less than 4% and no more than 8% of general fund revenues and we do that graphically. And we just do it show it graphically every year to show that you know through the ended audit through the last prior years we're showing that trend to show that we are in compliance and then of course as we look
031uh towards where we would have been as of September 30th we're showing that as well. The second piece is then just monitoring our cash, our investments and liquidity. And it has exactly what it says it's talking about and it focuses I think m mostly on liquidity. The investment policy is set in statute and so we know that we're in compliance with that and you heard a presentation last time on our investment policy. In here you can tell that our cash positions through the first quarter that this line here the average monthly operating expenditures we're sufficiently above so that our operating cash is sufficient to cover 3 months uh or that average monthly operating expenditures and so we're good there. The next piece is just accounts payable and receivable and you hear very specific presentations on
032accounts payable and receivable throughout the year and that we show compliance. You also see different pieces around the bonds and tracking the bond spending and the MLO spending as well as and we'll come to this in our work study session today where we'll talk about monitoring audit compliance and internal controls. The audit was presented to the board last night and then uh we'll talk about um that audit and a little bit more in our December meeting when our auditor from Clifton Larson Allen will give a presentation to you. You've already heard a presentation from Clifton Larson Allen. Now this will be the culmination of that audit. And then we then turn uh to the quarterly financials. When we look at the overall board presentation for internal monitoring, this gets a very specific into the components
033of 2.4 that the board wants to see on a month on a quarterly basis. Again, we summarize these um we summarize these uh in the PowerPoint presentation. But then uh we go into a little bit more detail and I can never figure out the right piece where we can see enough but not have it be too little. Uh here again uh just that we know we have Taber reserves and our contract reserves. We do show um the district's level of Taber and contract reserves as well as each of our charter schools. And the reason we do that is we believe and I think uh the state also has this belief that should any of our charter schools not have a tab reserve that we would be responsible for ensuring that the district then had a
034tab reserve sufficient to cover the charter schools tab reserve. So it's a it's an inter interesting interpretation but certainly we know that each of our four charters have a Taber reserve. We feel as if or they feel as if and their auditors feel their individual auditors feel that they are in compliance with Taber reserve policy. The next piece is then the flip side of this which is as we already talked about which is the unassigned reserve for the district and we were showing a 4.9% uh reserves 4.9% of general fund revenue and that I was sufficient to be within policy no less than four and no more than 8% of of general fund revenue. What we do share with the board every time is that um the GFOA, the Government Financial Officers Association does say
035what their fund balance policy has been and it has changed a lot over the years. Even though the last 15 years, I believe that the best practice from GFO has changed a couple of times. They used to just do this flat out um two months of regular operating expenses which in other words is 16.67%. And the board has chosen a policy of 4 to 8% no less than four no more than 8. And if it were 2 months of regular operating revenues then that's closer to 16.67%. So you can see that that's a little bit different. GFOA then came and and provided some nuance to that policy and they said that as long as the district or a government is better in a better pos position to predict contingencies and the revenues and expenditures are
036more diversified and less subject to volatility. And if you think about our general fund, it is somewhat uh even though uh we have we do have some level of being able to predict contingencies. For example, declining enrollment and where we know that there was volatility was related to mostly to grants and so those grants were covered in a different fund, not the general fund. And I don't remember, I don't know what you you did, Bob, if you remember, but when we had the floods and some of that money came from the state and then some of it came from FEMA, that when you have the 100red-year flood, certainly that could cause some level of volatility on those expenditures. But I do believe that in most instances, especially for school districts, I'm not sure for the
037university, but for the school districts, FEMA did a pretty quick job uh in in paying back, especially the front range districts. I will say we had perhaps a different experience at uh at Aurora. And I know that the state of Colorado I I'd have to look back at their latest piece, but they were still owed money from FEMA from the floods I think at least up until 2 years ago. And and I'm not sure FEMA has paid yet. Um but that hasn't happened really for the district. And so I could argue that uh having that level of reserve is sufficient given um less uh less volatility in our revenue. Uh I think the volatility of revenue came into play certainly for the district in starting in 2008 9 10 and 11 with the introduction of
038the budget stabilization factor. Once it was in, so this is a strange way of putting this. Once it was announced, it all of a sudden became predictable. Hoping that makes sense. So then it became less volatile because now we already knew it. So it was volatile for one year, but then we knew uh and we knew what to do with it. The cash piece is really u what we've already talked about and shown. and um then do not expend more operating funds than have been received. And here I just want to do take a little bit of time on this because in this case I would say this is a little bit more uh difficult uh because and it's it's sort of in the oopsy daisy go the wrong way I guess. Yeah. Um this
039this is a little bit different because you can see that in the net changes we are going to show from time to time negative balances and and that means that that we've spent more and then that there has been revenue in and most of the time that is in um that's just straight because of cash flows and timing of especially reimbursements from the state related to food service and related uh sometimes s related to grants, but we did receive some additional grant uh reimbursements. So, that went pretty well. We'll talk more as we go through about accounts receivable and how we uh we look at accounts receivable. Where we have accounts receivable now is in our base operations and student fees. We no longer have um a se a really significant balance at all in
040nutrition because we have um healthy free meals for all where again we're not charging uh any student balances. Okay. Um, and then just sort of the rest of these, like I said, we'll go through these and these are all coming up on our schedule, but these happen to do with bond spending. So, we've authorized uh the voters have authorized the uh issuance of 830 million. We have issued 171 and just over 171 a.5 million of bonds uh at that par amount with premium and costs in our interest through no uh September was $5.2 million. We do distribute um bond proceeds to our charter schools and that had already been done in March but we keep that at the forefront so everyone does realize that we do share on a per pupil basis bond proceeds with
041our charter schools and uh we'll come back to this more but we do present to them on a quarterly basis what the original budget was what has been um expent to date as well as our any encumbered balances is and you'll see that, you know, over the next um summer, we'll be spending quite a bit of that initial trunch and we expect to issue again in April of 2027. So, I'm looking forward to that because that is a significant amount of work for me. But I also get to work with my friends um at some law firms and I get to go back into my legal care my legal career and put my legal hat back on and and um Gina knows I could just get to geek out over that uh portion of my
042job. Uh which um you know, I always look forward to those days in a very weird sort of way. But we also get to work with SNP and Moody's and we've been having um very good success at the district. Um I think Gina and I um Pat's on our own backs really received some really good feedback from S&P and Moody's this last time around and and so we were very um uh we were very uh happy about about that and and their opinion overall of the district. We do tell the board of course that um and this is this is prior to the last election but um we have set mills these first 17.7 you know million if in FY19 you know we had 17.7 million it would be 20 37.9 million by 2029 so
043we've lost a lot of buying power because we have a lot of set mills. The 2018 mill is then what allowed us to grow a portion of our mill in this section here by uh inflation. So the portion of that mill has remained the same. The new mill is what's called a flat mill and it would only grow if we had growth in assess valuation. So without growth in assessed valuation um the collections would in theory go down. If we had to decrease in assessed valuation and net assessed valuation then de then revenue on two on the latest on the 20 November 2025 uh mill would actually go down if property values go up. If net assessed valuations go up, then with a flat mill, then the district's collections would be higher. Um, and now
044I'm going to just kind of fly through some of the rest of these. Um, there's just kind of this overall shall um all district policies written in the negative. So, I always have to remember that the superintendent shall not achieve compliance. Um yeah, I I don't know. It's very difficult to read these in the negative. The superintendent uh shall comply with the provisions of this policy to ensure that he's not um damaged uh the future capacity of the district. and and that is what we talked about a little bit earlier in my presentation that um you know we know that we have declining enrollment and we're not going to overbudget in any year uh to put future years at risk. I think Gina and I are up to a seven-year forecast right now, seven or
045eightyear forecast, which um as many of you know, every year we go out into a forecast. Um our our ability to be precise goes down just a little bit. Um but we do feel as if we have some fairly good uh uh assumptions in those forecasts so we can show compliance. the superintendent cannot and and and u Phil will cover this in his as well but the superintendent cannot decide to borrow on his own all borrowing must go through the board and in fact I will tell you that no one will lend us money unless they talk to the board that it's just not going to happen uh we can't the superintendent Phil himself me Gina we just can't call up somebody and start issuing bonds um without the approval of the board and in
046fact it just I don't I don't know how it would happen. Uh and then um again monetary or any kind to join or support litigation and Phil will talk about this at a different meeting but we you know we're not going to be committing district resources to any sort of litigation without um board knowledge. Um we'll talk in our off session about the competitive process to select an auditor because we are now up of we are now going to release probably today an RFP for selection of auditors and then uh we must then obviously provide a budget to pay set auditors and we will not fail to do either one of post. And uh we talked last time about the prudent of estimates investor standard and the overall district um policy and state law about
047u limitations on our um investments. And then I do believe I'm really close to the end. Uh public image mil levy overrides which we'll talk about uh more in a in a future piece. So overall compliance with 2.4 and uh as we've discussed previously we do have uh you know our quarterly financial report uh by all of our funds that show a quartertoate budget actual percent. And as you all know, we're only at this point 3 months in. So very difficult to show any sort of of variance uh with any new information that we might have. So with that and we'll come back uh to questions, but I do want to yield to to Phil. And so, um, Phil Spair is here as our general counsel and Phil is here to talk about the superintendent
048compensation. And, um, I will flip off my share screen. Um, or I think I will, that's on a different screen to stop sharing. There we go. Uh, welcome, Phil. Again, Phil's uh Phil Spar is our general counsel and um I am uh I don't know. I I won't tear up Phil. Uh this will be I I promise I'll feel I'll tear up a little later. Um Phil has decided to abandon me and uh has uh decided to to join uh other ventures uh as he's moving into the retirement world and uh he he is uh retiring of the district at the end of next month. So December 31st as as the worst sort of uh happy new year celebration that I could ever have. Um, but I will turn this over uh to Phil to
049talk about uh superintendent uh compensation. Thanks, Phil. Thanks for being here. >> I don't know if I should thank you or not for that intro, uh, Erin, but thank you anyway. So, my name is Phil Spar. I've been general counsel here for 11 years. Prior to that, I was in private practice representing school districts in Pennsylvania for 22 years. Um, and I am retiring from full-time in-person employment uh at the end of December, starting my own law firm, hanging out with my granddaughter, and going to go fishing on weekdays. So, um, I was asked to present to fact this morning about board policy 2.6, employment, compensation, and benefits. And there's a section in there that says that the superintendent cannot change his own compensation. And my uh analysis of this is that the superintendent has
050not changed his own compensation during the time frame that you're looking at or any other time while I've been here. Um, in order to check that, I check with uh many district leaders to ask them in general, are they aware of any ongoing policy violations? And the answer has been no. And then I checked specifically with Heather Anderson, the district's payroll manager, and ask about the superintendent's compensation. I did prepare a memo that I believe has been distributed um kind of a short and sweet memo because I don't have a lot to report. Um I did find it noteworthy that both our superintendent Gdowski and our deputy superintendent Bo Fbert declined to receive uh a pay increase for the school year that they were entitled to. But during the difficult budget discussions of spring of
0512025, they both decided to forego those increases. Um, so that's my report. Um, and I'd be happy to answer any questions you may have. I will note that the current superintendent contract that we're working under was uh approved by the board in May of 2023 and is a three-year contract. So, we're two and a half years into a three-year contract, and I would suspect there'll be discussions in the coming months uh about an extension of that contract is my forecast. >> Any follow-ups um for Phil on the superintendent's compensation? >> Not for me. Very clear. And I appreciate the superintendent and the other not taking a increase even though they more than deserved it. >> I thought that was very unusual and noble of them and a indication of the strong leadership we have here.
052>> I agree. What Jane and I would also add is that we have really a lot of internal controls around our ERP system specifically Peopleoft which is how we pay everyone whether we pay them even if we decided to pay someone through accounts payable if they were not an employee um but through the people's thought system and how we pay people the number of people who need to be involved in the checks imbalances of adjusting pay. There are a substantial number of people um not the last of which is Gina and myself as well as our payroll managers Phil mentioned but also uh multiple people on our um on our HR team um related to payroll in order to get pay increases or changes into the system as well as uh you know all the
053way uh from my side through cash a cash approval and a payroll approval. And um those would be those would be all of our internal control checks. All part of also all part of checks that get happen during our annual audit provision where they do check and do sample um payments to make sure for example that my pay would match um what uh what is in my contract and that that pay has not varied from that. Um and and those are easy as well for our external auditor. And then should it be a request through accounts payable again there are are a sufficient number of internal controls that would not allow for that payment without it going through again at least three or four uh checks before um internal control checks before it it was
054ever paid. Thank you, Phil. Thanks so much uh for joining us today and um and we'll now move on to our next piece. >> Thank you everyone for your attention today and for your service on FAC. I appreciate you. >> Congratulations on your retirement. >> It's great. >> Y enjoy it. >> All right. >> Congratulations. Okay. So, uh now I just want to turn briefly to a presentation that I was asked uh for. I I think it's a a good presentation u specifically around uh centering on and I I did load it out there uh for folks uh to see. I know uh Mike was not able to join us today, but I do want to just briefly cover it. And I I think Kelly uh and James, you've already seen it, so I don't
055want to I don't want to to cover it in so much detail. Uh Bob, I know you also have a significant amount of experience in this area, but please do uh stop me if there's anything you want me to cover in in more detail specifically as it relates to um the district funds. Uh we keep track of funds. We talk a lot about the general fund. We talk a lot about cap reserve. We talk a lot about the bonds. Uh specifically there are two pieces of bond funds. There is bond redemption fund which is where property taxes go to repay the principle and interest on the bonds that we issue. That is the bond redemption fund. And then there is the building fund. It's a capital reserve fund, capital projects fund. Uh that capital projects
056fund related to the building fund is where the bond proceeds go. That is for the spending of the bond projects. That allows us if you think about a fund as an individual, we won't call it an individual company, but it is an individual uh entity that allows for its own set of books, which means it has its own identifiable assets, its own identifiable liabilities, its own identifiable revenue expenditures, and then fund balance. uh the board then must adopt a budget for each fund. So the more funds we have um fund in fund accounting the more funds we have the more budgets for each of those funds would need to be um need to be established for appropriations from the board. We talk about um the four main buckets of funds. the first and I'll go
057backwards we would say capital reserve capital projects funds we have two capital projects funds cap reserve and the building fund then we have the bond redemption fund which is our debt service fund on the uh general obligation bonds of the district then we have something that are called special revenue funds special revenue funds u I'm going to try to use the word special. In the definition of special revenue funds, it is revenue received for a special or a specific purpose. And the easiest one to think about here is nutrition. Nutrition is its own fund. In fact, by law, by federal law, it's required to be its own fund if in order to participate in the national school lunch program within the fund. Then it means any money that comes into that fund must be spent
058on the very specific purposes for which it was collected. We could think of our before and after school enrichment program. Same concept. The money that we receive into base is then limited to the purposes of base. In other words, without very specific board authority and it's not it's we would talk about areas where this would be permissible and areas where it would not be permissible. They could not then take these funds out of the special revenue fund and move it to the general fund. The general fund has the best definition. The general fund's definition is if it isn't a capital reserve fund, if it isn't a debt service fund, if it is not a special revenue fund, then it must be a general fund. So, it doesn't define it positively. It defines it in the
059negative. It just says if it's not any of these other funds, it must be uh the general fund. As I talked about we have very now I would say very restricted funds. These funds are restricted because of a constitutional limitation or a contractual limitation. The bond redemption debt service fund is a both a voter approved restriction on the how those resources can be used namely the principal and interest repayment on the debt of the district. It cannot be used for any other purpose. Those taxes come in, they are held by um by a separate uh trustee as required by law. That trustee then uh releases the payments for the principal and interest on the bonds. There is no other way, no other use for that. Those monies, the building funds again by contract with our
060bond holders as well as through the election. The proceeds from the issuance of the debt. The purpose for those expenditures are limited. They're limited both as required in the official statement uh for the issuance of the bonds as well as limited to the items specified in the election in the ballot question. Grants funds that are federal or state grants come with restrictions. Um if you do not want to follow those restrictions, don't accept the funds. There's nothing in the law that requires us to accept title one funds. If we do accept title one funds, we are restricted in the be ability to use those funds. Other special revenue funds, these are the ones we talked about. People activity, food service base, athletics. If we receive money for athletics, then we spend it on athletics. We
061don't take any of these funds in order to pay for um educational uh programming within the classroom or teacher salaries, those types of things. That is then the general fund. That is where by far the most significant amount of resources live is in the general fund and that is of those overall operations. Specifically, we also want to talk about fund balance. Fund balance is if you took all the revenue over the last 75 years and you subtracted out all the expenditures for the last 75 years whatever is left would be called fund balance. So in fund balance there are specific categories. Non-spendable essentially means we can't spend it again. It just lives in non-cash assets, specifically inventory and any prepaides. We talked about restricted revenue. Any unspent restricted revenue becomes restricted fund balance. Then management
062also makes assignments of fund balance and assignments could happen in a special revenue fund or cap capital reserve capital projects fund that is assigned and limited for the purposes of a fund. We also do assign fund balances in fund 10 or in the general funds. The most significant of that um there are uh there are three. One is our risk reserve fund balance of $5 million. We also set aside a reserve for overtime our instructional uh materials replacement and overtime our IT refresh device refresh. And why do we do that? because those expenditures are never constant. In other words, we don't just adopt a curriculum every year. If we did, um if or because we don't do that, we then set aside a reserve. If we did not set aside a reserve, what that would
063look like is we would all of the sudden need to find $8 million in order to pay for a curriculum adoption. Well, that would be very difficult to trim the budget for a single year in order to pay for a one-time expense. We do not believe that that's fiscally responsible of the district. And by having assigned fund balances, it allows us to provide for those known one-time future expenses. or in the term of risk, we are able to put aside an insurance reserve. We never know when certain things are going to happen, but if they did happen and it would require uh us to meet a deductible on our premium policy, in order to do that, we would have to make potentially mid-year reductions somewhere or we can rely on an assigned fund balance. Again,
064we we believe Gina and I believe that this is the most fiscally responsible approach that allows us flexibility for both known future transactions. For example, um the curriculum replacement and IT refresh as well as unknowns but predictable. I mean, we know at some point we may need a higher uh percentage of our expenses to be around uh around insurance risk. So why wouldn't we prudently set aside a fund balance for that? The restricted purpose of the revenues, if it's unspent, the restrictions do not go away. The restrictions stay. We are required to have a Taber reserve and that is 3% of fiscal year spending which we believe means revenue which is hilarious. Um and then multi-year obligations uh could be debt service capital projects and food service as we talked about food service is federal
065funds. If we don't spend it uh those are restricted monies. If we do not spend it becomes restricted fund balance. We talked about our assignments uh around insurance reserve it refresh and and instructional resources refresh and then the limit of policy of unassigned would is no less than 4% and no more than 8% of general fund resources. then track our revenue, our uh expenses by other components which allow us to break down a fund and budget uh in more uh greater granular detail. Uh that could be by department and location. And then within a department and location, it could be by program. So um you know a good program would be a program it just so happens to be 2500 uh that is finance or financial services and so as we set up a budget
066for this location um the ESC around um financial services it would be uh Gina's department as as the owner of the budget this location and the program of financial services. So really allows that level of granular detail and then what did we spend it on? Did we spend it on um salaries and benefits? Did we spend it on supplies? Did we send it on purchase services? Uh like the audit and then if it's and then it's further broken down if it's salaries and benefits. What is the specific job class to which it's in? So you can see our daily life. Uh I think if you use Quicken or Quickbooks in your life or any other sort of um software, you know that there's a lot of emphasis right here on an object, which most people
067would just call what's the account, right? Um and so uh that's uh kind of um uh for us that is just oopsie Daisy. I guess I'm at the end. Uh that is just called the object. So, I wanted to stop there, see if there are any questions, and we can move into um the other portion of our of our work, and we'll end the the public side of this meeting. But before we do that, are there uh any questions on anything I've I've quickly tried to quickly cover? >> Uh Erin, I have I have a couple. Uh one on the legal reserve is that number based on what is that number based on I guess basic question >> both historical >> Yep. Both historical trends as well as um based on a portion of the
068district's deductible. >> Okay. All right. And then a comment on the upcoming um RFP for audit services. Uh I think I've asked before but I'm sorry I've forgotten the answer. Is CLA is allowed to rebid? >> So we'll cover that in uh after we end this portion of the meeting. >> Okay. Ellie, uh, James, Kristen, any questions that you might have? And if if not, we can end this this portion of the meeting. >> No, I don't have any questions. >> None for me. >> Um, so good. There will be a fund accounting, Aaron. Very good. >> Yeah. >> Not fund accounting, not FUN accounting, but FUND accounting. >> Oh, yes. It's always just a fund. Never fun. Yep. This is a lemonade stand. >> Sorry, Aaron. Uh, Camdom, can you stop streaming and recording?
069Sorry, Erin.