College board approves tentative budget
California’s perennial budget drama left Feather River Community College District trustees approving a tentative budget for the 2011-12 fiscal year that incorporates a 15 percent reduction.
|Trustees approve drastically reduced tentative budget, react to cost overruns and accounting errors|
The board met Thursday, June 16, and Jim Scoubes, director of Business Services and chief financial officer at Feather River College, outlined the essential elements of general fund reduction for the trustees.
Planning for the budget began last August and involved not only the budget committee, but also the strategic planning committee and an ad hoc advisory committee.
The ad hoc committee, composed of Human Resources Director Jamie Cannon; Dr. Lisa Kelly, interim dean of Student Services and Enrollment Management; history professor Dr. Tom Heaney; and incoming Interim Dean of Instruction and Chief Instructional Officer Dr. Derek Lerch, was charged with developing a base budget.
Scoubes reported the committee identified $557,729 in corrections, reductions in force and cuts to operational expenditures, less than half of the amount needed to achieve a general fund reduction of $1,667,417, or 15 percent.
Ultimately a combination of operational savings, associate faculty reductions, across-the-board salary cuts, and management and classified layoffs led to the tentative budget Scoubes presented to trustees for approval at their June 16 board meeting. (See accompanying sidebar for details of the individual item savings.)
Pending a signed state budget, Scoubes anticipates unrestricted general fund revenues of $11,419,784 and restricted general fund revenues of $2,478,871, for total anticipated revenue of $13,898,655 in 2011-12, down from $14,560,870 in 2010-11.
Trustees approved the tentative budget unanimously.
Scoubes was again before the board later in the meeting, requesting approval to allocate $700,000 from Secure Rural Schools (Forest Reserves) funds to cover estimated cost overruns on learning resource center (LRC) construction.
According to material Scoubes submitted to the trustees, as of July 1, 2010, the fund balance stood at $1.22 million and the district received an additional $296,684 during the 2011-12 fiscal year, totaling just over $1.5 million.
Of that amount, Scoubes proposes to pay $71,081 in current year expenses unrelated to the learning center project and $45,000 in LRC contactor settlement.
Scoubes also anticipates an additional $484,351 in improvements and repairs at the residence halls, computer upgrades and other capital improvements.
He requested an additional set-aside of $300,000, bringing total proposed Secure Rural Schools (SRS) earmarks to $900,432.
Scoubes’ oral presentation to the board centered on $700,000 in estimated cost overruns for the LRC project. He told the board that in the course of reviewing project costs he discovered an accounting error made in November 2010.
At that time, the state alerted the college that it was releasing funds for the construction project. When the construction account was credited with the disbursement, there was an unexplained failure to adjust for expenses already accrued against those funds. The resulting total gave the impression that there was more money than there really was — by about $308,000 — Scoubes’ best estimate as of the morning of the board meeting.
Stunned silence followed that announcement as trustees digested the information.
Board president Bill Elliott asked if that could be paid out of the contingency set-aside.
Adding insult to injury, Scoubes told the board the contingency fund had already been spent paying for unanticipated soil analysis and the required design changes.
In the planning phases of the construction project, the college commissioned a soils report to provide the architect and engineer with information needed to design and construct the building’s foundation.
As it turned out, bedrock was not where it was expected to be. Another soil analysis by a different expert was prepared and the project re-engineered to accommodate new conditions.
Instead of the $276,000 budgeted for the original soils analysis, the actual cost was $402,700.
Re-engineering costs and the resulting project delays, as well as the inevitable change orders customary in any large construction project, have brought cost overruns to about $307,000, with work still to be completed.
Elliott asked, “How much do we have to pay today?”
Scoubes could only provide an estimate, which kept growing as Facilities Director Nick Boyd entered the discussion to explain about continuing work, anticipated final costs and payment of the remaining and customary 10 percent retention, $336,382.
As Scoubes became increasingly silent, trustees turned to Boyd and college president Ron Taylor to explain.
A clearly irritated Leah West, Area I trustee, asked, “Where’s the control? I mean, November … hello?” Scoubes made no response.
Elliott asked if the district had recourse with the original soils engineer. Boyd had discussed the matter with the district’s construction attorney, whose response was that the amount the engineer would be liable for, $125,176 — the difference between his bid and the actual cost — did not make legal action cost effective, even if the district had a stronger case.
Elliott appeared astonished and dismayed by the attorney’s position.
Trustees eventually tabled the proposed allocation of SRS funds.
After expected contractor settlements and disbursement of 2011 SRS funds, the anticipated remaining balance as of June 30, 2012, would be $3,772.
In a telephone conversation the following day, Taylor estimated total overruns to be in the neighborhood of $900,000, money Area III Trustee John Sheehan clearly wanted to have available.
Sheehan commented later, “There are dozens of other capital improvements that need to be made. Other things that won’t get done.”