Minutes from the Funding Reforms Work Group - Meeting #2

At the second work group meeting for funding reforms tonight, the focus was back on how to address the funding reform motion.  The funding problems and potential solutions that was started at the last meeting will be picked up again after the actual motion items are discussed and possible solutions suggested.

The City process of encumbrances was explained and how Neighborhood Council funds are currently encumbered was also discussed.  This led to a discussion on whether Neighborhood Councils should have a grant based funding allocation.  The work group agreed with those comments from the town halls that it would be too cumbersome to have such a system though grants could be considered for any swept roll over funds so that the funds are kept with each region of the Neighborhood Councils.

The work group then discussed project specific encumbrances.  While everyone agreed that there should be such encumbrances, there were differing opinions on what type of projects could have encumbrances as well as the length that funds could be encumbered.  For details, please see the minutes below and give us your comments and suggestions.

The last funding work group meeting will be on Monday, October 17, 2011, and it will be back at the Hollywood Constituent Center, located at 6501 Fountain Ave., Los Angeles 90068.  We hope to see you there!  

Neighborhood Council Funding Program

Work Group Meeting Agenda/Notes

Tuesday, October 11, 2011

Goals:

1.     Review Policy Discussion & Proposals RE: NC Funding Program

2.     Develop ACTIONABLE NC recommendations that Address Controller audit and City Council motions (i.e. recommendations that can be implemented through policy and task revision)

3.     Establish process & schedule for future discussions

Purpose:  To develop processes and policies to create a more efficient and transparent funding program.

 

I.  Welcome and Introductions

Glenn Bailey – Encino NC

Randy Waller – Westlake North/South NC

Frank Wada – Lincoln Heights NC

Harvey Goldberg – Tarzana NC

Estrella de la Rosa – Empowerment Congress South East

Eddie Lockhart - Empowerment Congress South East

Louretta Randell – CANNDUNC

Esther Glaze – CANNDUNC

Gustavo Moreno – Greater Echo Park Elysian NC

Amber Meshack – Department of Neighborhood Empowerment

Rita Moreno – Department of Neighborhood Empowerment

Grayce Liu – Department of Neighborhood Empowerment

BongHwan Kim – Department of Neighborhood Empowerment

II.  Items for Discussion

Short-term

Controller audit

City Council motions

Long-term  
List of Problems & Solutions – in looking at the problems and solutions that the group came up with last meeting, it did not match up to the motion items that we need to report back to the City Council; therefore, we wanted to hold these items until after the group deals with the motion items

Review

October 11 Discussion Topics:

Clarify and discuss process of encumbering NC funds

The City’s budget book (pg. 380) defines an encumbrance as:  “An unpaid obligation incurred for current or future services such as for personal service, materials, equipment and capital improvements.”

According to Controller Accounting Staff, an encumbrance is a mechanism for
fund accounting in recording a reserve of available resources (appropriation with support of cash) in order to meet the future obligation (contract payments).  Normally, a department is required to have the encumbrance in place after contract execution and before services are rendered, or goods are purchased or delivered.

However, for the NC funding program at the fiscal year end on June 30,
2011, an exception was made to allow NC to submit accountable documentation recognized and approved by DONE to substantiate the amount to be encumbered. The documentation was reviewed a second time and approved in FMIS by the Controller F&A. The exception in the encumbrance process was agreed upon at an earlier meeting (late April) held in the Controllers Office, attended by DONE and CAO.

• Neighborhood Councils had a special situation to roll over money until last year since every City departments’ funds are swept
• When are funds considered encumbered by the Department?  When the Department received the demand warrant, inputted it into its database.  The Department would do a query of its funding database to provide a list of encumbered funds for the Controller’s Office along with supporting documentation for the demand warrant.
• City freezes its funds for all City departments on June 15^th
• Question – why is there a department delay from May 9^th to June 15^th
• This past fiscal year was special because no more roll over
• Request for these deadlines as soon as possible – preferably at the beginning of the fiscal year
• One of the group members thinks the hard date with the City is beyond June 15^th – so wants to know what the hard date is and reiterated that NC’s need to know the final date way ahead of time and also that April 15^th is too short a time line for the NC’s to use their funds
• BongHwan wants to know specifically if there should be changes to the existing encumbrance process
• NC’s want the ability to focus funds on specific projects
• Rita stated that another way to encumber is to do a demand warrant for the total amount (such as a storage facility, meeting location, etc.)at the beginning of the fiscal year, then you can schedule to pay out a set amount each month as opposed to waiting until the end of the month – the Department just learned that this was possible with the new Controller financial management system
• Request to let NC’s know of the recurring expenses and the ability to do it at the beginning of the fiscal year to avoid a huge avalanche of DW’s at the end of the fiscal year
• Leases do not qualify because the amount is taken out on the date of the lease execution

• Discuss PROS & CONS of alternative funding models

grant-based (from item #5 on the motion) – Background: the City Council would like to see more structure for the funding program.  When it was initially set up, it was supposed to be part grant/part funding for administration, but the town halls around the City resulted in great resistance to this idea.

$1 mil was swept this past year

Concern that these grants would only go to certain areas that have lawyers to write successful grants

Can keep the money in the region

Problem is that the Department can’t even pay a bill so how would they manage grants and how would they decide who gets it?  Also, harder for NC stakeholders to get the money if they have to get the grant if the NC’s are no longer in control of the money.
Tarzana sent a letter to all the CBO’s and told them to submit any grants by October, which would be hard to do if had to go through the Department, too, for grants

Because this idea was shot down during the town halls, it’s not an option to proceed with at this point  

 Another version would be to keep the swept funds in the system where NC’s could write grants for

Other

Should have a minimal roll over of $5k per NC’s to transition from fiscal year to fiscal year

Concern that  some NC’s are spending a lot of money on administrative costs on payroll, lease, etc. and reflects badly on all NC’s

recommendation is that no more than 20% goes to administrative costs, but there is nothing mandated so can’t penalize

requirements, such as translation, should be paid out from the Department because it’s burdensome on some NC’s over others

• Project-based rollover policy
•  Identifying/defining qualifying projects

Tangible/intangible – capital improvement projects are tangible

Should projects only be for capital improvements?

Yes – that’s why it takes over one fiscal year

No – NC’s should be allowed to choose how the money can be allocated

Value based – i.e. the dollar amount of the project - $5k was suggested as anything under $5k should be able to be completed within a fiscal year

Example – doing a median that will cost $100k, but the NC can only do $20k for now, so can they encumber $20k for 5 years?

Problem is that Board members could change their minds or even newly elected Boards  

Don’t think NC’s should be granting in the first place because the Plan doesn’t provide for it and should go after the City department that does put in medians or advocate for the City Councilmember to do so
Key elements of application and approval process

Capital Improvement Projects can be tracked on the NC’s budget as a separate line item

What would be deadlines for project completion?

Any unused money should go back to the Department

Suggestion for a due date of March 30^th for submission

Can intentionally slow down payments if projects are not completed

Suggestion can only limited for 2 years (based on terms)– another is 5 years – risk is that the longer it is, the more risk that the Board may decide against it and then the NC loses the money

should be able to switch projects within the roll over – very messy and harder to track

• Suggestion that any roll over money should be allocated into various pots held for each region, such as outreach, grants, projects, Department money, i.e. anything that helps the Neighborhood Council system; grants can be weighed against each other each year based on a specific focus, e.g. million trees.

• FY 2010-11 NC equipment purchases for City and proprietary departments
• In motion, City Council wants to know FY 2010-11 expenditures from NC’s to City departments?  City Council may be concerned that NC’s are being used as an end around the established budgets for the departments.
• Ÿ  Feedback that NC’s can buy things cheaper for City departments, but NC’s are supposed to do department transfers and not buying it and donating it because it is a transparency and accountability problem 

• What guidelines would maximize benefit to City departments and NC’s?
• Ÿ  Suggestion that Board needs something in writing from the City department that states the object being funded for is a high priority for the entire department – need to be from someone from above the local department
•  Suggestion regarding schools – need to address City needs first before going to other community agencies and schools
• Ÿ Suggestion that the Department should provide a list of priorities of the City departments and what specifically they need within – disagreement with this view and suggestion that each NC should make the decision because every neighborhood is different
•   Would like to see a rule that NC’s shouldn’t be giving money to other agencies since they already went through a budget check

8:30 p.m. at this point so the remainder will be picked up next week

• Request that the Controller be present next meeting to discuss the electronic funding program
• PROPOSED: Development of electronic system for funding program

1.     Integrate P-card and FMS data for real-time tracking of expenditures and balance

2.     Accept electronic submission and approval of budgets, demand warrants and reconciliation reports

Provide interface to track and create financial statements and treasurer reports for board

October 17

Continue discussion