Final Report for the Neighborhood Council Funding Program

Here is the final report for the Neighborhood Council Funding Program.  The only changes we made were to correct the number of funding work group members and clarify how the Neighborhood Councils' general consensus regarding a grant based funding program was that they did not want it.  The changes are highlighted below in yellow.

We will be submitting this report to the City Council, and you can make additional comments next week at the special meeting of the Arts, Parks and Neighborhoods Committee on Wednesday, November 30, 2012 at 3 p.m. at downtown City Hall.

Thank you all again for your comments, suggestions and time on these reports!

REPORT RE:

NEIGHBORHOOD COUNCIL SYSTEM FUNDING PROGRAM

The Honorable City Council

 of the City of Los Angeles
Room 395, City Hall
200 North Spring Street
Los Angeles, California 90012

Council File No. 11-1020

Honorable Members:

As requested by your Honorable Body, this department submits this report as requested by the City Council, to address four (4) main items in the approved motion.

Ÿ  Clarify the encumbrance policy

Ÿ  Alternative funding models

Ÿ  Develop a mechanism by which Neighborhood Councils may request to roll over funds from year to year, on a project-by-project basis

Ÿ  Neighborhood Council purchases of equipment for City and Proprietary Departments in fiscal year 2010-2011

At this time, the department recommends continued discussion to address these items, to better ascertain the feasibility of implementation and to provide a greater opportunity for input from Neighborhood Councils on proposed policies or processes. 

Background

On August 16, 2011, the City Council approved a series of motions related to the work of the Department of Neighborhood Empowerment (Department) and its oversight of the Neighborhood Council system.  This report responds to the motion related to the Neighborhood Council Funding Program (attached), which established a number of new requirements, gave authority to the Department to suspend Neighborhood Council funds under specific circumstances, and listed four (4) items for the Department to address and report back to the City Council within ninety (90) days.

Collaboration Process for Feedback

            The Department collaborated with the Neighborhood Council regional alliances across the City to solicit feedback from Board members and stakeholders on this motion.  Starting in September and continuing through the beginning of October, the Department cosponsored mini town halls with the Los Angeles Neighborhood Councils Coalition, the Harbor Alliance of Neighborhood Councils, the Valley Alliance of Neighborhood Councils, the Northeast Los Angeles Coalition, the Westside Regional Alliance of Councils and the South Los Angeles Alliance of Neighborhood Councils.  Approximately, one hundred and fifty (150) Board members and stakeholders provided their feedback at the town halls.   In addition, the Department created an online survey for feedback on the motion where seventeen (17) Board members and stakeholders provided detailed input.  We invited Board members and stakeholders via our bi-monthly eblast to participate in the town halls, survey, blog and work group meetings.

In October, the Department held three (3) work group meetings on the Funding Program, inviting Neighborhood Council Board members, particularly those who serve as Treasurers.  The invitation was also extended to the Office of the Controller, Office of the City Attorney, the City Administrative Officer (CAO), the City Legislative Analyst (CLA), the Board of Neighborhood Commission, and the Information Technology Agency (ITA).  Between nine (9) to seventeen (17) Board members participated in each of these work group meetings.  A representative of the Office of the Controller attended two (2) of the meetings.  All of the minutes for the town halls and work groups meetings were uploaded to a blog for further comments though we did not receive any. 

Item 1

The Department was directed to: (1) clarify the encumbrance process; (2) standardize financial templates, forms, and reporting; (3) streamline approvals and management of the program; and (4) increase accountability.

Status

On February 18, 2010, the City Council voted to limit the access of Neighborhood Councils to rollover funds (C.F. 09-0600-S159), then eliminated the rollover policy for fiscal year 2010-11 funds.  Consequently, the Department encumbered funds for each Neighborhood Council based on requests for demand warrants received by April 15, 2011 and executed contracts.  The deadlines were the focus of several department communications; however, there were a number of Neighborhood Councils that were unable to plan accordingly.

The Department’s encumbrance policy is defined as monies set aside to pay for requests submitted by a Neighborhood Council by the April 15th deadline and/or operational costs, such as services provided by the Department’s contracted vendors, utility bills and month-to-month office and meeting space expenses.  The Department will be developing different guidelines to encumber funds as long as required conditions are met.

Discussions with Neighborhood Council members present revealed the belief by some that funds were encumbered, for purposes of the Department, when the board acts to commit funds at a Neighborhood Council meeting.  Work group participants also expressed that the deadlines were not provided with sufficient lead time for Neighborhood Councils to prepare, and that the April 15th deadline leaves Neighborhood Councils without the ability to pay vendors through a request for a demand warrant two (2) months before the end of the fiscal year.

The Department considers these concerns valid and has committed to providing greater notice and reviewing the deadlines for submission of funding requests.  The Department proposes to provide notice on the deadlines in January and accepting Neighborhood Councils’ requests for demand warrants until June 1st.  The June 1st deadline is contingent on the Department’s ability to implement an electronic platform for receipt of requests.

The Department has standardized the budget and all forms and reports associated with the funding program, but will continue to be challenged in managing the funding program as long as it remains a manual paper-based system.  The City’s newly adopted, state of the art Financial Management System is designed to meet the needs of large departments to manage and track highly complex budgets, but it cannot accommodate our unique Demand Warrant and Purchase Card based system for ninety-five (95) cost centers.  Both ITA and the Controller have indicated that, due to other citywide priorities, they would not be able to build a customized module in the near future.  With their guidance, however, we will be securing a professional consultant who can develop a comprehensive plan to design and build an automated paperless system.  The Department will prepare a report with a system proposal and budget to the Mayor and City Council which will be based on a thorough assessment of our functional needs.

Item 2

The City Council continued its policy to prohibit the rollover of unencumbered funds and directed the Department to report back on alternative funding models, including a grant based funding system.

Status

Discussions regarding this item focused exclusively on a grant-based funding system.  The Department presented a scenario in which funds could be allocated on a citywide or regional basis with Neighborhood Councils applying for funds for specific projects or programs.  A certain amount would be provided up front for operational expenses, perhaps twenty (20) percent, while the rest of the funding would be grant based.  A panel comprised of City staff and Neighborhood Council representatives can review each proposal and make the funding determination based on agreed upon standards.  This process would require strategic planning on the part of Neighborhood Councils to solicit the participation of all sectors of the community in determining short and long-term priorities.  Bringing everyone to the table can result in the identification of other funding sources to leverage the City’s funds. 

In the town halls, online survey and work group meetings, the general consensus was that Board members were adamantly opposed to changing the current funding system.  The main concern voiced was the feeling that the decision-making process would be removed from the Neighborhood Council to the City if a grant based funding process was implemented.  There were also concerns raised about the ability of certain Neighborhood Councils to produce better written proposals and possibly leaving out those who may not have the skills or the time.  Many stated that a grant system was too complex and time consuming for Neighborhood Council volunteers to use and the Department to oversee with its limited staffing. 

A suggestion was offered that rather than sweeping unencumbered funds at the end of the fiscal year, remaining funds should be placed in a fund intended to be parceled out as grants to Neighborhood Councils based on need.  For example, some Neighborhood Councils have the need to provide translation at meetings, placing a higher proportion of their funds in operational expenses and less on neighborhood improvement projects and outreach.

Item 3

The Department was directed to report back with a mechanism to allow for the rollover of Neighborhood Council funds from one (1) year to the next for approved projects.  Projects would be deemed appropriate by the Board of Neighborhood Commissioners or a committee comprised of the CLA, CAO and the Department, which will: (1) define the type of project that would qualify; (2) provide the details as to the application and approval process; and (3) establish deadlines to complete an approved project.

Status

The Department proposes to establish a Neighborhood Improvement Project budget, similar to the Capital Improvement Project budget that allows allocated funds to roll over from year to year.  This provides an option for Neighborhood Councils that wish to implement neighborhood improvement projects that may take a significant amount of time and money to implement.  Work group participants did not agree on whether projects should be tangible or intangible, or whether they should be limited to capital projects.  They did feel, however, that the project should cost in excess of $5,000.  Some felt that the project should be completed within one (1) fiscal year given the turnover of Board members, while others argued that such a short time limit negates a rollover project.  Stipulating that the funds can only be used for the intended project or be swept by the City would encourage the completion of the project by incoming Board members.  The feeling was also expressed that capital projects should be undertaken by the City and that Neighborhood Councils should advocate for priority community projects instead of using their funds.

Item 4

The Department was directed to report back on equipment purchases made by Neighborhood Councils in fiscal year 2010-11 for city and proprietary departments, and on any guidelines that can be implemented to maximize the benefit of said purchases to the corresponding department and the Neighborhood Council.

Status

The discussion on the purchase of equipment for City Departments in FY 2010-11 clarified the process that Neighborhood Councils are to request a transfer to the City Department and not buy and donate the equipment because it presents a transparency and accountability problem.  There is also a concern that Neighborhood Councils are being used as an end around the established budgets for the departments.  Suggestions were made about how to ensure the equipment is of benefit to the community, such as having the requesting department provide a written statement indicating the equipment is a high priority for the entire department or having each department provide a list of priority items to the Neighborhood Councils.  It was also expressed that City departments should be a greater priority over schools, and some had the view that Neighborhood Councils should not give money to other City agencies since their needs were discussed and determined in the budget process.

Conclusion

The Department received valuable input from Neighborhood Council representatives and believes a final recommendation on each of the directives can be provided after allowing for more input on any preliminary recommendations.

            If you have any questions regarding this matter, please contact me at (213) 485-1360.  I will be available when you consider this matter in order to answer any questions you may have.

Very truly yours,

BONGHWAN “BH” KIM, General Manager