Peralta Board Belatedly Adopts 2009-10 Budget

Financial recovery consultants bring accountability to district

By Ryan Ariel Simon

The Peralta Community College District Board of Trustees unanimously adopted a 2009-10 budget on April 27, more than seven months later than is required by district bylaws.

Several trustees voiced serious concerns about the document regarding its clarity, and Trustee Bill Withrow even formally requested that the word “approve” not be used when passing the budget resolution.

As it is being adopted more than halfway into the current fiscal year, the document will function more as an accounting of what has already been spent rather than a budget plan.

As was reported in the March 18 Laney Tower, former District Chief Financial Officer Tom Smith was suspended without pay following the controversy surrounding the previous budget proposal that was presented.

Tom Henry, an expert in financial recovery operations, was brought in late last fall according to district spokesman Jeff Heyman. Henry assembled his team to compile the 2009-2010 budget document over the ensuing months.

Mike Lenahan was brought in several weeks ago to be the interim Vice Chancellor for Finance.

Henry warned that despite the drawbacks of this document, the board was legally bound to adopt a budget by September 15, 2009.

Should the district have failed to adopt a budget, there would be implications for fiscal stability and accreditation for the district as previously reported in the Tower.

“I’ve been doing budgets for over 40 years and this is the least satisfactory I’ve ever done,” said Jim Grivich, a member of Henry’s team. Grivish noted from the beginning it was difficult to get information to put the document together.

He told board members that accounting problems were systemic within the district, and that it was a case of finance administration officials not being held accountable.

“You can change people, or you can change people,” Grivich said. “All the red flags this community needed to know about were in the 2007-08 audit.”

Trustee Cy Gulassa agreed, complaining that, in his time on the board, “the buck has not stopped with anyone.”

Gulassa added that he appreciated the accountability he’s seen with the financial recovery team, but that he was “appalled at the budget,” asking how Peralta can make sure this collapse in oversight does not happen again.

Many of these problems, Grivich said, stemmed from the fact that the district has failed to follow the state budget and accounting manual, which it is mandated to use.

Additionally, there was no revenue budget other than one for the unrestricted fund, a fund covering only a small percentage of finances that goes toward running the day-to-day district operations.

What is known is that the district has spent $7 million more than it took in, running down the ‘reserve for contingencies’ fund, or “cash in the bank, so to speak,” Grivich said.

He added that the lack of cash was the most serious problem facing the budget, and if the over-spending continues will cause Peralta to “be basically out of money some time during the 2010-11 year.”

Because the district was late paying its payroll taxes it will owe over $200,000 in fines, an unanticipated expenditure that wasn’t included in the first budget plans.

Other items the recovery team found that were missing from previous budget projections included: $4 million for faculty priority pay; $1.7 million to service debt on OPED bonds the district sold to pay for staff health benefits, a contract with sheriffs that was under-budgeted by $1 million; a payment of $700,000 to the U.S. Education Department for improperly awarded financial aid, line item to augment DSPS by $1.1 million was missing, and $250,000 in unanticipated fiscal recovery costs.

The recovery team has not yet been able to close the books from the 2008-09 budget, meaning most of the beginning balances for the 2009-10 budget year are only estimates.

Laney Cal Works counselor Irina Rivkin implored the board to keep in mind Peralta’s institutional goals of “access, equity, and success,” and said for the first time she has had have to turn away new students simply to be able to serve current ones.

Peralta board president trustee Abel Guillen said, “I should have trusted my gut when I started at the district four years ago and saw the mess. I vow this, sh…” nearly swearing before catching himself, and finished “won’t happen again.”

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