ACCREDITATION '98

The budget allocation model (revenue-based), drives all District-wide financial planning. Expenditure needs are not considered in this revenue-based formula. Generally, the number of full-time equivalent students educated at the College determines the income allocation to the College.

Saddleback College's Strategic Plan that was developed through the shared governance process in 1995-1996 and identifies institutional goals. College committees, primarily the President's Council, Dean's Cabinet, and the Academic Senate, meet regularly and make planning recommendations.

The College Budget Committee, comprised of administrators, faculty, and staff, who are also representatives of the Dean's Cabinet, Academic Senate, Classified Senate, Associated Student Government, and Classified Leadership, meets and makes budget allocation recommendations.

The College has been operating under severe financial constraints with a high percentage of resources (over 90 percent) allocated to salaries and benefits in 1997-1998 (Ref. 9.1). This limits the ability of the College to allocate unrestricted funds in a manner that supports institutional goals, however, institutional goals have been taken into consideration where there is some financial flexibility, such as classified and faculty replacements, transfers of personnel, and allocation of restricted resources such as Certificates of Participation (COPS), and state equipment funds. At its July 16, 1997, meeting, the Board of Trustees unilaterally took action to transfer five Saddleback College Deans to Irvine Valley College (IVC). This action disrupted College financial planning, and its long-term effect on College institutional planning efforts is not yet known. At the District level, the allocation of resources to both colleges does not take into account institutional plans, because resources are allocated purely on a revenue-based formula (Ref. 9.2).

The Classified Staffing Committee and the Equipment Committee were established at the recommendation of the College Budget Committee and have been operating effectively. The College Technology Committee, which makes recommendations on the expenditure of College technology funds (funds supplied through the issue of COPS) and has representation on the District Technology Committee, has also been effective. These committees have promoted College involvement in the allocation of College financial resources. Many of the members on these committees were also involved in the development of the College's Strategic Plan. Recommendations from all these committees and from the College Budget Committee are presented to the President's Council, a forum in which institutional goals and the allocation of resources are discussed.

The District receives its funding from the state under a Program Based Funding (PBF) formula. Primarily funding is tied to the number of students enrolled in credit and non-credit programs. Additionally, the College receives categorical funding from the state that is based on the number of students served by programs such as Matriculation, Extended Opportunity Programs and Services (EOPS), and Disabled Student Programs and Services (Special Services). The funding levels applied to the PBF formula and to certain categorical programs are decided by the State. The California Community Colleges do not have sufficient resources to fund themselves at 100 percent of the calculated "standard." The South Orange County Community College District (SOCCCD) is funded at just over 55 percent of the state-calculated standard. The College also collects local fees such as parking, student, and Community Education fees.

The College has limited control over resident tuition rates and cannot generate additional revenue from students in excess of the state allocation, except for some material fees and non-resident tuition fees. Non-resident tuition fees are retained by the District and fee amounts are established annually and approved by the Board of Trustees.

The SOCCCD plans budgets based on realistic assessments of available resources. This is evidenced in the allocations made through the budget allocation model at the time of the adopted budget, as compared to the state apportionment report. The District Resources Allocation Committee (DRAC), with representation from the College, makes recommendations regarding the allocation of funds within the District budget allocation model. The Vice Chancellor of Fiscal Services completes a Five Year Fiscal Projection (Ref. 9.3), which estimates income and expenditures within the district for a five year period. This document is revised periodically and is a useful resource. Revenue estimates are conservative, and as data and other information about enrollments, ending balances, and the state budget becomes available, revenue estimates are revised incrementally. The College budgets its expenditures based on income projections, taking into account growth requirements, negotiated collective bargaining issues, step and column increases for existing personnel, plans for new personnel, changes in utility expenditures and other items that affect expenditures within the budget. The College does not maintain a contingency because income is typically barely sufficient to fund ongoing needs. A contingency fund is maintained at the District, and the amount is recommended by DRAC and approved by the Board of Trustees. The College has quantified needs that have been assessed through various shared governance groups, and as income becomes available, funds are applied to those needs. Categorical programs are budgeted conservatively, at a minimum guaranteed level, until a state allocation is provided.

Saddleback College developed a Strategic Plan for 1996-1999 consisting of recommendations regarding the College's philosophy and goals, organizational structure, institutional staffing, balance of programs and educational plan, program review, facilities and the physical plant, and an institutional survey. The District developed a 1996 Educational Master Plan and an Educational and Facilities Master Plan for the Saddleback Community College District (now the South Orange County Community College District), with projections for the next 20 years.

The College Facilities Committee, chaired by the Director of Maintenance and Operations, establishes and maintains a prioritized Facilities Project List for retrofitting and deferred maintenance projects, small capital improvement projects, and special projects under COPS funding.

For state-funded projects, the District's Director/Purchasing Director/Facilities Planning prepares the five-year Facilities Plan which is submitted to the state. The District Director confers with the College President to review, update, and add to the requests from the College.

The District created its Educational and Facilities Master Plan in response to a state mandate, and future facilities funding, paid for by the state, will be tied to such a plan.

There has been no on-going formal mechanism by which the College and District together plan for facilities. Because the District offices are located on the Saddleback College campus, there is a continuing struggle for space allocation and control. District actions that illustrate this are the location of the golf driving range and the baseball stadium on the Saddleback College campus, which were initially developed with little input from the College community. Financial data relating to these facilities is maintained by the District. There are no examples of such District-controlled facilities at IVC.

Currently, there is no clear process by which the colleges and the District work together. The District is responsible for the development of new facilities and allows limited College input to the decisions, yet maintenance of the facilities remains a College responsibility. The College believes that the greater responsibility for developing new facilities should lie with the College since it is ultimately responsible for maintenance and upkeep. Under the current procedure, buildings are constructed and modified with little consideration of life-cycle costs and the College is responsible for funding upkeep costs once the buildings are completed.

There are residual concerns regarding the lease of property to third parties by the District (e.g., the Cox cable agreement and the lease of space at the top of the library building to various entities). The income from these agreements goes to District services, not to Saddleback College, while any such agreements at IVC benefit that college directly. There are no clear guidelines as to how the monies generated from lease agreements are distributed among the colleges and the District.

Budget development is guided by state requirements for filing tentative and final budgets. The District publishes annual budget development guidelines. The College Budget Committee membership includes representatives from all shared governance groups.

The College budget allocation model follows a defined, documented process. A Classified Staffing Committee determines the priority of classified staff replacements and new positions. The Deans' Cabinet and the Academic Senate determine the priority of faculty replacements and new positions. The Academic Senate established a standing committee and developed a process for determining hiring priorities for full-time faculty positions during the Spring, 1997, semester. The Equipment Committee prioritizes new and replacement equipment requests. The District Technology Committee makes recommendations on the allocation of the COPS funds available for technology. Similarly, the College Facilities Planning Committee recommends the priority for deferred maintenance and facility projects.

Recommendations from all these groups are presented to the President's Council and subsequently to the President for approval. The President's Council is representative of all governance groups and open to all who wish to attend.

Budget development guidelines are revised each year and issued as the process begins. These guidelines clearly delineate the budget development process from beginning to end and are routinely followed (Ref. 9.4). The College's Strategic Plan (Ref. 9.5) is supported by prioritized needs in specific areas such as staffing. College staff are frustrated in the fact that often, when they participate in committees that develop plans and delineate priorities, those plans are priorities are sometimes ignored or minimally implemented because of a lack of available financial resources. In recent years, vacancies in classified staff and faculty have grown faster than replacements have occurred (Ref. 9.6). The resulting savings have been used to balance the College budget. The College Budget Committee has reviewed the allocation patterns for the disbursement of discretionary funds (supplies/materials/contract services) which are allocated based on an established formula. The Budget Committee concluded that it would be inappropriate to take from one division in order to give to another. This would be the only way to adjust discretionary allocations because funds have not been available in recent years to increase the discretionary portion of the budget. The College committees that develop guidelines and processes have clearly documented these processes.

There are several District-wide committees that make recommendations regarding financial plans and budgets. These are the District Resources Allocation Committee (DRAC), the Fiscal Resources Advisory Committee (FRAC) and the Certificates of Participation (COPS) Committee.

The DRAC recommends District-wide budget allocations. These recommendations are forwarded to the Chancellor and then to the Board of Trustees for approval.

The FRAC is comprised of members from shared governance units, the California Schools Employment Association (CSEA), and the California Teachers Association (CTA). Their charge is to advise the District on the fiscal condition of the District.

The District presented plans to meet recognized infrastructure, maintenance, and technology needs to the colleges, with funding to be obtained through Certificates of Participation. The colleges provided input on the priority of the projects and the two Academic Senates clarified a procedure for allocation of funds and repayment. A COPS Committee was then formed, whose role was to make recommendations regarding the expenditure of the COPS funds, and to identify which budget unit, i.e., IVC, Saddleback College, or District Services, is responsible for what portion of the repayment.

Recommendations from the College Budget Committee, the Equipment Committee, the Classified Prioritization Committee, the Facilities Planning Committee, and the District Technology Initiative Committee are passed through the President's Council to the President.

Official College committees are clearly representative of all College groups. Administrators, faculty, and support staff have opportunities to participate in the development of financial plans and budgets. Although individuals are appointed to committees, they sometimes do not attend meetings (e.g., College Budget/DRAC/FRAC/COPS). It is often difficult for faculty and students to attend meetings, particularly during the summer when many budget recommendations are being made. The responses to the Institutional Effectiveness Survey (IES) showed that the majority of staff agreed that they have opportunities for participation in the development of plans and budgets in their respective shared governance groups (Ref. 9.7). College divisions may not regularly include classified participants in division meetings where budget allocations are reviewed. Participation on committees at the District level has improved since the last accreditation, although decisions are sometimes made without recommendations or input from the colleges. The issue of the Certificates of Participation is a prime example. The colleges will fund the repayment of the COPS, and have been involved in discussions as to how that will occur, but neither Saddleback College nor IVC had any involvement in the initial decision to issue COPS.

In November, 1994, the County of Orange declared bankruptcy, with an investment loss of at least 1.5 billion dollars, and in December the College was asked to reduce its budget by 1.2 million. The budget process proved its effectiveness, and by late January the College had completed a difficult budget reduction. This process included representation from all shared governance and bargaining units.

The SOCCCD's financial management system consists of a computerized system as well as manual control mechanisms. The computerized system is well established and can be accessed by all College divisions and units for reference. The College Budget Office is responsible for developing the Saddleback College budget, which is input directly into the system at the College. The financial management system is currently being enhanced to provide better and more timely financial information to all segments of the College.

Once budgets are developed and approved, they are entered into the accounting system. Division managers can then monitor their own accounts from their offices. All accounts are also monitored from the College Budget Office. Controls are in place that will not allow accounts to be overextended. Any requests that might result in over-expenditure are directed to the College Budget Office for attention. The College Budget Office approves all budget transfers, expenditure transfers, budget increases, and budget decreases.

Since the last accreditation, the College has worked with the District Information Technology Department to ensure access to budget accounts by division managers and their secretaries. This has worked well and managers have immediate access to their accounts. The College control mechanisms that are in place to prevent account overruns have also worked well, resulting in the prevention of individual division accounts running into a deficit. The College Budget Office also reviews expenditure requests in certain restricted accounts to ensure that expenditure guidelines are followed. These controls sometimes cause frustration for the requester because of the delays in processing requests. The College, however, continues with these controls to ensure fiscal prudence. The Vice Chancellor of Fiscal Services provides a Financial Status Report to the Board of Trustees each month (Ref. 9.8), as well as a Quarterly Financial Status Report (Ref. 9.9).

As part of the District Technology Initiative, new financial and student registration software will be purchased. College staff have taken part in focus groups with a software vendor, and have specified software requirements and desires. The College is looking forward to a new financial/student software package because the current system has many limitations, particularly in the Student Accounts Receivable area. It is anticipated that these enhancements will provide local electronic input of purchase requisitions, transfer of budget appropriations, and report writing, in addition to live look-up capabilities at any workstation within the District.

Information on student enrollment, which drives financial decision-making, is not always timely or accurate.

The District contracts for an annual independent audit of all recorded financial transactions. Audit findings are promptly addressed by the administration and at times resolved even before the audit report is presented to the governing Board. Budgets are adopted within the specified timelines and reflect allocations within the constraints provided by the funding mechanism for community colleges.

The District has a Chart of Accounts (Ref. 9.10) that is used to develop new accounts and reflects the account code structure identified in the California Community Colleges Accounting Manual. As notification of changes is received from the State, the District Chart of Accounts is revised, along with any affected accounts already in the system. This is done on a regular basis and in a timely manner. System reports can be generated and categories of expenditures identified by the account code structure. These reports reflect the appropriate allocation of financial resources in support of institutional programs and services. The College/District complies with all state requirements. An annual audit is performed in accordance with California Education Code 84040. In the last five years, the auditors have made findings and recommendations to improve internal controls. In an effort to achieve annual audits that contain no findings or adjustments, the District strives to implement recommendations on a timely basis. The independent financial report for the year ending June 30, 1996, found two material weaknesses within the District (Ref. 9.11). These findings pertained to deficit spending in the general fund for three of the prior four years, and to a significant negative ending balance for the Saddleback College Community Education Program. Saddleback College has streamlined operations in the Community Education program to bring expenditures in line with income. It is projected that the District's negative spending pattern will be reversed during the 1997-1998 fiscal year.

The SOCCCD Business Services Office maintains comprehensive financial records of all District fiscal transactions, including financial aid, externally-funded programs, contracts, and auxiliary organizations (Associated Student Government and Saddleback College Foundation funds). Internal controls are in place under the stewardship of the Board of Trustees. In addition, the College Budget Committee and the College Fiscal Office monitor all aspects of the College budget. Institutional investments are made in accordance with the District's established Board policy, and exclude any speculative money instruments. Quarterly and annual reports of investments are provided to the Board of Trustees at regularly scheduled public meetings.

There is effective oversight of Financial Aid finances by the Federal Title 4 program for student financial aid, by the State of California financial aid program, and by the College itself. All required audit information is available at the District level upon request.

Oversight of College finances, including financial aid, externally-funded programs, contractual relationships, auxiliary organizations, and the College Foundation, is provided both at the College and the District level. Institutional investments, with the exception of the Foundation, are overseen at the District level. Financial information relating to these programs is well-documented and openly reviewed. The Associated Student Government presents its budget to the College and the Board of Trustees annually (Ref. 9.12). The Foundation issues monthly financial reports to its Board, the College, and District (Ref. 9.13). Part of the income and expenditure function of the Foundation is carried out in the College Fiscal Office. Financial Aid and Community Education budgets are part of the College budget and are reviewed regularly. Formal contracts between the District and any third party are reviewed by the District Vice Chancellor and approved by the Board of Trustees. At the conclusion of service, appropriate invoices stipulate payment for services performed.

Contracts between the College and outside vendors for the operation of both the Bookstore and the Cafeteria are formulated by use of a formal District competitive open bid process that includes College representation. College advisory committees monitor contract compliance, recommendation for improvement, and provision for a communication vehicle for all interested individuals or groups.

The Foundation is a non-profit organization that performs fund-raising and other auxiliary activities under the direction of the College. A Board of Directors, six committees, and support groups currently form the structure, which changes periodically. The support groups represent over one thousand volunteers and donors. Foundation staff meet with faculty and administrators to ascertain College funding priorities, review scholarships, and review the status of Foundation accounts. The Foundation Mission Statement is consistent with the mission and goals of the institution (Ref. 9.14).

There have been some recent changes in the structure of the Saddleback College Foundation. In prior years the Foundation had a full time Director. At the Board of Trustees meeting on March 23, 1998, the Dean of District Foundations was reassigned to IVC where he will administer its foundation. An assistant director will be hired to supervise foundation activities at Saddleback College, with the IVC Dean providing advice and limited oversight. Saddleback College is concerned that the focus of Foundation efforts is now on IVC.

The Foundation has created a President's Business Roundtable which acts as an advisory body for the President so that the College will be able to develop relationships with key local companies. A newly developed Planned Giving Program has resulted in the implementation of policies and procedures for gifts and donations.

The objective of the Scholarships Plan is to establish a large number of scholarships for students. In 1991 the Foundation funded $1,729 for scholarships. Between 1992 and 1996 it raised over $100,000 and created six endowed scholarships.

Foundation staff meet with faculty and Deans to establish funding priorities, review the scholarships, and review Foundation accounts.

There are several categories of contractual agreements with external entities: (1) contractual agreements for credit programs with non-accredited organizations, (2) rental of facilities, (3) educational services agreements with local business and industry, (4) grants and contracts, and 5) independent contractors. Contract education is currently in effect with two private post-secondary cosmetology schools. The Division of Health Sciences and Human Services routinely enters into contracts with both public and private entities for educational facilities that are not available on campus. Saddleback College does not emphasize educational services agreements, but the College has maintained a contract with the Orange County Department of Health Care Services for paramedic training and is the sole provider of this for all of Orange County. The College has been successful in obtaining a number of federal, state, and local grants for program improvement, educational services and curriculum development.

There are institutional procedures that are followed before entering into any contractual agreement with a third party. Procedures are outlined in Board Policy 3200, Contract Regulations, Board Policy 3200, Purchasing Policy, and in a Central Services Manual. All contracts are reviewed by the Board of Trustees and then signed by the District Vice Chancellor of Fiscal Services, and copies are retained in that office. With the administrative reorganization on July 16, 1997, there is no clear authority designated to one Dean for oversight of contractual agreements.

The Board of Trustees and the administration receive monthly financial status reports, and at numerous intervals throughout the year receive recommendations that help maintain a fiscally sound position. In addition, the District files a quarterly financial status report with the California Community Colleges Chancellor's Office Fiscal Monitoring Unit.

Evaluation of financial management is an ongoing process at the College, and is conducted through feedback from constituent groups which monitor procedures, independent audit reports, and feedback from the College community. Audit reports have consistently highlighted the need for a centralized, secure cashier function. The College believes that a centralized cashier function is needed to better account for cash receipts, to ensure safety of College personnel collecting income, and to better serve students.

The College has worked closely with District Technology personnel to develop a bursar software program, which has improved the student accounts receivable function. The College, however, is anticipating that a new administrative software program will be a vast improvement. Due to fiscal constraints the College has not yet developed a centralized bursar function.

The District has issued three different long-term debt obligations in the form of Certificates of Participation (COPS). The two oldest of these, one for $22.5 million and the other for $4.9 million have a specific income stream devoted to retiring the debt. The most recent COPS issue for $18.9 million (June, 1996, issue), is an obligation that, based on current projections, must be repaid from the general unrestricted operational fund of the District. The initial payment on this issue is due on May 15, 1999, in the amount of $965,961, with the final payment of $1.5 million due on November 15, 2021.

Future obligations are clearly identified, but plans for payment are not. The College is concerned about three future obligations in particular: repayment of Certificates of Participation, Retiree Liability, and the acquisition of the Tustin Marine Corps Air Station.

The first payment for COPS is due in May, 1999. The Retiree Liability is estimated at 23 million, and currently the District has saved a limited amount toward this. The Tustin Marine Corps Air Station becomes District property in July 1999. For all three of these obligations, the only source of income currently available to the District is general fund apportionment. The College has withheld expenditure of its entire COPS allocation, with the intent of using these funds to retire the College's portion of the debt retirement for at least the first two years. According to the current funding mechanism, the colleges will pay for any financial obligations associated with these items. The College is concerned about this because, even with full-time staffing levels significantly below those of 1992, the College allocated over 90 percent of its budget to salaries and benefits in 1997-1998.

The SOCCCD is fully-insured for workers compensation through the California Community College Risk Management Association (CCCRMA). This group purchases workers compensation insurance through Unicare Insurance Company. Property losses in excess of $10,000 and liability losses in excess of $25,000 are provided for through the State-Wide Association of Community Colleges (SWACC) Joint Powers Authority. The Director of Business Services, in conjunction with the Risk Management Coordinator and College departments (primarily security and maintenance), is responsible for the implementation and coordination of risk management programs for the College.

Coverage provided through CCCRMA and SWACC adequately protects the District against loss. The District is able to maximize its purchasing power for losses by taking advantage of the size of these organizations. Additionally, both groups have developed guidelines and programs for its member districts which help to identify and mitigate loss. Saddleback College has clearly defined rules and procedures for the safety of the College community. A Safety Committee made up of representatives from the College and the District Risk Management Coordinator meets regularly to identify and address safety issues. The College staff and the District Risk Manager work cooperatively and effectively to implement recommendations from the Safety Committee. Because of the size and scope of District activities, it is often difficult to implement risk management procedures. This situation is compounded by actions taken outside of established policy and procedures, which result in increased risk to the District.

Increased Program Based Funding (PBF) revenues in the fiscal year 1997-1998 (comprising approximately 87.6% of all unrestricted general fund revenues), allows the District to find itself in a better financial position for the current fiscal year. In addition, lower Health and Welfare benefits costs to staff will reduce expenditures. Additional PBF revenues, and the careful control of expenditures for the year should allow the District to meet all current expenditures and end the current fiscal year in an improved financial position. The ending balance should be approximately four percent of the unrestricted general fund budgeted expenditures.

The District maintains a positive cash position by budgeting a contingency reserve of at least three percent of the total general unrestricted fund, and by issuing short-term Tax and Revenue Anticipation Notes (TRANS). Since the District budget is heavily dependent upon funding from local property taxes (approximately 76.2 percent of the total budget), the issue of TRANS provides sufficient cash to fill the cash flow void between July and November of a given year. The proceeds of the TRANS issue are invested at the highest possible yield within arbitrage constraints, enabling the District to generate sufficient interest income to offset the administrative and interest costs related to the notes.

Projected revenues and ending balances are provided to a District-wide FRAC that issues advisories on District resources. The FRAC meets at least once a year. In addition, the District uses the DRAC that deals with the allocation of available fiscal resources. The DRAC recommends to the Board methods to allocate fiscal resources for a given year, including the setting aside of a three percent or higher contingency reserve as suggested by the Community Colleges Board of Governors. This reserve is established every year in order to take care of urgent or emergency situations.

Saddleback College does not have a budgeted reserve for financial emergencies or unforeseen occurrences. The two colleges of the District rely on the District contingency fund to address major emergencies. Funds for the contingency are located in a District budget.

In the fiscal year 1996-1997 the Board approved a budget with a three percent contingency reserve that if left untouched for the entire year would have resulted in an ending balance within Title 5 parameters. However, as a result of an unexpected statewide deficit in property taxes at year-end, expenditures greatly exceeded expected revenues. The District, through careful monitoring of expenditures, and as a result of one time revenue adjustments that are certain to occur within the current fiscal year, should book a healthy ending balance in excess of four percent and should be out of a deficit spending mode by the end of the 1997-1998 fiscal year. These revenue adjustments are the result of the following factors:

The value of this reserve was demonstrated by the unprecedented Orange County bankruptcy in December, 1994. It was during the crisis created by the bankruptcy that the District demonstrated its resiliency in coping with fiscal emergencies. In addition to maintaining the reserve intact, immediate reductions were implemented to safeguard the overall fiscal position of the District. The Orange County bankruptcy resulted in the loss of an amount in excess of $2.4 million of all funds on deposit in the Orange County Investment Pool, a calamity that will continue to have a drastic impact upon District resources for many years to come.

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