Los Angeles Unified School District Statements of Project Costs from Inception Through June 30,2005 and Proposition BB, Measure K, and Measure R School Bond Construction Programs Agreed-Upon Procedures Report for the Year Ended June 30, 2005 (With Independent Auditors' Report Thereon)
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Los Angeles Unified School District
Statements of Project Costs from Inception Through June 30,2005and
Proposition BB, Measure K, and Measure R School Bond
Construction Programs
Agreed-Upon Procedures Report for the Year Ended June 30, 2005
(With Independent Auditors' Report Thereon)
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KPMG LLPSuite 2000355 South Grand Avenue
Los Angeles, CA 90071-1568
Independent Auditors' Report
The Board of Education
Los Angeles Unified School District:
We have audited the actual costs incurred included in the accompanying statement of project costs of theProposition BB School Bond Construction Program of the Los Angeles Unified School District(the District) for the period from April 1, 1997 (inception) through June 30, 2005. Such statement ofproject costs is the responsibility of the District's management. Our responsibility is to express an opinionon the actual costs incurred included in the accompanying statement of project costs based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the actual costs incurred included in the statement of project costs is free of material misstatement.An audit includes consideration of internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the District's internal control over financial reporting. Accordingly, we express no suchopinion. An audit also includes examining, on a test basis, evidence supporting the amounts anddisclosures in the statement of project costs, assessing the accounting principles used and significantestimates made by management, as well as evaluating overall financial statement presentation. We believethat our audit provides a reasonable basis for our opinion.
In our opinion, the statement of project costs referred to above presents fairly, in all material respects, theactual costs incuned of the Proposition BB School Bond Construction Program for the period from April I ,1997 (inception) through June 30, 2005, in conformity with U.S. generally accepted accounting principles.
December 22, 2005
KPMG LLP. a u.s. limited liability partnership, is the U.Smember firm of KPMG International, a Swiss cooperative.
LOS ANGELES UNIFIED SCHOOL DISTRICTPROPOSITION BB SCHOOL BOND CONSTRUCTION PROGRAM
Statement of Project CostsPeriod from April I, 1997 (inception)- through June 30, 2005
Actual costs incurred
April 1, 1997Project costs,Total
(inception)year endedproject costs,
AdjustedthroughJune 30,throughUnspent
budgetJune 30, 2004200SJune 30, 200Sbudget
(Unaudited)(Unaudited)- New facilities:
New construction:Construction$276,457,844 190,555,3786,674,622197,230,00079,227,844
Tests2,561,7071,770,104791,6032,561,707
Inspection3,559,9492,888,270671,6793,559,949
Sites419,494,206393,302,24226,191,964419,494,206
Plans72,486,64867,065,6675,420,98172,486,648
Nonreimbursable cost852,784899,753(46,969)852,784
Project related salaries - new facilities1,986,8171,827,850-1,827,850158,967- Total new construction777 ,399,955658,309,26439,703,880698,013,14479,386,811
Class size reduction - new facilities share:Portables
-See accompanying notes to statement of project costs.
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LOS ANGELES UNIFIED SCHOOL DISTRICTPROPOSITION BB SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from April 1, 1997 (inception)through June 30, 2004
(1) Proposition BB School Bond Construction Program Background
Proposition BB Initiative (Proposition BB) authorized the Los Angeles Unified School District to issue$2.4 billion in general obligation bonds. Bond proceeds are to be utilized for projects such as the repair ofsafety hazards, asbestos removal, installation of air-conditioning, making classrooms accessible to thedisabled, upgrading security, and the construction of new classrooms. Proposition BB specifically statesthat no bond proceeds are to be used for administrator salaries.
The Proposition BB School Bond Construction Program (Program) is intended to provide needed healthand safety improvements to more than 800 deteriorating schools and 15,000 buildings and to match statefunds for new construction and modernization projects. The Los Angeles Unified School District Board ofEducation has established a Citizen's Oversight Committee to ensure that the proceeds of theProposition BB School Bond Construction Program issues are used for the purposes stated in the resolutionwhich placed the Proposition BB on the 1997 ballot.
All projects are managed by LAUSD approved Program Managers. The Board of Education must approveall project contracts. Each Program Manager is responsible for managing all program-related activities,including the maintenance of master construction schedules and the master program budgets.
(2) Basis of Presentation
The accompanying statement of project costs has been prepared in conformity with U.S. generallyaccepted accounting principles. The accompanying Statement of Project Costs reflects the flow ofeconomic resources management and is presented on the full-accrual basis of accounting.
(a) Adjusted Budget (Unaudited)
The amounts included within the adjusted budget (unaudited) column in the accompanying statementof project costs represent costs that are expected to be expended to complete the various projects.
(b) Actual Costs
The amounts included within the actual costs incurred columns in the accompanying statement ofproject costs represent actual expenditures paid and accrued by the Los Angeles Unified SchoolDistrict for the period from April 1, 1997 (inception) through June 30, 2005.
(c) Unspent Balance (Unaudited)
The amounts included within the unspent balances (unaudited) column in the accompanyingStatement of Project Costs represent the difference between the adjusted budget (unaudited) columnand the total project costs through June 30, 2005 column.
4 (Continued)
-LOS ANGELES UNIFIED SCHOOL DISTRICT
PROPOSITION BB SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from April 1, 1997 (inception)through June 30, 2004
(3) Budget Balances from Inception toFiscal Year Ended June 30, 2005 (Unaudited)
The following is a summary of the budgeted revenues and expenditures for the Proposition BB SchoolBond Construction Program from April 1, 1997 (inception) through June 30, 2005:
Bonds issued
Interest - actual from 1997 (inception) to 2004Interest - actual fiscal year 2005Local income
Total bonds issued plus interest and other income as ofJune 30, 2005
Less prepaid OCIP Insurance
Total budget as of June 30, 2005
Less expenditures/project costs from inception to June 30, 2005
Available budget balance as of June 30, 2005
5
$ 2,400,000,000125,620,124
10,733,68593,057--
2,536,446,866
(12,686,764)
2,523,760,102
(2,271,670,232)
$ 252,089,870
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KPMG LLP
Suite 2000355 South Grand Avenue
Los Angeles, CA 90071-1568
Independent Auditors' Report
The Board of Education
Los Angeles Unified School District:
We have audited the accompanying statement of project costs of the Measure K School Bond ConstructionProgram of the Los Angeles Unified School District (the District) for the period from November 1, 2002(inception) to June 30, 2005, as required by Proposition 39. Such statement of project costs is theresponsibility of the District's management. Our responsibility is to express an opinion on theaccompanying statement of project costs based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the statement of project costs is free of material misstatement. An audit includes consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of the District'sinternal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the statement of projectcosts, assessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion.
In our opinion, the statement of project costs referred to above presents fairly, in all material respects, theproject costs of the Measure K School Bond Construction Program for the period from November 1, 2002(inception) to June 30, 2005, in conformity with U.S. generally accepted accounting principles.
December 22, 2005
KPMG LLP, a u.s. limited liability partnership, is the U.S.member firm of KPMG International, a Swiss cooperative.
LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE K SCHOOL BOND CONSTRUCTION PROGRAM
Statement of Project CostsPeriod from November 1,2002 (inception) to June 30, 2005
Actual costs incurred
Total projectTotal project
costs,Project costs,costs,
through yearyear endedthrough year
Adjustedended June 30,June 30,ended June 30,Unspent
Cost categorybudget2004200S200SBalance
(Unaudited)(Unaudited)
New construction: Phase one:New construction$1,162,626,071 318,302,358458,757,599777,059,957385,566,114
See accompanying notes to the statement of project costs.2
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LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE K SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from November 1,2002 (inception) to June 30, 2005
(1) Measure K School Bond Construction Program Background
The Measure K School Bond Construction Program (Program) is intended to provide funding forcontinued improvements to schools and to provide an additional 112,000 new seats for children and tobuild new neighborhood schools. Additionally, the Program has set funds aside for improving theneighboring communities by enhancing recreational activities and providing after-school space byconstructing new schools near parks and libraries.
The Board of Education has established a School Construction Bond Citizens' Oversight Committee toensure that the proceeds of the Measure K School Bond issues are used for the purposes stated in theresolution which placed Measure K on the 2002 ballot. The Measure K School Bond initiative authorizedthe issuance of $3.35 billion in bonds, after which $2.1 billion was issued in March 2003. The proceedsfrom the Measure K School Bonds are to be used for projects such as repairing leaky roofs, connectingclassrooms to intranets and the internet, equipping libraries at new schools with the initial stock of newbooks, and construction of new schools and early education centers. All projects to be funded under theMeasure K School Bond Construction Program must be included in the Board of Education approvedStrategic Execution Plans, which detail the scope of work to be done for each project. The District hasestablished a Bond Charging Policy to outline the allowable expenditures for the Measure K School BondConstruction Program related costs. Such policies specifically state that no funds will be spent for teacheror administrator salaries or for operating expenses.
All projects are managed by approved District Program Managers. Program Managers are responsible formanaging all program-related activities, including the maintenance of the District's master schedule andthe master program budget.
(2) Basis of Presentation
The accompanying statement of project costs has been prepared in conformity with U.S. generallyaccepted accounting principles. The accompanying Statement of project costs reflects the flow ofeconomic resources management and is presented on the full accrual basis of accounting.
(a) Budget (Unaudited)
Of the $3.35 billion in bonds, the amounts included within the adjusted budget (unaudited) column inthe accompanying statement of project costs represent the current budget authority requested fromthe Board for costs that are expected to be expended to complete the various projects.
(b) Actual Costs Incurred
The amounts included within the actual costs incurred column in the accompanying statement ofproject costs represent actual expenditures paid and accrued by the Los Angeles Unified SchoolDistrict for the period from November 1, 2002 (inception of the program) to June 30, 2005.
(c) Unallocated Costs
Un allocated costs included in the accompanying statement of project costs represent year-endaccrued expenditures incuned for fiscal year 2003-2004 but not yet allocated to a specific costcategory as of June 30, 2004. There were no unallocated costs as of June 30, 2005.
3 (Continued)
LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE K SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from November 1, 2002 (inception) to June 30, 2005
(d) Unspent Balances (Unaudited)
The amounts included within the unspent balances (unaudited) column in the accompanyingstatement of project costs represent the difference between the adjusted budget (unaudited) columnand the total project costs through June 30, 2005 column.
(3) State Funding
The Facilities Services Division transferred $35.8 million in expenditures for seven projects to Measure Kfunds in order to leverage the local bond funds against state matching funds. These projects were going tobe funded by Escutia funds from the state but because of increasing construction costs, the Escutia fundswere insufficient to fund all projects originally planned under Escutia. The transfer resulted in anadditional $80 million of state matching funds for the New Construction Phase I program. All sevenprojects are identified in the Measure K Bond language and in the New Construction Strategic ExecutionPlan.
(4) Budget Balances from Inception toFiscal Year Ended June 30, 2005 (Unaudited)
The following is a summary of the budgeted revenues and expenditures for the Measure K School BondConstruction Program from November 1,2002 (inception) through June 30, 2005:
Bonds issued (fiscal year 200212003)Interest (fiscal year 2002/2003)Interest (fiscal year 2003/2004)Interest (for fiscal year 200412005)
Total bonds issued and interest as of June 30, 2005
Less expenditures/project costs from inception to June 30, 2005
Available budget balance as of June 30, 2005
4
$ 2,100,000,0005,069,730
32,440,48325,954,620
2,163,464,833
(1,122,494,803)
$ 1,040,970,030
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KPMG LLPSuite 2000355 South Grand Avenue
Los Angeles, CA 90071-1568
Independent Auditors' Report
The Board of Education
Los Angeles Unified School District:
We have audited the actual costs incurred included in the accompanying statement of project costs of theMeasure R School Bond Construction Program of the Los Angeles Unified School District (the District)for the period from September 1, 2004 (inception) to June 30, 2005, as required by Proposition 39. Suchstatement of project costs is the responsibility of the District's management. Our responsibility is toexpress an opinion on the actual costs incurred included in the accompanying statement of project costsbased on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance aboutwhether the actual costs incurred included in the statement of project costs is free of material misstatement.An audit includes consideration of internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the District's internal control over financial reporting. Accordingly, we express no suchopinion. An audit also includes examining, on a test basis, evidence supporting the amounts anddisclosures in the statement of project costs, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of project costs referred to above presents fairly, in all material respects, theactual costs incurred of the Measure R School Bond Construction Program for the period fromSeptember 1, 2004 (inception) to June 30, 2005, in conformity with U.S. generally accepted accountingprinciples.
December 22, 2005
KPMG LLP, a u.s. limited liability partnership, is the U.S.member firm of KPMG International, a Swiss cooperative.
LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE R SCHOOL BOND CONSTRUCTION PROGRAM
Statement of Project CostsPeriod from September 1,2004 (inception) to June 30, 2005
Actual costs incurred
Total projectProject costs,
costs, throughyear ended
Adjustedyear endedJune 30,Unspent
Cost categorybudgetJune 30, 20052005balance
(Unaudited)(Unaudited)
New construction: New schools most impacted campuses$15,100,000 4,256,7934,256,79310,843,207- Full day kindergarten 25,000,0004,773,4974,773,49720,226,503
S & T upgrade312,720,67980,400,22380,400,223232,320,456
Support costs - existing facilities34,750,000-34,750,000
Support costs - existing facilities - district salaries1,022,802369,271369,271653,531
Measure R - Prop BB program support cost105,628,22853,964,17353,964,17351,664,055
M R-BB program support cost - district salaries2,269,646703,451703,4511,566,195
Board member priority16,200,000- 16,200,000
M & 0 modernization400,000400,000
AlC auditorium and gym8,000,0008,000,000
Access camp portable classrooms5,228,0005,228,000
Total existing
928,681,449210,901,514210,901,514717,779,935
Others: Adult Education and others - New8,500,00028,75728,7578,471,243
Adult Education - Other200,000200,000
Early Education8,000,0002,003,4142,003,4145,996,586
Early Education - New400,00068,90768,907331,093
Refunding of 1FT-CSF-02B COPS60,471,23360,471,23360,471,233
Refunding of 1FT-CSF-OOBCOPS89,523,47989,523,47989,523,479
Measure R election costs2,719,5352,719,5352,719,535
Cost of issuance - Measure R1,431,3041,431,3041,431,304
Pers-Savings Recap - MR247,400247,400247,400
Pers-Savings Recap - MR others12,12612,12612,126
Total others
171,505,077156,506,155156,506,15514,998,922
Total Measure R project costs
$1,168,694,712 379,014,605379,014,605789,680,107
See accompanying notes to statement of project costs.
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LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE R SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from September 1,2004 (inception) to June 30, 2005
(1) Measure R School Bond Construction Program Background
The Measure R or "the Safe and Healthy Neighborhood Schools Improvement Act of 2004" is intended toprovide funding for continued improvement to schools and to provide an additional 163,233 new seats forchildren and to build approximately 50 new neighborhood schools.
The Board of Education has established a School Construction Bond Citizens' Oversight Committee toensure that the proceeds of the Measure R School Bond issues are used for the purposes stated in theresolution which placed Measure R on the 2004 ballot. The Measure R School Bond initiative authorizedthe issuance of $3.87 billion in bonds. The proceeds from the Measure R School Bonds are to be used forprojects such as: continue repair/upgrade of aging classrooms, restrooms; build neighborhood schools,early education centers; improve security systems, fire/earthquake safety; purchase library books; upgradecomputer technology; eliminate asbestos and lead paint hazards; create small learning communities; andconstruct/upgrade science laboratories and other buildings. All projects to be funded under the Measure RSchool Bond Construction Program must be included in the Board of Education approved StrategicExecution Plans, which detail the scope of work to be done for each project. The District has established aBond Charging Policy to outline the allowable expenditures for the Measure R School Bond ConstructionProgram related costs. Such policies specifically state that no funds will be spent for administrator salaries.
All projects are managed by approved District Program Managers. Program Managers are responsible formanaging all program-related activities, including the maintenance of the District's master schedule andthe master program budget.
(2) Basis of Presentation
The accompanying statement of project costs has been prepared in conformity with U.S. generallyaccepted accounting principles. The accompanying statement of project costs reflects the flow of economicresources management and is presented on the full accrual basis of accounting.
(a) Adjusted Budget (Unaudited)
Of the total $3.87 billion in bonds, the amounts included within the adjusted budget (unaudited)column in the accompanying statement of project costs represent the current budget authorityrequested from the Board for costs that are expected to be expended to complete the various projects.
(b) Actual Costs Incurred
The amounts included within the actual costs incurred column in the accompanying statement ofproject costs represent actual expenditures paid and accrued by the Los Angeles Unified SchoolDistrict for the period from September 1,2004 (inception of the program) to June 30, 2005.
(c) Unspent Balance
The amounts included within the unspent balances (unaudited) column in the accompanyingstatement of project costs represent the difference between the adjusted budget (unaudited) columnand the total projects costs through June 30, 2005 column.
3 (Continued)
LOS ANGELES UNIFIED SCHOOL DISTRICTMEASURE R SCHOOL BOND CONSTRUCTION PROGRAM
Notes to Statement of Project Costs
Period from September 1,2004 (inception) to June 30, 2005
(3) State Funding
The Facilities Services Division transferred $13,746,972 in expenditures for 20 projects to Measure Rfunds in order to leverage the local bond funds against state matching funds. All 20 projects are identifiedin the Measure R Bond language and in the Existing Facilities Strategic Execution Plan.
(4) Budget Balances from Inception toFiscal Year Ended June 30, 2005 (Unaudited)
The following is a summary of the budgeted revenues and expenditures for the Measure R School BondConstruction Program from September 1, 2004 (inception) through June 30, 2005:
Bonds issuedInterest
Total bonds issued and interest as of June 30, 2005
Unissued bonds
Total budget as of June 30, 2005
Less expenditures/project costs from inception to June 30, 2005
Available budget balance as of June 30, 2005
$ 204,182,83717,510
204,200,347
964,494,365
1,168,694,712
379,014,605
$ 789,680,107
Total project costs from inception to June 30, 2005 include $149,994,712 of funds used to refund1FT-CSF-02B and IFT -CSF-OOB certificates of participation.
4
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We have performed the procedures enumerated below for the Proposition BB, Measure K, and Measure RSchool Bond Construction Programs (Bond Programs) administered by the Los Angeles Unified SchoolDistrict (the District or LAUSD). The tasks we undertook were agreed to by the District's officials andwere performed solely to assist the District and its management in fulfilling its oversight responsibilitysurrounding the administration of the Bond Programs funding for the year ended June 30, 2005. Thisagreed-upon procedures engagement was conducted in accordance with attestation standards established bythe American Institute of Certified Public Accountants. The sufficiency of these procedures is solely theresponsibility of those parties specified in this report. Consequently, we make no representation regardingthe sufficiency of the procedures described below either for the purpose for which this report has beenrequested or for any other purpose.
Our areas of inquiry and the corresponding findings are as follows. The samples selected below were forProposition BB, Measure K and Measure R expenditures, unless otherwise noted.
1.1. Procedure
Based on the transactions tested below in procedures 1.2 to 1.16, review compliance with theexpenditure provisions/restrictions in the bond initiatives.
Results
We obtained and inspected the provisions/restrictions imposed by Proposition BB, Measure K andMeasure R. From detail listings of District expenditures incurred during the year ended June 30,2005 under Proposition BB, Measure K and Measure R, we selected the 50 samples listed inAttachment I to determine compliance with the expenditures provisions/restrictions in the Bondinitiatives.
See results section in procedures 1.2 to 1.16.
1.2. Procedure
For the 50 transactions selected in Procedure 1.1, inspect the transactions selected for testwork toensure that no Bond funds were spent on "administrator salaries" as noted in Proposition BB in the1997 Ballot Pamphlet, as well as in the State Proposition 39 and as codified in the State Constitution,Article 13A, Section l(b)(3)(A) for Measure K and Measure R.
KPMG LLP, a u.s. limited liability partnership, is the U.Smember firm of KPMG International, a Swiss cooperative.
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Results
We obtained and inspected Proposition BB in the 1997 Ballot Pamphlet, as well as in the StateProposition 39 and as codified in the State Constitution, Article 13A, Section l(b )(3)(A) forMeasure K and Measure R (provisions/restrictions).
Of the 50 transactions we tested (see Procedure 1.1 above), we noted that no "administrator salaries,"as that term is used in the Bond guidelines, have been charged against Proposition BB andMeasure K and Measure R moneys.
However, during the course of this procedure, we identified the following:
Observation
The Ballot language is broad with regards to the definition of "administrator salaries." We inspectedProposition BB Bond language and the LAUSD Inter-Office Correspondence memo (BB directive)dated October 17, 2002 titled "Cost Assignable to BB Bond Program" and the LAUSD Inter-OfficeCorrespondence memo dated March 19, 2003 titled "Punds Allocation and Bond ChargingProcedures for Measure K" (Measure K directive) as guidelines for "non-administration salaries" andother excludable expenditures related to Proposition BB and Measure K. Expenditure-chargingprocedures for Measure R follow the guidelines outlined in the Measure K directive.
Management's Response
Please see Management Response 1.7.1 to procedure 1.7.
1.3. Procedure
As noted in the State Proposition 39 and as codified in the State Constitution, Article 13A,Section 1(b)(3)(A), there is a requirement that the proceeds from the sale of the bonds be used onlyfor the purposes specified in Article 13A, Section 1(b)(3), and not for any other purpose, includingteacher salaries and other school operation expenses. Based on the transactions tested below inprocedures 1.4 to 1.16, we inspected the transactions selected for testwork below to ensure that noBond funds were used for teacher salaries or other day-to-day school operating expenses.
Results
We obtained the 50 warrant packages identified in Procedure 1.1 and inspected the invoices todetermine whether or not teacher salaries or other day-to-day school operating expenses were paidfor through the use of Proposition BB or Measure K and Measure R funds. We noted that no fundswere used for such purposes.
1.4. Procedure
Select a sample of 20 Measure K and Measure R expenditures to ensure that projects are within workcategories presented to the voters in the applicable Bond initiatives.
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ResultsFrom the 50 items noted in Procedure 1.1, we selected the following 20 expenditures:No.
For the 20 samples noted above, we obtained the account classification, project account code,program and object codes, and compared to the defined work categories presented to the voters in theapplicable Bond initiatives.
No exceptions were noted.
1.5. Procedure
Select a sample of 25 project management firms' billings and inspected the billings for compliancewith contract terms.
Results
We requested and obtained a sample of 25 contracts (Attachment n and III) between LAUSD andconstruction management firms. Of these 25 contracts, 15 contracts were for new construction andthe remaining 10 contracts were for existing construction. The following table shows theconstruction management firms and the type of construction that they perform for LAUSD:
Construction management firm
3DIBovis Lend Lease Inc.
Heery International Inc.HNTB Corp./William J Yang & AssociatesJenkins Gales & Martinez, Inc.Swinerton Management & Consulting, Inc.
3
Type of construction
NewNewNewNewNewNew
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Construction management firm
Vanir Construction Management Inc.Jacobs Facilities, Inc.K-RML, Inc.Parsons Infrastructure & TechnologyPinnacle One, Inc.Tishman Construction CorpTurner Construction CompanyCCG/HarrisJacobs Facilities Inc.DMJM+NOrgel Construction Management3DI
Parsons Infrastructure & TechnologyTurner Construction CompanyHNTB Corp./William J Yang & AssociatesWarner Technologies, IncParsons Brinkerhoff Construction
We interviewed individuals in the New Construction and Existing Facilities and Facilities Contractsdepartments regarding the consistency of contracts between construction firms. The NewConstruction and Existing Facilities and Facilities Contracts departments outlined terms that werestandard in each contract. Based on our discussion, we confirmed that our sample contracts containedthe following: a rate schedule, terms of cancellation, contractor code of conduct, and insurancerequirements (see Attachment II). In our discussions, we found that the management contracts aredifferent between new and existing. For example, New Construction Contracts are fixed fee and for aspecific school, versus Existing Facilities Contracts where the selection is made from a list composedof contractors that responded to an open RFP.
For New Construction and Existing Facilities construction samples listed on Attachment III, weperformed the following procedures (See Attachment III for attributes tested and results obtained):
1. We obtained the payment to construction management warrants and selected two warrantsand/or invoices billed for each contract. We inspected the billings for compliance with contractterms, confirming the position types and the billing rates.
2. We also inspected billing and contract compliance by confirming the number of hours billedon the invoices, and approval by appropriate individuals as indicated in interviews withDistrict personnel.
Except for the following, no other exceptions were noted:
Observation 1.5.1
LAUSD contracts are different for New Construction versus Existing Facilities construction. Weobserved inconsistent standard contract terms as discussed in interviews with the District's Facilities
Contracts Department. In one of the 25 sampled Construction Management Firm Contracts, wefound that the rate schedule was different than the other contracts inspected.
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Management's Response 1.5.1
The observation that the professional services (Construction Management) contracts for NewConstruction and Existing Facilities are different is correct. However, this is by intent as the scope ofservices for New Construction is different from that of Existing Facilities. While there aresimilarities between the two, the scope of the New Construction agreement is LAUSD-wide whilethe scope of the Existing Facilities agreement is more regional. Nevertheless, the established rateschedules for the contracts are identical.
The Terms and Conditions are generally standard. In some cases individual articles, such asindemnity and insurance, may vary as they have been negotiated with the contractor to accommodatetheir form of insurance, optimize the contract, and minimize the risk to LAUSD.
The observation that one of the contracts had a different billing rate is correct. The rate schedulefound in Contract 0490037 is different from that found in the Construction Management contracts.The contract is for Program Management, not Construction Management and the individual rateswere set accordingly as the skill set for Program Management is different from that required forConstruction Management.
Observation 1.5.2
In our review of the 25 new Construction Management Firms encumbrance's requests andsupporting invoices, we observed two exceptions where the hour's documentation (time sheets) didnot agree with the encumbrance request. See exceptions (A) and (B) in Attachment III.
We also observed four (4) invoices reflecting hours worked during a District holiday. Seeexceptions XCI) to X(4) in Attachment III.
Management's Response 1.5.2
Project work schedules do not necessarily conform to LAUSD holiday schedules. Invoices withpreapproved requests for work done during District holidays are paid at straight time.
Finally, these contracts state that only 40 hours per week will be paid, unless additional hours areapproved in advance with signed approval accompanying invoice. If invoice shows more than 40hours per week without signed approval, Facilities Contract Invoice Unit (FCIU) will only pay for 40
- hours.
1.6. Procedure
-Select a sample of 20 projects with expenditures that were incurred during fiscal 2005 to ensure theproject is included in applicable Strategic Execution Plan (SEP).
Results
1. We obtained and inspected the June 30, 2005, 2004, and 2003 SEP for New Construction andExisting Facilities.
2. We selected and inspected twenty (20) of the fifty (50) paid expenditures identified mProcedure 1.1. See Attachment VIII.
3. Based on discussion with the District's Facilities Services Division, the applicable SEP forNew Construction is based on a calendar year; whereas, the SEP for Existing facilities is basedon the fiscal year.
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1.7.
4. We inspected the applicable SEP to the detail of expenses in order to verify that the projectscharged were included in the designated school.
Except for the following, no other exceptions were noted:
Observation 1.6.1
We observed the following exception where we could not determine if the project was allocated tothe proper bond measure:
While Pinewood, Brainard, Mt. Gleason, and Sunland schools were included in the SEP, wenoted Warrant 12101192 covered "Safety and Technology" expenditures for Pinewood,Brainard, Mt. Gleason, and Sunland schools using Measure K funds. While Measure K hasapproved "Safety and Technology" allocations for Pinewood school, it does not have approved"Safety and Technology" project allocations for Brainard, Mt. Gleason, and Sunland. The SEPindicates that Brainard, Mt. Gleason, and Sunland schools have approved Safety andTechnology allocations under Proposition BB and Measure R which are the funding sourcesnoted for these projects in the SEP.
Management's Response 1.6.1
Do not concur. We found all projects and named schools properly supported by the 2005 SEP.Management systems and controls are in place that effectively assure that projects funded by GeneralObligation (GO) bond funds are authorized in the SEPs. Systems are in place that effectively trackprojects to the SEPs for both New Construction and Existing Facilities.
Procedure
Select a sample of 20 expenditures and test project cost controls and charging policies by performingthe following procedures:
1. 7.1 Procedure
Test costing and cost allocations/distributions to projects to determine compliance with theDistrict's Bond Charging Policy.
1. 7.2 Procedure
Inspected overhead/indirect charging practices to determine compliance with the District'sBond Charging Policy.
1. 7.3 Procedure
Inspected cost allocation methodologies to determine compliance with the District's BondCharging Policy.
Results
To test compliance with the District's Bond Charging Policy, we performed the following:
- 1. We obtained and inspected District's cost allocation polices and procedures for the BondPrograms.
2. We inquired as to recent changes and the frequency of updates, for all bond measures.
6
3. We selected a sample of 20 expenditures to test project cost controls and charging policies byperforming the following procedures (See Attachment IV for samples selected and attributestested):
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- A. Tested costing and cost allocations/distributions to projects to determine compliancewith the District's Bond Charging Policy by performing the following procedures:
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• For Measure K and Measure R, verified that the funds were used to pay forconstruction, reconstruction, rehabilitation, or replacement of school facilities,including the furnishing and equipping of school facilities, or the acquisition orlease of real property for school facilities.
• Verified that the following items were not charged to Measures K and R funds:
administrator salaries
teacher salaries
operating expenses
• Verified that movable furnishings and equipment, leasehold interests in realproperty and District administrative salaries were excluded expenses forProposition BB.
B. Inspected overhead/indirect charging practices to determine compliance with theDistrict's Bond Charging Policy
• Verified that the costs for common or joint objectives that could not be identifiedreadily and specifically to a Board approved project, but incurred for the jointbenefit of both projects and other activities limited to the bond program, werecharged to Measure K and Measure R appropriately.
• Verified that the indirect costs incurred at the district level, general andadministrative expenses were not charged to Measure K and Measure R.
Verified that the indirect labor costs incurred at the branch level were charged toMeasure K and Measure R as long as the work performed significantly influencedthe successful execution of the Bond projects. Also verified that all indirect laborcosts for routine maintenance and operations management were not chargeable toMeasure K and Measure R funds.
C. Inspected cost allocation methodologies to determine compliance with the District'sBond Charging Policy.
Except for the following, no other exceptions were noted:
Observation 1. 7.1
The District does not have written policies or procedures specific to Measure R. Instead, it iscurrently following the guidelines established for Measure K under the memorandum datedMarch 19, 2003 titled "Funds Allocation and Bond Charging Procedures for Measure K." Thememorandum establishes general policies for indirect and overhead costs, and is not specific enoughto explain why similar costs may be given a different accounting treatment when it is incurred byNew Construction versus Existing Facilities.
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1.8.
Management's Response 1. 7.1
Partially Concur. The Facilities Services Division (FSD) currently has adequate procedures for thedistribution and execution of bond funds issued pursuant to the passage of Measure BB and MeasureK. Measure K procedures are currently being used as the template for Measure R support. Bothprocedures were developed by FSD and the Chief Financial Officer (CFO) in cooperation with theGO bond counsel and KPMG Financial Advisors. They were reviewed and approved by the CFO,Chief Facilities Executive, and by both in-house and external legal counsels. Official guidance forincorporating Measure R funds is currently under review by various levels of management, includingthe office of the CFO and also Bond Counsel. A consolidated bond policy that addresses all GO bondmeasures (Measure BB, Measure K, Measure R, and Measure Y) will be released in the near future.It is under review at this time.
Measure K guidelines are being used as guidance for Measure R until the consolidated Bond GObond policy is finalized and issued.
Observation 1.7.2
In 4 of the samples inspected, we were not able to clearly identify if the District was responsiblepaying certain indirect expenses. Inspection of the warrant packages for warrants number 12856795,12220930, 12878898, and 12802570 revealed that the District was charged by the vendor for itemssuch as dumpsters, field office/trailers, fax, copier, and temporary toilets.
Unlike other contracts inspected by us, where the contract stated that LAUSD would provide officespace, office equipment and supplies, telephones, and computers necessary to accomplish the scopeof service assigned, the contracts with the entities paid with the above warrants did not clearly definewho was responsible for bearing the noted costs.
Management Response 1. 7.2
Do not concur. Expenditures observed by the KPMG auditors are covered under Section 11.5 - Costof the Work of the General Conditions of construction contract. As defined in this section, "Cost ofthe Work" shall include the sum of all direct and indirect costs necessarily incurred and paid for byContractor in the proper furnishing and/or performance of the Work.
Procedure
If the selected sample in Procedure 1.1 above includes any transactions related to materials chargedto the GOB program by contractors, test to determine that the "materials" billed were for work onrelated projects.
Results
From the sample noted in Procedure 1.1, we selected the twenty (20) warrants listed IIIAttachment V for testwork.
• We obtained and inspected LAUSD Construction Manual Section 14.15 for contractorpayment procedures as well as interviewed members of the FCIU.
• We confirmed that the sample expenditures fell within the scope for each school as stated inthe actual Proposition BB, Measure K, and Measure R documentation. In addition, we verifiedthat each invoice was coded to the appropriate fund to the encumbrance request form.
8
-• We verified the submittal of application for payment process by:
Verifying that the Contractor submitted "draft" Application for Payment to OwnerAuthorized Representative (OAR) for review.
Verifying that the OAR completed the Contract Payment Checklist, indicatingverification of certain items required for payment approval. These are the followingitems in the checklist:
A. Review the Application for Payment to ensure completeness
- B. Review with lOR and Architect the percent of work completed as indicated in the"Total Percent Complete" column of the Contractor's Application for Payment
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C. The Description of Work and Schedule Values should be compared against theapproved Proj ect Schedule of Values
D. Review approved Change Orders Work is completed in and correlates to thepercentage completed listed in each line item(s)
E. Verified with the Inspector of Record (lOR) that all stored material being billed issecured on-site or in a bonded warehouse.
• We verified the Application of Payment Processing and validity and accuracy of expendituresby:
Verifying that the OAR prepares Encumbrance/Payment Request form and obtainsrequired signatures
Verifying that OAR assembles payment documents and forwards to Facilities ContractInvoice Unit
Verifying that the FCru reviews for completeness, sets up payment in the IntegratedFinancial System (IPS), and forwards to Accounts Payable
Verifying that Accounts Payable reviews for completeness, updates IPS, and forwardsdocuments to the County of Los Angeles
Verifying that the County issued the checks to the Contractor
Verifying that OAR forwards original Owner Assessment Summaries and documents toFacilities Contract Services, Construction Contracts Unit.
We noted no exceptions as a result of performing the procedures, except as follows:
Observation 1.8.1
We observed that warrant 12847226 related to a bridge loan made by LAUSD to The AcceleratedSchool (TAS), an independent charter school, using bond funds. Such expenditures are notspecifically addressed in the Bond language.
Management Response 1.8.1
The purpose of the bridge loan was in accordance with the purpose of the GO bond funds utilized forthe loan. The completed construction work on this project supported the amount of the payment forthe bridge Joan. There was clear documentation describing the terms and conditions of the bridge
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loan. As part of the bridge loan agreement, the District has legal recourse to the improvementsfunded by the loan. FSD obtained a favorable opinion from the Office of the General Counsel andBond Counsel, for the use of GO bond funds for the bridge loan.
In light of the foregoing, FSD believes that the bridge loan was an appropriate use of GO bond funds.
Observation 1.8.2
We observed that TAS project expenditures were paid to the developers via an escrow account.
Management's Response 1.8.2
Appropriate management oversight in the execution of this project was provided. The project is nowcomplete and the school in operation.
1.9. Procedure
Review compliance with the District's Change Order procedures for GOB funded projects by testing20 change orders to determine if they were approved in accordance with the District's policy.
Results
To test compliance with the District's Change Order procedures, we performed the following:
1. Obtained and inspected the District's Change Order Polices and Procedures.
2. Inquired as to recent changes and the frequency of updates, for all bond measures.
-3. Selected 20 Change Order Packages to test compliance with Facilities Services Division
change Order Policies and Procedures (see Attachment VI for sample selected and attributestested).
4. Inspected compliance with the District's Change Order procedures for bond-funded projects todetermine if they were approved in accordance with the District's policy. Verified andinspected each change order had the following documentation and signatures as stated in theFacilities Services Division Change Order Policies and Procedures revised September 8, 2003.
a) Verified that Request for Proposal is used by the OAR directing the Contractorsubmission of a written estimate detailing the proposed changes. Determine if the OARsigned and authorized, transmitted the RFP to the Architect and inspector of Record.Verified the contractor responded to the RFP in 14 day or less.
b) Verified a Change Order Proposal was prepared and issued by the Contractor settingforth proposed adjustments.
c) Verified a Change Order Package had the OAR directing the preparation of ChangeOrder and submits the Change Order Package to Facilities Contract Services, ChangeOrder Processing Unit (COPU).
d) Verified the date of submission was within seven days from the date of the agreement.
e) Verified the Change Order had the following approval signature:
1. Architect
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11. Structural Engineer (when required by law or regulation)
Ill. Contractor; OAR
IV. (For owner-initiated change to scope of work) Director of Facilities Projects,Existing Facility; the Deputy Chief Executive (SBP New Construction); or theDeputy Director of Maintenance & Operations.
f) Verified the Construction Directive was issued by the OAR on or after the effective dateof the contract directing the Contractor to proceed regarding an issue of dispute orrequiring the Contractor to take a specified action regarding the Work, Project, and/orContract.
Except for the following, no other exceptions were noted:
Observation 1.9.1
We observed that the supporting documentation for the 20 Change Orders selected for testing wasnot complete based on the guidelines outlined in the Construction Manual section "Change Orders."See Attachment VI for exceptions identified.
Management Response 1.9.1
The Change Order procedures include guidelines for when specific criteria are required or optionalduring the Change Order approval process.
Observation 1.9.2
All twenty (20) samples tested were not in compliance with District policy requiring the Contractorto sign a Change Order.
Management Response 1.9.2
Partially concur.
Contractor's signature is preferred but not required for a Change Order to be executed or processed.The contractor's signature on the change order is redundant. The contractor, by signing theconstruction contract, warrants that he will perform all work. Contractor has right to file a claim orgo to arbitration whether he has signed the change order or not. Potential disputes/claims areidentified by the OAR and are identified and tracked. These reports are inspected by the ProjectControls staff to develop an Estimate at Completion (EAC) forecast that includes potential claimsactivity.
Observation 1.9.3
The Districts' Construction Manual requires Change Orders to be submitted within 7 days of therevised agreement. Of the twenty (20) samples tested, 14 were not submitted within seven days andfive did not have a date indicated. See Attachment VI.
Management Response 1.9.3
The LAUSD Facilities Construction Manual provides a goal for the submission of Change Orders.To the extent possible, the District follows that goal.
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Depending on the specific circumstances, Change Orders range from simple to complex. Forexample, design drawings for change order work can require approval of the Division of the StateArchitect. This is a time-consuming process, only partially controllable by the District.
Use of guidelines rather than inflexible time requirements for Change Order submittal is utilized bythe District because it makes the most sense under the circumstances.
1.10. Procedure
Test a selected sample of 30 "A" and "B" letters for compliance with the District's policy on the useof these types of contracts.
Results
To test compliance of "A" and "B" letters with District policy, we performed the following:---
1.
2.
We obtained and inspected the LAUSD Financial Guide No A-3, which reviews the policy oninformal contracts.
We inquired as to recent changes and the frequency of updates.
3. We selected a sample of 30 "A" and "B" letters processed during fiscal year 2005 for all GObond program funds. See Attachment II.
4. We inspected and verified the letters for compliance with the District's policy stated InFinancial Guide No. A-3. We verified the following policy items:
C. For "A" letters exceeding $2,000, Branch Director or Deputy Director approvalsignatures are required.
A. For "A" letters - we confirmed that the dollar mount of the work performed was lessthan $14,999, the project was for repainting, alterations, improvements, renovation,erection, construction, reconstruction, and repair work (except for maintenance asdescribed below) for any District owned, leased, or operated facility.
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B. For "B" letters - we confirmed that the amount was between $25,000 and $60,900 forthe period July 1,2004 to April 30,2005, and $62,400 for May 1, 2005 to June 30,2005the work may also be related to repair and "maintenance" defined as routine, recurring,and usual work for the preservation, protection, and keeping of any District-owned oroperated facility for its intended purpose in a safe and continually useable condition forwhich it was designed, improved, constructed, altered, or repaired. All paint projects areexcluded.
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D. For "B" letters exceeding $5,000, Branch Director or Deputy Director approvalsignatures are required.
E. For "A" and "B" letters greater than $15,000, not to exceed $60,900, the contractormust:
1. Submit a bid guarantee bond in the amount of 10% of the bid
11. Submit a performance bond from an admitted surety approved by the District.
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-- 5. We obtained all other A and B letters issued for the projects related to the 30 type "A" and "B"
letters tested and determined if any of the combinations of type A and B letters totaled morethan $60,900.
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No exceptions were noted.
1.11. Procedure
Test a sample of transactions to determine the appropriateness of the allocations of expenditures tocapital assets or expenses.
Results
To test the appropriateness of the allocations of expenditures to capital assets or expenses, weperformed the following:
1. From the sample population identified in Procedure 1.1, we selected 20 transactions fortesting. See Attachment IX.
2. We verified the supporting documentation, including invoice/payment, to ascertain that theexpenditures matched the description of the Program and Object code.
3. We verified the documentation included an Encumbrance Request Form, proper approvals,and coding information.
No exceptions were noted.
1.12. Procedure
Review the District's Fund Allocation and Bond Charging Procedures for payment of GOB"Construction Program" expenditures to confirm the following:
An authorized representative of the Project Management Firm must "certify" invoices relatingto professional services.
• The invoice, along with a District-approved Encumbrance/Payment Request form, includingevidence of approval by an appropriate Los Angeles Unified School District employee, mustbe submitted in order to process the payment.
• With respect to construction expenditures, we noted that OAR must certify the Application forPayment and submit a completed Contractor Payment Transmittal, which includes anauthorized Encumbrance/Payment Request form, Application for Payment, and the OwnerAssessment Summary.
• The District FCru Analyst reviews all requests for payment for compliance with theexpenditure policy for the bond construction programs prior to the processing of the paymentby the District.
Results
We performed corroborating inquiries of multiple individuals within the Facilities department toascertain compliance with the above procedures. See observations 1.2, 1.3, and 1.7 regarding theDistrict's Fund Allocation and Charging Policies.
No exceptions were noted.
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Management's Comment on Point 4 of Procedure
The appropriateness of projects and their funding under the bond construction programs areestablished and verified well in advance of project work completions and requests for contractorpayments. Compliance with the expenditure policy for the bond construction programs is a jointeffort, primarily of the project management organizations (New Construction and Existing Facilities)and the Facilities Support Operations (FSO) Department (part of FSS). This takes place early in thelife cycle of a project.
The role of the FCru is to assure compliance (at the time requests for payments are processed) withwhat has previously been verified as appropriate (under the bond construction programs) by FSO andProject Management and, further, to assure that all necessary approvals and supportingdocumentation are provided and data and calculations are correct.
1.13. Procedure
Compare the GO Bond Fund financial statements as of June 30, 200S with the monthly financialreports of GOB budgets and expenditures prepared by LAUSD for the Board Facilities Committeeand Bond Oversight Committee over the same fiscal period/year.
Results
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• We obtained the Statements of Project Costs for Proposition BB, Measure K, and Measure R(Statements) for the period from inception through June 30, 200S. We compared and agreedthe total project costs for Proposition BB, Measure K, and Measure R on the Statements to thegeneral ledger without exception. We also compared and agreed, in total, bond expenditures tothe District's Comprehensive Annual Financial Report (CAFR) as of and for the year endedJune 30, 200S. However, we were not able to perform the monthly comparison of theStatements due to the following exception:
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Observation 1.13.1
We observed that the District does not issue monthly financial reports to the BOC or the Board thatcompare actual versus budget information in a similar fashion to the annual Statements of ProjectCosts.
Management's Response 1.13.1
We concur that the monthly financial reports described are not issued to the BOC or the Board.
However, based on communications with the BOC consultant, the information requirements of theBOC are currently being met.
1.14. Procedure
Test appropriate GOB hours recorded on contractor time sheets and hours billed to the GOB programby contractors to determine that the hours billed were for work on GOB projects.
Results
We sampled ten subcontractors' time sheets from our original sample of warrants selected inProcedure 1.1. We were not able to complete the procedure as the subcontractor's time sheetssubmitted with the prime contractor application for payment could not be reconciled.
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Management's Response
The purpose and use of these time sheets are to assure that subcontractors are paid at prevailing wagelevels as determined by the State of California. They are irrelevant for reconciliation of constructioninvoice payments under fixed price contracts.
1.15. Procedure
Review budget to actual expenditures, as applicable, to ensure that actual expenditures againstbudgeted amounts are inspected by District management.
Results
We could not complete this procedure as the District does not prepare monthly bond funds financialreports for the Board Facilities Committee and Bond Citizens' Oversight Committee. SeeProcedure 1.13.
1.16. Procedure
Test the selected sample identified in Procedure 1.1 for compliance with the District's exceptionreporting policy. If project is more than 5% over budget, was it reported to Augmented FacilitiesCommittee and BOC?
Results
This procedure could not be completed as the District is currently not preparing early warnmgmemos, as required by the Bond Citizens' Oversight Committee's MOD.
Management's Response
In reviewing the details of the MOD, it was determined that the spirit and intent of the MOD arebeing met, even though, technically, there are some requirements that are not being met. However, indiscussion with the BOC consultant, it was further determined that the information needs of the BOCare, in fact, being met. Therefore, a project is underway to align the MOD to the true needs of theBOC, which are being met with the information now provided.
The term "memo" is not sufficiently descriptive. This "early warning" information is provided forNew Construction projects in a very usable form. New Construction prepares a schedule of changesto the Program Contingency on a regular basis. Each project with a budget increase from theProgram Contingency is identified on a form with pre-existing and new budget, reason for thechange(s), and percentage change.
The BOC Consultant, receives the above report and reviews it with the head of New Construction, atwhich time, they come to agreement as to what information should be presented in the monthlyreport to BOC. As a practical matter, the situation is often reported to the BOC earlier than when achange to the Program Contingency is made, such as when the bids for a construction project comein over estimate, but the Program Contingency change is put on "hold" until the procurement iscompleted. Such reporting packages are available and can be provided to KPMG.
For Existing Facilities - Modernization, the requirement of the MOD is not currently followed,because that was not fully considered when the MOD was drafted. For New Construction, with about200 projects, each of at least seven figures, it is appropriate to report variations on a project-byproject basis. For Existing Facilities - Modernization, however, with 18,000 projects, it is generallynot appropriate or productive for BOC to get into great project detail on cost. For example, when
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..•....••
$90k painting project goes to $96k, it is not useful information for the BOC. Instead, the BOC isprovided with "class" reports that are truly useful to the Committee members. As an example,painting projects (the class) in total are within the limit, but HV AC projects (another class) as overbudget by X%. This information is useful to and used by the BOC.
We were not engaged to, and did not, conduct an examination, the objective of which would be theexpression of an opinion on the District's administration of the Proposition BB, Measure K, and Measure RSchool Bond Construction Program. Accordingly, we do not express such an opinion. Had we performedadditional procedures, other matters might have come to our attention that we would have been reported toyou.
This report is intended solely for the information and use of the Board of Education, management, andmembers of the Citizen's Oversight Committee of the Los Angeles Unified School District and is notintended to be, and should not be, used by anyone other than these specified parties.
We thank the members of the Citizen's Oversight Committee and the staff of the Los Angeles UnifiedSchool District for their assistance and cooperation in performing our review. We shall be happy to meetand discuss our findings at your convenience.
December 22, 2005
16
-LOS ANGELES UNIFIED SCHOOL DISTRICT
PROPOSITION BB, MEASURE K, AND MEASURE R PROGRAMSAGREED-UPON PROCEDURE 1.1
Attribute met without exception.Hours invoiced exceeded 40 hours a week in accordance to the contract for two employees.1I0urs documentation did not agree with the amount paid. Invoice was less than time sheet, an employee's time sheet indicates 168hours for the month but in the invoice it was noted that he worked 160 hours.
Employee's time sheet renects hours on 2/21/2005, which was a LAUSD holiday.Employee's time sheet renects hours on 2/21/2005, which was a LAUSD holiday.Employee's time sheet renects hours on 1/17/2005, which waS a LAUSD holiday.Employees' time sheets renect hours on 2/21/2005, which was a LAUSD holiday.Invoice amount was $336,356. This represents a $4 difference from the amount in FCIU data record.
LOS ANGELES UNIFIED SCHOOL DISTRICTPROPOSITION BB, MEASURE K, AND MEASURE R PROGRAMS
AGREED-UPON PROCEDURE 1.7
YEAR ENDED JUNE 30, 2005
Attachment IV
Verizon California 04/15/05$1,332,558.921285679541020201R,BB(1), (2)(1), (2)(2)(2)(2)
Expenditures excluded administrator salaries, teacher salaries, and operating expenses. (Measure K and Measure R).
Expenditures excluded movable furnishings and equipment, leasehold interests in real property, and District administrative salaries (Proposition BB).
Expenditures with common or joint objectives identified readily and specifically to a Board-approved project but incurred for the joint benefit of both projects havebeen charged to Measure K and Measure R.
Expenditures with indirect costs comply with policy Measure K and Measure R funds.
Verify that all indirect labor costs for routine maintenance and operations management are not chargeable to Measure K and Measure R funds.
Attribute met without exceptions.
Expenditures do not comply with charging policy of Proposition BB for indirect expenses.
Expenditures do not comply with charging policy of Measure K and Measure R for indirect expenses.
Items such as classroom accessories were charged to the fund.
The cost allocation on the schedule provided by client reflects Proposition BB; however, the encumbrance request indicates Measure R.
The cost allocation on the schedule provided by client reflects Proposition BB; however, the encumbrance request indicates SME.
The warrants are for Professional Construction Management Fees. The documentation does not detail costs; therefore, we could determine appropriate costallocation.
Does not specify the exact type of work that was performed.
Not Applicable.
LOS ANGELES UNIFIED SCHOOL DISTRICT
PROPOSITION BB, MEASURE K, AND MEASURE R PROGRAMSAGREED-UPON PROCEDURE 1.8
YEAR ENDED JUNE 30, 2005
Attachment V
-tllllWrll!
"~", ' '. ,~\. :B ."3~" , ._ '. ,,'..r'L
431314473707/18/05Alfa 26 Construction Co Van Nuys School
I 2
I43 1255591201/14/05Bernards Bros Construction IncPeary Middle School
I
3 43 1272853603/04/05Verizon California Le Conte Middle School-4
45 1252625801/10/05Alfa 26 Construction Co Foshay Learning Center
5
45 1278634703/25/05S J Amoroso Construction CoBelmont School
6
45 1216367809/09/04Masco Electric Inc Miles Elementary
7
45 1222093009/28/04Emma Corporation Humphreys
- I8 45 1247232312/16/04Pinner Construction Co IncHamilton School
9
45 1244558412/08/04C & P Plumbing & ConstructionJordan School
10
45 n/a n/aVerizon California Ford Blvd Elementary
11
45 1282924604/17/05Verizon California 96th St
12
44 1266184302/14/05La School Developers Central LA Area New HS#lO
13
44 1284722604/08/05LAUSD (the Accelerated School)IAccelerated Charter
14
44 1287889804/19/05Tutor-Saliba Corporation ICentral LA Area New SH #1
15
44 1297953005120/05Bernards Bros Construction IncE. Valley Area New MS #1
16
44 1315297007/14/05LA School Developers Central LA Area New HS#lO
17
44 1313846907/11/05Hensel Phelps Construction CoICentral LA Area New SH # 2
18
44 1275812003/09/05Pel Construction Services IncEast Valley New HS #1 b
19
44 1284035303/30/05Pinner Construction Co IncCentral LA Area New MS #1
20
44 1222092909/21/05Emerald Development Co JncSo Cntrl LA Area New SH #1
LOS ANGELES UNIFIED SCHOOL DISTRICT
PROPOSITION BB, MEASURE K, AND MEASURE R PROGRAMSAGREED-UPON PROCEDURE 1.9
YEAR ENDED JUNE 30, 2005
{ (
Attachment VI
District Policy Chan 'c Order ProcessChan cOrder Packal!c Compliance
Change Order
Change OrderConstructionOriginal
% or ChangeChange OrderOAR SignedOAR Change OrderPackageDate ofSigned by the
Directive Issued byChange Order
Change Order ContractChange OrderOrder toReceived byChange OrderDays inand
Requested Proposal isSubmitted by OARSubmission isArchitect,the OAR on or
AmountServices Dale the Requestto theRespondedtheContract Services,from the Date ofEngineer,Dale of thefor ProposalArchilecl and ContractorChange Orderthe Agreement.Contractor, and
SCS FLOORING SYSTEMS INC 156TH STEL]2/06/041/31/2005-2/28/2005B K-00000729$25,000.00N/AXN/AXN N
30
RELIABLE FLOOR COVERING STANFORDEL04/07/045/1/2004-6/15/2004BJ -00000222$36,293.00N/AXN/AXN N
Attributes tested:
(I) If < $14,999, the project is for repainting, alterations, improvements, renovation, erection, construction, reconstruction, and repair work.
(2) If amount is between $25,000 and $60,900 for the period 7/1/04 to 4/30/05 and $62,400 for 5/1/05 to 6/30/05, thc work may also be related to repair and "maintenance" defined as routine, recurring, and usual work.
(3) "A" letters exceeding $2000 - Signed by Branch Director or Deputy Director.
(4) "B" letters exceeding $5000 - Signed by Branch Director or Deputy Director.
(5) Contractor submitted guarantee bond for I0% of bid.
(6) Contracted submitted performance bond from an admitted surety approved by the District.
Legend:
X = Attribute met without exception.
X (I) = Attribute met without exception; however, the recorded data provided by FCTU states that the bid amount was $0.00 and the documentation, the Bid Letter stated the amount was $2,374.88.
X (2) = Attribute met without exception; however, the recorded data provided by FCTU does not agree to the Bid Letter and the documentation, the Bid Letter states that the bid amount is $2,252.50.
(3) = Contract is not signed by either Branch Director or Deputy Director as stated in procedures.Y = Yes.N = No.
N/ A = Not applicable to specific contract letter.
LOS ANGELES UNIFIED SCHOOL DISTRICT
PROPOSITION BB, MEASURE K, AND MEASURE R PROGRAMSAGREED-UPON PROCEDURE 1.6