Report 2020-104 Recommendation 2 Responses

Report 2020-104: Calbright College: It Must Take Immediate Corrective Action to Accomplish Its Mission to Provide Underserved Californians With Access to Higher Education (Release Date: May 2021)

Recommendation #2 To: Calbright College

To provide greater accountability regarding its spending and to ensure that it effectively uses the public funds it receives to accomplish the goals for which it was created, Calbright should do the following:

1. By November 2021, incorporate into its implementation plan a spending plan that details how and when it expects to spend the funds the Legislature allocates to it. At a minimum, the spending plan should identify the estimated costs to accomplish the tasks set forth in its implementation plan and a timeline for when it expects to incur those costs. The spending plan should also describe Calbright's strategy for staying within its budget while completing necessary start-up activities and achieving its milestones.

2. Calbright should annually review the spending plan and make adjustments as necessary. It should also annually report to the Board of Governors on its spending to date and explain how its spending has furthered its progress in achieving its mission.

Annual Follow-Up Agency Response From October 2023

In November 2021, Calbright incorporated into its Implementation Plan an aligned Spending Plan. The California State Auditor's office indicated this recommendation would be complete following the first annual review of the Spending Plan and report to the Board of Trustees.

The first annual review of the Spending Plan (SP) took place late 2022 and early 2023, which led immediately into the College's FY 2023-2024 budget planning. Calbright's annual budget is the manifestation of the SP and advances the strategy and priorities outlined in the internal and deliberative planning document. The review of the SP included consultation with Calbright's department heads and pertinent directors to ensure alignment in forward-looking planning, and was also updated to reflect prior fiscal years' actual spending. This review includes evaluation of anticipated personnel and resource needs, departmental priorities as they relate to the College's operations and Strategic Vision, and progress against deliverables in the Implementation and Spending plans. This review and update served as the foundation for initial development of Calbright's FY 2023-2024 budget, which aligns with and advances the College's priorities and Board-approved Strategic Vision.

Calbright's budget is created in collaboration with College leadership, department heads, chief financial officer, and Board of Trustees and is a multi-month process. Activities also include regular public updates to the Board of Trustees as well a formal adoption of the budget in the summer as part of regularly scheduled public Board meetings. The College also provides quarterly financial updates in Board meetings to ensure budget compliance and also presents, for approval by the Board, contracts the College seeks to engage in that exceed $100,000, and provides monthly updates on all external contract expenditures processed in the prior month as well as all significant expenditures made by the College.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Calbright has previously provided its implementation plan, which we found to include a spending plan that projected the costs associated with its planned activities for setting up the college. For this update, Calbright provided documentation showing its annual budget and quarterly updates to the board on that budget. It also provided its spending plan, which had been updated to include actual expenditures for fiscal years 2022 and 2023.

Annual Follow-Up Agency Response From November 2022

In November 2021, Calbright incorporated into its Implementation Plan (IP) an aligned Spending Plan, which provides greater accountability regarding the College's spending and ensures an effective use of public funds. The California State Auditor's office has indicated that this recommendation is currently partially implemented and will be considered fully implemented when the first annual review of the Spending Plan and report to Calbright's Board of Trustees is complete. Calbright anticipates conducting an annual review of the Spending Plan on schedule and reporting to the Board of Trustees during the first quarter of 2023.

The first annual review of the Spending Plan will begin in November 2022. Following an internal review, the College will provide a report to the Board of Trustees about how the Plan has advanced progress toward achieving the College's mission, and any necessary adjustments made to the Plan as part of the review process. As noted above, the College anticipates this report to the Board will take place during the first quarter of 2023.

In addition to an annual review of the Spending Plan, the College also provides a quarterly financial update as part of regular Board meetings, and will continue to present an annual budget for Board approval that is designed to achieve the College's mission.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

In November 2021, Calbright incorporated into its Implementation Plan (IP) an aligned Spending Plan, which provides greater accountability regarding the College's spending and ensures an effective use of public funds. This recommendation is fully implemented at this time, with the caveat that an annual review and report to our Board of Trustees will be completed each year going forward. To accomplish this, the College plans to provide a quarterly financial update as part of regular Board meetings, and to also continue presenting an annual budget for Board approval that is designed to achieve the College's mission.

The Spending Plan identifies estimated costs to accomplish the tasks set forth in the IP and a timeline through the end of FY2025 for when we expect to utilize these funds. These costs include both labor and related expenses (e.g., salaries and benefits for full-time staff and faculty) and operating costs.

The spending plan, like Calbright's board-approved Strategic Vision goals, is based on a conservative assumption of flat annual funding from the state at $15 million (not adjusted for inflation), which materially constrains future growth. This is a reduction from the $20 million annual funding initially provided, even though statutory and other expectations have not been adjusted accordingly. Any additions or reductions in actual annual funding levels through FY2025 will affect the pace and scope of activities identified in the IP.

Calbright will review this Spending Plan at least annually and make adjustments as needed to ensure budget compliance while also completing necessary start-up activities and achieving institutional milestones specified in Calbright's founding legislation. Data on actual spending and revised projections of specific tasks will be included in the years ahead. Additionally, as we review our IP at least every six months, any modifications or adjustments to the IP will be reflected in updates to the spending plan.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

As we stated in the last evaluation of this recommendation, we will assess Calbright's implementation of the annual review portions of this recommendation in November 2022.

6-Month Agency Response

To provide greater accountability regarding Calbright's spending and to ensure an effective use of public funds, the College has incorporated into its Implementation Plan (IP) an aligned spending plan that details how and when we expect to spend the funds allocated by the Legislature. The spending plan identifies estimated costs to accomplish the tasks set forth in the IP and a timeline over the next four fiscal years (FY2022-FY2025) for when we expect to utilize these funds. These costs include both labor and related expenses (e.g., salaries and benefits for full-time staff and faculty) and operating costs. The spending plan, like Calbright's board-approved Strategic Vision goals, is based on a conservative assumption of flat annual funding from the state at $15 million (not adjusted for inflation), which materially constrains future growth. This is a reduction from the $20 million annual funding initially provided, even though statutory and other expectations have not been adjusted accordingly. Any additions or reductions in actual annual funding levels will affect the pace and scope of activities identified in the IP.

To stay within budget while completing necessary start-up activities and achieving institutional milestones specified in Calbright's founding legislation, we will review our spending plan at least annually and make adjustments as needed to ensure fiscal efficiency and sustainability, incorporating data on actual spending and revised projections of specific tasks. Additionally, as we review our IP at least every six months, any modifications or adjustments to the IP will be reflected in updates to the spending plan. We will annually report to the Board of Trustees on our spending to date and explain how our spending has advanced progress in achieving Calbright's mission.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

The Implementation and Spending Plan that Calbright provided incorporates the estimated costs associated with each of the tasks included in the Plan, as well as a timeline for which it expects to complete those tasks.

Because this recommendation includes annual review of the spending plan and reporting to the Board of Governors, we will assess Calbright's full Implementation of this recommendation after Calbright's first opportunity to implement those elements of the recommendation, which will occur in November 2022.

60-Day Agency Response

Calbright is developing a spending plan that details how and when the college expects to spend allocated dollars. Subsequent to the final enactment of the 2021-2022 State Budget, the college is working with its Board of Governors (Calbright's Board of Trustees) to adopt its FY 2021-2022 budget consistent with the goals and objectives under the first year of the college's Strategic Vision, key legislative milestones, and other program and compliance requirements.

As noted in the response to Recommendation #6, the college has taken the next steps in the development of the 7-year implementation plan including a preliminary operational plan identifying key activities being undertaken and timeframes for advancing the goals set forth in the College's plan (Strategic Vision). This plan is based on the best available data in the field.

The development of the spending plan will track the development of the college's revised 7-year implementation plan also required by November 2021. The Chief Financial and Administrative Officer and Controller/Executive Director of Finance have begun a process to identify estimated costs associated with key activities under the operational plan. This process includes a budget review with an eye toward capital outlays and additional estimates of staffing to match the growth in students over the next several years. These activities will be essential to the success of our students, and the college will be working to ensure that there are sufficient resources to meet these needs while the college grows.

Longer-term cost estimates are anticipated to follow 2021-2022 budget and policy deliberations, which are expected to wrap up by August 2021, and will also inform longer-term discussions.

California State Auditor's Assessment of 60-Day Status: Pending

We will assess Calbright's spending plan when Calbright provides that plan in November 2021.

All Recommendations in 2020-104

Agency responses received are posted verbatim.