Report 97107 Summary - December 1998

Los Angeles Community College District:

Proposed Reforms Have Not Fully Addressed Past Problems and Create a New Set of Challenges

RESULTS IN BRIEF

The Los Angeles Community College District (district), composed of nine colleges and a district office that provide educational services to approximately 100,000 students, is the largest in the State. In December 1997, its independent financial auditors warned that the district might not remain financially viable. Moreover, the Accrediting Commission for Community and Junior Colleges expressed extreme alarm in January 1998 about this opinion and cited specific concerns about district-level planning, budgeting, administrative stability, and fiscal health.

Our review focused on the causes of the district's fiscal and budgetary difficulties and how the district plans to address them. We found that costly policies and poor management have contributed significantly to the district's poor fiscal condition. For example, the board agreed to salary increases for district employees and allowed excessive overtime for campus police officers, which significantly increased costs. In addition, ineffective budgeting practices and lack of accountability have prevented the district from promptly reacting to its fiscal problems and have resulted in overspending and depletion of district reserves. The district's ability to effectively deal with its fiscal problems has been hampered by its lack of cohesive long-range planning, the terms of agreements the board has negotiated with employee unions, and state requirements for the use of full-time faculty. As a result, the district continues to face financial uncertainty.

Many college facilities are run down and in need of repair. While we did not find conditions that raise serious and immediate safety concerns, we believe the poor condition of the facilities is severe enough to affect students' decisions to attend the colleges. The lack of funding at the state and local level hampers needed repairs, improvements, and ongoing maintenance.

Finally, the district is undergoing reforms, a primary feature of which is a decentralization process to vest more decision-making authority with the college presidents. While the district initiated these reforms in response to its fiscal problems, plans to date have not adequately addressed the costly decisions and poor budgeting practices that historically contributed to these problems. Additionally, the decision to decentralize creates a new set of challenges that the district must address amidst its current fiscal difficulties. For example, the district will need to clarify roles and responsibilities and articulate the new system of internal controls it envisions.
RECOMMENDATIONS

To improve its decision making and guide its reform efforts, the district needs to develop a comprehensive vision for the future that clearly spells out the roles of the board, the district office, and college administrators. This vision should include goals and objectives for the district and the individual colleges that are linked into a consistent, cohesive framework against which all parties can evaluate the merits of proposed management decisions.

To avoid overspending and further eroding its fiscal condition, the district should enforce budgetary and spending controls, including the following:

  • Require that colleges base their budgets on realistic estimates of planned activities justified in light of historical expenditures and detailed plans for more efficient use of resources.

  • Ensure that appropriate administrators at each college are held accountable for developing and adhering to approved budgets.

  • Deny payments if colleges attempt to spend beyond their budgets.

  • Ensure that funds are available to cover any increased costs and that terms are consistent with the need to maintain administrative flexibility when negotiating new agreements with its employees.

  • Ensure that appropriate action is promptly taken on anticipated budget shortfalls.

To improve the condition of its facilities, the district should consider using savings it achieves in other areas to fund maintenance projects and continue to request funding from the State for needed projects.

The district's efforts to decentralize should include the following:

  • Making the presidents' responsibilities commensurate with their authority.

  • Ensuring the district can continue to meet its districtwide obligations, statutory or otherwise.

  • Determining how it will ensure that the good of the district as a whole prevails in an environment of potentially increased competition among the individual colleges.

Finally, the district should ensure that its decisions on reform result in efficient administration, and cost savings, while preserving basic educational services. AGENCY COMMENTS

The district agrees with our recommendations and believes it can make improvements in a number of areas our report identifies. It is addressing its fiscal issues and expects to end the current fiscal year with an adequate balance in its unrestricted general fund.


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