SAN JUAN ISLAND SCHOOL DISTRICT

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FHHS may become a High Tech High School

San Juan School Board adopts tight budget

EDITOR's NOTE: a clarification has been added to this story. It is in bold.

posted 08/03/04
San Juan Island School Board approved a budget for the 2004/2005 school year that has a surplus of $11,745. To balance the budget, the board cut back on staffing and supplies for the schools. Student athletes will need to pay $50 per sport in order to participate. Interim Business Manager Rosemary Ziara told the board at its July 28, 2004 meeting, "It is going to take the district several years to get to the point where you don't have to make cuts. They are going to need to occur again next year."

The budget includes 1 percent pay increases for certificated and classified staff. The salary schedule for the middle school and high school principal will increase 4 percent this year as part of a three year plan to make those salaries competitive with mainland districts. Superintendent Michael Soltman recommended the salary for the high school principal be increased from $76,040 to $86,000 and the salary for the middle school prinicpal will increase from $76,040 to $83,000 by 2006/2007.

The current middle school principal actually receives a 1 percent increase this year to $79,872 since his salary was higher than the listed salary last year due to longevity pay. The district has eliminated the longevity pay. The current high school principal's salary will increase by 4 percent to $79,872 this year.

San Juan Island resident Shelle Cropper questioned the salary increases when the district is losing staff. She also told the board she didn't think comparing San Juan Island to Bellevue or Mercer Island was the right choice.

The school board agreed with Soltman that in order to attract top quality applicants it is necessary to be competitive with other districts. It is unfair to hire a replacement and pay them $10,000 to $15,000 than the person who previously held that position, Soltman said.

The way to solve the district's financial difficulties is to increase revenue, Soltman said. "We need to find additional revenue sources," he said. "Marilyn (Luckman, high school prinicpal) has done a terrific job at (pursuing grants)."

Luckman was the driving force behind the school's successful application for a Gates Foundation grant. She is now applying for grants to cover the Gates Grant coordinator position since the grant itself cannot be used for staffing.

Another source of revenue will be the Public Schools Foundation phone-a-thon set for October, Soltman said. The goal is to raise $100,000.

Middle School Prinicpal Court Bell noted the district is not allowed to take the full amount of the voter approved levy. The district is limited to an amount equal to not more than 24 percent of its other funding from the federal and state governments. This year the district will not be able to collect $150,000 from the levy because it exceeds the limit.

The district ended the 2003/2004 school year with $148,000 in ending balance. The budgeted ending balance for $2004/2005 school year is $158,000.

No more choir at Friday Harbor High School

posted 07/06/04
Budget cuts are necessary at San Juan Island School District for the 2004-2005 school year. The budget will be available for public review July 10, 2004. A public hearing will be held during the school board meeting July 28, 2004. The draft budget presented to the school board included new $50 fee for participation in a sport, $17,000 cuts in stipends including the ones for choir. A reduction of 2.17 full-time equivalents (FTE) in teaching staff. The cuts are made by not filling open positions. Cuts in classified staffing of 5.35 FTE will mean the loss of jobs for people currently employed by the district.

No such thing as a free sport

posted 06/16/04
Facing a need to cut expenditures, San Juan Island School Board is considering charging students a $50 fee for each sport they participate in. Even with the increased revenue, the athletic department must find $28,000 more in cuts. The school board held a work session June 16, 2004. A draft budget will be presented at the June 30, 2004 school board meeting.

Staff cut at San Juan Island School District

posted 06/16/04
San Juan Island School Board members reviewed the first round of staff cuts in the draft 2004-2005 school district budget during June 16 worksession. Cuts in teaching staff will be made through attrition, some open positions will not be filled. The cuts in classified staff were harder, Superintendent Michael Soltman said. "These are real jobs with real people."

The cuts in certificated staff (teachers) equal 1.5 full time equivalent (FTE) personnel. A Social Studies/English teacher position will not be filled. Dance will be dropped as will Advanced Placement (AP) Art. World language will be reduced slightly.

In the classified staff, 3.02 FTE will be cut. The cuts include an accounts payable/purchasing position in the district office, .5 FTE custodian at Friday Harbor Elementary School, .48 FTE at Stuart Island school, .35 FTE in counseling at FHES, .17 secretary at FHES, .18 secretary at Friday Harbor Middle School, .84 FTE in Special Ed paraprofessional. An additional .35 FTE will be added for English as a Second Language support.

The district will also cut $17,000 in stipends at the high school and $20,000 in co-curricular activities. The total cuts equalled $236,600.

An additional $80,000 in cuts or an increase in revenue must still be found in order to balance the budget. Classified positions are the most likely to be affected. One area that will be looked at is the Gates Grant coordinator position. It was funded with grant money this year, but the program won't give grant money for the position next year. "I'm not sure we can afford to subsidize the position," Soltman said.

The school board will review a draft budget at its June 30, 2004 meeting.

Audit report issued on San Juan Island School District

posted 05/26/04
An audit requested by San Juan Island School District has determined "oversight and monitoring of financial activity and administrative controls were inadequate." The audit covered September 1, 2000 through August 31, 2003.

Superintendent Michael Soltman said the audit did not find any evidence of misappropriation or misuse of public funds. "There were clearly inadequate accounting practices," he said.

Soltman realized shortly after he became superintendent in August 2002 that there were problems. "There were no normal reporting practices," he said. "I asked for the standard report set and they were never available." The school district's Business Manager Terry Coulter was the only one who knew what the district's financial situation was, Soltman said.

Coulter was hired in February, 1993 when Greta Merwin was superintendent. He also served under former superintendent Steve Enoch. After Coulter did not meet Soltman's expectations, Coulter submitted his resignation in the spring of 2003.

The findings in the three reports issued by the state Auditor's Office were:

Accountability Audit Report

• The District did not adequately monitor Associated Student Body (ASB) revenues.

Report on Financial Statements Audit

• The District did not adequately monitor its financial condition.

The audit uncovered unauthorized interfund transactions.

Between fiscal year 2001 and fiscal year 2003, $500,615 was transferred from the General Fund to the Debt Service, Capital Projects, Transportation Vehicle, and ASB Funds. The Board had authorized only $30,000 of these transfers.

During fiscal year 2003, the Debt Service Fund and ASB Fund made transfers to the General Fund in the amounts of $200,000 and $11,615, respectively. However, we could find no evidence that interest had been paid on the loans.

Also, the General Fund shows $155,000 loaned to the Capital Projects Fund had not been repaid. We could find no Board authorization for this loan.

Schedule of Federal Audit Findings and Questioned Costs

• The San Juan Island School District did not maintain adequate time and effort records to support payroll costs charged to its Special Education grants (CFDA 84.027/84.173).
  
  
• The San Juan Island School District did not maintain adequate records to support student eligibility for the Title I program.

The state auditors were unable to to audit the financial statements for fiscal years ending in August 31, 2001 and August 31, 2002.

The report stated:

We were not unable to obtain financial statements, notes to the financial statements and schedules for fiscal years ended August 2001 and 2002, nor were we able to satisfy ourselves as to those financial activities by other auditing procedures. Accordingly we do not express an opinion on compliance and internal control over financial reporting in accordance with government auditing standards.

The school board hired a full-time business manager, Lynn Restrepo, last month. Prior to the hiring, Michael and Rosemary Ziara worked part time to help straighten out the district's records after Coulter's resignation. "We are in a healthy place now with a full time business manager on site," Soltman said in a phone interview Tuesday, May 25, 2004. He expects a smooth transition with Restrepo building on the Ziara's groundwork.

Soltman said the proper accounting procedures have been implemented. "The audit confirms the concerns we had," he said. He was frustrated with the statement in the audit blaming the staff turnover for the problem. "That was the solution to the problem," he said. "Not the cause."

The district, by its request, will be audited again next year. Normally it would be two years before another audit.

"Unusual" transfers on school district’s books

posted 10/30/03
"The school district is very fiscally sound," consultant Michael Ziara told the San Juan Island School Board Oct. 29, 2003. "The spending pattern last year was fine." The district’s negative cash balance can be traced back to previous years, he said.

Rosemary Ziara of ESD 114 Fiscal Services Department presented a report showing the differences between the budgeted ending fund balances and the actual fund balances for the years 1998-2003. In 2001-02, the actual ending balance was $239,782. When the 2002-03 budget was set, the beginning balance was listed as $564,865 rather than the actual $239,782.

Another wrinkle was the presence of interfund loans from the general fund to the debt service fund and the capital fund. Michael Ziara said, "In 98-99, the district supposedly made a loan from the general fund to the debt service fund." Needing to borrow for the debt service fund is "extremely unusual," he said. Payments are scheduled for June and December, times when districts are ususally flush having received tax revenue the previous months. Property taxes are due in two payments - April 30 and Oct. 31.

Interfund loans require board approval. "There are interfund loans I can track back to 98-99. I haven’t seen any evidence of board action," Rosemary Ziara said. "The effect would be to impact the fund balance in a positive way."

The Ziaras could not find any supporting documentation regarding the transfers or any evidence the funds were ever transferred from the general fund. "We are not seeing it on the treasurer’s statement. It doesn’t mean it was not carried in some other form we aren’t used to," he said. If the transfer did not take place and the amount was listed as a receivable, the fund balance would be inflated.

Asked when the issue would be resolved, Michael Ziara said, "The bulk of your fund balance won’t be totally resolved until March." The auditors will be at the district in early January.

School Board member Sally Bryan said, "I find it hard to understand why $155,000 wouldn’t show up in some of these smaller funds."

Michael Ziara said, "We find it confusing as well."

District reviewing former business manager's practices

posted 10/17/03
Instead of focusing on curriculum development as expected when he was hired to be San Juan Island School Superintendent, Michael Soltman has been studying math. More specifically the way the former business manager, Terry Coulter, dealt with the school district's finances.

Coulter was hired in February, 1993 when Greta Merwin was superintendent. He served under former superintendent Steve Enoch. Soltman was hired by the school board in the summer of 2002. In the early fall he set expectations for Coulter to meet. "I was shocked not to have basic tools available," Soltman said. "I was used to having good status reports every month. I had access to no information." All financial decisions were centralized to the business manager, he said.

By January it was clear progress was not being made, said Soltman. In February 2003, Coulter offered his resignation effective June 30, 2003. Soltman called a former colleague, Associate Superintendent for Business Services in the Mercer Island School District Mike Ziara, to review the district's finances. In April, Coulter was placed on administrative leave.

Ziara said there is no sign of misappropriation of funds. "It looks like there was inconsistency in maintaining the record system," he said. The district only partially utilized the state accounting software. Three years ago, Coulter developed an offline complex system to track the district's finances, according to Ziara.

At a media briefing Oct. 15, 2003, School Board Chair Boyd Pratt and Board Member Bob Mancuso were effusive in their praise of the way Soltman is handling the situation. "We really appreciate the way Michael has pursued it," said Pratt. "We now have systems in place that ensure it won't happen again. There are now checks and balances."

The district is due for a three-year audit next year. Ziara has asked for an early audit and expects the auditors to begin work around the first of the new year. "It will be difficult to reconcile book entries," he said. He expects a negative audit report. The state auditors won't be able to give the district its "seal of approval" due to the lack of records.

While a negative audit will probably have an impact on the district's credit rating, Ziara said he can guarantee it will be back up in three years. The systems and procedures which are now in place ensure reports will be done accurately and on time. The district has asked for annual audits once the three year audit is complete. Ziara noted the district's last audit was "sterling."

Ziara will give the school board an update on fund balances at its Oct. 29, 2003 school board meeting.

Asked how long the board has been dissatisfied with the monthly reports it received from the business manager, Pratt said he and fellow board member John MacDougall lobbied for improved reports for years. Both have served for four years on the board. "We asked. We gave up after we didn't get anywhere," Pratt said. "It's embarrassing. Unless you have good data in front of you, how do you make good decisions?"

San Juan Island School District Press Release

posted 10/17/03
One of the challenges the new Superintendent Michael Soltman inherited when hired 14 months ago was low confidence on the part of the Board of Directors, faculty and staff in the business operations of the District. Immediate concerns expressed included ongoing inaccuracies in employee paychecks, delays and/or failure to meet commitments made to employees and vendors, often late and inaccurate financial reporting to the ESD and OSPI budget offices, and delayed and incomplete financial reporting to the Superintendent and Board of Directors.

Despite attempts to address these issues with the former business manager, the concerns continued and in early February 2003 the Superintendent hired an outside consultant, Mike Ziara, Associate Superintendent for Business Services in the Mercer Island School District, to begin a review the District's business accounting and reporting practices.

On February 26, 2003, the Board of Directors accepted the former business manager's resignation, to be effective June 30, 2003. Mr. Ziara's review, conducted during March and April confirmed the former business manager's accounting system did not conform to standard state accounting practices, was completely controlled by one person and lacked standard checks and balances, and only partially utilized the state accounting software. The former business manager was placed on administrative leave effective April 28 through June 30, 2003.

Mike Ziara and the ESD 114 Fiscal Services Department, were retained to provide business management services to the District. The District faced several immediate tasks that were dealt with in priority order.

• First priority was to begin to transform the District's business practices to include appropriate checks and balances, and standard, easily accessible accounting systems. Conforming practices were used to develop the District's 2003-2004 operating budget approved by the Board of Directors in July 2003.
  
  
• Second priority was to review 2002-2003 operating expenditures and budget capacity to develop necessary budget extensions. Such extensions were approved by the Board of Directors as required by August 2003.
  
  
• Third priority was to ensure that adequate resources were available for cash flow by using interest bearing warrants or other appropriate means. Interest bearing warrants were approved by the Board in August 2003. Longer term cash flow management strategies are currently being considered for recommendations to the Board.
  
  
• Fourth priority is to reconcile budget years 2000 through 2003 in cooperation with the state auditor and to close the 2002-03 fiscal year by the end of October 2003. Reconcilation will include establishing actual ending balances in all funds. Full reporting of the 2002-2003 year end records will be sent from OSPI to the District offices in mid-November.

The District is committed to managing the current 2003-04 operating budget within revenue and expenditure limits established by the Board of Directors. The District will continue to transform District business practices to conform to state standards and best practices. In addition, the District must conduct longer term planning to rebuild operating fund reserves. The District must also plan for major capital improvements/maintenance of District facilities, and ongoing replacement of technology network electronics, computers and equipment, and software.

The District is committed to sound financial management and ethical business practices. The Superintendent and Board of Directors have requested an early audit to reconcile the financial accounting of the past three budget years, and to discover any other irregularities in the District's financial records. We are also requesting that the District be audited annually for the next three years to establish a baseline and record of sound financial practices. We are confident in our current business office team and are sure that these actions will address these longstanding problems uncovered during these past few months.

School district borrows from county

updated at 2:45 p.m. (updates in bold)
posted 10/13/03
For the first time in 27 years, San Juan Island School District is borrowing money to pays its monthly bills. The district began issuing interest-bearing warrants in August 2003, after it ended the month of July with a $93,000 negative cash balance. The county is issuing the warrants and will receive interest from the school district.

The district is exploring solutions other than interest-bearing warrants to its cash flow problem. According to School Board Chair Boyd Pratt the district was turned down for a line of credit from a bank and is now looking into a Tax Anticipation Note. According to San Juan Island School District Superintendent Michael Soltman the bank did not turn down the district. The bank did not want to issue the warrants because it was busy with treasury bonds. "There is no problem with credit-worthiness of the district," he said. He noted the district has a 3.5 percent operating fund balance.

Pratt also clarified his statement Tuesday, Oct. 14. The bank had not "turned down" the line of credit request but instead declined to continue to process the request because of the "onerous" paperwork, Pratt said.

Interim financial manager Mike Ziara said the cash flow problem stems from the district running down the reserve and the delay in receiving a a $178,000 check from the Gates Foundation. According to the terms of the Gates Grant, the payment was due to be paid in Dec. 2003. Soltman said Friday Harbor High School Principal Marilyn Luckman arranged to receive payment earlier. The check was received in September 2003.

In an interview Friday, Oct. 10, 2003, Ziara said, "This is a short term situation, we may not need to borrow (more)." The school board will discuss aspects of its finances at its Oct. 15, 2003 meeting in San Juan Island High School Library. Ziara noted the district's debt service fund, which is used to pay off bonds, has plenty of reserve. Ziara was hired on a consultant basis after former Business Manager Terry Coulter left the district in the spring of 2003.

Soltman said it is common practice for school districts to issue interest-bearing warrants. A review of records available indicates San Juan Island School District hasn't done so since 1976. The district receives the majority of its funds from property taxes. The local taxes are paid in April and October so the district receives an influx of revenue then. The state distributes the portion of property tax it collects on its own schedule.

Asked if the problem is related to increases in staffing, Soltman said it wasn't. The district replaced Athletic Director/Special Ed Coordinator Cal Johnson with two people. Rod Turnbull is serving as Athletic Director and teaches two classes. Kay Jakutis, the supervisor of Special Education at Shoreline School District, was hired as the Special Ed/School Psychologist. Previously Arlo Morganweck had served as the school psychologist on a part-time basis. The district also added a technology coordinator this year rather than contracting the services. The additional cost to the district as a result of the changes is $25,000 not including benefits, according to Soltman.

The school board had a $564,865 or 8.3 percent reserve in its general fund for the 2001-2002 school year. It was reduced to $239,782 at the beginning of the 2002-2003 school year after the school board approved a transfer to the capital fund to cover some of the cost of capital projects and unexpected expenses.

The capital fund balance was $305,000 in July 2002. It was down to $70,000 in November 2002. The capital fund can only be used for capital projects. The general fund is the operating fund. Money can be transferred from the general fund to the capital fund. It cannot be transferred from the capital fund to the general fund.

In the summer of 2002, the school board approved $305,000 of capital projects and purchase of a office building for a new district office. The purchase was supposed to be a "wash" according to School Board Chair Boyd Pratt. The sale of two other buildings the district owned should have covered the cost. Due to renovations which needed to be made to one of the buildings, the transaction cost the district $70,000.

The list of capital projects included:

• resurfacing of the tennis court
• repainting the elementary school
• replacement of the elementary school roof
• replacement of the elementary school carpet

While replacing the carpet, the district discovered mold in the elementary school. The cleanup cost the district $85,000. Insurance was expected to cover $30,000 of the cost.

According to figures released by the school district in August 2002, the roof cost $109,961 to replace, the exterior painting cost $32,070 and the carpet cost $110,000.

The figures in the table below show the month end cash balance through August 2003. Ziara said the district is compiling estimates for the coming school year. They should be available at the Oct. 15, 2003 meeting, he said.

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School district to buy ReMax building

posted 08/01/02
San Juan Island School Board members approved the purchase of the ReMax building on Blair Avenue pending an appraisal. The 1900 sq. foot office building will be used as the district office.

The current district office is located across the street on Ellsworth Ave. It will be sold. The district will also sell a house it owns on Park Street which is currently rented out.

Under the proposed terms, the district will make a $250,000 down payment and the remaining balance of $150,000 will be due a year later.

School district considering real estate purchase

posted 07/30/02
San Juan Island School Board members are considering buying more property in Friday Harbor. Details of the purchase are not available. The board will discuss the matter in an executive (closed) session before their July 31, 2002 board meeting. The agenda for the open portion of the meeting includes possible action on real estate transaction.

The district currently owns two school sites, 30 acres off of Carter Avenue, two houses on Park Street and the district office on Ellsworth Avenue.

The board has previously considered purchasing property to build office space. A plan to expand the current district office by adding storage space was dropped from the capital needs list earlier this year.

$440,000 price tag for district's capital needs

posted 04/15/02
San Juan Island School Board members were presented with an estimated $440,000 worth of capital facilities projects at their April 10, 2002 worksession. The list includes a new roof, carpet and exterior paint for the Elementary School, a cover for the outdoor "Big Toy area;" expansion of the district office; resurfacing of the tennis courts; and a new score clock for Turnbull gym.

Athletic Director Cal Johnson said the men's basketball group which uses the gym has donated $2.500 towards the cost of the new score clock.

The board will make decisions about which projects to fund during their budget process for the 2002-2003 school year. Business Manager Terry Coulter suggested the district consider taking out a $500,000 line of credit and take care of all the projects. He said, "Interest rates are extremely low and the district is extremely credit worthy," If the entire amount was used the district would need to repay $65,000 per year according to Coulter.

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