Purpose of the SPLOST III Performance Audit

Transcription

1 Tallahassee Office 2123 Centre Pointe Boulevard Tallahassee, Florida P: (850) F: (850) January 26, 2011 Superintendent J. Alvin Wilbanks Gwinnett County Public Schools 437 Old Peachtree Road NW Suwanee, GA Dear Superintendent Wilbanks: This letter serves as the management report for the Gwinnett County Public Schools Special Purpose Local Option Sales Tax Performance Audit for FY2010. Purpose of the SPLOST III Performance Audit The purpose of the audit on capital outlay projects funded by the sales tax is to follow Official Code of Georgia Code , which states the following: (a) When a sales tax for educational purposes is imposed for capital outlay projects as provided in Part 2 of Article 3 of Chapter 8 of Title 48 and such tax generates or is reasonably anticipated to generate annualized proceeds of $5 million per year or more, the expenditure of tax proceeds shall be subject to an ongoing performance audit or performance review as provided in this Code section; but this Code section shall not apply if such tax generates annualized proceeds below $5 million. (b) Each local board of education expending tax proceeds for capital outlay projects shall provide for a continuing performance audit or performance review of the expenditure of such funds. The local board of education shall contract with an outside auditor, consultant, or other provider for such performance audit or performance review. The performance audit or performance review contract shall: (1) Include a goal of ensuring to the maximum extent possible that the tax funds are expended efficiently and economically, so as to secure to the expending school district the maximum possible benefit from the tax dollars collected; (2) Provide for the issuance of periodic public reports, not less often than once annually, with respect to the extent to which expenditures are meeting the goal specified in paragraph (1) of this subsection; and (3) Provide for the issuance of periodic public recommendations, not less often than once annually, for improvements in meeting the goal specified in paragraph (1) of this subsection. (c) The auditor, consultant, or other provider to carry out the performance audit or

2 Superintendent J. Alvin Wilbanks Page 2 performance review shall be selected through a public request for proposals process. The cost of the performance audit or performance review may be paid from the proceeds of the sales tax for educational purposes or any other available funds of the local school system. (d) The performance audit or review shall be required when the sales tax for educational purposes is imposed in whole or in part for capital outlay projects but shall not be required when the sales tax for educational purposes is imposed for the sole purpose of retirement of previously incurred general obligation debt. (e) The requirements of this Code section shall apply with respect to any sales tax for educational purposes which is in effect on July 1, 2003, as well as any sales tax for educational purposes imposed or reimposed on or after that date. Information on SPLOST III Program Based on the fast growth in the county and the demands of increasing student enrollments, GCPS approached the Gwinnett County Board of Education to request SPLOST III funding for the District. The Board of Education agreed to move forward with asking the voters for this new option. The District completed and submitted the appropriate documentation to the local election board for approval. In November 2006, Gwinnett County voters subsequently passed, by a 66 percent favorable response, an additional SPLOST for another five years. SPLOST III runs from July 1, 2007 through June 30, This special local option sales tax can be used to construct or modify school facilities and purchase transportation vehicles or technology-related equipment for the school district. The Gwinnett County Board of Education approves all projects considered as part of this funding program, and GCPS is responsible for overseeing each aspect of every project. Compliance Statement Based on MGT s findings during the SPLOST III Audit and Review for the FY10, MGT has found GCPS in full compliance using SPLOST III funds in all areas reviewed: SPLOST III planning, design, and construction of school-related facilities. SPLOST III procurement process related to the construction or renovation of schoolrelated facilities. SPLOST III project budgets, revenue and expenditure projections, and project completion status. SPLOST III cash, investments, and General Ledger reconciliation documentation and procedures.

3 Superintendent J. Alvin Wilbanks Page 3 SPLOST III receivables, payables, accruals, and General Ledger reconciliation documentation and procedures. Gwinnett County Public Schools is therefore in compliance with the related sections of Georgia s Constitution and Official Code of Georgia (O.C.G.A.) , , and Recommendations detailed in the report provide for additional efficiencies and are not meant to state that GCPS is not in compliance with Georgia laws governing SPLOST III funding. The documents included in this management report include the Executive Summary and Chapters 1.0 and 2.0, which provide detailed information regarding findings, commendations, and recommendations for GCPS. Recommendations provided are for additional efficiencies and are not meant to state that the District is not in compliance with Georgia laws governing SPLOST III funding. Sincerely, Kathy Brooks Partner, MGT of America, Inc. cc: Rick Cost, Chief Financial Officer

4 Year 3 SPLOST III Audit and Review for the School Year Submitted to: Gwinnett County Public Schools FINAL REPORT Submitted by: January 26, 2011

5 YEAR 3 SPLOST III AUDIT AND REVIEW FINAL REPORT Submitted to: Mr. J. Alvin Wilbanks Superintendent Gwinnett County Public Schools 437 Old Peachtree Road NW Suwanee, GA Submitted by: 2123 Centre Pointe Boulevard Tallahassee, Florida January 26, 2011

6 TABLE OF CONTENTS PAGE EXECUTIVE SUMMARY... i 1.0 FACILITIES-RELATED SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS 1.1 Project Planning, Design, and Construction Procurement Process Project Oversight and Budgetary Controls NON-FACILITIES RELATED SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS 2.1 Planning and Budget Activities Financial Management Technology SPLOST II Program

7 EXECUTIVE SUMMARY

8 EXECUTIVE SUMMARY In May 2009, MGT of America, Inc. (MGT) was awarded a contract to conduct an Annual Special Purpose Local Option Sales Tax III (SPLOST III) Audit and Review for the and school years for Gwinnett County Public Schools (GCPS). As stated in the Request for Proposals (RFP), the purpose of the study is to conduct an external audit and review of SPLOST III fund expenditures by GCPS to ensure compliance with the requirements of Georgia law and prepare a final report of the findings, commendations, recommendations, and projected costs and/or savings for recommendations. The RFP stated that the scope of work should include: To become familiar with the District s planned scope of the capital building program including, but not limited to, knowledge of the type of work planned for new construction, renovation, major/minor addition, upgrade, etc., furniture and supply purchases, and technology services and equipment including networking, installation, and procurement. Reviewing and evaluating schedules for projects. Reviewing accounting records/reports for projects in progress and/or completed and compare work completed to date with funds expended to date. Reviewing contracting process for all work, labor and materials contracts as required by HB-1079 conformance and best practices in accordance with industry standards. Presenting or assisting in the public presentation of the annual performance audit and review. Commendations Detailed commendations for exemplary practices are found in Chapters 1.0 and 2.0. The commendations regarding SPLOST III funds for which GCPS is recognized are: Gwinnett County Public Schools is commended for continuing a culture of effective management and partnership with vendors (Commendation 1-A). Gwinnett County Public Schools is commended for the continued effective management of a facilities development and construction program that meets SPLOST III objectives (Commendation 1-B). Gwinnett County Public Schools is commended for successfully identifying additional funding sources for facilities (Commendation 1-C). Gwinnett County Public Schools is commended for continued commitment to the elimination of mobile classrooms (Commendation 1-D). MGT of America, Inc. Page i

9 Executive Summary Gwinnett County Public Schools is commended for the continued use of performance indicators and updating them on an annual basis (Commendation 1-E). The Division of Facilities and Operations is commended for persistently improving the materials, systems, methodologies, and designs for facilities within a framework of life-cycle costing (Commendation 1-F). Gwinnett County Public Schools continues to use effective methods and controls in processing change orders (Commendation 1-G). Gwinnett County Public Schools has followed a consistent process of project cost control related to SPLOST III projects during that resulted in lower construction costs than those found in neighboring school systems (Commendation 1-H). Gwinnett County Public Schools is commended for continuing to use effective procedures that keep bid amounts within construction budgets (Commendation 1-I). Gwinnett County Public Schools is commended for maintaining project schedules (Commendation 1-J). Gwinnett County Public Schools is commended for maintaining an effective planning process for the identification and implementation of the capital needs of the District (Commendation 2-A). Gwinnett County Public Schools is commended for providing a capital budget in the budget document (Commendation 2-B). Gwinnett County Public Schools is commended for continuing to provide monthly status reports to key central office staff and school principals for SPLOST III as they did for SPLOST II information (Commendation 2-C). Gwinnett County Public Schools is commended for maintaining a welldocumented process to track program changes to the SPLOST III program (Commendation 2-D). Gwinnett County Public Schools continues to use an effective process to track retention associated with each vendor report pertaining to SPLOST III funds (Commendation 2-E). Findings and Recommendations Although this Executive Summary briefly highlights areas of recommended improvement in GCPS regarding SPLOST III funds, detailed recommendations for improving operations are found in Chapters 1.0 and 2.0. These recommendations are not meant to state that GCPS is not in compliance with Georgia laws governing SPLOST III funding. Findings and recommendations for improvement regarding SPLOST III revenue include the following: MGT of America, Inc. Page ii

10 Executive Summary Consider expanding the budget materials for the Capital Projects Fund to include identification of revenues and expenditures for each subsidiary capital projects fund (Recommendation 2-1). Consider a budget and account for the debt service payments in the internal financial documents with all sales tax revenues being allocated to the SPLOST III Fund and the necessary amount for the debt services being transferred to the Debt Service Fund (Recommendation 2-2). Consider closing the three accounts associated with the $425 million bond issue in March 2007 (Recommendation 2-3). GCPS should review existing procedures for tagging assets (Recommendation 2-4). Consider closing the Georgia 1 Long Term account and the Wachovia Tax Anticipation Notes account and transfer the balances to the Georgia 1 Investment Account (Recommendation 2-5). Consider transferring the assets in the SPLOST II Fund to the SPLOST III Fund, establish a budget account for the remainder of the bus refurbishing program, and place the remaining assets as part of the existing project reserve (Recommendation 2-6). Compliance Statement Based on MGT s findings during the Annual Special Purpose Local Option Sales Tax III Audit and Review, MGT has found Gwinnett County Public Schools to be in full compliance using SPLOST III funds in all areas audited and reviewed during the school year. Sections audited and reviewed include: SPLOST III planning, design, and construction of school-related facilities. SPLOST III procurement process related to the construction or renovation of school-related facilities. SPLOST III project budgets, revenue and expenditure projections, and project completion status. SPLOST III cash, investments, and General Ledger reconciliation documentation and procedures. SPLOST III receivables, payables, accruals, and General Ledger reconciliation documentation and procedures. Gwinnett County Public Schools is therefore, in compliance with the related sections of Georgia s Constitution and Official Code of Georgia (O.C.G.A.) , , and Recommendations provide for additional efficiencies and are not meant to state that GCPS is not in compliance with Georgia laws governing SPLOST III funding. MGT of America, Inc. Page iii

11 1.0 FACILITIES-RELATED SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS

12 1.0 FACILITIES-RELATED SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS Chapter Summary Gwinnett County Public Schools (GCPS) has maintained the following practices during the school year (FY 2010) and throughout the entire SPLOST III program: Establishing a culture of effective management and partnership with vendors. Effectively managing a facilities development and construction program that meets SPLOST III objectives. Successfully identifying additional funding sources. Continuing a commitment to the elimination of mobile classrooms. Using performance indicators and updating them on an annual basis. Persistently improving the materials, systems, methodologies, and designs for school facilities within a framework of life-cycle costing. Using effective methods and controls in change order processing. Following a consistent process for cost control that resulted in lower construction costs than those found in neighboring school systems. Using effective procedures that generally keep bid amounts within construction budgets. Maintaining project schedules. GCPS has met the goals for the year by completing the following projects in the school year through the SPLOST III program. ADDED STUDENT CAPACITY TOTAL CONSTRUCTION COST ($MILLION) CLASSROOMS ACTIVITIES ADDED 10 Projects 17, $ North Gwinnett Middle School 2, $24.19 Archer High School 3, $56.53 Mountain View High School 2, $47.56 Twin Rivers Middle School 1, $23.19 Bay Creek Middle School 1, $15.28 Couch Middle School 1, $19.99 Woodward Mill Elementary School 1, $13.00 Dyer Elementary School 1, $12.38 Starling Elementary School 1, $12.60 Lanier High School 2, $50.77 MGT of America, Inc. Page 1-1

13 SPLOST III FACILITIES To date, GCPS s SPLOST III program has accomplished a significant increase in capacity, as shown in the chart below. ADDED STUDENT CAPACITY TOTAL CONSTRUCTION COST ($MILLION) CLASSROOMS ACTIVITIES ADDED 17 Projects 26,393 1,137 $ Knight Elementary School $7.50 Trip Elementary School 1, $16.27 Puckett's Mill Elementary School 1, $15.41 Lanier Elementary School 1, $11.01 Lanier Middle School 1, $21.34 Rosebud Elementary School 1, $14.38 Crews Middle School $1.40 North Gwinnett Middle School 2, $24.19 Archer High School 3, $56.53 Mountain View High School 2, $47.56 Twin Rivers Middle School 1, $23.19 Bay Creek Middle School 1, $15.28 Couch Middle School 1, $19.99 Woodward Mill Elementary School 1, $13.00 Dyer Elementary School 1, $12.38 Starling Elementary School 1, $12.60 Lanier High School 2, $50.77 This chapter also provides a summary of facilities-related SPLOST III findings for the school year (FY 2010) in GCPS. The three major sections of this chapter are: 1.1 Project Planning, Design, and Construction 1.2 Procurement Process 1.3 Project Oversight and Budgetary Controls Well-planned educational facilities should be designed to support and enhance the educational experience of the students. The design process and the final design of the schools should be driven by the requirements of the educational program as defined in the District s strategic plan, the diverse needs of the students, and the goal of supporting a multitude of learning and teaching styles. The design process requires input from all stakeholders, including administrators, teachers, security specialists, parents, students, and the maintenance and operations staff. The facility design should ensure efficient and effective maintenance and operation of the facility. The planning, design, and construction process must result in safe and secure environments that efficiently use the school system s resources. A wellimplemented facility construction program should have the following goals: Design goals that meet educational program needs. On-time facility delivery. Facility delivery within budget. MGT of America, Inc. Page 1-2

14 SPLOST III FACILITIES Facility delivery at specified levels of quality and quantity. High level of cost-benefit value for the construction, operations, and maintenance of the facility. 1.1 Project Planning, Design, and Construction The purpose of educational facilities planning, design, and construction is to provide well-designed schools that meet the needs of the educational programs and to provide sufficient capacity for the District s enrollment. To meet these goals, accurate enrollment projections are required and must be frequently updated. In addition, planners must be very knowledgeable about the educational programs and teaching/learning styles. FINDING The GCPS facility planning and construction operation is based on a simple organizational structure and a culture of teamwork. This structure and these values permeate all aspects of the planning and construction function, making it effective and efficient. Exhibit 1-1 presents the organizational chart for GCPS s facility planning and construction functions. This organization contributes to effective communication and a clear sense of responsibility. The three major departments include: Facility Planning, which oversees the planning and design of all construction projects using private architects and contractors. Construction, which oversees the construction of all projects constructed using private contractors. Contracts Engineering, which oversees all projects using in-house personnel. MGT of America, Inc. Page 1-3

15 SPLOST III FACILITIES EXHIBIT 1-1 GCPS FACILITY PLANNING AND CONSTRUCTION ORGANIZATION CHART Division of Facilities and Operations Chief Operations Officer Facility Planning and Construction Executive Director Administrative Assistant Department of Facility Planning Director Department of Construction Director Department of Contracts Engineering Staff (6) Staff (5) Staff (5) Source: Gwinnett County Public Schools, Facility Planning and Construction, Facilities Planning and Construction works hard to develop a partnership with its architectural consultants and general contractors. At the beginning of each project, the staff conduct a workshop to establish the attitude of working together. The staff establish goals for each project with the consultants. In support of this partnership attitude, the Department prominently displays its credo in its offices. The credo reads: The employees of F&O govern their actions and words by asking the following; COMMENDATION 1-A: Is it the truth? Not hearsay or rumor. Will it build GOODWILL and a BETTER PARTNERSHIP? Is it FAIR and BENEFICIAL to all? Gwinnett County Public Schools is commended for continuing a culture of effective management and partnership with vendors. FINDING GCPS continues an aggressive and effective building program in SPLOST III, Phase I of a three phase program called The Plan. Phase II has funded projects utilizing General MGT of America, Inc. Page 1-4

16 SPLOST III FACILITIES Obligation Bonds, which were approved on February 5, 2008, and Phase III expects to utilize funds from SPLOST IV which will be presented to voters in November The goal of SPLOST III was to increase the District s capacity by 26,393 seats, as shown in Exhibit 1-2. As listed in the exhibit, the District was planning on building seven new elementary schools, one replacement elementary school, and one addition, for a total of 507 new elementary classrooms. Five new middle schools and one addition were to be built, for a total of 262 new middle school classrooms. There were to be three new high schools built, for a total of 300 new classrooms. EXHIBIT 1-2 GCPS SPLOST III GOALS FACILITY TYPE NEW REPLACEMENTS ADDITIONS CLASSROOMS Elementary Schools Middle Schools High Schools Totals ,069 Source: Gwinnett County Public Schools Building Program, and June 2010 Monthly Report to Board of Education. Exhibit 1-3 summarizes those projects, while Exhibit 1-4 provides detailed information regarding the type of project, number of classrooms, the capacity of the school, the contract amount, and the status. As shown: Capacity was added for 17,793 students in FY new classrooms were added. EXHIBIT 1-3 SUMMARY OF GCPS SPLOST III EDUCATIONAL FACILITIES OCCUPIED, UNDER CONSTRUCTION, IN DESIGN, OR IN PLANNING, FISCAL YEAR ADDED STUDENT CAPACITY TOTAL CONSTRUCTION COST ($ MILLION) CLASSROOMS STATUS ADDED Occupied 17, $ Under Construction In Design or Planning Totals 17, Approx. $ Source: Gwinnett County Public Schools Building Program, and July 2010 Monthly Report to Board of Education. MGT of America, Inc. Page 1-5

17 SPLOST III FACILITIES EXHIBIT 1-4 GCPS EDUCATIONAL FACILITIES OCCUPIED OR IN CONSTRUCTION WITH SPLOST III FUNDS FISCAL YEAR NEW CLASS- ROOMS OLD CAPACITY NEW CAPACITY CONTRACT AMOUNT ($MILLIONS) SCHOOL YEAR OPEN SCHOOL NAME TYPE STATUS North Gwinnett Middle New ,000 $24.19 Occupied Archer High New ,000 $56.53 Occupied Mountain View High New ,500 $47.56 Occupied Twin Rivers Middle New ,800 $23.19 Occupied Bay Creek Middle New ,250 $15.28 Occupied Couch Middle New ,250 $19.99 Occupied Woodward Mill New ,331 $13.00 Occupied Elementary Dyer Elementary New ,331 $12.38 Occupied Starling Elementary New ,331 $12.60 Occupied Lanier High New ,000 $50.77 Occupied Source: Gwinnett County Public Schools Building Program, and July 2010 Monthly Report to Board of Education. COMMENDATION 1-B: Gwinnett County Public Schools is commended for the continued effective management of a facilities development and construction program that meets the objectives for SPLOST III funds. FINDING GCPS continues to identify and utilize funding sources in addition to SPLOST. The District identified the need for additional funding early in based on projected facility needs and projected SPLOST funding. The projected need continues to exceed projected SPLOST funding. The current five-year enrollment projections show that enrollment will continue to grow through the school year. Exhibit 1-5 presents GCPS enrollment projections for school years through As shown, GCPS enrollment is projected to increase by approximately 5,689 students in , increasing over existing enrollments. MGT of America, Inc. Page 1-6

18 SPLOST III FACILITIES EXHIBIT 1-5 GCPS 5-YEAR ENROLLMENT PROJECTIONS THROUGH SCHOOL YEAR ENROLLMENT PROJECTION ,618* ,219* ,931* , , , ,620 *Actual enrollment. Source: MGT of America, Inc. summary, prepared from data furnished by Gwinnett County Public Schools, Division of Facilities and Operations, Based on enrollment projections, GCPS has developed a three-phase plan to meet the facility needs of the District. Exhibit 1-6 outlines the plan phases and funding sources for the Building Program, or The Plan. As the exhibit shows, the District has identified funding sources in addition to SPLOST funds for the program, including General Obligation Bonds and Quality School Construction Bonds. EXHIBIT 1-6 GCPS BUILDING PROGRAM THE PLAN PLAN PHASE FUNDING SOURCE SCHEDULE Phase I SPLOST III Approved November 7, 2006 Phase II General Obligation Bonds Approved February 5, 2008 Phase II Quality School Construction Bonds 2009 Calendar Year 2010 Calendar Year Phase III SPLOST IV To voters in November, 2011 Source: MGT of America, Inc. summary, prepared from data furnished by Gwinnett County Public Schools, Division of Facilities and Operations, COMMENDATION 1-C: Gwinnett County Public Schools is commended for successfully identifying additional funding sources. FINDING GCPS has continued to eliminate the number of single and double-wide trailers used for classrooms during the SPLOST III audit year of Exhibit 1-7 shows the number of single and double-wide trailers requested on campuses for the and school years. As shown: GCPS was able to reduce the overall number of single trailers by 299. MGT of America, Inc. Page 1-7

19 SPLOST III FACILITIES GCPS was able to reduce the number of double-wide trailers by 31. NUMBER OF SINGLEWIDES REQUESTED EXHIBIT 1-7 GCPS COMPARISON OF TRAILERS REQUESTED AND NUMBER OF SINGLEWIDES REQUESTED NET TOTAL ADDED OR REMOVED NUMBER OF DOUBLEWIDES REQUESTED NUMBER OF DOUBLEWIDES REQUESTED NET TOTAL ADDED OR REMOVED Elementary Schools (159) (31) Middle Schools (83) 7 5 (2) High Schools (57) Special Facilities GRAND TOTAL (299) (31) Source: Gwinnett County Public Schools and Trailer Allotments. COMMENDATION 1-D: Gwinnett County Public Schools is commended for continued commitment to the elimination of mobile classrooms. FINDING GCPS tracks and publishes twelve performance indicators for its Facility Planning, Construction, and Contracts Engineering Departments. The performance indicators include typical industry type measures, such as costs per square foot, and measures specific to the District s program goals, such as number of classrooms added. The results of some of the performance indicators are included in an annual report and all of the indicators are framed and posted on the walls of the departments offices. These performance indicators include: Cost comparison of normal versus prototype designs. Construction cost comparison for elementary, middle, and high schools with Atlanta Metro area and Cobb County (6 indicators). Hours of staff development. On-time performance of Design-Bid-Build process. Classrooms delivered compared to classroom obligated. Average time for design through bidding. Rate of construction change orders. MGT of America, Inc. Page 1-8

20 SPLOST III FACILITIES COMMENDATION 1-E: Gwinnett County Public Schools is commended for the continued use of performance indicators and updating them on an annual basis. 1.2 Procurement Process An effective construction program requires the procurement of professional architectural, engineering, and construction services. In addition, the procurement of the construction material must be done with an awareness of the current markets and innovations in products to capitalize on the best opportunities. GCPS continues to use procedures for acquiring services that ensure a high level of performance for the professionals involved in its construction program. GCPS continues to look at innovative construction materials and processes to maximize the performance of its finished facilities. FINDING GCPS has continued to improve the quality materials used in the construction of schools and to explore new methodologies which can save resources and maintain quality. Exhibit 1-8 lists some of the initiatives the District has undertaken to become more energy efficient. EXHIBIT 1-8 GCPS ENERGY/RESOURCE CONSERVATION INITIATIVES FY INITIATIVE Energy Efficient Lighting PROGRESS Lighting retrofits changing T-12 lamps for T-8 lamps and electronic ballast have been accomplished in 49 of 54 schools (91% complete). This is a 37 percent increase over the previous year. Water Conservation Conversion of non-water urinals has been completed in 103 of 103 schools (100% complete). All 15 new schools completed in the last two years have received zero-flush equipment. This is a 66 percent increase over the previous year. Occupancy Sensors Occupancy sensors have been installed to control lights and HVAC equipment when rooms are vacant. Sensors have been installed in 43 of 54 schools (80% complete). This is a 30 percent increase over the previous year. Energy Use Management The Utility Manager software program has been implemented to track energy cost and consumption. The program will allow the District to submit data to the U.S. Department of Energy s Energy Star Program for evaluation and rating. Of the thirty-five schools run through the analysis, thirty qualify for the Energy Star Recognition plaque. As of the school year, 104 of 110 schools (95%) have rated 75 or better on their ENERGY STAR Portfolio Manager score. Source: Gwinnett County Public Schools, Division of Facilities and Operations, MGT of America, Inc. Page 1-9

21 SPLOST III FACILITIES Exhibit 1-9 shows the results of the initiatives listed above and from constructing new energy efficient buildings. The graph compares GCPS s utility cost per student with those of Cobb County and with national data for school districts with more than 25,000 students. The Maintenance Department documents a savings of over $19 million annually due to effective energy management. EXHIBIT 1-9 COMPARISON OF UTILITY COST PER STUDENT Source: Gwinnett County Public Schools, Division of Facilities and Operations, Maintenance Department, COMMENDATION 1-F: The Division of Facilities and Operations is commended for persistently improving the materials, systems, methodologies, and designs for school facilities within a framework of life-cycle costing. 1.3 Project Oversight and Budgetary Controls The effectiveness of project oversight and budgetary control mechanisms can be readily measured by the following outcomes: Projects are delivered on time. Projects are delivered within budget. Projects conform to the standards set forth in the construction documents. Life-cycle costing is used to obtain the lowest possible initial costs, combined with the lowest possible operating and maintenance costs. MGT of America, Inc. Page 1-10

22 SPLOST III FACILITIES Change order rates are kept within best practice standards. Unforeseeable situations are handled with confidence and trust in the established procedures and processes. FINDING The GCPS Division of Facilities and Operations exhibited all of the above characteristics related to project oversight and budgetary control mechanisms during the Annual SPLOST III Audit and Review. Exhibit 1-10 summarizes the record of change orders for projects completed during the school year with SPLOST III funds. During this period, 132 change orders were initiated, for a net savings for GCPS of approximately $1,192,819. The majority of the change orders were due to unforeseen conditions on one project. For FY , the total net dollar amount of change orders represented a savings to the District, which is well below the industry standard of 3 to 4 percent for the construction cost of new construction and 6 to 9 percent for renovation work. Approximately 58 percent of the change orders were due to unforeseen conditions (soil conditions), most of which occurred on one project. Another 5 percent were due to unused allowances, and these were negative amounts or negative adjustments to the contract amount. As shown in Exhibit 1-10, the District improved its change order performance over the previous year. The total amount of change orders and the average per project decreased. The dollar amount of change orders increased in the District s favor and the amount of owner initiated change orders increased, which indicates these changes were not due to errors in the contract documents. EXHIBIT 1-10 SUMMARY OF GCPS SPLOST III CHANGE ORDERS SCHOOL YEAR CATEGORY CHANGE Total Number of Change Orders Average Number of Change Orders per Project Net Total -$92,057 -$1,192,819 $1,100,762 Average $/Change Order $5,366 -$9,036 -$14,402 Owner Initiated 20 (11%) 42 (31%) 22(20%) Architect/Engineer Initiated 48 (27%) 2 (2%) -46(-25%) Contractor-Only Initiated 0 (0%) 0 (0%) 0(0%) Fire Marshall Initiated 3 (2%) 6 (5%) 3(3%) Unforeseen 88 (50%) 77 (58%) -11(8%) Unused Allowances 9 (5%) 6 (5%) -3(0%) Source: MGT of America, Inc. summary, prepared from data furnished by Gwinnett County Public Schools, Division of Facilities and Operations, MGT of America, Inc. Page 1-11

23 SPLOST III FACILITIES COMMENDATION 1-G: Gwinnett County Public Schools continues to use effective methods and controls in change order processing. FINDING For the third year of SPLOST III, GCPS has continued a consistent process of project cost control. This process has resulted in lower construction costs than found in neighboring metropolitan school systems. Exhibit 1-11 compares the construction costs per square foot for projects bid since 2006 in the Atlanta Metro Area, and GCPS for the SPLOST III projects occupied in the school year. As the exhibit indicates, GCPS is continuing to build schools at a significant lower cost per square foot than other districts in the region. Construction costs for GCPS, on average, are 30 percent less than the comparison area. EXHIBIT 1-11 PER SQUARE FOOT CONSTRUCTION COST AVERAGES FOR NEW CONSTRUCTION IN THE ATLANTA METRO AREA AND IN GCPS FOR SPLOST III SCHOOL YEAR PER SQUARE FOOT AVERAGE IN ATLANTA METRO AREA PER SQUARE FOOT AVERAGE IN GCPS DIFFERENCE BETWEEN ATLANTA METRO AND GCPS PERCENT DIFFERENCE SCHOOL TYPE Elementary Schools $ $90.97 $ % Middle Schools $ $98.60 $ % High Schools $ $ $ % Source: Prepared by MGT of America, Inc. from data supplied by the Gwinnett County Public Schools, COMMENDATION 1-H: Gwinnett County Public Schools has followed a consistent process for cost control related to SPLOST III projects during the school year that resulted in lower construction costs than those found in neighboring school systems. FINDING GCPS continues to use processes that generally keep bid amounts within the architectural construction budgets. As noted during SPLOST II, these processes include: Prototype designs. Standard materials, finishes, and construction methods. MGT of America, Inc. Page 1-12

24 SPLOST III FACILITIES Architects with significant prior GCPS experience who produce clear and easyto-understand construction documents. Contractors with significant prior GCPS experience who do not add large contingencies to their bids. A cadre of experienced subcontractors with equally considerable GCPS experience. Exhibit 1-12 compares the bid amounts versus the actual architectural construction budgets for the projects occupied during the school year. Six of the 10 projects were within the Architecture/Engineering (A/E) Construction Budgets. Of the four bids that were not within the budgets, one project had difficult soil conditions and another project had only two bidders. EXHIBIT 1-12 BID AMOUNTS VERSUS A/E CONSTRUCTION BUDGETS SCHOOL YEAR A/E CONSTRUCTION BUDGET DIFFERENCE BETWEEN BUDGET AND BID AMOUNT PERCENT DIFFERENCE BID PROJECT NAME AMOUNT North Gwinnett Middle $24,195,000 $24,000,000 ($195,000) (1%) Archer High $50,610,000 $45,000,000 ($5,610,000) (12%) Mountain View High $47,572,000 $45,000,000 ($2,572,000) (6%) Twin Rivers Middle $23,185,000 $24,000,000 $815,000 3% Bay Creek Middle $15,260,467 $16,250,000 $989,533 6% Couch Middle $19,392,005 $19,000,000 ($392,005) (2%) Woodard Mill Elementary $12,995,000 $13,500,000 $505,000 4% Dyer Elementary $12,380,956 $13,500,000 $1,119,044 8% Starling Elementary $12,603,436 $14,500,000 $1,896,564 13% Lanier High $40,760,000 $41,000,000 $240,000 1% Source: Gwinnett County Public Schools documents, COMMENDATION 1-I: Gwinnett County Public Schools is commended for continuing to use effective procedures that generally keep bid amounts within construction budgets. FINDING For the FY , GCPS had a good record of completing projects on schedule and before the school opening date. Completing projects on schedule is another indicator of a well-managed building program. Exhibit 1-13 compares the actual FY project completion dates (as determined by the date of the Fire Marshall Certificate of Occupancy) with the scheduled completion dates and school opening dates. As the exhibit shows, all schools were ready for occupancy on the school opening date. MGT of America, Inc. Page 1-13

25 SPLOST III FACILITIES EXHIBIT 1-13 PROJECT COMPLETION DATES VERSUS SCHOOL OPENING DATES SCHOOL YEAR PROJECT SCHEDULED COMPLETION DATE ACTUAL COMPLETION DATE SCHOOL OPENING DATE North Gwinnett Middle May 1, 2009 May 3, 2009 August 11, 2009 Archer High April 1, 2009 April 1, 2009 August 11, 2009 Mountain View High April 1, 2009 June 1, 2009 August 11, 2009 Twin Rivers Middle May 1, 2009 March 2, 2009 August 11, 2009 Bay Creek Middle May 1, 2009 March 6, 2009 August 11, 2009 Couch Middle March 1, 2009 January 22, 2009 August 11, 2009 Woodard Mill Elementary May 1, 2009 April 30, 2009 August 11, 2009 Dyer Elementary May 1, 2009 May 1, 2009 August 11, 2009 Starling Elementary March 1, 2009 April 17, 2009 August 11, 2009 Lanier High May 31, 2010 June 3, 2010 August 11, 2010 Source: Gwinnett County Public Schools document, COMMENDATION 1-J: Gwinnett County Public Schools is commended for maintaining project schedules. MGT of America, Inc. Page 1-14

26 2.0 NON-FACILITIES RELATED SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS

27 2.0 NON-FACILITIES RELATED SPLOST II AND SPLOST III FINDINGS, COMMENDATIONS, AND RECOMMENDATIONS This chapter describes the findings related to the overall financial position of the Gwinnett County Public Schools (GCPS) SPLOST III resources for the program to date ( through ) and the school year activities. Information pertaining to the SPLOST II activities for is also provided. The five major sections of this chapter are as follows: 2.1 Planning and Budget Activities 2.2 Financial Management 2.3 Technology 2.4 SPLOST II Program SPLOST III funds were authorized in a November 2006 referendum approved by the voters of Gwinnett County. The referendum approved a maximum collection of $1.1 billion in sales tax revenues from July 1, 2007 through June 30, 2012 for SPLOST III. In addition to approving the sales tax, the voters also authorized the Board of Education to sell short-term bonds in the amount of $425 million to be repaid with sales tax revenue. The sale of the bonds was designed to provide cash flow to address the immediate classroom needs of GCPS. SPLOST III funds became available to GCPS beginning in March 2007 with the sale of $425,000,000 in short-term general obligation bonds. The first sales tax revenues were collected in July These resources can be used for capital improvements and to purchase furniture and equipment for the newly constructed and remodeled buildings, acquire technology-related equipment, and purchase new vehicles for school district use. Capital resources for the Child Nutrition Program are paid from the School Nutrition Enterprise Fund; however, the Child Nutrition costs associated with new schools are included in the overall capital budget. Chapter Summary The original budget for the SPLOST III program has been adjusted to address the current trend of reduced sales tax receipts. Exhibit 2-1 provides a comparison of the original and current budgets for the SPLOST III program. Although the sales tax revenues are anticipated to decline by over 21 percent, the overall decrease in revenues is 5.21 percent. The reduction in sales tax revenues has been offset by conservative estimates for interest income and a 74 percent increase in State Capital revenue. Therefore, given the reduction in the sales tax revenues, GCPS has done an admirable job of recovering a major portion of the lost revenues and keeping the program on track. MGT of America, Inc. Page 2-1

28 SPLOST III NON-FACILITIES EXHIBIT 2-1 GWINNETT COUNTY PUBLIC SCHOOLS SPLOST III COMPARISON ORIGINAL BUDGET TO CURRENT BUDGET JUNE 30, 2010 PERCENTAGE ORIGINAL CURRENT INCREASE INCREASE BUDGET BUDGET (DECREASE) (DECREASE) REVENUES Sales Tax $ 844,382,866 $ 660,000,000 $ (184,382,866) % Interest Income 11,000,000 32,877,803 21,877, % Other Local Revenues % State Capital Revenue 91,986, ,472,824 68,486, % Bond Revenue 425,000, ,476,689 22,476, % Total Revenues 1,372,369,142 1,300,827,316 (71,541,826) -5.21% EXPENDITURES Capital Improvements Construction 403,360, ,807,389 (3,553,271) -0.88% Site Work - 12,483,000 12,483, % Land Purchases 120,000,000 51,523,273 (68,476,727) % Total Capital Improvements 523,360, ,813,662 (59,546,998) % Non-Facility Expenditures Technology-Media 2,386,000 13,430,304 11,044, % Technology - Central 136,405, ,684,398 (26,721,397) % Bus Purchase - 12,597,373 12,597, % Stadium Projects 5,000,000 - (5,000,000) % Equipment - Facilities 33,940,581 31,407,212 (2,533,369) -7.46% Buy Back of ISC Facility 50,500,000 18,537,000 (31,963,000) % Supply Services - Property 1,200,000 1,199,992 (8) 0.00% Finance & Accounting (Bank Fees) 3,400, ,250 (2,447,750) % Transfers to Other Funds 616,176, ,470,325 27,294, % Cost of Issuing Bonds - 2,447,750 2,447, % Project Reserve - 3,287,050 3,287, % Total Non-Facility Expenditures 849,008, ,013,654 (11,994,828) -1.41% Total Expenditures $ 1,372,369,142 $ 1,300,827,316 $ (71,541,826) -5.21% Source: Gwinnett County Schools Multi-Year Project Summary as of June 30, The budget for the SPLOST III program was developed in 2006 and the projected sales tax revenues were based on previous experience with the SPLOST II program. The economic downturn has had a negative impact on sales tax revenues and the budget for these revenues has been adjusted accordingly. The State Capital Plan revenues are based on a five-year facilities plan submitted annually by all of the school districts in Georgia. At the time of submission, it is not known what projects will be eligible for the program as the level of funding must be approved each year. GCPS received state revenues associated with the SPLOST III program that were well above the original estimate. As previously shown in Exhibit 2-1, adjustments in the expenditure categories occurred as follows: MGT of America, Inc. Page 2-2

29 SPLOST III NON-FACILITIES Site Work These projects were originally included with new school or addition projects; the site work category was established to identify the site work separately from the facility construction. Land Purchases In June 2008, when it became apparent the sales tax revenues for SPLOST III were going to be less than originally anticipated, $52 million of the remaining land purchases were transferred to the Bond Construction Fund. Bus Purchases The SPLOST III budget was adjusted in to purchase 145 new buses at a cost of $9,389,329. An additional 41 buses were purchased using SPLOST III resources during the Fiscal Year at a cost of $3,208,044. Buyback of Instructional Service Center (ISC) Facility This budget was reduced to provide for the monthly lease payments from July 2007 through June The original budget included the buyback amount and the current intent is to repurchase the facility between 2012 and 2013 using bond proceeds. Finance and Accounting (Bank Fees) This budget transferred $2,447,750 to a new account identifying the cost of issuing the five year bonds. Exhibit 2-2 provides a summary of the and program to-date financial activities for the SPLOST III program. The budget amount represents the anticipated activity for the total program. MGT of America, Inc. Page 2-3

30 SPLOST III NON-FACILITIES EXHIBIT 2-2 GWINNETT COUNTY PUBLIC SCHOOLS SPLOST III SUMMARY OF REVENUES AND EXPENDITURES JULY 1, 2007 THROUGH JUNE 30, 2010 REVENUES PERCENT CURRENT RECEIVED SPLOST III YEAR PROGRAM EXPENDED BUDGET ACTIVITY TO DATE TO DATE Sales Tax $ 660,000,000 $ 127,839,367 $ 382,331, % Interest Income 32,877, ,469 22,837, % Other Local Revenues - 16,954 20,642 - State Capital Revenue 160,472,824 5,147, ,472, % Bond Revenue 447,476, ,476, % Total Revenues 1,300,827, ,968,306 1,013,138, % EXPENDITURES Capital Improvements Construction (1) 399,807,389 (10,722,887) 388,176, % Site Work 12,483,000 1,055,446 3,944, % Land Purchases 51,523,273-51,523, % Total Capital Improvements 463,813,662 (9,667,441) 443,644, % Non-Facility Expenditures Technology 123,114,702 17,046, ,047, % Bus Purchase 12,597,373-12,597, % Equipment - Facilities 31,407,212 3,879,781 29,278, % Buyback of ISC Facility 18,537,000 3,712,500 11,110, % Supply Services - Property 1,199, ,015 1,199, % Finance & Accounting (Bank Fees) 952,250 20,443 50, % Transfer to Fund 204 For Administration 12,000,000 2,902,094 7,857, % Transfer to Debt Service Fund (COPs) 115,770,325 30,107,732 66,506, % Transfer to Debt Service Fund (Bonds) 515,700, ,986, ,577, % Cost of Issuing Bonds 2,447,750-2,447, % Project Reserve 3,287, % Total Non-Facility Expenditures 837,013, ,812, ,675, % Total Expenditures 1,300,827, ,145, ,319, % Ending Fund Balance $ - $ (35,177,138) $ 163,819,117 - Source: Gwinnett County Schools Multi-Year Project Summary as of June 30, (1) The net credit amount for construction in results from adjustments to two projects. - Because of the reduction in sales tax receipts, it was necessary to transfer $21,000,000 of SPLOST III expenditures for Lanier High School to the Bond Construction Fund. - The Knight Elementary School Addition was funded from State resources that were recorded in SPLOST II. $1,318,998 originally expended in SPLOST III was transferred to SPLOST II to match the recorded revenue. - If these adjustments are excluded from the current year activity, the total construction expenditures for the current year would be $12,649,555 and the total expenditures would be $191,462,440. Exhibit 2-2 also shows that the SPLOST III program has expended $849,319,872 during the first three years of the program, representing percent of the total program expenditures. This overall percentage is misleading as the majority of the construction and technology activities have been completed. MGT of America, Inc. Page 2-4

31 SPLOST III NON-FACILITIES The ability to complete the major projects for SPLOST III occurred because of the $425 million bond issue in This infusion of bond proceeds provided the necessary cash to complete the construction projects and the bulk of the technology program during the first three years. There are four expenditure categories in the SPLOST III fund that were budgeted to be paid over the five-year life of the program, thus, the majority of the expenditures for SPLOST III over the last two years of the program will be for the following ongoing activities: Buyback of ISC The remaining budget for this activity for the next two years includes lease payments of $3.7 million. Transfer for Administrative Costs This represents the administrative costs associated with the SPLOST III program which are $2.9 million annually. Transfer to Debt Service Fund (COPs) These are annual payments that were budgeted in SPLOST III to pay principal and interest on the certificates of participation issued in This amounts to $24.9 million annually. Transfer to Debt Service Fund (Bonds) This transfer is to pay the principal and interest on the $425 million bond issue. The balance due for this obligation at June 30, 2010 is $356,092,500 to be paid through February 1, Exhibit 2-3 identifies the construction projects that were completed in Projects totaling $275,523,503 were closed out in the school year. These 31 projects represent 69 percent of the total construction projects in the SPLOST III program. MGT of America, Inc. Page 2-5

32 SPLOST III NON-FACILITIES EXHIBIT 2-3 GWINNETT COUNTY PUBLIC SCHOOLS SPLOST III PROJECTS COMPLETED EXPENDITURES CURRENT TOTAL PROJECT BUDGET YEAR PROJECT Lovin Transportation House $ 108,466 $ 63,970 $ 108,466 Woodward Mill Transportation House 164,071 1, ,071 Berkmar High School Field House 2,137,927 51,880 2,137,927 Brookwood High School Stadium Restrooms 409,611 30, ,611 Dacula High School Fieldhouse Renovation 1,839,719 67,734 1,839,719 Gwin Oaks Elementary Wall Replacement 98,543 35,822 98,543 Phoenix High School HVAC Renovations 106, , ,014 Harmony Elementary School Lighting 100,740 6, ,740 Knight Elementary School (1) 6,534,292 (1,316,996) 6,534,292 North Gwinnett Middle School 25,541, ,069 25,541,415 Bay Creek Middle School 15,830,554 76,853 15,830,554 Archer High School 52,723, ,591 52,723,663 Archer High School Athletic Facility 6,641, ,952 6,641,385 Mountain View High School 47,331, ,100 47,331,117 Mountain View High School Athletic Facility 6,162, ,582 6,162,160 Twin Rivers Middle School 24,704, ,954 24,704,184 Couch Middle School 20,970,021 74,352 20,970,021 Woodward Mill Elementary School 16,704, ,191 16,704,840 Starling Elementary School 13,449,157 51,573 13,449,157 Benefield Elementary Replacement 14,354,222 85,906 14,354,222 Dyer Elementary School 15,333, ,079 15,333,226 M'Creek Concession 476, ,988 Meadow Creek Kitchen HVAC 39,545 8,387 39,545 Norcross Elementary School Roof 85, ,374 Norcross High School Kitchen HVAC 39,581 9,085 39,581 North Gwinnett Concessions 672,059 35, ,059 Parkview High School Stadium RR 532,419 6, ,419 Rockbridge Elementary School Roof 223,570 4, ,570 Shiloh Middle School HVAC 1,098,104 2,560 1,098,104 Peachtree Ridge High School Kitchen 39,694 8,137 39,694 Summerour Middle School HVAC 1,070, ,745 1,070,842 TOTAL $ 275,523,503 $ 3,054,211 $ 275,523,503 Source: Gwinnett County Schools Multi-Year Project Summary as of June 30, (1) The Knight Elementary School Addition was funded from State resources that were recorded in SPLOST II. $1,318,996 originally expended in SPLOST III was transferred to SPLOST II to match the recorded revenue. Exhibit 2-4 identifies the total construction projects completed during the first two years of the SPLOST III program. These projects represent 20 percent of the total construction. MGT of America, Inc. Page 2-6