FIRST 5 A. Wang, M.D. CONSENT. May 26, rd 4. FY 5. FY 7. FY. Authorization. 9. Discussion of. 12. Fund Balance PROGRAM 14.

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1 FIRST 5 A LAMEDA COUNTY COMMISSION MEETING AGENDA Thursday, June 23, :00 AM 11:30 AM First 5 Alameda County 1100 San Leandro Blvd., Suite 120 San Leandro, CA Conference Room A Commissioners: Chair: Pamela Simms-Mackey M.D., Vice Chair: Helen Mendel, CMD, Alex Briscoe, Keith Carson, Gilda Gonzales, Rosemary Obeid, Deborah Roderick Stark, Albert Wang, M.D. 1. Public Comment 2. Special Presentation CONSENT 3. Approval of Minutes from May 26, FY rd Quarter Financial Report 5. FY rd Quarter Investment Report 6. Investment Policy Update 7. FY Budget Proposal Final Reading 8. Local Agency Investment Fund (LAIF) Authorization 9. Discussion of ACERA 401(h) Authorization 10. Grant Authorization INFRASTRUCTURE 11. Long Range Financial Plan Recommendation 12. Fund Balance Commitment (GASB 54) 13. Bridge Loan Program Recommendation PROGRAM 14. FY Strategic Plan Review- Final Reading 15. School Readiness Evaluation Commission Meeting Agenda June 23, 2011

2 16. Strengthening Families/ Parent Café Update 17. State Commission & Association Updates 18. Legislation and Public Policy Updates MISCELLANEOUS 19. Staff Announcements 20. Communication from Commissioners 21. Adjournment Commission Meeting Agenda June 23, 2011

3 Agenda Item 3 FIRST 5 A LAMEDA COUNTY COMMISSION MEETING MINUTESS Thursday, May 26, :00 AM 11:30 AM First 5 Alameda County 1100 San Leandro Blvd., Suite 120 San Leandro, CA Conference Room A Commissioners: Chair: Pamela Simms-Mackey M.D., Vice Chair: Helen Mendel, CMD, Alex Briscoe, Gilda Gonzales, Albert Wang, M.D. Chair Simms- Mackey announced a special thank you to Deborrah Bremond, Director of Family Support Services for the last 11 years. This is her last Commission meeting before retirement later this month. 1. Public Comment Beatriz Leva-Cutler from BAHIAA asked the Commission n to consider the bridge loan program again the year to help support childcare programs with the delayedd budget process. She also asked that the Commission consider starting the process earlier this year. Mark Friedman, CEO stated that staff is working on presenting the bridge loan program at the June Commission meeting. 2. Approval of Minutes from March 24, 2011 Commission Action: The Commission approved the March 24, 2011 minutes upon motion by Commissioner Gonzales, seconded by Commissioner Briscoe and unanimously carried (5 in favor, 0 opposed) INFRASTRUCTURE 3. FY Budget Proposal First Reading Mr. Friedman stated that this is the most difficult budget that we ve had to implement since the agency began. He stated that in September the Commission approved the program reductions based on the declinee in tobacco tax revenue. Then two months ago the Legislature passed Assembly bill 99, signed by Governor Brown which compels First 5 Commissions to transfer one billion dollars to the state by July 1, He stated that the Governor issued his May revised budget and did not include the 1 billion because of the First 5 litigation to prevent AB99 action. He stated that we are still going to have too transfer the money because once things get to the court we cannot guaranteee the outcome. He stated that theree is an effort to work with legislatures to see if we can repeal, however it could stilll be 2-3 years down the road before the funds may be restored. Commission Meeting Minutes May 26, 2011

4 Agenda Item 3 Mark Rasiah, Financial Controller, presented the budget proposal. He pointed out that it is no fun presenting a budget that has percent reductions across the board. He stated that in March the Commission voted on Scenario A which was designed to reflect the transition of where the long range plan currently is and where it will be when the $23.5 million is taken from sustainability at the end of next year. He stated that the slope/cliff scenario required that we reduce the budget by $6.7 million. He stated that the goal was to give stakeholders time to adjust to the challenges we face in a tight fiscal climate. He stated that staff spent a tremendous amount of time and effort reexamining the program budgets down to the last $100. He stated that this has been a stressful and emotional process for all. Commissioner Gonzales asked if the reductions were made in equal measurements to each program across the board. She asked for clarification on the criteria for the program reductions. Janis Burger, Deputy Director stated that the criteria and the proposed program reductions were reviewed in detail at the Program Committee meeting. She stated that staff looked at documented outcomes, sustainability over time, systems change, and the ability to have an impact and move a system forward. Mr. Rasiah added that the programs were not impacted identically but all programs were reduced. Mr. Rasiah stated that First 5 typically submits a two year budget cycle. He stated that this is the first year of the two year budget and that for the second reading, a two year budget will be submitted. Public Comment: Linda Olivenbaum from the Enhanced Mentor Program spoke on behalf of the program and stated that she submitted a document that supports, point by point, how the program meets the reduction criteria. Helena Welch from the Alameda County Corps Leadership program spoke in support of continued funding for the Alameda County Corps Leadership program. Chair Simms- Mackey stated that she attended the Program Committee meeting on May 5 th. She stated that the meeting was heavily attended by community partners and there was a very detailed discussion where the reduction criteria was reviewed in great detail. She stated that partners were very understanding of the criteria and framework that the Commission set forth. Commission Action: The Commission approved the FY Budget Proposal First Reading upon motion by Vice Chair Mendel, seconded by Commissioner Gonzales and unanimously carried (5 in favor, 0 opposed) 4. Contract Authorizations Applied Survey Research Black Adoption Placement and Research Center Interpreters Unlimited Commission Meeting Minutes May 26, 2011

5 Agenda Item 3 Luna Kids Dance Patel & Associates Oakland Parents Together Social Interest Solutions Xantrion Commission Action: The Commission approved the above contract authorizations upon motion by Vice Chair Mendel, seconded by Commissioner Gonzales and unanimously carried (5 in favor, 0 opposed). Asian Health Services Lifelong Medical Care Commission Action: The Commission approved the above contract authorizations upon motion by Commissioner Gonzales, seconded by Vice Chair Mendel with Commissioner Briscoe abstaining and unanimously carried (4 in favor, 0 opposed, 1 abstention). 5. ACERA 401(h) Account Authorization Mr. Friedman presented the ACERA 401(h) Account Authorization to the Commission. He stated that there are currently two First 5 retirees. Commission Action: The Commission approved the ACERA 401(h) Account Authorization upon motion by Vice Chair Mendel, seconded by Commissioner Wang and unanimously carried (5 in favor, 0 opposed). PROGRAM 6. FY Community Grants Recommendation Janis Burger, Deputy Director introduced Malia Ramler, Community Grants Administrator to present the Community Grants Initiative Recommendations to the Commission. Ms. Ramler presented the Community Grants Initiative Recommendations. Commissioner Briscoe asked if the WIC Dental is coming through the office of Dental Health. He stated that ACHCSA did approve a Measure A allocation for $160,000, he thinks for the same purpose. He stated to the public who might be losing resources that the people working on their behalf are not going quietly. He stated that this is a really good example of a relatively small grant that they intend to leverage through Federally Qualified Health Care Center reimbursement that might not be reflected in these grants or recorded in evaluation, but will dramatically expand access to these services. He stated that there are efforts, that not everyone is aware of, that might help to mitigate some of these heart breaking decisions. Commissioner Wang asked for a description of the community reviewers. Ms. Ramler responded that there were two panels of seven reviewers each who represent a variety of Commission Meeting Minutes May 26, 2011

6 Agenda Item 3 backgrounds and disciplines such as early childhood expertise, parents with children under 5, other grant makers, faith based organizations and more. They were a diverse group with high levels of expertise in one or more of our outcome areas. Public Comment: Jill Ellis from the Center for Early Intervention on Deafness stated that her agency was not funded in this year s grants process and asked that the Commission work with their agency to find alternative ways to fund the need. Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel, seconded by Commissioner Wang and unanimously carried (5 in favor, 0 opposed) 4C s of Alameda County Alameda Recreation and Park Department Bay Area Hispano Institute for Advancement, Inc. (BAHIA)/Centro VIDA Black Adoption Placement and Research Center CALICO Center (Child Abuse, Listening, Interviewing and Coordination Center) Centerforce City of Berkeley, Recreation Division City of Union City Leisure Services Community Alliance for Special Education Emergency Shelter Program, Inc. Hayward Public Library Housing Rights Jewish Family and Children's Services of the East Bay Lotus Bloom Loved Twice Luna Kids Dance Marcus A. Foster Educational Institute Oakland Ready to Learn Our Family Coalition Regents of the University of California Tibetan Association of Northern California Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel, seconded by Commissioner Gonzales with Commissioner Briscoe abstaining and unanimously carried (4 in favor, 0 opposed, 1 abstention). Abode Services Alameda County Public Health Department - Asthma Start Alta Bates Summit Foundation Asian Health Services City of Fremont, Youth and Family Services Commission Meeting Minutes May 26, 2011

7 Agenda Item 3 The Dental Health Foundation, Office of Dental Health, Alameda County Public Health Department Tri-City Health Center Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel, seconded by Commissioner Wang with Commissioner Gonzales abstaining and unanimously carried (4 in favor, 0 opposed, 1 abstention). Raising A Reader, San Francisco and Alameda Counties Through the Looking Glass Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel, seconded by Commissioner Gonzales with Commissioner Wang abstaining and unanimously carried (4 in favor, 0 opposed, 1 abstention). Asian Community Mental Health Services Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel, seconded by Commissioner Wang with Commissioners Gonzales and Briscoe abstaining and unanimously carried (3 in favor, 0 opposed, 2 abstention). La Clínica de La Raza, Inc. Commission Action: The Commission approved the following grants upon motion by Commissioner Gonzales seconded by Commissioner Wang with Vice Chair Mendel and Commissioner Briscoe abstaining and unanimously carried (3 in favor, 0 opposed, 2 abstentions). East Bay Agency for Children Commission Action: The Commission approved the following grants upon motion by Commissioner Gonzales seconded by Commissioner Wang with Chair Simms Mackey and Commissioner Briscoe abstaining and unanimously carried (3 in favor, 0 opposed, 2 abstentions). Silva Pediatric Clinic Bananas, Inc. Commission Action: The Commission approved the following grants upon motion by Vice Chair Mendel seconded by Commissioner Wang with Chair Simms-Mackey and Commissioners Gonzales and Briscoe abstaining and unanimously carried (2 in favor, 0 opposed, 3 abstentions). Children's Hospital & Research Center at Oakland - Asthma Program Children's Hospital Oakland - Parent-Infant Program Commission Meeting Minutes May 26, 2011

8 Agenda Item 3 Public Comments: Henry Hicks from Oakland Parents Together thanked the Commission for supporting their parenting workshops. He stated that they were not funded this year through the grants process but were very grateful for being selected to coordinate the Parent Cafés for Project LAUNCH. He offered help with opposing the state s attempts to reduce First 5 funding. He presented a petition that they have been circulating. Kwame Nitoto from Oakland Parents Together stated that he wanted to thank First 5 for selecting Oakland Parents Together to implement the Parent Cafés. He also asked the Commission continue to support parent education programs. 7. FY Strategic Plan Review Mr. Friedman stated that Prop 10 requires the Strategic Plan be reviewed annually at two public hearings. He stated that the plan is not changing overall, the goals and measurable outcomes will remain the same. There are modifications required as per the budget that was passed for the first reading. He stated that the fiscal impact is $5.5 million for these changes. 8. Help Me Grow (SART) Update Ms. Burger stated that First 5 applied to be a part of the national Help Me Grow replication through the state of California working with Fresno, Los Angeles, San Diego, and Orange County. She stated that this is an enhancement of our SART program and there is a lot of support that we will receive. She stated that the SART program name will change to Help Me Grow. She stated that we ll be a part of the larger national network and receive evaluation technical assistance. She stated that it s a small $20,000 grant. 9. State Commission & Association Updates Mr. Friedman stated that the focus of the State Association is working towards the repeal of AB 99. He stated that he and Sean Casey will be meeting with Sherry Novick to coordinate a strategy for the East Bay Legislators. He stated that he invited Benito Delgato Olsen, the head of the K to College program, to the Bay Area Regional Executive Directors team to present on expansion of their program to 0-5 kids. 10. Legislation and Public Policy Updates Mr. Friedman stated that yesterday the Assembly Budget committee voted to roll back some of the significant cuts to child care that were proposed in the May revise. Commissioner Mendel asked if, after meeting with Sherry Novick, it be a good idea to have another legislative breakfast. Mr. Friedman stated that he will either hold another breakfast or Commission Meeting Minutes May 26, 2011

9 set up one on one meetings with the legislators either in their district or in Sacramento. Commissioner Mendel encouraged the audience to go out and vote. Agenda Item 3 MISCELLANEOUS 11. Staff Announcements There were no Staff Announcements. 12. Communication from Commissioners There was no communication from Commissioners. 13. Adjournment Chair Simms-Mackey adjourned the meeting at 10:39AM. Commission Meeting Minutes May 26, 2011

10 AGENDA ITEM 4 To: From: First 5 Alameda County Commission Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Financial Report for July 1, 2010 March 31, 2011 REQUESTED ACTION To review and approve the Financial Report for the first nine months of FY BACKGROUND This narrative and the attached statements report Revenues and Expenses for the period July 1 March 31, With nine months of the fiscal year complete, total revenues and total expenses were at 59% of budget, subject to timing lags. Material exceptions are noted below. Revenue As of March 31, revenues were at $10.3m, or 61% of the revenue projection for the year. Of this amount: Tobacco Tax receipts of $8.4m (60% of budget) were in line with expectations for the first nine months of the year. Tax receipts include allocations through January and are two months in arrears as in prior years. Income from Alameda County agencies were budgeted at nearly $1.0m, representing o State AB212 funding from GSA Child Care Planning Council - $48,000. o Substance Abuse Mental Health Administration (SAMSHA) grant from Alameda County Behavioral Health Care Services (BHCS) - $242,854. o SAMSHA Project Launch federal grant - $608,237. o BHCS SART Pathways data collection system - $99,020. Receipts to date total nearly $0.4m. As in years past, it is expected that the remainder will be invoiced and received at the end of the fiscal year San Leandro Blvd. Suite 120, San Leandro California Phone: fax:

11 AGENDA ITEM 4 The Federal Grants Budget represents the reimbursable balance from the two federal appropriations for the SART program. A Private Grant from the Long Foundation to expand some school readiness sites was budgeted. Revenues for Medi-Cal Administrative Activities (MAA) for the billing period FY were budgeted at $0.5m in the current year. Actual reimbursable expenses however totaled $0.77m. Although the invoice for this amount was submitted in February 2011, reimbursements have not been received as yet. Investment revenue of $537,868 was received during the period. This represents 62% of budget projections. Investment fees of $34,931 were paid to the money managers. Sustainability funds from the First 5 Alameda County Sustainability Fund reserve will be used to bridge the gap between actual revenues and expenses at year-end, to the extent authorized by the Commission. Expenses With nine months of the year complete, total Expenditure for the period was $15.4m or 59% of the budgeted amount of $26.2m. This is similar to expenditure trends in prior years. The two major categories Personnel Costs and Program Contracts were at 64% and 58% of budget respectively and are subject to timing lags. After these two major groups, Space rental comes in as the third largest fixed expense with a budget of $657,000 for the year. Actual expenditure to date on the building lease was at 73% of budget. The Administration Budget will be apportioned to all programs at year-end and will reflect a more complete picture of program costs at that point. Summary Revenues and Expenses are in line with the progression of the fiscal year. Fiscal Impact None. RECOMMENDATION To review and approve the Financial Report for the first nine months of FY Submitted by: Reviewed by: Mark R Rasiah, Financial Controller Mark Friedman, Chief Executive Officer Financial Report

12 First 5 Alameda County Revenue and Available Funds For the Period July 1 - March 31, 2011 Agenda Item 4 Percentage Revenues Budget Actual Variance Received Prop 10 Tobacco Tax 14,000,000 8,393,183 (5,606,817) 60% A Income from County Agencies 998, ,132 (565,979) 43% B Grants Federal 485,798 0 (485,798) 0% C Private 154, , % D 640, ,561 (485,798) 24% Fiscal Leveraging Medi-Cal Administrative Activities (MAA) 500, , , % E Title IV-E Child Welfare Education 8,000 0 (8,000) 0% 508, , , % Investment Revenue 863, ,868 (325,132) 62% Total Revenues 17,009,470 10,290,933 (6,718,537) 61% Available Funds Sustainability Fund 9,174,546 5,128,005 (4,046,541) 56% Total Available Funds 9,174,546 5,128,005 (4,046,541) 56% TOTAL REVENUES & AVAILABLE FUNDS 26,184,016 15,418,938 (10,765,078) 59% Notes: A - Tobacco tax revenues received include allocations up to January Receipts from the State are 2 months in arrears. B - A major portion of the budget is for SAMHSA Project LAUNCH federal grant funds which will be invoiced at year end. C - Balance from the SART program. This revenue is typically received at the end of the fiscal year. D - Grant from the Long Foundation E - MAA reimbursement for FY , invoiced in February 2011, pending receipt of funds. 3

13 First 5 Alameda County Budget Vs Actual July 1, March. 31, 2011 Agenda Item 4 Family Support Services Early Care & Education Community Grants Support Strategies Evaluation & Technology Administration T o t a l Percentage Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Budget Actual Personnel Personnel 1,663,132 1,140, , , , , , , , , , ,525 5,424,411 3,597,142 (1,827,269) 66% Benefits 831, , , , ,527 93, , , , , , ,019 2,661,701 1,558,072 (1,103,629) 59% Sub-total Personnel 2,494,698 1,706,760 1,303, , , ,136 1,400, , , ,496 1,362, ,544 8,086,112 5,155,214 (2,930,898) 64% Program Contracts/Grants/MOUs Contracts 5,291,467 3,090,318 3,213,115 1,919, ,569 26,221 3,042,902 1,185, , ,539 18,819 17,458 11,945,515 6,379,057 (5,566,458) 53% Grants 1,257, ,648 2,330,538 2,095, ,588,046 2,678,440 (909,606) 75% Professional Services Contracts 31,664 9,936 65,854 97,605 80,000 2, ,250 36,639 5,000 4,178 55,000 29, , ,212 (274,556) 40% Sub-total Program Contracts/ Grants/MOUs 5,323,131 3,100,254 4,536,477 2,599,926 2,530,107 2,124,976 3,261,152 1,222, , ,717 73,819 47,349 15,989,329 9,238,709 (6,750,620) 58% Training Expenses Copying/Printing 40,400 24,618 17,300 3,248 1, ,500 9,989 7, , ,700 37,910 (61,790) 38% Equipment Rental 1, , ,650 0 (5,650) 0% Food/Hospitality 17,500 8,930 9,650 3,831 7,000 1,872 45,500 14,193 1, ,500 1,614 89,650 30,453 (59,197) 34% Honoraria 11, ,700 1,200 1, ,480 33, ,180 35,509 (43,671) 45% Postage 2, , , , , , ,230 3,122 (17,108) 15% Professional Services 43, ,000 5,036 1, ,000 3, ,500 9,079 (106,421) 8% Space Rental 1, , , , , , (7,286) 6% Supplies 52,000 20,914 88,500 21,436 5, ,981 67,333 6, ,700 42, , ,565 (214,516) 42% Travel 23,700 15,628 9,100 4,655 3,000 2,195 39,545 14,992 7, , ,845 38,560 (45,285) 46% Staff Development/Training 12,775 6,110 6,000 2,943 2, ,500 5,082 4,000 1,697 6,000 1,588 35,275 17,468 (17,807) 50% Sub-total Training Expenses 206,225 78, ,800 37,750 22,500 5, , ,605 31,900 2,795 88,250 51, , ,130 (578,731) 36% General Expenses Communications 19,981 5,790 10, , ,726 2,726 3, ,004 15,667 50,399 26,582 (23,817) 53% Copying/Printing 8, , , ,149 1,228 1, , ,996 1,228 (24,768) 5% Equipment Leases/Rentals/Maint. 11,487 1,926 9, , , , ,309 23,494 35,406 25,420 (9,986) 72% Equipment Purchase 20, , , ,086 2,680 3, ,121 14,981 88,194 17,705 (70,489) 20% Insurance 25,025 13,768 20,698 3,260 10,114 1,565 12,311 3,467 3,957 2,793 5,030 16,640 77,135 41,493 (35,642) 54% Membership and Dues 9, , ,933 1,500 4, , ,956 18,492 29,997 20,457 (9,540) 68% Postage ,501 0 (1,501) 0% Professional Services 71, , ,711 3,028 34,954 10,496 11, ,279 72, ,980 86,614 (132,366) 40% Space Rental 99,430 71,316 68,813 49,071 27,012 19, , ,133 46,018 33,398 87,330 63, , ,460 (179,806) 73% Travel ,000 1,725 4,000 1,926 (2,074) 48% Depreciation 4, , , , ,840 0 (14,840) 0% Sub-total General Expenses 270,989 93, ,978 53,534 92,096 26, , ,030 73,052 37, , ,316 1,203, ,885 (489,989) 58% TOTAL 8,295,043 4,978,613 6,205,148 3,447,195 3,198,284 2,511,720 5,494,328 2,505,415 1,340, ,239 1,650,561 1,144,756 26,184,016 15,418,938 (10,765,078) 59% Variance Spent 4

14 AGENDA ITEM 5 To: From: First 5 Alameda County Commission Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Investment Report (January 1, 2011 March 31, 2011) REQUESTED ACTION To review and approve the Investment Report for the Third Quarter of FY BACKGROUND OF ACTIVITIES The investment objectives of the First 5 Alameda County Agency are first, to provide safety of principal to ensure the preservation of capital in the overall portfolio; second, to provide sufficient liquidity to meet all requirements that may be reasonably anticipated; and third, to earn a commensurate rate of return consistent with the constraints imposed by the safety and liquidity objectives. The performance objective of the First 5 Alameda County Agency portfolio is to earn a total rate of return that exceeds the total rate of return on a market benchmark index of 1-5 Year Government securities. In , First 5 Alameda County transferred $34,000,000 from the Sustainability Fund held by the Alameda County Treasurer s investment pool to outside money managers. This report summarizes the activity and status of the investment portfolio as of September 30, PORTFOLIO HIGHLIGHTS The Investment Report shows the performance of funds that are invested in the Alameda County pool and with two money managers, Cutwater Asset Management and Chandler Asset Management. At year end, the total market value of the funds with Cutwater and Chandler was $41,782, 249. During the nine months ending March 31 st 2011 a total of $3,5m was withdrawn and the market value of the portfolio was $38,745,406. Adjusted for withdrawals, this represents an unrealized net gain of $307, 036. The Federal Open Market Committee completed round one of the asset purchase program designed to stimulate economic growth, and is on track to complete round 1100 San Leandro Blvd. Suite 120, San Leandro California Phone: fax:

15 AGENDA ITEM 5 two on June 30, At its meeting on March 15 th the committee left the federal funds target rate in the zero to 0.25 percent range and restated its willingness to keep interest rates exceptionally low for an extended period of time. Treasury yields moved slightly higher in March with continued improvement in the overall employment situation. At the end of March, two-year Treasuries yielded 0.82% (up from 0.59% at the end of December); five-year Treasuries yielded 2.28% (up from the 2.01% at the end of December); ten-year Treasuries yielded 3.47% (up from 3.29%) and 30-year bonds yielded 4.51% (up from 4.33% at the end of December). The yield curve is expected to remain relatively steep for the foreseeable future, since the rates on long term Treasuries continue to be higher than the short term ones. Yields on the Investment portfolio managed by the two fund managers registered a moderate 1.6% return on an annualized basis, for the quarter. INVESTMENT REPORT Investment Income Investment income is primarily derived from interest or yield payments on securities held in the investment portfolio. Typically, interest income from each security is received semiannually. The money managers buy, sell and exchange securities consistent with the First 5 Alameda County Investment Policy in order to optimize overall yields. Net investment income for the third quarter totaled $247,054 representing $245,216 from the money managers and $1,838 from the Alameda County Treasurer s Office. Investment Fees Fees include those levied by the money managers (Cutwater and Chandler) and the account maintenance fees levied by the account custodian (Union Bank of California). The total fees paid during this period were $13,703. Investment Activity The Investment Activity shows all transactions affecting our portfolio. A purchase of securities increases the value of the portfolio whereas the sale of securities decreases the total portfolio value and may result in a gain or loss on the transaction. Market Value and Unrealized Gains and Losses There was an unrealized gain of $307, 036 at the end of March. This is determined by comparing the Cost and the Market Value of the portfolio on that date. It implies that a gain would have been realized, had the portfolio been liquidated on March 31 st. Since the portfolio was not liquidated, this section is for information only. However, government entities are legally required (GASB 31) to report unrealized gains and losses on investments. Investment Report

16 AGENDA ITEM 5 Yield Benchmarks Investment yields are compared to the Local Agency Investment Fund (LAIF) yields in order to benchmark investment manager performance. Cutwater and Chandler s yields (1.69% and 1.58%, respectively) have surpassed the LAIF benchmark (.69%) for the same period. The Alameda County Treasury Investment Pool is net of fees. FISCAL IMPACT The total realized investment earnings for the third quarter of the fiscal year were $247,054. RECOMMENDATION To review and approve the Investment Report for the Third Quarter of FY Submitted by: Reviewed by: Mark R Rasiah, Financial Controller Mark Friedman, Chief Executive Officer Investment Report

17 Agenda Item 5 First 5 Alameda County Investment Report For the Period Jan 1 - Mar Cutwater Chandler Union Asset Asset Bank Management Management Total INVESTMENT INCOME: Interest Received 0 138, , ,920 Income from Alameda County Treasurer 1,838 Total Investment Earnings 260,758 Investment Fees Paid (1,382) (6,482) (5,839) (13,703) Net Investment Income (Net of Fees) 247,054 INVESTMENT ACTIVITY: Portfolios at 12/31/ ,912,660 17,279,700 38,192,360 Purchases 2,955, ,955,637 Sales (2,879,419) (180,000) (3,059,419) Maturities (425,000) (200,000) (625,000) Gain (Loss) on Disposal (4,690) 2,506 (2,184) Cash Disbursement Net Cash Management 482, , ,977 Portfolios at 03/31/ ,041,989 17,396,380 38,438,370 COST VS. MARKET VALUE: Portfolios at Market 03/31/ ,117,491 17,627,915 38,745,406 Portfolios at Cost 03/31/ ,041,988 17,396,381 38,438,370 Unrealized Gain (Loss) at 3/31/ , , ,036 YIELD AND BENCHMARKS: Cutwater Asset Management (current yield) 1.280% Chandler Asset Management ( current yield) 1.200% Local Agency Investment Fund (LAIF) 0.700% 1-5 Government Index (total rate of return) 0.600% 4

18 Fisrt 5 Alameda County Investment Holdings As at March 31st, 2011 Agenda Item 5 Holder Asset Name Shares/Units Cost Basis Market Value Asset Type S & P Rating Moody Rating Cutwater FFCB ,003, ,013, Other Fed Govt AAA Aaa Cutwater FFCB , ,010, Other Fed Govt AAA Aaa Cutwater FFCB ,027, ,045, Other Fed Govt AAA Aaa Cutwater FHLB , , Other Fed Govt AAA Aaa Cutwater FHLB , , Other Fed Govt AAA Aaa Cutwater FHLB , , Other Fed Govt AAA Aaa Cutwater FHLB , , Other Fed Govt AAA Aaa Cutwater FNMA , , Other Fed Govt AAA Aaa Cutwater FNMA , ,007, Other Fed Govt AAA Aaa Cutwater FNMA , , Other Fed Govt AAA Aaa Cutwater FNMA ,250, ,250, Other Fed Govt AAA Aaa Cutwater FNMA , , Other Fed Govt AAA Aaa Cutwater FNMA , , Other Fed Govt AAA Aaa Cutwater FNMA , , Other Fed Govt AAA Aaa Cutwater FNMA ,000, , Other Fed Govt AAA Aaa Cutwater FHLMC ,016, ,011, Other Fed Govt AAA Aaa Cutwater FHLMC , , Other Fed Govt AAA Aaa Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FFCB BDS , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLB Note , , Other Fed Govt Aaa AAA Chandler FHLMC NTS , , Other Fed Govt Aaa AAA Chandler FHLMC NTS , , Other Fed Govt Aaa AAA Chandler FHLMC NTS , , Other Fed Govt Aaa AAA

19 Fisrt 5 Alameda County Agenda Item 5 Investment Holdings As at March 31st, 2011 Holder Asset Name Shares/Units Cost Basis Market Value Asset Type S & P Rating Moody Rating Chandler FHLMC NTS , , Other Fed Govt Aaa AAA Chandler FHLMC NTS , , Other Fed Govt Aaa AAA Chandler FHLMC , , Other Fed Govt Aaa AAA Chandler FHLMC , , Other Fed Govt Aaa AAA Chandler FHLMC , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA NTS , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA , , Other Fed Govt Aaa AAA Chandler FNMA NTS , , Other Fed Govt Aaa AAA Chandler FNMA NTS , , Other Fed Govt Aaa AAA Chandler FNMA NTS , , Other Fed Govt Aaa AAA Chandler Tenn Vy Auth Ser A , , Other Fed Govt Aaa AAA Chandler Tenn Vy Auth Ser A , , Other Fed Govt Aaa AAA Chandler Tenn Vy Auth Ser A , , Other Fed Govt Aaa AAA Chandler Tenn Vy Auth Ser A , , Other Fed Govt Aaa AAA Chandler Tenn Vy Auth Ser A , , Other Fed Govt Aaa AAA Cutwater Bank ofnew York , , Corporate Bonds AA- Aa2 Cutwater GE Cap Corp ,029, ,060, Corporate Bonds AA+ Aa2 Cutwater Microsoft Corp , , Corporate Bonds AAA Aaa Cutwater TIAA GLOBAL MARKETS , , Corporate Bonds AAA Aa1 Cutwater NY Life Global Bonds , , Corporate Bonds AAA Aaa Cutwater Walmart , , Corporate Bonds AA Aa2 Chandler Bank of America , , Corporate Bonds Aaa AAA Chandler Bank of New York Mellon , , Corporate Bonds Aa3 A+ Chandler Bank of New York Mellon , , Corporate Bonds Aa3 A+ Chandler Berkshire Hathaway Fin , , Corporate Bonds Aa2 AA+ Chandler Berkshire Hathaway Fin , , Corporate Bonds Aa2 AA+ Chandler Black Rocking NTS , , Corporate Bonds A1 A+ Chandler Chevron Corp , , Corporate Bonds Aa1 AA Chandler Chevron Corp , , Corporate Bonds Aa1 AA Chandler Chevron Corp , , Corporate Bonds Aa1 AA Chandler Ebay Inc , , Corporate Bonds A2 A Chandler Goldman Sachs , , Corporate Bonds Aaa AAA Chandler Goldman Sachs , , Corporate Bonds Aaa AAA Chandler GECC FDIC , , Corporate Bonds Aaa AAA

20 Fisrt 5 Alameda County Agenda Item 5 Investment Holdings As at March 31st, 2011 Holder Asset Name Shares/Units Cost Basis Market Value Asset Type S & P Rating Moody Rating Chandler GECC NTS , , Corporate Bonds Aa2 AA+ Chandler General Elec Cap Corp , , Corporate Bonds Aa2 AA+ Chandler Hewlett Packard , , Corporate Bonds A2 A Chandler IBM Corp , , Corporate Bonds Aa3 A+ Chandler JP Morgan Chase & Co , , Corporate Bonds Aaa AAA Chandler JP Morgan Chase & Co , , Corporate Bonds Aa3 A+ Chandler JP Morgan Chase & Co , , Corporate Bonds A2 A Chandler JP Morgan Chase & Co , , Corporate Bonds A2 A Chandler Northern Trust Co , , Corporate Bonds A1 AA- Chandler Northern Trust Co , , Corporate Bonds A1 AA- Chandler PNC FDG , , Corporate Bonds Aaa AAA Chandler Praxair , , Corporate Bonds A2 A Chandler Praxair , , Corporate Bonds A2 A Chandler Praxair , , Corporate Bonds A2 A Chandler US Bancorp , , Corporate Bonds Aaa AAA Chandler US Bancorp , , Corporate Bonds Aa3 A+ Chandler US Bancorp , , Corporate Bonds Aaa AAA Chandler Wells Fargo , , Corporate Bonds Aaa AAA Chandler Wells Fargo , , Corporate Bonds Aa3 AA- Chandler Wal-Mart Stores , , Corporate Bonds Aa2 AA Chandler Wal-Mart Stores , , Corporate Bonds Aa2 AA Chandler Wal-Mart Stores , , Corporate Bonds Aa2 AA Cutwater Highmark Money Market , , Money Market Chandler Highmark Money Market , , Money Market Aaa AAA Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Cutwater U.S. Treasury Notes , , U.S. Treasury AAA Aaa Chandler U.S. Treasury Notes , , U.S. Treasury TSY TSY Chandler U.S. Treasury Notes , , U.S. Treasury TSY TSY Chandler U.S. Treasury Notes U.S. Treasury TSY TSY Chandler U.S. Treasury Notes , , U.S. Treasury TSY TSY Chandler U.S. Treasury Notes , , U.S. Treasury TSY TSY Chandler U.S. Treasury Notes , , U.S. Treasury TSY TSY Total 38,438, ,745,405.81

21 AGENDA ITEM 6 To: From: First 5 Alameda County Commission Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Investment Policy Recommendations ACTION REQUESTED To review and approve the following revisions to the Investment Policy recommendations. BACKGROUND First 5 Alameda County (F5AC) adopted an Investment Policy in May 2005, which was amended on December 2005, May 2006 and every year since June In accordance with the Investment Policy Section VIII.1, the CEO or his designee shall annually render a statement of investment policy, which the Board will consider at a public meeting. Each year, prior to such review, First 5 Alameda County Finance staff works with the money managers to discuss any proposed changes to the policy or changes in California Government Code Section 53600, which guides the investment of public funds. RECOMMENDATIONS This version of the Investment Policy document remains substantially unchanged from that approved by the Commission in June The proposed revisions are: 1. Replacing Director of Finance and Administration with Financial Controller throughout the document. This is in keeping with the current organization structure, where the Director position has been eliminated. 2. Section 8, Page 10: Changing the reporting frequency from monthly to quarterly to reflect current practice San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org

22 AGENDA ITEM 6 These recommendations are made in the attached document in track changes format for easy identification. FISCAL IMPACT There is no fiscal impact. RECOMMENDATION To review and approve the proposed revisions to the Investment Policy Submitted by: Reviewed by: Mark R Rasiah Financial Controller Mark Friedman, Chief Executive Officer Investment Policy Recommendation June 23,

23 AGENDA ITEM 6 FIRST 5 ALAMEDA COUNTY INVESTMENT POLICY ADOPTED MAY 2005, AMENDED DEC. 2005, MAY 2006, JUNE 2007, JUNE 2008, JUNE 2009, JUNE 2010 AND JUNE 2011 I. APPLICABILITY The Investment Policy (the Policy ) of First Five Alameda County ( F5AC ) is intended to cover all funds and investment activities under the direction of F5AC. All funds shall be invested in accordance with this Policy and California Government Code Section et seq. related to the investment of public funds. The primary funds available for investment are maintained in F5AC s Sustainability Fund. The Long Range Financial Plan guides F5AC s use of the Sustainability Fund with the goal of sustaining program spending at a high level as the tobacco tax declines. It is anticipated that the Sustainability Fund will be used by F5AC for program services over the course of the next 8-10 years. The Sustainability Fund (the Fund ) was accumulated in several ways: First, the Fund developed through the initial reserve that occurred when tax dollars were accumulated but funds could not be spent until a Strategic Plan was passed (Jan Jan. 2000). In addition, contributions to the Sustainability Fund were budgeted over a number of years ( ). Finally, budgeted funds that remained unspent were directed to the Sustainability Fund rather than rolling to the subsequent year s budget (2001-present). The Executive Committee shall assure that F5AC operates its investing activities in accordance with this Policy. To carry out this charge, the Executive Committee s responsibilities include the following: 1. Review the overall investment philosophy of F5AC, determine whether the investment practices follow that philosophy and this Policy, and recommend appropriate changes to the Board. 2. Establish benchmarks and strategies for the investment portfolio. Monitor the investment performance of F5AC s portfolio for compliance with established benchmarks. 3. Monitor the cash flow requirements of F5AC and assure investments mature to provide the amounts needed. Periodically review the appropriateness of the model and assumptions used to estimate these requirements. 4. Ensure F5AC s compliance with applicable laws and regulations. 5. Monitor and direct the selection, evaluation, and retention of each broker/dealer, investment manager, custodian or other agent utilized by F5AC to implement the investment function. Negotiate compensation with them and monitor expenses paid and services received. Prepare quarterly investment reports and present to the Commission. Also communicate to the Commission actions taken by the Committee in meeting the responsibilities described herein. F5AC Investment Policy X-XX

24 AGENDA ITEM 6 II. OBJECTIVES F5AC s funds shall be invested in accordance with all applicable F5AC policies and codes, State statutes, and Federal regulations, and in a manner designed to accomplish the following objectives, which are listed in priority order: 1. SAFETY. Safety of principal is the foremost objective of the investment program. The objective shall be to mitigate credit risk and interest rate risk. a. Credit Risk. F5AC shall minimize credit risk, the risk of loss due to the failure of the security issuer or backer, by: Limiting investments to the types of securities listed in Section VI of this Policy. Pre-qualifying the financial institutions, broker/dealers, intermediaries, and advisers with which F5AC will do business in accordance with Section IV. Diversifying the investment portfolio so that the impact of potential losses from any one type of security or from any one individual issuer shall be minimized. b. Interest Rate Risk. F5AC shall minimize interest rate risk, which is the risk that the market value of securities in the portfolio will fall due to changes in market interest rates, by: Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity to meet liquidity needs. Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investment pools and limiting the average maturity of the portfolio in accordance with Section VII of this Policy. 2. LIQUIDITY. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). In addition, F5AC shall maintain a minimum of three months of operating expenditures in the Alameda County Treasury. 3. YIELD. The investment portfolio shall be designed with the objective of attaining a market rate of return throughout budgetary and economic cycles, taking into account the investment risk constraints and liquidity needs. Return on investment is of secondary importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a fair return relative to the risk being assumed. Securities generally shall be held until maturity, with the following exceptions: A security with declining credit may be sold early to minimize loss of principal. A security swap would improve the quality, yield, or target duration in the portfolio. F5AC Investment Policy X/XX/

25 AGENDA ITEM 6 Liquidity needs of the portfolio require that the security be sold. III. STANDARDS OF CARE 1. PRUDENCE. The standard of prudence to be used by investment officials shall be the "prudent person" standard and shall be applied in the context of managing an overall portfolio. The "prudent person" standard states that "Investments shall be made with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. F5AC s overall investment program shall be designed and managed with a degree of professionalism that is worthy of the public trust. F5AC s recognizes that no investment is totally without risk and that the investment activities of F5AC are a matter of public record. Accordingly, F5AC recognizes that occasional measured losses may occur in a diversified portfolio and shall be considered within the context of the overall portfolio's return, provided that adequate diversification has been implemented and that the sale of a security is in the best long-term interest of F5AC. The Director of Finance and AdministrationFinancial Controller and authorized investment personnel acting in accordance with established procedures and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided that deviations from expectations are reported in a timely fashion to the Executive Committee and appropriate action is taken to control adverse developments. 2. ETHICS AND CONFLICTS OF INTEREST. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Portfolio managers who are dealers should not buy securities from their own or related companies. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of F5AC. Individuals acting on behalf of F5AC in accordance with this Policy and related written procedures and exercising due diligence shall be relieved of personal liability for any individual security's risk or market changes. 3. DELEGATION OF AUTHORITY. The management responsibility for the investment program is hereby delegated to the Chief Executive Officer (the CEO) who has further delegated the authority to conduct investment transactions and to manage the operation of the investment portfolio to the Director of Finance and AdministrationFinancial Controller. The Director of Finance and AdministrationFinancial Controller shall maintain a list of persons authorized to transact securities business for F5AC and no person may engage in an investment transaction except as expressly provided under the terms of this Policy. F5AC Investment Policy X/XX/

26 AGENDA ITEM 6 The Director of Finance and AdministrationFinancial Controller shall develop written administrative procedures and internal controls, consistent with this Policy, for the operation of F5AC s investment program. Such procedures shall be designed to prevent losses arising from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees. F5AC s Director of Finance and AdministrationFinancial Controller may engage the support services of outside investment advisors in regard to its investment program, so long as it can be demonstrated that these services produce a net financial advantage or necessary financial protection of the Town's financial resources. The advisor(s) shall follow this Policy and such other written instructions as are provided. IV. SELECTION OF FINANCIAL INSTITUTIONS, DEPOSITORIES AND BROKER/DEALERS 1. SELECTION OF FINANCIAL INSTITUTIONS AND DEPOSITORIES The Director of Finance and AdministrationFinancial Controller shall maintain a list of FDIC insured banks approved to provide depository and other banking services for F5AC. To be eligible, a bank shall qualify as a depository of public funds in the State of California as defined in California Government Code Section and shall secure deposits in excess of FDIC insurance coverage in accordance with California Government Code Section SELECTION OF BROKER/DEALERS. The Director of Finance and AdministrationFinancial Controller shall maintain a list of broker/dealers authorized to provide investment services. All broker/dealers who desire to become qualified for investment transactions must meet the following criteria: Be recognized as a Primary Dealer by the Federal Reserve Bank of New York or have a primary dealer within their holding company structure; or Report voluntarily to the Federal Reserve Bank of New York; or Qualify under Securities and Exchange Commission (SEC) Rule 15c3-1 (Uniform Net Capital Rule). Each authorized broker/dealer shall maintain a minimum capital requirement of $10,000,000 and have been in operation at least five years. In addition, authorized broker/dealers shall submit and annually update a F5AC approved Broker/Dealer Information Request form which includes the following information: The firm s most recent financial statements; Proof of Financial Industry Regulatory Authority (FINRA) certification; and Evidence of adequate insurance coverage. Furthermore, authorized broker/dealers must be licensed by the State of California as a broker/dealer as defined in Section of the California Corporations Code. F5AC Investment Policy X/XX/

27 AGENDA ITEM 6 In the event that an external investment advisor is not used in the process of recommending a particular transaction in F5AC s portfolio, authorized broker/dealers shall attest in writing that they have received and reviewed a copy of this Policy. An annual review of the financial condition and registration of all qualified broker/dealers shall be conducted by the Director of Finance and AdministrationFinancial Controller and the Executive Committee. 3. MINORITY AND COMMUNITY FINANCIAL INSTITUTIONS. From time to time, the Director of Finance and AdministrationFinancial Controller may choose to invest in instruments offered by minority and community financial institutions. In such situations, a waiver to certain parts of the criteria under Paragraph 2 may be granted by the Executive Committee. All terms and relationships shall be fully disclosed to the Executive Committee prior to purchase. 3. WORKING WITH INVESTMENT ADVISORS/PORTFOLIO MANAGERS. Investment advisors and portfolio managers shall be selected by the Finance Committee or their designee after an initial screening and an interview process. Among the criteria for selection shall be the stability of the institution, track record, customer service, ability to comply with these investment policies, and typical return on investment. Portfolio managers shall maintain detailed accounting records related to investment transactions and balances. They shall prepare and submit the following reports and records to F5AC: Monthly, a list of investments owned, including type of security, CUSIP number, number of shares, date purchased, maturity date, interest rate, accrued interest, purchase cost and market value. Investment advice within five business days of any trade. Documentation supporting three bids or offers obtained for each security purchased or sold. Quarterly, a report demonstrating compliance with this Policy. Notice of noncompliance, within five business days of the transaction, when the rating of an individual security declines below that allowed by this Policy, or the percentage of the portfolio in an investment type exceeds the maximum allowed by this Policy, or the amount allowed to be invested in one issuer exceeds the percentage allowed by this Policy. V. SAFEKEEPING AND CUSTODY The Director of Finance and AdministrationFinancial Controller shall select one or more financial institutions to provide safekeeping and custodial services for F5AC. A Safekeeping Agreement shall be executed with each custodian bank prior to utilizing that bank's safekeeping services. Custodian banks shall be selected on the basis of their ability to provide services for F5AC's account and the competitive pricing of their safekeeping related services. F5AC Investment Policy X/XX/

28 AGENDA ITEM 6 The purchase and sale of securities and repurchase agreement transactions shall be settled on a delivery versus payment basis. All securities shall be perfected in the name of the F5AC. Sufficient evidence to title shall be consistent with modern investment, banking and commercial practices. All investment securities, except non-negotiable Certificates of Deposit, Money Market Funds and LAIF, purchased by the F5AC shall be delivered by either book entry or physical delivery and shall be held in third-party safekeeping by a F5AC approved custodian bank, its correspondent bank or its Depository Trust Company (DTC) participant account. All Fed wireable book entry securities owned by the F5AC shall be held in the Federal Reserve System in a customer account for the custodian bank which shall name the F5AC as customer. All DTC eligible securities shall be held in the custodian bank s DTC participant account and the custodian bank shall provide evidence that the securities are held for the F5AC as customer. All non-book entry (physical delivery) securities shall be held by the custodian bank or its correspondent bank and the custodian bank shall provide evidence that the securities are held by the bank for the Town as customer. VI. ELIGIBLE INVESTMENTS A. Authorized Investments All investments shall be made in accordance with Sections , , and of the Government Code of California and as described within this Policy. Permitted investments under this Policy shall include: 1. U.S. Treasury Obligations: Treasury bills, Treasury notes, Treasury bonds and Treasury STRIPS with maturities not exceeding six years from the date of trade settlement. There is no limit on the percentage of the portfolio that may be invested in these obligations. 2. Federal Instrumentality Securities: Debentures, discount notes, callable securities, step-up securities and stripped principal or coupons with maturities not exceeding five years from the date of trade settlement. Federal Instrumentality securities shall be rated at least AAA or the equivalent by a nationally recognized statistical-rating organization (NRSRO) at the time of purchase. There is no limit on the percentage of the portfolio that may be invested instrumentalities. 3. Negotiable Certificates of Deposit: Certificates of Deposit with a maturity not exceeding five years and issued by institutions which have long-term debt rated at least A or the equivalent by a NRSRO and/or have short-term debt rated at least A1 or the equivalent by a NRSRO. No more than 30% of the total portfolio may be invested in CDs F5AC Investment Policy X/XX/

29 AGENDA ITEM 6 4. Repurchase agreements: Repurchase Agreements with a final maturity date not exceeding 1 year, collateralized by U.S. Treasury obligations or Federal Instrumentality securities listed in items 1 and 2. For the purpose of this section, the term collateral shall mean purchased securities under the terms of F5AC s approved Master Repurchase Agreement. The purchased securities shall have a minimum market value including accrued interest of 102% of the dollar value of the funds borrowed. Collateral shall be held in safekeeping in F5AC s name by its custodian bank and the market value of the collateral securities shall be marked-to-the-market daily. There is no limit on the amount to be invested in repurchase agreements. 5. Prime Commercial paper: Prime Commercial Paper with a maturity not exceeding 270 days from the date of trade settlement with the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper shall meet all of the following conditions in either sub-paragraph A. or sub-paragraph B. below: A. The entity shall (1) be organized and operating in the United States as a general corporation, (2) have total assets in excess of $500,000,000 and (3) have debt other than commercial paper, if any, that is rated A or higher by a NRSRO. B. The entity shall (1) be organized within the United States as a special purpose corporation, trust, or limited liability company, (2) have program-wide credit enhancements, including, but not limited to, over collateralization, letters of credit or surety bond and (3) have commercial paper that is rated A-1 or higher, or the equivalent, by a NRSRO. No more than 25% of the City s total portfolio shall be invested in commercial paper. 6. State of California s Local Agency Investment Fund (LAIF): LAIF, in accordance with California Government Code Section Corporate Medium-term Notes: Corporate medium-term notes issued by corporations organized and operating within the United States or by depository institutions licensed by the United States or any state and operating within the United States, with a final maturity not exceeding five years from the date of trade settlement, and rated at least A or the equivalent by a NRSRO. The aggregate investment in medium-term notes shall not exceed 30% of the City s total portfolio. AAA rated FDIC-guaranteed corporate bonds are herein authorized, with the aforementioned diversification and maturity requirements. 8. Mortgage Pass-through Securities and Asset-backed Securities: Mortgage passthrough securities and asset-backed securities shall have a maximum stated final maturity of five years and shall be rated at least AAA or the equivalent by a F5AC Investment Policy X/XX/

30 NRSRO. No more than 20 percent of the portfolio may be invested in such securities. AGENDA ITEM 6 9. Money Market Mutual Funds: Money market mutual funds which are registered under the Investment Act of 1940; are no-load (meaning no commission or fee shall be charged on purchases or sales or shares); have a constant net asset value of $1.00; invest only in the securities and obligations authorized in California statutes; and are rated AAA or the equivalent by a NRSRO. The aggregate investment in money market funds shall not exceed 20% of the portfolio. 10. Local Agency Obligations: Local agency obligations whose short-term rating is at least A-1 or equivalent by two NRSROs or whose long-term rating is at least AA or the equivalent by two NRSROs. B. Prohibited investment vehicles and practices 1. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to, mutual funds (other than government money market funds as described in Section VI A(9), unregulated and/or unrated investment pools or trusts, collateralized mortgage obligations and futures and options. 2. Investing in inverse floaters, range notes, or mortgage derived interest-only strips is prohibited, per Government Code Section Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. 4. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited. 5. Purchasing or selling securities on margin is prohibited. 6. Using reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited. 7. Purchasing securities issued by company in the tobacco business, including parent companies and their controlled subsidiaries, is prohibited. 8. Purchasing foreign currency denominated securities. Prohibited investments held in the portfolio at the time of adoption of this Policy may be held until maturity at the discretion of the Finance Director. C. Mitigating credit risk in the portfolio F5AC Investment Policy X/XX/

31 AGENDA ITEM 6 Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. F5AC shall mitigate credit risk in the following ways: 1. Abiding by the diversification requirements included in Section VI (A); 2. Limiting 5% of the total portfolio to securities of any single issuer, other than the US Government, its agencies and instrumentalities; 3. Electing to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or F5AC s risk preferences; and 4. Reviewing securities owned by F5AC which are downgraded to a level below the quality required by this Policy. It such cases it shall be F5AC s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. a. If a security is downgraded two grades below the level required by F5AC, the security shall be sold immediately. b. If a security is downgraded one grade below the level required by this Policy, the F5AC Finance Director shall use discretion in determining whether to sell or hold the security based on its current maturity, the loss in value, the economic outlook for the issuer, and other relevant factors. c. If a decision is made to retain a downgraded security in the portfolio, its presence in the portfolio shall be monitored and reported monthly to the Executive Committee and the Commission of F5AC. D. Mitigating market risk in the portfolio Market risk is the risk that the portfolio will decline in value (or will not optimize its value) due to changes in the general level of interest rates. F5AC recognizes that, over time, longer-term portfolios achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. F5AC shall mitigate market risk by providing adequate liquidity for short-term cash needs, and by making some longer-term investments only with funds that are not needed for current cashflow purposes. F5AC further recognizes that certain types of securities, including variable rate securities, securities with principal paydowns prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. Therefore, the following strategies shall be adopted to control and mitigate exposure to market risk: F5AC shall attempt to match its investments with anticipated cash flow requirements. F5AC Investment Policy X/XX/

32 AGENDA ITEM 6 Maximum final maturity of investments in the Treasury and Agency securities shall not exceed six years. All other investments shall have a final maturity as stated in Section VI, Eligible Investments. The weighted average maturity of the portfolio shall not exceed three years. Reserve funds and other funds with longer-term investment horizons may be invested in securities exceeding six years if the maturities of such investments are made to coincide as nearly as practicable with the expected use of funds. VII. Performance objectives and expectations The investment portfolio shall be designed to attain a market rate of return throughout budgetary and economic cycles, taking into account prevailing market conditions, risk constraints for eligible securities, and cash flow requirements. The performance of F5AC s investments shall be compared to the average yield on the U.S. Treasury security that most closely corresponds to the portfolio s actual weighted average effective maturity. When comparing the performance of F5AC s portfolio, its rate of return shall be computed net of all fees and expenses. VIII. REPORTING QuarterlyMonthly, the Director of Finance and AdministrationFinancial Controller shall submit to the Executive Committee a report of the investment earnings and performance results of F5AC s investment portfolio. The report shall include the following information: 1. Investment type, issuer, date of maturity, par value and dollar amount invested in all securities, and investments and monies held by the F5AC; 2. A description of the funds, investments and programs; 3. A market value as of the date of the report (or the most recent valuation as to assets not valued monthly) and the source of the valuation; 4. A statement of compliance with this Policy or an explanation for non-compliance; and 5. A statement of F5AC s ability to meet expenditure requirements for six months, and an explanation of why money will not be available if that is the case. IX. POLICY REVIEW This Investment Policy shall be adopted annually by resolution of the Executive Committee. It shall be reviewed at least annually to ensure its consistency with the overall objectives of preservation of principal, liquidity, yield and diversification and its relevance to current law and economic trends. Amendments to this Investment Policy shall be approved by resolution of the Executive Committee. F5AC Investment Policy X/XX/

33 AGENDA ITEM 6 GLOSSARY OF INVESTMENT TERMS Agencies. Shorthand market terminology for any obligation issued by a government-sponsored entity (GSE), or a federally related institution. Obligations of GSEs are not guaranteed by the full faith and credit of the US government. There are eight GSEs, five of which are currently active in the new issue market. The five include: FFCB. The Federal Farm Credit Bank System provides credit and liquidity in the agricultural industry. FFCB issues discount notes and bonds. FHLB. The Federal Home Loan Bank provides credit and liquidity in the housing market. FHLB issues discount notes and bonds. FHLMC. Like FHLB, the Federal Home Loan Mortgage Corporation provides credit and liquidity in the housing market. FHLMC, also called FreddieMac issues discount notes, bonds and mortgage pass-through securities. FNMA. Like FHLB and FreddieMac, the Federal National Mortgage Association was established to provide credit and liquidity in the housing market. FNMA, also known as FannieMae, issues discount notes, bonds and mortgage pass-through securities. Federally related institutions are arms of the federal government. Most do not issue securities directly into the market. Those, which do issue directly, include the following: GNMA. The Government National Mortgage Association, known as GinnieMae, issues mortgage pass-through securities, which are guaranteed by the full faith and credit of the US Government. PEFCO. The Private Export Funding corporation assists exporters. Obligations of PEFCO are not guaranteed by the full faith and credit of the US government. TVA. The Tennessee Valley Authority provides flood control and power and promotes development in portions of the Tennessee, Ohio and Mississippi River valleys. TVA currently issues discount notes and bonds. Asked. The price at which a seller offers to sell a security. Average life. In mortgage-related investments, including CMOs, the average time to expected receipt of principal payments, weighted by the amount of principal expected. Banker s acceptance. A money market instrument created to facilitate international trade transactions. It is highly liquid and safe because the risk of the trade transaction is transferred to the bank which accepts the obligation to pay the investor. Benchmark. A comparison security or portfolio. A performance benchmark is a partial market index, which reflects the mix of securities allowed under a specific investment policy. F5AC Investment Policy X/XX/

34 AGENDA ITEM 6 Bid. The price at which a buyer offers to buy a security. Broker. A broker brings buyers and sellers together for a transaction for which the broker receives a commission. A broker does not sell securities from his own position. Certificate of Deposit (CD). A time deposit with a specific maturity evidenced by a certificate. Large denomination CDs may be marketable. Collateral. Securities or cash pledged by a borrower to secure repayment of a loan or repurchase agreement. Also, securities pledged by a financial institution to secure deposits of public monies. Collateralized Mortgage Obligations (CMO). Classes of bonds that redistribute the cash flows of mortgage securities (and whole loans) to create securities that have different levels of prepayment risk, as compared to the underlying mortgage securities. Commercial paper. The short-term unsecured debt of corporations. Cost yield. The annual income from an investment divided by the purchase cost. Because it does not give effect to premiums and discounts which may have been included in the purchase cost, it is an incomplete measure of return. Coupon. The rate of return at which interest is paid on a bond. Credit risk. The risk that principal and/or interest on an investment will not be paid in a timely manner due to changes in the condition of the issuer. Current yield. The annual income from an investment divided by the current market value. Since the mathematical calculation relies on the current market value rather than the investor s cost, current yield is unrelated to the actual return the investor will earn if the security is held to maturity. Dealer. A dealer acts as a principal in security transactions, selling securities from and buying securities for his own position. Debenture. A bond secured only by the general credit of the issuer. Delivery vs. payment (DVP). A securities industry procedure whereby payment for a security must be made at the time the security is delivered to the purchaser s agent. Derivative. Any security that has principal and/or interest payments which are subject to uncertainty (but not for reasons of default or credit risk) as to timing and/or amount, or any security which represents a component of another security which has been separated from other components ( Stripped coupons and principal). A derivative is also defined as a financial instrument the value of which is totally or partially derived from the value of another instrument, interest rate or index. Discount. The difference between the par value of a bond and the cost of the bond, when the cost is below par. Some short-term securities, such as Tbills and banker s acceptances, are known as discount securities. They sell at a discount from par, and return the par value to the investor at F5AC Investment Policy X/XX/

35 AGENDA ITEM 6 maturity without additional interest. Other securities, which have fixed coupons trade at a discount when the coupon rate is lower than the current market rate for securities of that maturity and/or quality. Diversification. Dividing investment funds among a variety of investments to avoid excessive exposure to any one source of risk. Duration. The weighted average time to maturity of a bond where the weights are the present values of the future cash flows. Duration measures the price sensitivity of a bond to changes in interest rates. (See modified duration). Federal funds rate. The rate of interest charged by banks for short-term loans to other banks. The Federal Reserve Bank through open-market operations establishes it. Federal Open Market Committee: A committee of the Federal Reserve Board that establishes monetary policy and executes it through temporary and permanent changes to the supply of bank reserves. Haircut: The margin or difference between the actual market value of a security and the value assessed by the lending side of a transaction (i.e. a repo). Leverage. Borrowing funds in order to invest in securities that have the potential to pay earnings at a rate higher than the cost of borrowing. Liquidity: The speed and ease with which an asset can be converted to cash. Margin: The difference between the market value of a security and the loan a broker makes using that security as collateral. Market risk. The risk that the value of securities will fluctuate with changes in overall market conditions or interest rates. Market value. The price at which a security can be traded. Marking to market. The process of posting current market values for securities in a portfolio. Maturity. The final date upon which the principal of a security becomes due and payable. Medium term notes. Unsecured, investment-grade senior debt securities of major corporations which are sold in relatively small amounts either on a continuous or an intermittent basis. MTNs are highly flexible debt instruments that can be structured to respond to market opportunities or to investor preferences. Modified duration. The percent change in price for a 100 basis point change in yields. Modified duration is the best single measure of a portfolio s or security s exposure to market risk. F5AC Investment Policy X/XX/

36 AGENDA ITEM 6 Money market. The market in which short term debt instruments (Tbills, discount notes, commercial paper and banker s acceptances) are issued and traded. Mortgage pass-through securities. A securitized participation in the interest and principal cashflows from a specified pool of mortgages. Principal and interest payments made on the mortgages are passed through to the holder of the security. Mutual fund. An entity which pools the funds of investors and invests those funds in a set of securities which is specifically defined in the fund s prospectus. Mutual funds can be invested in various types of domestic and/or international stocks, bonds and money market instruments, as set forth in the individual fund s prospectus. For most large, institutional investors, the costs associated with investing in mutual funds are higher than the investor can obtain through an individually managed portfolio. Premium. The difference between the par value of a bond and the cost of the bond, when the cost is above par. Prepayment speed. A measure of how quickly principal is repaid to investors in mortgage securities. Prepayment window. The time period over which principal repayments will be received on mortgage securities at a specified prepayment speed. Primary dealer. A financial institution (1) that is a trading counterparty with the Federal Reserve in its execution of market operations to carry out U.S. monetary policy, and (2) that participates for statistical reporting purposes in compiling data on activity in the U.S. Government securities market. Prudent person (man) rule. A standard of responsibility which applies to fiduciaries. In California, the rule is stated as Investments shall be managed with the care, skill, prudence and diligence, under the circumstances then prevailing, that a prudent person, acting in a like capacity and familiar with such matters, would use in the conduct of an enterprise of like character and with like aims to accomplish similar purposes. Realized yield. The change in value of the portfolio due to interest received and interest earned and realized gains and losses. It does not give effect to changes in market value on securities, which have not been sold from the portfolio. Regional dealer. A financial intermediary that buys and sells securities for the benefit of its customers without maintaining substantial inventories of securities, and that is not a primary dealer. Repurchase agreement (RP, Repo). Short term purchases of securities with a simultaneous agreement to sell the securities back at a higher price. From the seller s point of view, the same transaction is a reverse repurchase agreement. Safekeeping. A service to bank customers whereby securities are held by the bank in the customer s name. F5AC Investment Policy X/XX/

37 AGENDA ITEM 6 Structured note. A complex, fixed income instrument, which pays interest, based on a formula tied to other interest rates, commodities or indices. Examples include inverse floating rate notes which have coupons that increase when other interest rates are falling, and which fall when other interest rates are rising, and "dual index floaters," which pay interest based on the relationship between two other interest rates - for example, the yield on the ten-year Treasury note minus the Libor rate. Issuers of such notes lock in a reduced cost of borrowing by purchasing interest rate swap agreements. Total rate of return. A measure of a portfolio performance over time. It is the internal rate of return, which equates the beginning value of the portfolio with the ending value, and includes interest earnings and realized and unrealized gains and losses on the portfolio. U.S. Treasury obligations. Securities issued by the U.S. Treasury and backed by the full faith and credit of the United States. Treasuries are considered to have no credit risk, and are the benchmark for interest rates on all other securities in the US and overseas. The Treasury issues both discounted securities and fixed coupon notes and bonds. Treasury bills. All securities issued with initial maturities of one year or less are issued as discounted instruments, and are called Treasury bills. The Treasury currently issues threeand six-month Tbills at regular weekly auctions. It also issues cash management bills as needed to smooth out cash flows. Treasury notes. All securities issued with initial maturities of two to ten years are called Treasury notes, and pay interest semi-annually. Treasury bonds. All securities issued with initial maturities greater than ten years are called Treasury bonds. Like Treasury notes, they pay interest semi-annually. Volatility. The rate at which security prices change with changes in general economic conditions or the general level of interest rates. Yield to Maturity. The annualized internal rate of return on an investment which equates the expected cash flows from the investment to its cost. Copyright 2008 by Chandler Asset Management, Inc. F5AC Investment Policy X/XX/

38 AGENDA ITEM 7 To: From: First 5 Alameda County Commission Mark Friedman, CEO Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Budget Proposal Final Adoption ACTION REQUESTED To review and adopt the following Budget Proposal. BACKGROUND Each First 5 agency is required by statute to pass a Strategic Plan that outlines the use of the tobacco tax funds to serve children age 0-5 and their families. The First 5 Alameda County Commission has approved a four-year Strategic Plan for FY The Strategic Plan was prepared after extensive program and needs assessment and community and stakeholder input. This two year budget proposal covers the last two years of that period, It reflects the strategies and programs outlined in the Strategic Plan as modified by the realignment of staffing and programs, necessitated by the reductions proposed in Scenario A of the Long Range Financial Plan, approved by the Commission in February-March This presentation is the final reading of the budget proposal. There were no changes to the Proposed Budget that was presented to the Commission in May, The Expenditure Budgets proposed for both years are identical. As is the practice of First 5 Alameda County, changes that occur during the course of the fiscal year will be formally incorporated into the budget during the mid-year Budget Modification in January This document provides a fiscal summary of revenue projections. In addition, the document will provide each program s total program expenses and the total cost of infrastructure that has traditionally been presented as an allocation to each program. The total program costs include: First 5 staff salaries and benefits Grants, contracts, and stipends Program Operating Costs Infrastructure/Overhead costs (by allocation) 1100 San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org

39 AGENDA ITEM 7 CURRENT BUDGET PROPOSAL The following Revenue and Expense projections are presented with a comparison to the current year budget, approved in June All Program areas are presented before the distribution of allocable administrative costs. Infrastructure costs (which include major items such as building lease costs, database hosting and computer network support) are presented in full, rather than as allocations. This was done in order to provide a comprehensive picture of the total indirect cost of supporting all programs. The Expense spreadsheet gives expense data by program divisions that currently exist. It is expected that once the program changes and re-organizations are completed over the next several months, the expense budget layout will be restructured to reflect the final organization structure. REVENUE AND AVAILABLE FUNDS The Prop 10 and other Revenue decrease from $17,009,470 in the current year to $16,823,738. Consistent with the Long Range Financial Plan, funds from the Sustainability Fund amounting to $3,846,262 are budgeted to close the gap between decreasing Tobacco Tax revenue and projected expenses. The primary reason for the decline in revenues is the anticipated 3.5% reduction in Tobacco Tax revenue of $490,000 and the reduction in investment income of $363,000 due to the low interest rate climate that is projected to continue at least for the duration of LINE ITEM Prop 10 Tobacco Tax Income from Alameda County Agencies ADOPTED PROPOSED RATIONALE $14,000,000 $13,510,000 Tobacco tax revenue projection is based on assessment of current year trend through December 2010 and First 5 California projections for county commissions. $998, 111 $1,013,421 The SAMHSA (Substance Abuse Mental Health Services Administration) Project LAUNCH federal grant for a place-based strategy designed to promote the healthy development of young children within the targeted East Oakland community from Alameda County Public Health Department (PHD) was committed for $608,237. The SAMHSA Early Connections federal grant for a six-year project that creates an infrastructure for a system of care for children ages 0-5 and their families from Alameda County Behavioral Health Care Services (BHCS) was committed in the amount of $305,184. The balance is for the Screening, Assessment, Referral & Treatment (SART) Pathways Linkage Line ($100,000) Grants $640,359 $1,100,317 The Federal Grant amount consists of a $500,000 federal earmark for the SART program. The State Grant consists of a Comprehensive Approache to Raising Educational Standards (CARES) Phase II grant ($272,000). A grant from The Long Foundation ($308,317) was committed to expand the School Readiness program. A grant from the Kellogg Foundation ($20,000) was committed for the Help Me Grow program. Fiscal Leveraging Investment Revenue Sustainability Fund $500,000 $700,000 Medi-Cal Administrative Activities (MAA), based on conservative estimates of actual invoices submitted for MAA in $863,000 $ 500,000 To be conservative and to reflect the sustained low interest rates climate of recent years, investment revenue yield is estimated to be 1.6% assuming a decreased fund balance due to partial liquidation of the investment portfolio. $9,174,545 $3,846,262 This amount is consistent with the Long Range Financial Plan approved in June That Plan allows up to $5.9 million in Sustainability Funds to maintain programs in Budget Proposal

40 AGENDA ITEM 7 EXPENDITURES The following Expense information compares the current budget with the proposed budget. The program expenditures presented below consist of Salaries and Benefits, Program related Contracts, Grants and Professional Services Costs and Direct Program Costs. They exclude shared or indirect Infrastructure costs which are shown separately. The budget will be approved at the division level as shown below, but will be managed at the program level. The budget narrative provides more detail on each Program. Programs are supported by facilities, infrastructure and data systems. These costs are shown separately as Infrastructure Costs in the proposed budget. The goals of this format of presentation are two-fold. Firstly, to disclose the full cost of each infrastructure component or fixed overhead cost in total rather than as an allocated cost. Secondly, in a declining funding environment keeping track of costs in aggregate can lead to better tracking, financial control and reporting. Consistent with legislative requirements brought about by AB 109, expense costs continue to be separated into three cost categories: Program, Evaluation and Administration. The expenses in each category are consistent with First 5 California guidelines, and those set forth in the Government Finance Officers Association s First 5 Financial Management Guide. Salaries and Benefits Salaries and benefits are projected to decrease from $8,086,110 to $6,288,645; a decrease of $1,797,465. This represents a reduction of 17 full time equivalent (FTE) positions including attritions, lay offs and unfilled positions. The decrease was necessary to cope with the anticipated transfer of $23.5 million from First 5 Alameda County Fund Balance to the State of California in June These reductions are a part of the reductions proposed in Scenario A of the draft Long Range Financial Plan that was presented to the Commission in March this year. Salaries are budgeted based on actual amounts. Benefits are budgeted at 50% of salaries. Consistent with direction from the Commission, the approved benefit package has remained mostly consistent with the Alameda County benefit package, including membership in the Alameda County Employee s Retirement Association (ACERA), health and dental benefits, life insurance and a flexible benefit of $1,500 to offset health, life insurance or flexible spending account costs. The 50% allocation is based on actual cost estimates that are revised periodically as needed Budget Proposal

41 Family Support Services AGENDA ITEM 7 The total Family Support Services (FSS) budget proposal for is $5,740,696, compared to $7,738,971 in the current year, a net decrease of $1,998,275. PROGRAM BUDGET Prenatal and postpartum home visiting for newborns: Your Family Counts PROPOSAL FUNDING SOURCES $1,433,159 $1,303,228 Tobacco Tax, Targeted Case Management (TCM), Medi-Cal Administrative Activities (MAA), Other Sources Lactation $355,192 $86,467 Tobacco Tax, Miscellaneous Income Intensive Family Support: Special Start: high risk families with infants discharged from the Neonatal Intensive Care Unit (NICU) Intensive Family Support: Pregnant and Parenting Teens SART Training and Screening: Pediatric Strategies Includes Reach Out and Read ($30,000) $3,088,226 $2,402,717 Tobacco Tax, Targeted Case Management (TCM) $1,136,304 $879,395 Tobacco Tax, Targeted Case Management (TCM) $814,498 $749,287 Tobacco Tax, Medi- Cal Administrative Activities (MAA) STRATEGY Home-Based Family Support Child Health Promotion Home-Based Family Support Home-Based Family Support Coordinated Children s SART (Screening, Assessment, Referral & Treatment ) Early Childhood Mental Health /Community Building Efforts * Includes Early Childhood Mental Health Harris Training Specialty Provider Services Mental Health / Child Development Family Support Services Provider Training Total Family Support Services Reach Out and Read is in the Community Based School Readiness strategy $206,379 $110,378 Tobacco Tax Mental Health Consultation is in the Child Health Promotion strategy Harris Training is in the Provider Capacity Building strategy $634,579 $158,798 Tobacco Tax, Medi-Cal Administrative Activities (MAA) Provider Capacity Building $70,634 $50,426 Tobacco Tax Training is in Training Institute in the Provider Capacity Building strategy $7,738,971 $5,740,696 ($1,998,275) Budget Proposal

42 Early Care and Education AGENDA ITEM 7 The Early Care and Education (ECE) budget proposal for is $4,335,172 compared with $5,942,207, a decrease of $1,607,035. PROGRAM BUDGET College And University Education PROPOSAL FUNDING SOURCES $3,149,850 $1,277,031 Tobacco Tax, Federal Grant STRATEGY Integrated Child Care Quality Support System Training for Consultants $139,388 $149,901 Tobacco Tax Integrated Child Care Quality Support System Community-Based Training and Coordination Inclusion Support and Training $1,034,421 $1,138,665 Tobacco Tax Integrated Child Care Quality Support System $187,597 $319,764 Tobacco Tax Integrated Child Care Quality Support System Child Care Capital Grants $797,017 $673,500 Tobacco Tax Integrated Child Care Quality Support System Quality Counts $633,933 $776,311 Tobacco Tax Integrated Child Care Quality Support System Total Early Care and Education $5,942,207 $4,335,172 ($1,607,035) Community Grants & Program Operations The Community Grants & Program Operations budget proposal for is $2,829,545 compared to $3,208,847 in the current year, a decrease of $379,302. This represents a $569,538 reduction in Total Grants and Contracts, which was partly offset by a $135,736 increase in the Personnel Budget which now includes The Grants and Contracts Administrator and the Contracts Manager Positions that were previously budgeted in Administration. Program Operations consists of The Deputy Director function and a Contingency Budget of $70,000 for unforeseen program expenses that may arise during the year. PROGRAM BUDGET PROPOSAL FUNDING SOURCES STRATEGY Community Grants $3,207,647 $2,829,545 Tobacco tax Programs will be funded in various strategy areas, depending on funding priorities selected by the Commission Total Community Grants $3,208,847 $2,829,545 ($379,302) Budget Proposal

43 AGENDA ITEM 7 Support Strategies The Support Strategies budget proposal for is $4,050,866, compared with $4,843,917 in the current year, a decrease of $793,051. PROGRAM BUDGET PROPOSAL FUNDING SOURCES Cultural Access Services $271,537 $106,500 Tobacco Tax, Medi-Cal Administrative Activities (MAA) Early Connections $235,154 $203,609 Behavioral Health Care Services (SAMHSA Federal Grant) Project LAUNCH $597,737 $590,453 Public Health Department (SAMHSA Federal Grant) STRATEGY Cultural Access Services is a program that works across all strategies Coordinated Screening, Assessment, Referral and Treatment (SART) Integrates all strategies at the community level Children s SART (Screening, Assessment, Referral and Treatment) Training/ Conference Center Outreach and Education Includes Parent Kit customization and distribution and Childhood Matters Tobacco and Health Education/ Services $1,501,490 $1,640,418 Tobacco Tax, Medi-Cal Administrative Activities (MAA), Behavioral Health Care Services funding for Pathways data system, Federal Grant, Kellogg Foundation. Coordinated Screening, Assessment, Referral and Treatment (SART) $122,292 $25,000 Tobacco Tax Provider Capacity Building $250,000 $48,500 Tobacco Tax Community-Based School Readiness Services Childhood Matters is in the Community-Based School Readiness Services strategy $432,475 $0 Tobacco Tax Child Health Promotion Includes Asthma Education and Services, Oral Health Education and Tobacco Education School Readiness Includes Literacy, Kindergarten Readiness and Transition Child Development/ Mental Health Strategies Total Support Strategies $1,004,548 $1,035,303 Tobacco Tax, Long Foundation Private Grant Community-Based School Readiness Services $428,683 $401,083 Tobacco Tax Mental Health Consultation to Child Care $4,843,917 $4,050,866 ($793,051) Budget Proposal

44 Evaluation and Technology AGENDA ITEM 7 The Evaluation and Technology (E&T) budget proposal for is $804,218, compared to the current year budget of $1,169,156 a decrease of $364,938. PROGRAM BUDGET PROPOSAL FUNDING SOURCES Evaluation $565,028 $416,938 Tobacco Tax, Behavioral Health Care Services (SAMHSA Federal Grant), Long Foundation Private Grant NOTES Includes internal and external evaluation activities, including annual report compilation, and ECE external evaluations (School Readiness) Evaluation Database $406,658 $237,891 Tobacco Tax, Medi-Cal Administrative Activities (MAA) Includes ECC Online and ECChange databases, only portions used for internal evaluation. Program costs for ECChange are charged to program budgets. Evaluation Technical Assistance Total Evaluation and Technology $197,470 $149,389 Tobacco Tax, Medi-Cal Administrative Activities (MAA) $1,169,156 $804,218 ($364,938) Includes provision of evaluation technical assistance to providers Administration The Administration budget proposal for is $1,037,984 compared with $1,316,185 in , a net decrease of $278,201. The decrease is partly due to transferring the Grants & Contracts Administrator and Contracts Manager Positions to Community Grants & Program Operations. PROGRAM BUDGET Commission, Finance, Human Resources and Facilities Management Total Administration PROPOSAL FUNDING SOURCES $1,316,185 $1,053,441 Tobacco Tax, Medi-Cal Administrative Activities (MAA) $1,316,185 $1,037,984 ($278,201) COMMENTS See note above Budget Proposal

45 Infrastructure AGENDA ITEM 7 The Infrastructure budget proposal for is $1,871,518 compared with $1,964,732 in , a net decrease of $93,214. This budget group consists of all fixed and overhead costs incurred by First 5 in running all programs. PROGRAM BUDGET Database Management, Network Support, Space Rental/Building Lease. Equipment leases, Communications, Professional Services etc. Total Infrastructure PROPOSAL FUNDING SOURCES $1,964,74 $1,871,518 Tobacco Tax, Medi-Cal Administrative Activities (MAA) $1,964,732 $1,871,518 ($93,214) COMMENTS See note above Administrative Cap As part of the agency Finance Policy and consistent with AB 109 and SB 35, First 5 Alameda County has set an administrative cost cap of 10%. Costs are segregated through the year into the Program, Evaluation and Administrative divisions according to guidelines and definitions set forth by First 5 California and in the Government Finance Officers Association (GFOA) First 5 Financial Management Guide. The proposed budgets administrative costs do not exceed the cap. They are: ADMINISTRATIVE CAP Program 90.5% Evaluation 4.1% Administration 5.4% TOTAL % Fiscal Impact The fiscal impact is $20,670,000 in budgeted expenses, a major portion of which will be funded by a combination of Prop 10 and other revenue sources amounting to $16,823,738. The balance is expected to be funded by the use of Sustainability funds in the amount of $3,846,262 in This amount is within the range set forth in the Long Range Financial Plan figures approved in June That plan projected up to $5,860,600 in Sustainability Funds to be used to maintain programs in This plan has now been superseded by the draft revised Long Range Financial Plan (Scenario A) which projects the use of $3,231,000 in ; an expense reduction shortfall of $615,262. However, it is anticipated that this shortfall will be made up from savings in the current fiscal year Budget Proposal

46 AGENDA ITEM 7 RECOMMENDATION That the Commission review and adopt the FY Budget Proposal-Final Reading. Submitted by: Reviewed by: Mark R Rasiah Financial Controller Mark Friedman Chief Executive Officer Budget Proposal

47 First 5 Alameda County Proposed Revenue and Available Funds Budget For the Period July 1, June 30, 2012 Agenda Item 7 Actual* Adopted Proposed Revenues Revenue Budget Budget Variance FY FY FY Prop 10 Tobacco Tax 14,532,492 14,000,000 13,510,000 (490,000) Income from Alameda Co. Agencies - ACBHCS Early Connections(SAMHSA) 305,184 - ACPHD Project LAUNCH (SAMHSA) 608,237 - SART LINKAGE LINE 100,000 Total Income from Alameda Co. Agencies 1,464, ,111 1,013,421 15,310 Grants Federal 121, ,798 (485,798) - SART Earmark #2 500, ,000 State 2,179,686 - CARES PLUS 272, ,000 Private - Long Foundation 207, , , ,756 - Kellogg Foundation 20,000 20,000 Total Grants 2,509, ,359 1,100, ,958 Fiscal Leveraging MAA 1,060, , , ,000 TCM 103,129 Title IV-E 25,697 8,000 (8,000) Total Fiscal Leveraging 1,189, , , ,000 Investment Revenue 1,471, , ,000 (363,000) Miscellaneous Income 281,976 TOTAL REVENUE 21,448,637 17,009,470 16,823,738 (185,732) Available Funds Sustainability Funds 3,278,751 9,174,545 3,846,262 (5,328,283) TOTAL REVENUES & AVAILABLE FUNDS 24,727,388 26,184,015 20,670,000 (5,514,015) * Source: Audited Financial Statements 10

48 First 5 Alameda County Proposed Expenditure Budget For the Period July 1, June 30, 2012 Agenda Item 7 Family Support Services Early Care & Education Comm.Grants & Prog Ops Support Strategies Evaluation & Technology Administration Infrastructure T o t a l Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Adopted FY Proposed FY Variance Personnel Costs Salaries & Benefits 2,494,698 1,624,889 1,303, , , ,345 1,400,191 1,353, , ,018 1,221, , ,086,110 6,288,645 (1,797,465) Program Contracts/Grants Contracts 4,994,384 3,944,657 3,152,752 2,957,378 80, ,790,389 2,274, , , , ,000 11,945,515 10,049,790 (1,895,725) Grants 0 0 1,257, ,822 2,330,538 1,871, , ,588,046 2,338,822 (1,249,224) Professional Services Contracts 31,664 43,000 65, ,000 50, , ,250 5, ,400 74, , ,250 (138,918) Total Contracts/Grants 5,026,048 3,987,657 4,476,114 3,410,200 2,490,538 1,921,000 3,008,639 2,442, , , , ,000 15,991,729 12,707,862 (3,283,867) Program Operating Costs 218, , ,201 92,150 23,700 78, , ,925 33,100 12,200 94,521 68, , ,975 (332,859) TOTAL PROGRAM DIRECT COSTS 7,738,971 5,740,696 5,942,207 4,335,172 3,208,847 2,829,545 4,843,917 4,050,866 1,169, ,218 1,316,185 1,037, , ,000 25,044,673 19,630,482 (5,414,191) INDIRECT / ALLOCATED COSTS Communications 43,426 30,000 43,426 30,000 (13,426) Copying/Printing 25,997 30,000 25,997 30,000 4,003 Equipment Leases/Rentals/Maint. 35,406 3,000 35,406 3,000 (32,406) Equipment Purchase 88,194 36,000 88,194 36,000 (52,194) Insurance 77,135 85,000 77,135 85,000 7,865 Membership and Dues 29,997 22,000 29,997 22,000 (7,997) Professional Services 161, , , ,000 (53,580) Space Rental 657, , , ,000 42,734 Miscellaneous 5,501 3,000 5,501 3,000 (2,501) Depreciation 14,840 22,518 14,840 22,518 7,678 Total Infrastructure 1,964,732 1,871,518 1,139,342 1,039,518 (99,824) TOTAL PROPOSED EXPENDITURE BUDGET 26,184,015 20,670,000 (5,514,015) 11

49 First 5 Alameda County Proposed Revenue and Available Funds Budget For the Period July 1, June 30, 2013 Agenda Item 7 Adopted Proposed Proposed Revenues Budget Budget Budget Variance FY FY FY Prop 10 Tobacco Tax 14,000,000 13,510,000 13,510,000 0 Income from Alameda Co. Agencies - ACBHCS Early Connections(SAMHSA) 305, ,184 - ACPHD Project LAUNCH (SAMHSA) 608, ,237 - SART LINKAGE LINE 100, ,000 Total Income from Alameda Co. Agencies 998,111 1,013,421 1,013,421 0 Grants Federal 485, SART Earmark #2 500, ,000 0 State - CARES PLUS 272, ,000 0 Private - Long Foundation 154, , , Kellogg Foundation 20,000 20,000 0 Total Grants 640,359 1,100,317 1,100,317 0 Fiscal Leveraging MAA 500, , ,000 0 TCM Title IV-E 8,000 0 Total Fiscal Leveraging 508, , ,000 0 Investment Revenue 863, , ,000 0 Miscellaneous Income TOTAL REVENUE 17,009,470 16,823,738 16,823,738 0 Available Funds Sustainability Funds 9,174,545 3,846,262 3,846,262 0 TOTAL REVENUES & AVAILABLE FUNDS 26,184,015 20,670,000 20,670,

50 First 5 Alameda County Proposed Expenditure Budget For the Period July 1, June 30, 2013 Agenda Item 7 Family Support Services Early Care & Education Comm.Grants & Prog Ops Support Strategies Evaluation & Technology Administration Infrastructure T o t a l Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Proposed FY Variance Personnel Costs Salaries & Benefits 1,624,889 1,624, , , , ,345 1,353,936 1,353, , , , , ,288,645 6,288,645 0 Program Contracts/Grants Contracts 3,944,657 3,944,657 2,957,378 2,957, ,274,755 2,274, , , , ,000 10,049,790 10,049,790 0 Grants , ,822 1,871,000 1,871,000 15,000 15, ,338,822 2,338,822 0 Professional Services Contracts 43,000 43, ,000 50, , , ,000 74, , ,250 0 Total Contracts/Grants 3,987,657 3,987,657 3,410,200 3,410,200 1,921,000 1,921,000 2,442,005 2,442, , , , ,000 12,707,862 12,707,862 0 Program Operating Costs 128, ,150 92,150 92,150 78,200 78, , ,925 12,200 12,200 68,350 68, , ,975 0 TOTAL PROGRAM DIRECT COSTS 5,740,696 5,740,696 4,335,172 4,335,172 2,829,545 2,829,545 4,050,866 4,050, , ,218 1,037,984 1,037, , ,000 19,630,482 19,630,482 0 INDIRECT / ALLOCATED COSTS Communications 30,000 30,000 30,000 30,000 0 Copying/Printing 30,000 30,000 30,000 30,000 0 Equipment Leases/Rentals/Maint. 3,000 3,000 3,000 3,000 0 Equipment Purchase 36,000 36,000 36,000 36,000 0 Insurance 85,000 85,000 85,000 85,000 0 Membership and Dues 22,000 22,000 22,000 22,000 0 Professional Services 108, , , ,000 0 Space Rental 700, , , ,000 0 Miscellaneous 3,000 3,000 3,000 3,000 0 Depreciation 22,518 22,518 22,518 22,518 0 Total Infrastructure 1,871,518 1,871,518 1,039,518 1,039,518 0 TOTAL PROPOSED EXPENDITURE BUDGET 20,670,000 20,670,

51 First 5 Alameda County Proposed Expenditure Budget For the Period July 1, June 30, 2013 Agenda Item 7 Adopted Proposed Proposed Expenditures Budget Budget Budget Variance FY FY FY Personnel Costs 8,086,110 6,288,645 6,288,645 0 Contracts 11,945,515 10,049,790 10,049,790 0 Grants 3,588,046 2,338,822 2,338,822 0 Professional Services Contracts 443, , ,250 0 Program Operating Costs 916, , ,975 0 Indirect/Allocated Costs 1,203,715 1,039,518 1,039,518 0 TOTAL EXPENDITURES 26,184,015 20,670,000 20,670,

52 Agenda Item PROPOSED PERSONNEL ALLOCATION PROPOSED BUDGET PERMANENT PERMANENT PERMANENT FTE FTE FTE ALL PROGRAMS EVALUATION & TECHNOLOGY ADMINISTRATION TOTAL BUDGETED PERSONNEL Positions Expressed in Full Time Equivalent Units (FTE) 15

53 Agenda Item 8 RESOLUTION OF FIRST 5 ALAMEDA COUNTY 1100 San Leandro Boulevard, Suite 120, San Leandro, CA (510) AUTHORIZING INVESTMENT OF MONIES IN THE LOCAL AGENCY INVESTMENT FUND WHEREAS, Pursuant to Chapter 730 of the statutes of 1976 Section was added to the California Government Code to create a Local Agency Investment Fund in the State Treasury for the deposit of money of a local agency for purposes of investment by the State Treasurer; and WHEREAS, the First 5 Alameda County Commission does hereby find that the deposit and withdrawal of money in the Local Agency Investment Fund in accordance with the provisions of Section of the Government Code for the purpose of investment as stated therein as in the best interests of First 5 Alameda County. NOW THEREFORE, BE IT RESOLVED, that the First 5 Alameda County Commission does hereby authorize the deposit and withdrawal of First 5 Alameda County monies in the Local Agency Investment Fund in the State Treasury in accordance with the provisions of Section of the Government Code for the purpose of investment as stated therein, and verification by the State Treasurer s Office of all banking information provided in that regard. BE IT FURTHER RESOLVED, that the following First 5 Alameda County officers or their successors in office shall be authorized to order the deposit or withdrawal of monies in the Local Agency Investment Fund: Mark Friedman Chief Executive Officer Janis Burger Deputy Director PASSED AND ADOPTED, by the Commission of First 5 Alameda County on June 23, Pamela Simms-Mackey, M.D. Commission Chair Helen Mendel, CMD Commission Vice Chair 1100 San Leandro Blvd. Suite 120, San Leandro California phone: fax:

54 Bill Lockyer, State Treasurer Inside the State Treasurer s Office Local Agency Investment Fund (LAIF) PMIA Performance Report LAIF Performance Report Average Quarter ending 03/31/2011 Daily Quarter to Maturity Date Yield* Date Yield (in days) Apportionment Rate: 0.51% 5/26/ Earnings Ratio: /27/ Fair Value Factor: /28/ Daily: 0.45% 5/29/ Quarter To Date: 0.52% 5/30/ Average Life: 193 5/31/ /1/ /2/ /3/ PMIA Average Monthly Effective Yields 6/4/ /5/ MAY % 6/6/ APR % 6/7/ MAR % 6/8/ *Daily yield does not reflect capital gains or losses Commercial Paper 9.13% Time Deposits 5.73% Pooled Money Investment Account Portfolio Composition $69.4 Billion 05/31/11 Corporate Bonds 0.00% Loans 6.15% CDs/BNs 15.35% Treasuries 47.69% Agencies 15.26% Mortgages 0.69%

55 AGENDA ITEM 9 To: From: Date: Subject: First 5 Alameda Commission Mark Friedman, CEO June 23, 2011 ACERA 401(h) Account Authorization ACTION REQUESTED R That the Commission discuss the request from Alameda County Treasurer Pat O Connell for the Commission to withhold paying any additional charges for Administration that were added to the ACERA invoice for the 401( (h) account that provides tax free health benefits to retirees. BACKGROUND In order for the Alameda County Employees Retirement Association (ACERA) to provide tax-free health benefits to its retirees, it is required that participating agencies such as First 5 Alameda County establish and pay post-retirement authorized the establishment of such benefits through a 401(h) account. In , the Commission an account. The 401( (h) account, also called the Advance Reserve Account, is funded by a portion of regular First 5 retirement contributions. First 5 contributions are then supplemented by the Supplemental Retiree Benefits Reserve (SRBR) in the amount of the 401(h) contribution. The effect is a no-cost transaction. For (and every year), it is required that the participating member agencies of ACERA authorize the required contributions to the account. The required contribution is determined by ACERA s actuary, The Segal Company, and is calculated based on the number of retirees receiving benefits in Basedd on the actuary, First 5 s contribution for is $17, The contributionn per pay period is $ beginning with pay period This year for the first time ACERA has added an extra administrative cost of $ to be paid by all participating ACERA agencies. This cost would not come from the SRBR reserves and thus our 401H participation would not be a wash. The largest by far contribution to this cost will come from Alameda County (about 80%). We have requested clarification from ACERA on this cost and whether First 5 Alameda County is 1100 San Leandro Blvd. Suite 120, San Leandro California phone: fax:

56 AGENDA ITEM 9 being billed and for how much as our invoice does not give the details. County Auditor Pat O Connell is protesting this added expense and has asked our Commission to amend our previous approval at the May 2011 Commission meeting to eliminate any payment for added administrative costs. Fiscal Impact The total amount allocated to First 5 Alameda County for this added administrative cost is likely to be less than $1,000, but agreeing to pay it establishes an unwelcome precedent. Recommendation That we continue to seek clarification from ACERA on these charges and that we stand in partnership with Alameda County in seeking to have these extra charges eliminated or modified. Submitted by: Mark Friedman, Chief Executive Officer Reviewed by: Janet Basta, HR Administrator 2

57 AGENDA ITEM 9 HERE IS THE RESOLUTION ON THE 401 (H) ACCOUNT APPROVED AT THE MAY 2011 COMMISSION MEETING: RESOLUTION ALAMEDA COUNTY CHILDREN S AND FAMILIES COMMISSION RESOLUTION APPROVING 401(h) ACCOUNT PURSUANT TO SECTION WHEREAS, in 1996, the Alameda County Employee s Retirement Association ( ACERA ) Board of Retirement informed the Board of Supervisors that by adoption of Resolution No , the Board of Retirement had established a health benefits account intended to satisfy the requirements of Internal Revenue Code ( IRC ) Section 401(h) and the regulations thereunder (the 401(h) Account ) in order to provide non-vested, tax-free health benefits to eligible County and Participating Employer retirees (collectively, the Retirees ); and WHEREAS, in 1996, this Board of Supervisors adopted Resolution No. R , which provided that ACERA could offer such non-taxable benefits if the County designated a portion of its contribution to ACERA for a fiscal year as a contribution to the 401(h) Account, and WHEREAS, under Section and Article 5.5 of the County Employees Retirement Law of 1937 ( CERL ), assets in the Supplemental Retiree Benefit Reserves (the SRBR ) at the end of a fiscal year of ACERA may, in the immediately succeeding fiscal year, be transferred to the Advance Reserves of the Participating Employers, and treated as a contribution to ACERA by the County and as applicable by other Participating Employers to the extent that in the immediately succeeding fiscal year the County and other Participating Employers make contributions to ACERA s 401(h) Account in order to pay for retiree health benefits; and WHEREAS, Section and Article 5.5 of the CERL thus permit the Participating Employers to contribute to a 401(h) Account and pay for retiree health benefits for a fiscal year without increasing the First 5 Alameda County s total contributions to ACERA for that fiscal year; and WHEREAS, commencing with the fiscal year, and for each fiscal year thereafter, the County has directed that a specified portion of its fiscal year contribution to ACERA for that year be contributed to the 401(h) Account; and WHEREAS, in 2007 First 5 Alameda County authorized ACERA to establish and manage a 401(h) sub-account on its behalf to provide tax free health care for its retirees. 3

58 AGENDA ITEM 9 NOW THEREFORE, IT IS RESOLVED AS FOLLOWS: 1. In fiscal year July 1, 2011 June 30, 2012, First 5 Alameda County shall contribute to ACERA $17, to be used only for the paying of retiree medical health benefits. This contribution shall be made on the terms and conditions set forth in the Agreement between First 5 Alameda County and ACERA concerning such contributions, executed on June 28, This contribution shall be designated, in writing, as being only for First 5 Alameda County s IRC 401(h) Account, and such designation shall be made at the time of contribution. 3. Such contribution is contingent on the Board of Retirement immediately transferring, in accordance with Government Code , an amount equal to such contribution from ACERA s SRBR account to First 5 Alameda County s advance reserve account. Such amount shall be treated as a contribution for pension and therefore shall be applied to reduce the pension contribution otherwise required by First 5 Alameda County for the fiscal year beginning July 1, No party, including any existing or future First 5 Alameda County employee, retiree, spouse or dependent, shall have any vested rights, contractual rights or other rights in or to any retiree medical benefits or payment or subsidy for any such benefits nor shall any such person or ACERA have any such rights to have First 5 Alameda County contribute towards paying or subsidizing the cost of any retiree medical benefits provided by ACERA under the 401(h) Account or otherwise. First 5 Alameda County may modify or terminate, at any time and without any limitation, its decision to contribute to First 5 s 401(h) Account. This modification or termination may occur even if it may affect any employee first hired prior to the date of such modification, any person who retired prior to such date, and/or any person who became a spouse or dependent of an employee or retiree prior to such date. 5. All contributions by First 5 Alameda County to its 401(h) sub-account shall be governed by requirements of the Internal Revenue Code and all administrative and other applicable rules established by ACERA governing such sub-account and ACERA s 401(h) Account. 4

59 AGENDA ITEM 10 To: From: First 5 Alameda County Commission Janis Burger, Deputy Director Date: June 23, 2011 Subject: Grant Authorization REQUESTED ACTION To approve the Grant Authorization for Bay Area Parent Leadership Action Network (PLAN). BACKGROUND Per our Financial Policies, Section VII, the Commission must approve award amounts in excess of $25,000. The following award requires specific authorization from the Commission. BAY AREA PARENT LEADERSHIP ACTION NETWORK (PLAN) - $108,000 The Commission authorized a FY $69,000 community grant for Bay Area PLAN at their meeting on May 26 to train providers to deliver Parents Ready for School, a curriculum that develops parent leadership and advocacy skills. Due to budget limitations they were the only grantee funded at less than the requested amount. Since that time we learned that another agency awarded a community grant is not able to accept the award. Therefore, we are requesting approval of an increase in the amount of $39,000 for Bay Area PLAN to conduct the full scope of services as requested in their grant proposal. The increase in grant amount eliminates the need to reduce the scope of work that was originally approved by bringing the funding level back up to the agency s original request. FISCAL IMPACT: None. All funds are budgeted. ACTION REQUESTED: Approve a FY award amount of $108,000 for Bay Area Parent Leadership Action Network. Submitted by: Reviewed by: Janis Burger, Deputy Director Mark Friedman, Chief Executive Officer 1100 San Leandro Blvd. Suite 120, San Leandro California p: f: e: ackids@acgov.org

60 AGENDA ITEM 11 To: From: First 5 Alameda County Commission Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Revised Long Range Financial Plan Recommendation ACTION REQUESTED To review and approve the attached Long Range Financial Plan. BACKGROUND First 5 Alameda County has adopted a Long Range Financial Plan annually since March Adoption of a Long Range Financial Plan has been a statutory requirement of all First 5 Commissions since Historical background information about the Long Range Financial Plan is provided in Appendix C. The current Long Range Financial Plan (LRFP) was formally approved by the Commission in June The plan was subsequently revised to reflect the transfer $23.6m of fund balance to the State of California, required by State law under Assembly Bill 99 (AB99), in FY At Commission meetings in February, March and May of this year, staff proposed three Scenarios to the Commission based on the current LRFP. Commissioners reviewed the proposed scenarios and instructed staff to propose budgets for the fiscal years, based on Scenario A. An update to the LRFP Scenario A is presented herewith (Appendix A) with underlying assumptions (Appendix B). The update largely reflects the Proposed Budgets for FY that are before the Commission for adoption as a separate agenda item, at this meeting. This final version of the LRFP reflects conditions that have changed significantly in the year since the last approved revision to the plan. Factors having an especially large impact are: 1. The transfer of $23,579,000 to the State of California, under AB The continuing decline in State tobacco tax collections and Prop 10 allocations to First 5 Alameda County at an average rate of 3.5% per year over the period. 3. Cumulative budget reductions approved by the Commission. In September 2010, the Commission approved a $4.7m reduction in expenses for FY In February 1100 San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org

61 AGENDA ITEM , the Commission approved a further $2 m reduction for a cumulative total of $6.7m reduction over the budget for FY MINIMUM FUND BALANCE REQUIREMENTS The Sustainability Fund cannot be spent down to zero; some funds must be maintained as an operating reserve to cover ongoing cash flow requirements to act as a buffer since there are delays in receiving state tobacco tax revenues or other revenues. The recommendation is to maintain an amount in the Fund Balance, at a minimum, equal to three months of operating expenses plus an amount to cover fiscal obligations under the Reduction in Workforce Policy (currently about $500,000). FISCAL IMPACT There is no fiscal impact. RECOMMENDATION To review and approve the attached Long Range Financial Plan recommendation. Submitted by: Reviewed by: Mark R Rasiah, Financial Controller Mark Friedman, Chief Executive Officer 2

62 First 5 Alameda County LONG RANGE FINANCIAL PLAN: UPDATED SCENARIO - A Appendix A Agenda Item 11 Current Strategic Plan Dollars in Thousands SLOPE CLIFF FINAL VERSION DATE - 6/17/2011 Actual BUDGET 5 Year Financial Plan ( ) Projections / / / / / / / / / /19 Beginning Fund Balance 50,437 47,158 38,133 10,707 6,357 5,961 4,675 1,334 1,855 2,101 Receipts Tobacco Tax 14,532 14,000 13,510 13,007 12,354 11,714 11,304 11,021 10,746 10,477 Net Rental income/sale & lease back CARES PLUS AB212 2,180 Interagency Income 1, ,013 1, Fiscal Leveraging 1, Federal Grants Private Grants Other/School Readiness 282 Investment Income 1, Total Receipts 21,448 17,159 16,823 16,320 14,254 13,364 11,309 11,021 10,746 10,477 Disbursements Programs 21,839 21,734 16,956 16,956 11,500 11,500 11,500 8,000 8,000 8,000 Evaluation & Technology 1,225 1, Administration 1,663 1,316 1,038 1,038 1,000 1,000 1, Infrastructure 1,965 1,872 1,872 1,350 1,350 1, Total F5AC Disbursements 24,727 26,184 20,670 20,670 14,650 14,650 14,650 10,500 10,500 10,500 TRANSFER TO STATE 23,579 Total Disbursements 24,727 26,184 44,249 20,670 14,650 14,650 14,650 10,500 10,500 10,500 Excess of Receipts over Disbursements (3,279) (9,025) (27,426) (4,350) (396) (1,286) (3,341) (23) Ending Fund Balance 47,158 38,133 10,707 6,357 5,961 4,675 1,334 1,855 2,101 2,079 Min Fund Bal. Reqd. (25% or 3 months of annual disbursements) 5,168 5,168 3,663 3,663 3,663 2,625 2,625 2,625 Ending Fund Balance: Committed for Stabilization $ 47,158 $ 38,133 $ 10,207 $ 6,357 $ 5,461 $ 4,675 $ 1,334 $ 1,500 $ 1,000 $ 400 Reduction in Workforce Policy Available $ - $ - $ 500 $ - $ 500 Total Ending Fund Balance $ 47,158 $ 38,133 $ 10,707 $ 6,357 $ 5,961 $ 4,675 $ 1,334 $ 1,500 $ 1,000 $ 400 3

63 Agenda Item 11 FORECASTED BUDGET & FUND BALANCE ($000s) LRFP - SCENARIO A 40,000 35,000 30,000 25,000 20,000 BUDGET 15,000 10,000 5,000 0 FUND BALANCE 2010/ / / / / / / / /19 4

64 APPENDIX B ASSUMPTIONS FOR THE REVISED LONG RANGE FINANCIAL PLAN SCENARIO A AGENDA ITEM 11 Presented below are the assumptions used to develop the Long Range Financial Plan Scenario A contained in Appendix A. REVENUES figures are from the budget approved in May For and subsequent years, the following revenue assumptions were used: Tobacco Tax The California Department of Finance (DoF) prepared revised projections of First 5 tobacco tax revenues in June These take into account the effects of the federal tobacco tax, other declines in state tobacco tax revenues (such as those due to general economic conditions), Prop 99 backfill amounts and other factors. The projections cover the period. The DoF projections for Alameda County show expected drops of 1.7% in , 5.8% in , 5% in and 5.2% in Annual declines in tobacco tax revenues for were averaged out at 3.5% in the Proposed Budget based on these DoF estimates. Starting in , the annual rate of decline is expected to reduce to 2.5% because of historical experience that reductions in tobacco tax collections do not continue at a steep rate of decline but instead flatten out within four to five years. Fiscal Leveraging From FY , fiscal leveraging revenues consist entirely of federal reimbursements under the Medi-Cal Administrative Activities (MAA) program. It is assumed that programs eligible for MAA claiming will be sustained throughout the remainder of the strategic plan period and that these will be maintained at rates. Starting in however, fiscal leveraging revenues are reduced by 30% - in proportion to program cuts that may eliminate staff and program activities that generate the MAA revenues. Other Private Grant Revenues from the Long foundation and the Kellogg Foundation are expected to continue through the FY period. Other grant revenues in consist of the federal earmark for the SART program. Interagency income represents SAMHSA federal grants for Project LAUNCH and Early Connections. The State grant is for CARES Phase II. When new grants are awarded, the Long Range Financial Plan will be revised if appropriate at that time to incorporate the effect of those grants. Investment Revenue The budget estimates investment income to be earned at a rate of approximately 1.1% of the beginning fund balance. To be conservative and to reflect the sustained low interest rates of recent years, investment income is estimated to be 1.0% of the beginning fund balance for the next two years and then drop below 1% for the final year San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org

65 AGENDA ITEM 11 EXPENSES figures are from the budget approved in May 2010, with reductions subsequently approved by the Commission in September 2010 and thereafter. For and subsequent years, the total expenses have been reduced so as to leave a minimum fund balance as recommended below. MINIMUM FUND BALANCE REQUIREMENTS The Sustainability Fund cannot be spent down to zero; some funds must be maintained as an operating reserve to cover ongoing cash flow requirements to act as a buffer if there are delays in receiving state tobacco tax revenues or other revenues. The recommendation is to maintain an amount in the Fund Balance, at a minimum, equal to three months of operating expenses plus an amount to cover fiscal obligations under the Reduction in Workforce Policy (currently about $500,000). 4

66 AGENDA ITEM 11 APPENDIX C HISTORICAL BACKGROUND The Long Range Financial Plan tool was designed to strategically guide the use of First 5 Alameda County s Sustainability Fund. The Sustainability Fund was established by the First 5 Alameda County Commission as a strategy to ensure a long term commitment to funding services for children age 0-5, even as the tobacco tax revenue declined. The Sustainability Fund is projected to be approximately $38 million at the end of the current fiscal year ( ) and was accumulated in a number of ways over the past ten years. First, the Fund developed through the initial reserve that occurred when tax dollars were accumulated but funds could not be spent until a Strategic Plan was passed (Jan Jan. 2000). In addition, contributions to the Sustainability Fund were budgeted over a number of years ( ). Finally, budgeted funds that remained unspent were directed by the Commission to the Sustainability Fund rather than rolling to the subsequent year s budget (2001-present). It is important to note that Sustainability Funds have been budgeted for program use since , which means that expenses have been projected higher than revenues in each of those years, but budget savings in those years made it unnecessary to draw from the Fund. However, changes to budgeting procedures were instituted for the budget to reduce over-budgeting of expense line items. These changes have resulted in draws from the Sustainability Fund since FY Budgets for FY and beyond will need to draw from the Fund in order to maintain a balanced budget. 5

67 AGENDA ITEM 12 To: From: First 5 Alameda County Commission Mark R Rasiah, Financial Controller Date: June 23, 2011 Subject: Fund Balance Commitment REQUESTED ACTION To review and approve the commitment of sustainability funds. BACKGROUND There is no single number in governmental accounting and financial reporting that attracts more interest and discussion than fund balance. Fund balance, also referred to as net assets, is the difference between asset and liabilities in the governmental funds balance sheet. First 5 Alameda County (F5AC) had approximately $47 million in fund balance as of June 30, The Governmental Accounting Standards Board (GASB) recently adopted Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This statement requires governments to revise how fund balance is reported in its financial statements. The planned use of net assets is required to be reported in various categories depending on the constraints imposed on the use of resources. The categories in which governments are required to categorize fund balance are (in order of most to least constrained): Nonspendable, Restricted, Committed, Assigned and Unassigned. The more constrained the resources, the less likely they can be redeployed to other uses. A description of the different categories was presented to the Commission by Staff at the Commission meeting in February, GASB 54 A hierarchy of fund balance classifications has been created by the Governmental Accounting Standards Board (GASB), based primarily on the extent to which governments are bound by constraints on resources reported in the funds. This approach which is referred to as GASB 54 is intended to provide users more consistent and understandable information about a fund s net resources. GASB 54 goes into effect in FY which ends on June 30 th San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org

68 AGENDA ITEM 12 The hierarchy of five possible classifications of fund balance is: Nonspendable Fund Balance Amounts that cannot be spent due to form; for example, inventories and prepaid amounts. Also, long-term loan and notes receivables, and property held for resale would be reported here. Amounts that must be maintained intact legally or contractually. Restricted Fund Balance Amounts constrained for a specific purpose by external parties, constitutional provision or enabling legislation. Committed Fund Balance Amounts constrained for a specific purpose by a government using its highest level of decision-making authority. It would require action by the same group to remove or change the constraints placed on the resources. Action to constrain resources must occur prior to year-end; however, the amount can be determined in the subsequent period. Assigned Fund Balance For amounts constrained for the intent to be used for a specific purpose by a governing board or a body or official that has been delegated authority to assign amounts. Unassigned Fund Balance For any remaining amounts not classified as any of the above. F5AC s sustainability fund or stabilization fund currently meets the definition of Assigned as defined in GASB 54. These stabilization funds can be categorized as Committed by having formal board action. Therefore, we are asking the Commission to formally commit stabilization funds. This can be done with a simple Commission action stating what the stabilization funds must be used for. AB 99 In May of this year the legislature approved Assembly Bill 99 at the urging of the Governor. Governor Brown subsequently signed it into law. As the law currently stands it requires $1 Billion to be transferred from First 5 Commissions throughout the state to the state general fund. First 5 Alameda County s share is $23.6 million and it must be transferred before the end of fiscal year The law is being challenged in court, but the resolution of the legal challenge could take several years. PROPOSED ACTION TO COMMIT FUND BALANCE Motion: To accept staff s recommendation to commit $38 million of net assets for budget stabilization in accordance with the Long Term Financial Plan adopted by the Commission on Fund Balance Commitment June 23,

69 AGENDA ITEM 12 June 23, These funds committed to budget stabilization shall only be used to maintain F5AC services as long as possible during anticipated funding declines in accordance with the Long Term Financial Plan. They can only be committed to other uses by a majority vote of the Commission. These funds are not anticipated to be replenished after they are used for budget stabilization. Of this amount, Staff recommends that an amount not exceeding $24 million be restricted and recorded accordingly as a current liability in the financial records of the agency as at June 30 th 2011, in order to comply with the enabling legislative requirements of AB 99 and subsequent amendments, if any. FISCAL IMPACT Fund balance reported as at June 30 th 2011, will be reduced by an amount not exceeding $24 million. This important new standard will reclassify the total amount reported as fund balance, and will substantially alter the categories and terminology used to describe its components in accordance with GASB 54. RECOMMENDATION To review and approve the commitment of sustainability funds. Submitted by: Reviewed by: Mark R Rasiah, Financial Controller Mark Friedman, Chief Executive Officer Fund Balance Commitment June 23,

70 AGENDA ITEM 13 To: From: Date: Subject: First 5 Alameda County Commission Mark Friedman, CEO June 23, 2011 Bridge Loan Program for Early Care and Education Facilities REQUESTED ACTION To review the proposal to establish a pool of funds for bridge loans to help state funded Early Care and Education (ECE) facilities that may be in jeopardy of closing if the state budget is delayed. BACKGROUND In recent years the passage of the state budget has been delayed for periods of a few weeks to a few months. With a still sizable projected state government budget gap and the continued lack of Republican support for the Governor s proposedd extension of sales taxes and vehicle license fees the budget might be delayed once again. The added crisis for our state funded ECE providers is that in the Governor s May budget revise he proposed drastic reductions in state funded child care programs. Both the State Assembly and State Senate budget committees have voted to decrease the size of those reductions, but the financial pressure on child care facilities is still severe. In the past we have contracted with the Low Income Investment Fund (LIIF) to administer the bridge loan program. However, after our experience with handling the Stage 3 Calworks loan program ourselves it will be more cost effective and timely to manage this bridge loan program ourselves. In our previous experience all loann recipients promptly paid back the funds they had been advanced. Last year the Commission set the following criteria for the bridge loan program: That agencies demonstrate long term stability so we are assured that the agency will be able to pay back the grants as soon as the state budget is passed and they receive the state money they are due. That agencies first access whatever lines of credit or reservee funds they have available to weather a delay in state reimbursement. Thiss will allow us to use our funds to maintain maximum services for children in agencies that have fewer funding options. That all money we advance will be only for services to children from birth to age San Leandro Blvd. Suite 120, San Leandro California phone: fax:

71 AGENDA ITEM 13 Given the likelihood that some agencies will not have an immediate need for our funds due to their existing reserves or lines of credit, we propose an initial allocation of $2 million dollars for this bridge loan program to be transferred only when needed. If the state budget is delayed into the fall and we are extremely confident that there will not be significant cuts to child care then an additional allocation of up to $2 million is proposed. Unless Assembly Bill 99 is overturned, this will likely be the last year that we will be able to offer bridge loans to our early care and education partners as our Sustainability Fund will be too depleted at the end of Fiscal Year Also, we plan to work with our partner agencies including the Child Care Planning Council to encourage local banks and financial institutions to step up and participate in making loans to agencies that will be negatively impacted by state budget adoption delays. FISCAL IMPACT A sum of $2,000,000 of the FY fund balance as of June 30, 2011 will be designated as assigned under GASB 54, for the specific purpose stated above. Loans made to State Funded ECE Facilities out of this category of fund balance will be treated as a current receivable. It is anticipated that all loans made will be repaid in full within FY and as such, will have no potential impact on the FY Proposed Budget. The opportunity cost of this action will be the notional loss of approximately $20,000 in lost return on investment for the funds removed from Sustainability Fund. RECOMMENDATION That the Commission approve moving forward on the establishment of a bridge loan program for ECE, assigning up to $2,000,000 for the pool of available funds, with the possibility of an additional $2,000,000 if the state budget is delayed into the fall and we are assured that the budget will include the necessary funds for child care that will allow prompt repayment. That the commission delegates to the CEO the express authority to use these funds for the specific purpose intended herein and to select and make disbursements as needed, under the loan program. Submitted by: Reviewed by: Mark Friedman, Chief Executive Officer Mark Rasiah Financial Controller Bridge Loan Recommendation June 23,

72 AGENDA ITEM 14 To: From: First 5 Alameda County Commission Mark Friedman, Chief Executive Officer Date: June 23, 2011 Subject: Strategic Plan Review REQUESTED ACTION That the Commission conduct the final review of the modifications to the FY strategic plan as required by Proposition 10 The California Children and Families Act. BACKGROUND Proposition 10 the voter approved initiative that established First 5 Commissions in November of 1998 requires that each county commission review the strategic plan and hold two public meetings on an annual basis and either modify it or approve it as it is. For the most part, the Strategic Plan will be intact for the next two fiscal years. The goals and outcomes remain the same. However the faster than anticipated decline of tobacco tax revenue and the passage of Assembly Bill 99 necessitate modifications to the funding levels for planned strategies and for the last two fiscal years of the current strategic plan. These modifications are planned for Fiscal Year and Fiscal Year Specific changes to the strategic plan that are embedded in the budget include: A decrease for expenses for College and University Education programs for early care and education providers as we shift to the First 5 California CARES Plus model and an emphasis on cohorts. (Page 10 of the Strategic Plan). The end of funding for the Enhanced Mentor Program (referenced on Page 10 of the Strategic Plan). A decrease in funding for grants for Early Care and Education facilities. (Page 10 of the Strategic Plan). A decrease in funding for New Parents Kit by ending the customization of the kits with additional resources (Page 11 of the Strategic Plan). A significant decrease in funding for lactation direct services supports. (Pages 12 and 14 of the Strategic Plan) San Leandro Blvd. Suite 120, San Leandro California phone: fax: ackids@acgov.org