Mr. Chris Ray, Partner, KPMG, LLP and Mr. Chuck Burbridge, Director, Management Assurance Services, KPMG, LLP presented the External Evaluation and Best Practices Review of the Office of the Inspector General (OIG) report. They commented on the strengths and accomplishments within the OIG, opportunities for improvement in areas of communication and reporting protocol, risk assessment and audit targeting, and skill sets of resources primarily in internal audit, and commented on best practices analysis.

After a brief discussion, Ms. Young indicated that the item would be brought back to the BFAT Committee in October 2001. There were 44 recommendations made in the report and Mr. Mullinax will present a progress report in response to those recommendations at that time.

APPROVAL OF THE MINUTES

The April 19, 2001 minutes were approved as submitted.

ISSUANCE OF CERTIFICATES OF PARTICIPATION

This item was withdrawn.
REPORT ON PHYSICAL INVENTORIES OF STOCK IN DISTRICT WAREHOUSE

Ms. Atienza presented Accounting and Disbursements Division Communication No. 1, a report on physical inventories of stock in District Warehouses recommending the action of the Chief Financial Officer in adjusting the perpetual inventory records be ratified.

The Committee approved the report for transmittal to the Board of Education on June 12, 2001.

AUTHORIZATION FOR MEMBERSHIP IN A JOINT POWERS AUTHORITY (JPA)

Dr. Zeronian presented Accounting and Disbursements Division Communication No. 2, authorization for membership in a Joint Powers Authority (JPA) to purchase delinquent property tax receipts.

The Committee approved the report for transmittal to the Board of Education on June 12, 2001.

IMPROVEMENTS TO PAYROLL TIME REPORTING

Mr. Mullinax noted that earlier this year the Office of the Inspector General retained the services of Arthur Andersen to perform a payroll best practices review for the purpose of comparing best practices of other entities to those practices used by LAUSD. He indicated that studies have been done in the past, but they did not detail options for improving the District's payroll system. The primary purpose of the Andersen review is to provide detailed options for improving the District's payroll system.

Mr. Chris Pating, Senior Manager, Education Practice, Arthur Andersen commented on the three phases to the project, key observations and findings, the pay structure, technology, the payroll process, statistics, and benchmarking highlights. He commented on the following recommendations for LAUSD:

1.Select and implement a time and attendance solution. This solution can range from

Dr. Zeronian agreed with the three main observations made by Arthur Andersen and said he would like to do two things; electronic time reporting for all District employees and he would like to pay everyone in the District for time worked. He noted that:

• About 75 percent of the errors in processing payroll have to do with paying employees 12 months, 13 months and thirteenthly. Thousands of adjustments need to be made for these employees. Very few employees are paid for time worked. Last year overtime in

• He was pleased to see that the report did not say that the District was paying employees incorrectly.

Dr. Rasmussen agrees with Dr. Zeronian's recommendations that District staff should take a look at possible savings by implementing a new payroll system. He does not believe that the savings identified in the review are hard estimates since Arthur Andersen did not document its estimates of overpayment and payroll errors. He believes that District staff should realistically review the expected costs and benefits associated with implementing a new payroll system. Dr. Rasmussen also commented that District staff should develop a prioritization of automation needs and indicate where a new payroll system fits into the larger priority list.

Dr. Zeronian responded to the Committee Members comments and questions. He will present an action plan on how to address the findings in the Arthur Andersen review at the August 2001 Business, Finance, Audit and Technology Committee meeting.

DECISION SUPPORT SYSTEM (DSS) PROGRESS REPORT

Mr. Wohlers commented that the District has endured many challenges implementing the Decision Support System (DSS). The challenges have been reflected in the written reports provided to the Committee. Mr. Wohlers and Ms. Valenzuela-Smith provided a demonstration of the DSS. DSS should be in operation by the end of August 2001 though the system will not be available to everyone at that time. There is a training component that must be rolled out first. Mr. Wohlers responded to the Committee Members questions and comments. He was asked by Ms. Young to provide the Committee (as a "Receive and File" agenda item) a training rollout schedule and plan.

E-RATE PROGRAM PROGRESS REPORT

Mr. Godfrey presented the E-Rate monthly progress report for May 2001. He commented that considerable progress has taken place since May 11, 2001. All of Vector, PacBell, and IBM projects are active. The exception are Wareforce projects. With the completion of the construction part of the E-Rate program, status reports on the instructional part of the program will be presented to the Business, Finance, Audit and Technology Committee beginning June 2001.

ORIENTATION PROGRAM FOR NEW BOARD MEMBERS

A memo responding to the Belmont Report recommendations regarding Board Orientation was accepted as "Receive and File."

REVIEW OF 2000 - 2001 PROGRAM EVALUATION AND RESEARCH BRANCH (PERB) ACTIVITIES

Report on Major Activities during 2000-01 School Year (Memo) was accepted as "Receive and File."
LEGAL SERVICES REORGANIZATION PROGRESS REPORT

A memo on the reorganization of legal services was accepted as "Receive and File."

ATTORNEY-CLIENT PRIVILEGE POLICY

A memo on Legal Compliance issues was accepted as "Receive and File."

STATUS REPORT ON THE IMPLEMENTATION OF VARIOUS INFORMATION TECHNOLOGY (IT) PROJECTS

A Technology Project Status Report, Information Technology Division was accepted as "Receive and File."

UPDATE ON THE IMPLEMENTATION STATUS OF VARIOUS AUDITS AND INVESTIGATIONS

A document from the Facilities Division, Audit Recommendations Status Report for May 2001 was accepted as "Receive and File".

ITEMS REFERRED TO THE COMMITTEE BY THE BOARD OF EDUCATION OR COMMITTEE OF THE WHOLE

There were no items referred to the Committee by the Board of Education or the Committee of the Whole.

PUBLIC COMMENTS

There were no public comments.

ADJOURNMENT

The meeting adjourned at 3:35 p.m.

Committee Members Committee Contact Person

Ms. Caprice Young, Chairperson Dr. Roger Rasmussen, Director
Mr. Mike Lansing, Vice Chairperson Independent Analysis Unit
Mr. David Tokofsky Tel: (213) 625-6091
Ms. Yvonne Perlberg Fax: (213) 687-7367
Ms. Carol Sharer
Mr. Sanford Sigoloff
Ms. Fredricka Taubitz

1. Evaluation of the Inspector General

Under Government Code 54957, the Committee will meet in closed session to evaluate the performance of the Inspector General.

2. Approval of the minutes for the April 19, 2001 meeting

The Committee will take action on approving the draft minute of the April 19, 2001 meeting.

3. Issuance of Certificates of Participation

The Committee may take action on approving a Board Report that authorizes the issuance of Certificates of Participation for various District capital projects.

The Committee will take action on approving a Board Report on physical inventories of stock in District warehouses.

The Committee will take action on approving a Board Report that authorizes District membership in a JPA that would purchase delinquent property tax receipts from the Los Angeles County Auditor Controller for financial benefit to the District.

6. Improvements to payroll time reporting

Dr. Zeronian, Mr. Mullinax and a representative from Andersen will present recommendations to improve the District's payroll time reporting practices.

Mr. Wohlers and Ms. Valenzuela-Smith will provide a progress report on the District's Decision Support System project.

Dr. Holmes and Mr. Konantz will present a progress report on the District's E-Rate program.

9. Committee organizational issues

The Committee will discuss various organizational issues such as identifying and prioritizing future agenda items, calendaring future meetings, and other related Committee business.

10. Orientation program for new Board Members

Mr. Crain will provide a memo that responds to findings in the Internal Audit and Special Investigation Unit report on Belmont Learning Complex (September 1999) regarding the need for an orientation program for new Board Members.

Dr. Bartell will review the Program Evaluation and Research Branch (PERB) activities for

2000 - 2001. The 2001 - 2002 PERB annual work plan will be presented at the June 14, 2001 BFAT Committee meeting.

Mr. Kwalwasser will provide a progress report on legal services reorganization.

13. Attorney-client privilege

Mr. Kwalwasser will provide a draft memo to be sent to District employees that provides guidance in the use of legal services.

Mr. Konantz will provide a status report on the implementation of various IT projects, including the Integrated Financial System (IFS), Decision Support System (DSS), E-Rate, Chanda Smith Management Information System (MIS) and others.

Mr. Solomon will provide an updated status report on the implementation of recommendations contained in various audits and investigations:
€Belmont Learning Complex (Mullinax investigative reports), Internal Audit and Special Investigations Unit, September 14, 1999 and December 13, 1999.

• Investigative Report: Monitoring Environmental Hazards at LAUSD (Rohman Report), Public Interest Investigations, Inc., September 28, 1999.
  
• Little Hoover Commission letter on LAUSD school facilities management, November 3, 1999 (included in Little Hoover Commission Report, "To Build a Better School", February 2000).
  
• LAUSD (school site selection process), California State Auditor, December 1999.

16. Items referred to the Committees by the Board of Education or Committee of the Whole

The Committees may consider and act upon motions, Board Reports, or other business referred to it by the Board of Education or Committee of the Whole, with respect to any properly posted matter at a meeting immediately preceding this committee meeting, where the time between that meeting and this committee meeting is less than 72 hours. Members of the public are encourage to review the order of business or agenda for the meetings of the Board of Education or Committee of the Whole.

Persons who wish to address the Committee may sign up at the meeting.