Report 2016-129 Recommendation 5 Responses

Report 2016-129: K-12 High Speed Network: Improved Budgeting, Greater Transparency, and Increased Oversight Are Needed to Ensure That the Network Is Providing Reliable Services at the Lowest Cost to the State (Release Date: May 2017)

Recommendation #5 To: Imperial County Office of Education

To ensure that it is able to continue critical network services with reduced operating reserves, ICOE should establish procedures to routinely monitor the K12HSN program's cash balance and to evaluate upcoming costs. If at any point ICOE determines that it will be unable to fund its costs due to delayed subsidy payments, it should notify Education regarding the size and timing of the anticipated shortfall and postpone significant discretionary expenditures, such as upgrading network site equipment, until ICOE collects the subsidies it is owed.

60-Day Agency Response

ICOE follows stringent budgeting practices and schedules for reviewing actual expenditures against budgeted expenditures and available cash to meet expenditures. A report reflecting the cash position of K12HSN is monitored weekly. Monthly reports are prepared within one week after the last day of the month and provided to the Imperial County School Board (ICSB) at their monthly meetings held on the 2nd Monday of the month.

The circuit orders, construction projects, and equipment procurement undertaken by the K-12 High Speed Network program through its network operator, CENIC have an unavoidable fluidity to them. A project may be planned in October of one year, come to fruition in August of the following year, and see invoices processed -particularly when it comes to the equipment purchasing -the following January. The challenge of aligning cash in treasury with timing of payments is complicated by both unpredictability in timing of the receipt of subsidy reimbursements, and by the unpredictability of service delivery and invoicing. Compound the unknowns of one project with the multiple projects always underway and it becomes clear that the exercises required are a delicate balancing act. Nevertheless, ICOE agrees to maintain open communications with Education and provide early notice of any potential shortfalls in available cash. Monthly phone meetings occur between K12HSN and Education. Updates for Education related to budget needs and project expenditures will occur then. Should there be an unanticipated and concerning scenario regarding cash balances and projects, K12HSN will contact Education immediately with all relevant information.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

ICOE provided documentation of its monitoring efforts in the form of monthly reports to the Imperial County School Board and a calendar denoting ICOE's scheduled phone calls with Education. Although ICOE indicated that the implementation date of this recommendation is ongoing, we consider the recommendation to be fully implemented because ICOE has demonstrated that it intends to continue monitoring its cash flow indefinitely, and the steps it has taken will allow it to identify and respond to a cash flow issue should one emerge.

All Recommendations in 2016-129

Agency responses received are posted verbatim.