Board of Education Finance Committee Meeting Part I

April 23, 2009

ATTENDANCE: Jody Bishop-Pullan, Chair; Glenn Iannaccone, Jack Chiaramonte, Amy Jimenez

OTHERS: Dr. Salvatore Corda, Superintendent of Schools; Board Member Shirley Mosby, George Gianetti, Food Service; Dr. Dan Cook, Norwalk Public Schools Finance Director; Jerry Patrini, Bruce Mellion, NFT President

CALL TO ORDER

Ms. Bishop-Pullan called the meeting to order at 7:35 p.m.

APPROVAL OF MINUTES OF MARCH 26, 2009

** MR. IANNACCONE MOVED TO THE MINUTES OF MARCH 26, 2009. ** MR. CHIARAMONTE SECONDED. ** THE MOTION TO APPROVE THE MINUTES OF MARCH 26 2009 MEETING AS SUBMITTED PASSED WITH TWO IN FAVOR AND ONE ABSTENTION (BISHOP-PULLAN AND JIMENEZ).

FOOD SERVICE MANAGEMENT COMPANY BID FOR 2009-2010 SCHOOL YEAR – UPDATE ON CURRENT CONDITIONS

Dr. Cook gave the Committee a quick review and explained that the District was mandated by the Food Service Management bid agreement to go out to bid again for the 2009-2010 School Year by the National School Lunch Program. The District has received four very favorable bids from Sedeco, Cutwell, Armac and Whitson’s, the current vendor. The bid documents currently are being reviewed. Mr. Gianetti displayed a copy of one of the bid packages, which is basically a proposed business plan. Dr. Cook said that the department was working on the evaluation process and developing a spreadsheet to compare costs benefits and expenses before making a recommendation to the Board. Dr. Cook said that the District controls the staffing levels and the food quality along with the right to accept or reject from each one of the companies. Additionally, the price setting and meals included in the bid packages were set fee and could only be determined by the Board of Education.

The items that are going to be evaluated are the management fees, the quoted salaries and benefits; business expenses like telephones, cleaning supplies, insurance, software fees, uniforms and a host of other items; thirdly, marketing costs and finally equipment depreciation. The District owns the equipment but while the vendor pays for it and the District returns the cost to the vendor over a five year period.

Dr. Cook then reviewed the calendar and said that the selection team will be meeting on April 27th to ask the applicants clarify questions and allow the applicants to ask questions about the bid document. Any member of the Board of Finance Committee is welcomed to join the meeting at 9:00 a.m. Questions from Committee members can also submit questions in written form and answers will be supplied following the meeting.

At the last meeting, a calendar was presented to the Committee and one of the last three items on the calendar was the April 27th vendor presentation. Following this meeting a recommendation will be presented for the Board discussion during the May 5th meeting and a final recommendation on May 19th. An additional Board meeting for June 2nd had been factored in if the Board has questions or something unexpected arises. A second back up date of the second Board meeting in June could be scheduled, but Dr. Cook said that he expected to have the contract awarded by July 1st in order to give the vendor to prepare for the school year starting in September.

Ms. Bishop-Pullan requested that Dr. Cook repeat the timeline, which he did. She said that the recommendation should come to the Finance Committee first. She added that having the item on the May 5th agenda for discussion was too fast. Dr. Corda said that if the May 19th was the target date for the Board information and reports, a potential vote could take place at the first meeting in June. Dr. Cook said that the presentation could be done at the next Committee meeting on May 14th and include it as a discussion item for the Board of Education agenda on May 19th. The item would be included on the June 2nd BOE agenda for a vote.

Ms. Bishop-Pullan asked who was on the selection committee. Dr. Cook listed the members as Mr. Gianetti, Ms. Rotolo, Mr. Morris, Don and Jim, along with himself. No vendors are allowed on the vendor committee.

Mr. Gianetti then updated the Committee on the collections efforts. The last time this was reported on, the outstanding balance was $38,500. This amount is currently $41,000, an increase of approximately $12,000. While there are multiple reasons, one issue was that there was a week when the school was closed and no payments were taken in during that time. Payment resumed the following Monday, but the final figures are not available. Several calls have been taken from parents where they acknowledge the amount owed, but also state they have lost their jobs. Attempts to pay the outstanding amounts are being made. The debt is not growing anywhere near earlier patterns. Previously the debt was accruing at about $2,000 per week.

Dr. Cook said that the amount of accounts that are being prepaid has been growing faster than before. This means that parents are depositing money ahead of time. Mr. Gianetti said that the number was $46,000 as opposed to the $41,000 and this was a complete reversal of the pattern from what it ever was before. This means that there is more money in the account than what is being drawn out of the account. Mr. Gianetti said that the teachers and the staff were working hard to drive the point home that this needs to be paid. He said that he believe that they would be back where they were two weeks ago within the next week.

Dr. Cook pointed out that the food service had a debt of $144,000 last year at the end of the year, which was paid out of the Operating Budget. This year’s estimated debt has been estimated at $70,000. If the pattern continues, next year should be a break-even proposition. He said he would like to see the account end up on the plus side in order to build up a reserve in that area. While this account is moving in the right direction, Dr. Cook said that he did not believe that the District would get there this year. However, the gap is being closed dramatically.

Ms. Jimenez asked where the account was at the close of last year. Dr. Cook stated that at the close of last year, the auditors reported the District had a deficit of $144,000. Ms. Jimenez then asked what the anticipated deficit was for this year. Dr. Cook said that it was expected to hover around $70,000. She then asked about the fact that the budget was already around $40,000 at the present time. Dr. Cook said that there were other factors that belonged to the deficit outside of the collections. Mr. Gianetti then said that originally that they were over $750,000 in debt and a five year plan to reduce the debt. Regarding the uncollected debt, unfortunately there was no accurate data saved as to what the exact dollar amount at the end of the year because the former accounting method allowed the figures to be deleted.

Mr. Giannitti said that currently, there is a system that allows him to know exactly what that figure is. Last year, the figure for uncollected funds was hovering around $110,000. As of this time, last year, the District debt was approximately $70,000. With this year’s new controls for serving cheese sandwiches, calling homes and sending mailings, the number has been reduced to $41,000. Out of that $41,000 there will be a loss that the District will not be able to recover. Mr. Gianetti’s best guess of what is will be between performance on the food service account and that debt combined changes the number to around $70,000.

Dr. Cook said that in order to be proactive, there have been meetings with the current vendor and discussing how they could continue to help the District resolve this problem. After closely examining their management, this has been reflected dramatically in the bid document. The vendor has said that one way to break even is to change some of their profit margin. They are aware that they are competing with other vendors who are also bidding. He said that when the Committee sees the bid document, they will be pleased because he is already pleased with the figures.

Ms. Jimenez asked for clarification on how the break even or profits for the company affects the collections for the lunches. Dr. Cook said that they don’t. Collections are a separate issues. She then asked if the Board was okay with the fact that the number was increasing and also wanted to know what the District was doing to mitigate this issue.

Mr. Chiaramonte said that the District wants the uncollected amount to be reduced. While the figures may not be perfect, there has been a strong improvement over the figure from last year. Both Dr. Cook and Mr. Gianetti have worked towards this.

Over the last six months, Dr. Cook said that various actions have been taken to reduce the amount of outstanding debt such as having Dr. Corda has sent a letter to the families who owed the food service money and a second, follow-up letter was sent six weeks later. He also instituted a routine phone call to the home of the top twenty students who owed money. Mr. Gianetti said the first letters and phone calls went out to the families of those students who owed more than $50.00. After that, the letters and calls went out to the families of those who owed smaller amounts and it has become apparent that it is making an impact without embarrassing the child. Throughout the District, there may only be one or two children that were impacted at the $50.00 level. As the payments were received at that level, the letters went out to a lower amount and currently the letters and phone calls are sent to those who owe an amount greater than $15.00.

Ms. Jimenez said that she was surprised that the debt amount went up because it means that $3,000 of free additional lunches were served since the last report. She asked if the District was trying to facilitate families that need assistance and was encouraging them to apply for assistance and wanted to know how many families were converted into the free and reduced lunch program. She said that it would be important to know so that the District is not just going out of pocket but making some type of attempt to infill from wherever possible. While it is good to know that reasonable and moderately successful efforts are being made to collect the outstanding amount, which is an improvement, but it will be a no win situation if the pattern continues. Dr. Corda said that the number of families on the Free and Reduced Lunch program since the outreach has started has increased by 700 families. Mr. Gianetti explained that there is a file date deadline of October 1st for the program and any additions after that date can be added, but the District will not receive reimbursement from the State for Title One for those families. However, it does help the program. Ms. Jimenez asked how the additional families help the program. Mr. Gianetti said that there is a payment of $2.56 per lunch to the District from the State of Connecticut even if they were not on the rolls at the deadline. Ms. Jimenez then wished to know what the District receives for families that are enrolled by the deadline. Dr. Cooke explained that the District receives more Title One funding that is retroactive to the first day of school. The District is trying to facilitate a program over the summer to encourage families to enroll in the program early. The school staff is working to assist the families in filling out the applications along with other efforts, including hiring some coverage workers for the summer to go to churches, community centers, and other places. Dr. Corda said that if a family is in arrears, the child no longer received the same lunch. It is still a nutritious lunch, but does not cost as much. He said that the District did everything possible before this step was taken to avoid putting students in this type of category.

Mr. Chiaramonte asked about the vacation. Mr. Gianetti explained that when the District is on vacation, there are no checks received. Ms. Jimenez asked why the amount went up. Mr. Giannitti said that the reason was because people that were paying stopped paying. He added that rather than refusing a student food, those students are given a cheese sandwich. This has had a major impact. Prior to this, repeated calls could made to the family but this had no result. Some of the families have been following this pattern for some time

Mr. Chiaramonte asked about Ponus and said that the program there was giving the students hot lunches. Mr. Gianetti said that the numbers at Ponus were going down. The program wasn’t rolled out at the middle school full bore. Currently, the program is operating in the secondary schools. It was felt that the best way to do this was to ease the District’s way into the new program and gauge the results. Now that it is clear that the program works, the program will be expanded. At the initial stage, it would be too difficult to handle all the cases at one time. Now, the numbers have been reduced and it is easier to manage. He said that he was aware that the figure had risen, but fully expected the number to drop. Mr. Gianetti said that he wished he had a firm solution, but short of denying a student food, this approach appears to be working.

Ms. Jimenez asked if there was a way to notify the families before a student accrues $15.00 in charges. Mr. Gianetti said that it could be done. Ms. Jimenez said that she would like the notification to go out as soon as the student hits a zero balance. Mr. Chiaramonte suggested that as soon as a student’s account approached the final ten dollars, a notice be sent to the family. Mr. Gianetti agreed but pointed out that when the process started some of the balances were approaching $100. Now the outstanding balances were in the $15.00 range. The goal is to get the account to one week in arrears.

Mr. Chiaramonte asked why this was not simply being automated. Mr. Gianetti said that it would be possible to lower it to $10.00, which is about two weeks worth of means.

Ms. Jimenez said that there were a few schools that did not have this problem. The outstanding balances were simple a few hundred dollars. She then asked what they were doing right. Dr. Cook said that he asked that question to the school administrations. One of the elementary schools said that they try to make contact with the parents as much as possible and when they see a child approaching a negative balance, the principal has the social worker call the family.

At one of the middle schools that is doing well, the staffing in the cafeteria appears to be handling the situation. The manager has been doing this for years. Ms. Jimenez asked if this could be made to work across the District. She added that this program needs to be done in the secondary level. At the elementary level, it might be worth have the social worker or some other intervention worker to assist with this. If this is not done, the District will be in a poor position. Positive steps have been taken and the District has come a long way and this is not to mitigate what has been done isn’t helpful, but from the policy perspective, the Committee should think about how to handle this. There are ways for families to approach and receive assistance. Then the District will not just be writing the check for them. These are hard times and this doesn’t need to be public, whether it is done by colored lunch tickets or student passes. She suggested that this be brought back next time with a better report. She said it was discouraging to see the number increase and the District will have to say no at some point. She wondered how much of this was at the high school level.

Mr. Giannitti said that there was quite a jump between middle school and high school. Ms. Jimenez said that a student goes through the lunch line and has to face the cashier at the end of the line. She added that she isn’t allowed to just walk out of the grocery store, either.

Mr. Chiaramonte pointed out that the hard part might be the student being sent to school hungry with no money. Ms. Jimenez said that schools do have some resources to deal with that and the social workers are clued in most of the time. That’s part of why they are there. There are some mechanisms to support that child in another way, such as the Free and Reduced Lunch. However, if there are no consequences, the family could decided that it doesn’t matter and the letter is no big deal. Ms. Jimenez said that she felt society was increasingly turning the tough cheek more and more.

Dr. Corda pointed out that the rock and the hard place that the District between simply was the fact that it was the parent’s responsibility to see that the child brings lunch or has lunch money. Unfortunately, the District has to deal with saying to a student “I’m sorry. We’re not going to give you lunch.” That is what the District is trying to avoid. Ms. Jimenez said that perhaps the District could try a three strikes, you’re out approach. That message needs to get home and the child is the messenger, which is why she felt that it should start at the secondary level.

Ms. Bishop-Pullan said that this would be on the agenda next time in order to see where the District is. She asked Mr. Gianetti to check to make sure procedures are being followed consistently and tighten up where possible. Ms. Jimenez said that she thought the Committee and the District should be getting some suggestions from the potential vendors on how this would be handled. While the staff are employed by the District, the vendor is managing the program. Mr. Gianetti said that the vendors can make suggestions but they are not allowed to participate in any collection of fees from the students. He said that he believed that there were resources, but reminded everyone that this was a nationwide problem. He said that he agreed with Ms. Jimenez that limiting the student to three free lunches and no more for middle school and high school levels would have a gigantic impact on the issue. It would send a strong message.

Mr. Chiaramonte asked what the students spend a week on lunch. Mr. Gianetti said that it depends on the level and suggested $10.00. The High School lunches cost $3.00, the middle school is $2.50 and the elementary school is $2.20. He said that when the students cash out, the cashier can tell them exactly how much is left in the account and that they frequently do. He said that he was not sure if all the staff was as aggressive or as well versed as Marge is. However, he could say that it would definitely make a difference. Mr. Chiaramonte said that if it were automated, it would help. Ms. Jimenez said that they don’t want to let the students run out of money and get into debt, but they should be warned before they hit $10.00. Ms. Jimenez said that they had heard from parents at one of the meetings that they did not know their children were out of money. Dr. Corda said that the District has become very aggressive about making sure that the parents know. But he added that he was hearing that the process of notification will be started when there is a balance of $10.00 and also that there will be notification to the student at the point of service when the balance become negative and the third notification will result in no food being served. Ms. Jimenez added that the letter should include an application for Free and Reduced Lunch. She said that the Board was also trying to encourage support where possible. Dr. Corda said that this has been part of the communication as well. She said that there could be language in the letter that would indicate that the District understood that there were families under duress.

BMHS BAND – FINANCING AND FUNDING

Dr. Cook said that he had been requested to keep Brien McMahon High School Band Financing and Funding on the agenda. He then distributed copies of the Q&A that were sent out to the Committee members.

Mr. Iannaccone said that he did not think that there was a policy that could force the parents to pay for the band fees if the program is part of the curriculum. He said he did not think the Board could have a policy that forced the parents to pay or not graduate. Ms. Jimenez asked if the band trips were indeed part of the curriculum.

Dr. Corda said that he thought that this program would also follow the same lines as the lunch program, which basically means that if a parent is not able to pay for the program then the student will not be able to participate in the program. The downside of this will be the impact on the band. The District is trying to avoid this and keep the band functioning and operational and continuing to do well to enhance the program. Unfortunately, there is no leverage. Mr. Chiaramonte said that it may mean having the band change from a Class 4 to a Class 2 until things can change.

Ms. Jimenez said that she needed clarification on that and wanted to know what was meant when Dr. Corda said that the students who couldn’t pay wouldn’t be able to participate in the band. Dr. Corda said that if the opportunity to participate in various competitions is contingent upon raising the dollars necessary to do that, and this comes because the obligations are no longer being met, then he said that there would be no other way to address the problem other than not competing at that level of competition.

Ms. Jimenez said that there were two issues. One was band practice and performance at the school. The other was marching band. She then said that she thought that marching band was the participation portion in the class. Mr. Chiaramonte said that he did not believe that competitions were part of the curriculum. Ms. Jimenez said that she thought that was one of the things that they were getting clarification on. Dr. Corda said that this was true, but it was accompanied by the understanding that there is a cost associated with it. When a student enrolls in the band, they need to be told this. Dr. Corda then said that he had been considering how to structure this and organize it. If a student enrolled in band, would the administration have to say to the parents, “You have to write a check.” in order to enroll in band. The way that the District has been able to avoid requiring a check from the families of the students is with the understanding that students are meeting the obligations and are participating in the fund raisers that are necessary. If this stops, then the District must consider different methods to insure that the financial support is there.

Ms. Bishop-Pullan said that there was some transportation money that is provided from the District and she thought above and beyond that, the band students should be figuring out what is affordable and what is not affordable for the program.

Dr. Corda said that last year, the band found themselves in a financial hole and the District stepped in. However, it is clear that the District can not do this again. If the funding is not available up front, then the band can’t go on the trip.

Ms. Jimenez said that if the Board felt that this was an important part of the curriculum, the Board needed to acknowledge that they would have to contribute. Dr. Corda then asked to what extend the District was in the position to go beyond what they are currently contributing because what the District does for one school; it must do for the other. He pointed out that at one school, which has been at it longer, there may be a different culture, which doesn’t have this problem, while this may not be true at the other. Ms. Jimenez said that the momentum is greater at one school than the other. Mr. Iannaccone said that there may be some regular competitions during the year that the District could contribute to, but things like the trip to Florida would be special.

Ms. Jimenez asked if anyone knew how far the $15,000 per school went. Mr. Patrini, the president of the Norwalk High Marching Band, said that the $15,000 stipend from NBI that they receive covers most of the cost of the buses during competition. That has nothing to do with the trip to Florida this year. That trip was all above and beyond the normal competition. There are five school buses that take the band students to various locations to compete. The money covers those buses. However, there are other expenses such as two Ryder trucks for transporting musical equipment for each competition or football game. The funding for the trucks does not come out of any of the City funding or the NBI funding. The parent fund those expenses.

Mr. Patrini said that Mr. Iannaccone had brought up the stipends. For the competition, things seems to be on the right track. He said at this point, the band was not asking for anything but simply present to find out what difficulties Brien McMahon is having. The trips to Florida aside because the groups have to be self sufficient to pay for them, but the competition is a major component to the curriculum, particularly in the fall.

One problem is the uniforms. Norwalk High does not have a problem with uniform, but they also don’t last forever. Everything that NBI purchases or raises, once the item is turned over to the band, it belongs to the City. He suggested that uniforms might be something to be aware of because they need to be purchased every six or seven years. These are a necessity. He said that he was present to help enlighten the Committee about what goes on behind the scenes. Dr. Corda said that the District may have paid for the uniforms. Mr. Patrini said that he had heard somewhere that the District may have paid for the uniforms, but that the band was supposed to pay the District back. Dr. Corda said that he did not believe this was so with the uniforms because the District knew the band did not have the resources. He said that he believed that the District stepped in to pay the bus costs with the understanding that the money would be paid back.

Ms. Bishop-Pullan asked that this be looked into since this was mentioned at the last meeting. She said that her present feeling was that the District should be paying for the uniforms, instruments and she knew that a few years ago, there had been a meeting about paying for the transportation. Mr. Patrini said that quite a few uniforms had to be patched. Ms. Jimenez commented that the students had to wear something dark underneath because so the holes didn’t show. She said that the Committee really needed to have that information in order to know who was paying for what and a course description. She added that having a understanding that marching band was a course versus band instruction would be important. Ms. Bishop-Pullan thanked Mr. Parini for attending.

2008-2009 OPERATING BUDGET

Dr. Cook stated that this report was started about six or more months ago to monitor the current status of the budget on a monthly basis. It has been broken down into the eight major categories. The 100 series remains approximately even with no large surpluses or deficit.

Last month, the 200 account was bordering on a $200,000 deficit because of a negative shift in paid claim activities. In the last month, more claims have been filed. In reviewing the claim through March 9th, the Board has continued to experience a negative shift in paid claim activities. March 2009 was the highest individual claim month this year and this is reflected in five new major claims were filed and a new large claim expense of over $526,000. Everything is driven by claims. This could result in a deficit of between $450,000 and $500,000 because the April figures have not been finalized.

Dr. Corda said that the insurance advisory group has indicated that there should be a margin built in for excessive claims. However, the Board of Estimate and Claims have been adamant about not budgeting with a margin. Mr. Iannaccone asked if there was any specific reason why the claims had increase. Dr. Cook said that people were going to the doctor and being referred to the hospital. This was all contractual.

Dr. Corda repeated that there had been five major claims filed. Dr. Cook said that there was a stop loss on the large claims of $150,000, but the District is required to pay that amount on each of those claims. This comes to $550,000 that the District had to pay out. Dr. Corda reminded everyone that open heart surgery without complications cost $30,000. Dr. Cook said that ten years ago, he had been admitted to Mass General and he tracked his accounts. Including the helicopter ride, it came to $135,000 back then.

Ms. Jimenez reminded everyone that the District had lost its reserve and that the agreement was that if the District went over, the District was going to look to the City for assistance. Dr. Corda pointed out that the first year that he was in Norwalk, the agreement was in writing during the Esposito administration. In fact, the District was $20,000 over the budget because of health insurance. The District had to go to the Board of Estimate and remind them of that. Every year when the District goes through the budget process, the District reminds them of this fact. There is no choice about it because there is no margin anymore. A memo will be sent to Mr. Hamilton in Finance and the Board of Estimate to advise them of the situation.

Mr. Chiaramonte asked what the City does when this situatio Category: Committee Minutes