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Regular Agenda Item 3. C.
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| Regular BOS Meeting |
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| Information |
| Request/Subject |
| Approve modifications to the funding of the Young Public Library for FY 2020. |
| Background Information |
The Library District distributes funding to the eight affiliate libraries for the provision of Library Services to the communities and residents in Gila County. The Library Service Agreement (LSA) specifically outlines the allowable uses of funding:
- The Board shall use the District funds to insure the payments of salaries, routine maintenance and upkeep and other necessary expenses of the Board library, pursuant to ARS 48 - 3901 et seq. Funds will not be used for capital improvement projects or major building repairs without prior approval from the Board of Directors of the Gila County Library District. The Board shall submit the annual FY__ Library budget to the District at the time of submission of this agreement. The Library will provide a year-to-date expenditure report to the District prior to the second payment by the District to the Board. An annual written accounting shall be made to the District describing the manner and use of funds are required by the District within the first quarter of the following fiscal year.
Because the Board receives public monies from the District, the Board shall conduct all business meetings in accordance with Arizona Open Meeting Laws, A.R.S. 38-431. While following the process outlined in the LSA during this fiscal year, the Library Board provided a document that outlined their expenses for FY 19, at approximately the time that we were distributing the first installment of funds for FY2020. In reviewing the documentation provided by the Pleasant Valley Community Library Board (PVCLB), operating funds in the amount of $31,069.21 were improperly used for major building repair/maintenance in violation of the terms and conditions of the LSA. The actual budgeted amount under Maintenance and Repairs – line item Building, was $1,000.00, which would be an allowable expense under the terms of the LSA, for a net disallowable amount of $30,069.21.
The Library Board has ample reserves that could have been used for the building repair/remodel without using the operating budget for FY2019 and without limiting the services to the residents. At the January 2020 Library Board meeting the December 2019 Treasurer’s Report shows that the Library Board had a total of $43,099.77 in available funds, before the November 2019 distribution of funds in the amount of $29,375.00 from the Library District for the first half funding for 2020.
The Library District was attempting to meet with the PVCLB beginning in August 2019 to present other issues related to community concerns regarding following of the open meeting law as required in the Library Service Agreement. The Library District made a number of attempts to coordinate schedules with the Library Board. The Library District staff had prior commitments on the regular meeting day of the third Thursday each month in August and September. Library District staff requested the Library Board President notify District staff of the October meeting date to attempt to meet with the Board at that time. The Library District did not receive the meeting notices for the PVCLB meetings for October, November or December. (The December meeting was canceled, but the Library District did not receive a cancellation notice).
Library District staff were present at the PVC Library Board Meeting in January 2020. Prior to the meeting, Library District staff had related some additional concerns to the Library Board, including the misuse of funds, review of the Open Meeting Law provisions, public access and retention schedules of documents, as well as requesting the copies of the annual financial report, Arizona Corporation Commission (ACC) filing, Internal Revenue Service (IRS) Letter of Determination for non-profits, and any records related to the most recent community election process for selecting Library Board Members as outlined in the Library Board by-laws. At the January 16, 2020 Board meeting, the Library Board provided copies of the ACC filings and the IRS Letter of Determination for non-profits. The Library District discussed the need for the Library Board to retain an accountant to provide an annual financial report. The Library Board did not provide records related community elections for selecting Board Members, or records related to the current board members terms of office and reported that they could not find any records related to those two issues. At that meeting it was discussed that since operating funds were used for capital improvement in violation of the Library Service Agreement, that Library District staff would have to create a plan for recovering those funds, in coordination with other County Offices and Departments. The plan at that time was to review Library District staff recommendations with the Library Board at its February meeting, and bring a plan to the Library District Board of Directors.
The February regular PVCLB meeting was cancelled. The March meeting was held on a Wednesday, rather than the normal Thursday. Library District staff were in attendance at the Wednesday meeting; however, a Board member felt ill and had to leave, and the meeting was cancelled due to lack of a quorum. The following Monday the Library Board posted a meeting notice for Tuesday, March 24, 2020. Since there was a conflict with the Board of Supervisors meeting, Library District staff were not in attendance at that meeting.
Beginning in 2001, the County/Library District required that the community Library Boards become recognized non-profit corporations if they were not already, and that their by-laws include provisions for public election/selection of Library Board members since they were using public funds and delivering a public service to their respective communities. The Library District has no records related to recent community election/selection of Board members, nor can the Library Board provide any records related to community election/selection processes or results. Since there are ongoing issues related to financial information and following of the bylaws and the open meeting law, there will be additional requirements added to the fiscal year 2021 LSA for the Pleasant Valley Community Library Board. Since one of those requirements will be to provide records that all Board members have been elected/selected by the community, and since the PVCLB at this time is planning on holding a May 2020 election for three members, and a November 2020 election for the remaining two members, it is possible that the PVCLB will not be able to contract with the Library District until after the November 2020 election/selection process. |
| Evaluation |
The PVCLB improperly used $30,069.21 of operating funds on capital improvements to the Young Library Building. The second half funding for FY2020 is $29,375.00. This presents a difference of $694.21 which could be deducted from the first half funding for FY2021.
Since the next LSA would begin in July 2020, and since there is ongoing concern regarding compliance with the LSA, following of the by-laws, understanding of the Open Meeting Law, and providing annual financial statements, it is the recommendation of Library District staff that the second half funding for FY2020 be withheld to account for the misuse of operating funds in FY2019. According to the Account Summary provided by the PVCLB, there are available funds to operate the library under current levels for approximately twelve months. This would recover the operating funds spent in error for FY2019 and satisfy the obligations of the PVCLB with regard to using operating funds for the operations and not for capital improvements without prior approval by the Library District Board of Directors. |
| Conclusion |
| Because the Library District became aware of the misuse of FY2019 operating funds in November 2019, the Library District has chosen to delay the sharing of the State Grants in Aid funds for FY2020 until the issue related to FY2019 misuse of funds is resolved. Given the number of issues and unknowns related to future contracts with the Pleasant Valley Community Library Board, and since funds were misused in FY 2019 and need to be recovered in the most efficient manner possible, and since the Library Board has ample funds to operate the Young Public Library until the next contract year, recovering $29,375 at one time, with the remainder of $694.21 recovered in FY2021 would resolve the issue related to misused funds. |
| Recommendation |
| Staff recommends the approval of modifications to the distribution of funding for FY 2020 for the Young Public Library to suspend the second half funding in the amount of $29,375.00 to recover the misused operating funds for a capital building project in FY2019 in the amount of $30,069.21, with the remainder of $694.21 to be withheld from the first half funding distribution for FY2021. |
| Suggested Motion |
| Information/Discussion/Action to approve modifications to the distribution of funding for FY 2020 for the Young Public Library to suspend the second half funding in the amount of $29,375.00 because of the misuse of operating funds for a capital building project in FY2019 in the amount of $30,069.21 with the remainder of $694.21 to be withheld from the first half funding distribution for FY2021. (Jacque Sanders) (Motion to adjourn as the Gila County Library District Board of Directors, and reconvene as the Gila County Board of Supervisors.) |
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