budget review for fiscal recovery plan

8334 Parus Way, Granite Bay, California 95746

Office (916) 652-7165 Fax (916) 652-7168 [email protected]

BUDGET REVIEW FOR FISCAL RECOVERY PLAN

Calaveras Unified School District September 2, 2014

BACKGROUND The Calaveras County Office of Education (CCOE) requires a Fiscal Recovery Plan from the Calaveras Unified School District (District) in accordance with the provisions of EC § 42127. In a letter to the District dated August 8, 2014, the Calaveras County Superintendent of Schools (County Superintendent) made the finding that the District may not be able to meet its financial obligations beyond the budget year. Given this circumstance, the County Superintendent provided conditional approval to the District’s 2014-15 Adopted Budget. The conditions which must be met in order for the County Superintendent to approve the District’s budget are as follows:

1. The Calaveras Unified School District Board must develop and approve a fiscal recovery plan that includes specific timelines and Board actions the District will implement for restoring minimum required reserve levels for 2015-16 and 2016-17.

2. The District will provide the fiscal recovery plan, any current year budget revisions, a revised multi-year projection, and updated cash flow statement to the County Superintendent on or before September 8, 2014.

The County Office of Education has warned that it is imperative that the District carefully monitor and evaluate its revenues and expenditures to attain full recovery; and that it is likewise crucial for the Governing Board to follow through on the District’s plans and commitments to achieve fiscal solvency. The substantive actions to implement the necessary reductions will be the basis for the County Office’s evaluation of the need to invoke the provisions of Education Code Section 42127.6 and appoint a fiscal advisor to the District, along with other interventions. If the District is unable to show, by timely board actions, that it will be able to meet its financial obligations for the current or two subsequent fiscal years, the county superintendent will disapprove the annual budget and shall notify the governing board and the SPI in writing of that determination and the reasons for the determination. The notification shall include the assumptions used and shall be available to the public. The county superintendent shall report to the SPI on the financial condition of the district and proposed remedial actions. The county superintendent shall adhere to E.C. 42127.6 in assisting the school district by doing at least one of the following (This is a paraphrased narrative of the code section. Please refer to E.C. 42127.6 for a complete listing):

(A) Assign a fiscal expert, paid for by the county superintendent, to advise the district on its financial problems.

Calaveras USD Budget Review of 15

8334 Parus Way, Granite Bay, California 95746 Office (916) 652-7165 Fax (916) 652-7168 [email protected]

(B) Conduct a study of the financial and budgetary conditions of the district. If expertise is needed for the study, the county office of education may hire staff with the approval of the SPI. The school district shall pay 75 percent and the county office of education shall pay 25 percent of those staff costs. County offices of education are eligible to request their 25 percent costs through a FCMAT reimbursement with the approval of the CDE and DOF.

History of communication from the CCOE There has been a history of communications from the Calaveras COE over the last couple of years indicating concern over the district's assumptions and advising caution and conservatism in budgeting. Specifically, guidance and oversight communications this year include the following letters from Claudia Davis, Associate Superintendent Business Services or Kathy Northington, Superintendent of Schools.

• 2013-14 First Interim Letter, January 15, 2014 – CCOE commented on declining enrollment and discussed the difficult fiscal situation in which the district continues to find itself. Comments included, “given that the District will not be able to meet its reserve requirement at the end of 2014-15 or 2015-16, the District must make and adhere to detailed plans to address these issues, as any delay in achieving reductions will only further jeopardize the financial stability of the District.” The CCOE asked for a detailed plan to address the deficit spending by Second Interim.

• 2013-14 Second Interim Letter, April 14, 2014 – CCOE concurred with the qualified certification approved by the district board. The COE noted concerns regarding declining enrollment; inability of district to demonstrate meeting the 3% economic reserve requirement; and the expectation that the district’s 2014-15 LCAP and adopted budget would contain specifics about how the district would meet its future obligations. This letter noted the requirement for the district to file a “third interim” report, including a “detailed narrative of the district’s efforts to return to a positive certification” before June 1, 2014.

• 2013-14 Annual EC §1240 Update, June 30, 2014 – CCOE expressed concerns that had been communicated to the district throughout the year. “As we move into the 2014-15 school year, it is evident that the District’s financial position is not improving as continued deficit spending is planned and will erode available reserves. As highlighted below, the District has shown a pattern of deficit spending over the past three years. Our office’s analysis of the District’s Projected Budget for 2014-15 illustrates the need to make on-going expenditure reductions of more than $2.4 million in order to achieve reserve levels of 3% by the end 2016-17.”

In addition, comments about the Cafeteria program included, “The food service operations of the district also show a trend of deficit spending. While fund balance exists to sustain this in the near term, this pattern cannot be sustained. Should the Cafeteria fund fully exhaust its available reserves, this will add yet another financial burden on the general fund.” And, CCOE commented about the Child Development Fund, that continued and increasing contributions have been required from the general fund to the child development fund, estimated in 2013-14 at $182,000. The letter concludes, “It is critical that the district develop a comprehensive multi-year plan for reductions, fully implements those reductions, and closely monitors its budget.”

• 2014-15 Adopted Budget Letter, August 8, 2014 – the CCOE conditionally approved the district’s 2014-15 budget with the following comments:

“The District’s budget reflects reserve balances of 3.74% at the end of 2014-15, 1.72% for 2015-16 and 1.43% for 2016-17 which indicates the District may not be able to meet its financial obligations beyond the budget year. Given this circumstance, the County Superintendent will provide conditional approval to the District’s 2014-15 Budget.”



In addition to outlining the conditions for budget approval identified on page 1, the letter stated that “we are seriously concerned about the solvency of the District and its ability to meet its multi-year financial commitments. In addition to our usual support services, we have provided a fiscal expert, Ms. Terri Ryland of Ryland School Business Consulting, to assist the District in developing the necessary fiscal recovery plan.” “It is imperative that Calaveras Unified School District carefully monitors and evaluates its revenues and expenditures to attain full recovery. It is likewise crucial for the Governing Board to follow through on the District’s plans and commitments to achieve fiscal solvency. We understand the District will adopt a fiscal recovery plan in the coming month however the substantive actions to implement the necessary reductions will be the basis for our office’s evaluation of the need to invoke the provisions of Education Code Section 42127.6 and appoint a fiscal advisor to the District.”

• 2013-14 AB1200 Disclosure Letter regarding CUEA, May 1, 2014 – the CCOE noted that based on

the information available at the time, an additional $436,000 in budget reductions would be needed to meet the reserve requirements and the salary agreement, and that deficit spending would continue. Per the letter, “our office believes that this agreement exacerbates what is already a financially tenuous situation for the District, and strongly recommends that the District does not make any further increases to on-going costs until some of the proposed reductions can be realized. Additionally, the District must prepare for additional reductions in order to eliminate the on-going operational deficit it currently faces.”

Enrollment History In school districts with solid fiscal health, enrollment is either increasing or stable for long periods of time. Districts with unstable or declining enrollment are much more likely to have fiscal instability. The inability to accurately predict enrollment trends or to react to enrollment decline will lead to increased levels of deficit spending. Enrollment projections should be updated at least semiannually, once in the fall or winter based on the most recent CBEDS information, then again after the students show up, or not, the next school year. Accurate enrollment projections should drive specific staffing assumptions, including layoffs or staffing reductions if needed. Given the District's continuing decline in enrollment, staffing can be reduced while still continuing reasonable class sizes. However, not making reductions in staffing will decrease class sizes to an unsustainable level, as has happened in some schools in Calaveras. The purpose of the declining enrollment funding guarantee (districts are paid on either the current year ADA or the prior year, whichever is higher) is to allow districts to adjust their spending patterns, including reducing staffing.



The above chart, a summary of prior and projected enrollment for the district, indicates ten years of declining enrollment. But, the good news is that the rate of decline appears to be slowing down, the curve flattening. This is a glimmer of hope, but of course, until the decline stops, it will be projected to continue. Over the last four years, enrollment has declined 9%; total district expenditures have gone from $26.3M to $28.0M (estimated for 2014), or 6.5% increase. Declining Enrollment Paradox The chart below illustrates the struggles that districts have with declining enrollment. The left hand side of the chart provides an example of a district with an ADA increase of 25, requiring the hiring of one teacher and the purchasing of a few supplies. The district gains $125,000 in additional revenue (funded at $5,000 per ADA) and has to spend an additional $65,000 on staff and supplies. This results in a net gain for this district of $60,000 for a modest ADA increase of 25. Conversely, when this sample district loses 25 ADA, the year following the decline, the district loses $125,000 in revenue limit funding, and if it is able to reduce staffing, would save the costs of the teacher and supplies. This decline of 25 ADA results in this district incurring additional deficit spending of $60,000 until other costs can be reduced and be brought into line.



ADA History Projecting ADA in the district is critical. Given the history over the last five or six years, and looking at the projected enrollments for the next three years, a steady decline is seen. The average annual decrease over the ten year period is (1.7%), while the total decrease is more than (15%). The multi-year projections (MYP) submitted with the district's Adopted Budget indicated projected ADA of 2,910, funded ADA of 2,990 (per Form A, and 3,010 per LCFF calculations.



Budget Accuracy An area of concern for CCOE or anyone reviewing a district's budget and financial situation is the reliance that can be placed on the numbers at any point in time. It appears the district needs to either spend additional time in developing a budget initially, or revisit the budget assumptions more regularly throughout the year. Two examples quickly emerge that create concern with reviewers. When the district submitted its annual Adopted Budget for 2013-14 in June 2013, Estimated Actual projections of where the district would end the prior year were included. Those Estimated Actuals indicated surplus spending for the total general fund of $247,000 as of June 2013. However, once the books were closed and all closing entries were booked by September 2013, the actual change for the general fund was a deficit of ($1,537,000), a difference of $1,784,000 – the wrong way. For fiscal year 2012, approximately 90% of the projected $4.5M deficit disappeared upon closing the books when the actual deficit for the total general fund was only ($450,000) instead of ($4,500,000).

Another way of saying the same thing is to focus on the size of the budget savings. Because a budget is the legal maximum that CAN be spent, expenditures should be something less, generating budget savings on the natural. However, with careful analysis and an integrated system of position control (which the district does not have), budget savings or unexpected fallout at the end of the year should be kept to no more than 5% of expenditures, or approximately $1,000,000. (A better goal would be in the 2-3% range.) The chart below shows the budget savings as of closing the books for the last several years – and the unexpected surprise has typically been greater than $1M. The current year numbers are not yet available. The first order of business in order to be more accurate in budgeting is to implement a position control system.



Annual Audit Findings Each year, independent auditors are required to perform an audit of the books of the district. This is an examination, after the fact, on the financial activity of the prior year and an opinion is expressed as to whether or not the financial statements present fairly the results of operations. Auditors do not examine or comment on budgeting practices and they do not represent the accuracy of the budget going forward. They, also, in conjunction with their annual audit, review the internal controls of the district and test for materially misstated transactions. For the 2012 audit, the District's annual financial report contained no findings or recommendations. This is troubling in all but the most well run and fiscally sound districts; in this case, it creates questions as to the thoroughness or completeness of the audit process and report. In addition, the 2012 audit results were restated in 2013 when a new audit firm took over the independent audit process. The new audit firm found several “significant” deficiencies that were not “material” to the overall financial statements, but the comments provided opportunities for improvements in the district’s operations. Comments were made in the areas of ASB accounting, time studies for federal programs and facilities inspection tools. FCMAT Fiscal Health Risk Analysis One of the tools utilized in conducting a financial and budgetary review of a district is the FCMAT Health Risk Analysis. This document focuses on the Key Fiscal Indicators of fiscal distress as identified by the Fiscal Crisis Management Assistance Team. A sample document is attached to this report. The specific areas identified by Terri Ryland, School Business Consulting, as unacceptable and as threats to the district's fiscal health follow.

1. Deficit Spending - the district continues to deficit spend in the current year and is projected to deficit spend in the two subsequent fiscal years (as adjusted). The continued use of fund balance to balance the budget will extinguish the fund balance, or savings account, in 2015-16 without additional cuts being made. The district must significantly reduce expenditures to address these on-going shortfalls.

2. Fund Balance – even with the board-approved Phase I cuts, the district does not meet the minimum 3% reserve requirement in either of the next two years. There are no other special reserve funds identified to contribute toward rebuilding the reserves.



3. Reserve for Economic Uncertainty - given the above two circumstances, the district is unable to maintain its reserve for economic uncertainty in the two subsequent years based on current revenue and expenditure trends. A plan must be developed and acted upon immediately to restore the reserve in the district's multiyear financial projection.

4. Enrollment - the district's enrollment has been decreasing for five years and is projected to continue its decline. No weighted average cohort survival projection methodology is used to project enrollment into the future; the prior year's enrollment is merely rolled forward grade for grade. Staffing is not adjusted, in advance, consistent with the enrollment changes resulting in significant overstaffing at all grades.

5. Position Control - the district does not maintain an integrated position control system. Salaries and benefits are by far the biggest portion of any district's budget. A position control system that drives the budget and drives payroll assures staff that there are no unbudgeted positions and requires a budget be set up before any staff can be hired. There is a manual approval process of new hires, however, there is not a separation of creating the position (done by payroll) and paying the employee (done by payroll.) There is significant room for error or other improprieties. In addition, there are a number of positions that are not being paid according to their board-approved salary schedule. Two of those positions have been very publicly discussed as being paid significantly below their appropriate salary schedule; those two errors have been corrected. There are also at least two other positions that are being paid more than their board-approved positions dictate, either in terms of additional days or being “y-rated” when choosing a lower level position. These errors should also be corrected.

6. Budget Monitoring - a review of the budget and related budget revisions should be done more frequently and brought to the board for discussion and approval. Open discussion at the board level is important for the board and public to understand why the budget needs to be changed and what the trends are that are driving the regular changes.

7. Leadership/Stability – with the recent resignation of the district’s chief financial officer, there is instability in the business office. In addition, the board is not consistently accepting, or is reluctantly accepting, the superintendent’s recommendations, whether in terms of budget reductions, salary placements or board policy changes. Leadership instability is one of the primary FCMAT Predictors of School Agencies Needing Intervention, attached to this report.

Given the above seven findings, there is a moderate to high level of risk to the district's fiscal health from these components. CURRENT STATUS Adjustments to Budget As discussed above, significant swings in the budget after budget adoption, or as a result of closing the books, are cause for concern if they are truly unanticipated. By tracking trends and activity regularly, material budget transfers can hopefully be avoided. Once the books are officially closed, an analysis of budget variances will be prepared. The results of this analysis may be used to tighten up the budget in the current year. Budget Changes as a Result of the State Budget Plan As explained to the board, there were three primary adjustments needed as a result of the State’s adopted budget – adjust LCFF gap funding levels, reduce the level of increase to employer STRS rates and one-time Mandated Cost reimbursement funds, distributed on an ADA basis. A summary of the results of these budget revisions follows:



Revised Budget and MYP (Multi-Year Projection) Given the changes to the current year budget identified just above, and the budget reductions approved by the board on August 23, a new MYP has been developed. The resulting deficit spending for the current plus two years is projected to be extreme and the district would be projected to run out of fund balance in the next fiscal year and have a negative fund balance of $(1.7M) by June 2017. Without any additional cuts, available fund balance at 6/30/16, after a presumed 3% reserve, would be negative ($1,000,000). Going out one more year, as is required for any MYP, deficit spending in 2016-17 is projected to be ($1,500,000) and available fund balance drops to a negative ($1,700,000). The budget reductions approved by the board on August 23 included:



Revised projections reflect the adjustments noted above, the Phase I budget reductions approved by the board at the August 23rd board meeting, and noting the reductions still needed:

Revised Enrollment Projections Enrollment projections are a critical part of facilities and financial planning in a district. They are particularly critical in a declining enrollment district. The simple method of rolling each cohort forward to the next grade can be used, but it only produces accurate results in a district that is neither growing nor declining. A more accurate way of projecting enrollment is the three-year, weighted average, cohort survival method, used below. This method weights recent changes more heavily than older changes, and is relatively accurate unless the district is facing a radical change in direction - at the top or bottom of the change curve, or when a new development produces an unusual amount of new students, for instance. Using the three-year, weighted average, cohort survival method, the district is projected to continue its decline of 38-40 students per year.



Revised ADA Projections Using an average of the last several years' ADA-to-enrollment yield, ADA is also projected to decrease in the 38-40 per year range. Cash Flow for the 2014-15 Fiscal Year Month end cash balances are a critical indicator of fiscal solvency, and the news is not good here. After adjusting the budget and MYP for the areas addressed above, the resulting cash flow projections for the district reflect negative cash of $($1,500,000) in October 2014, and this negative balance grows until property taxes start to come in. Within Calaveras County, the County Treasure treats all school funds as one fund, so as long as dollars remain in another fund (the only one with cash is the building fund), the general fund will be covered. However, growing cash deficiencies due to deficit spending will only result in a fiscally insolvent district. Resulting Deficit Spending Based on the revised MYP above, without any additional cuts, deficit spending has a significant impact on the resulting fund balances.



NEXT STEPS "Cost of 1%" All options for reducing the district's spending will need to be "on the table" - no sacred cows allowed. One common unit of measure in assessing the impact of salary changes is the "cost of 1%." One percent is just a building block, a unit that can be multiplied by however many units are needed to reach the desired result. In the example below, one percent of the District salaries and benefits would be $207,700. A five percent adjustment to salaries and statutory benefits would be 5 x $207,700 or approximately $1,038,000. It should be noted that each unit should be evaluated separately as the teacher’s unit has received increases in the past few months, whereas the classified unit has not. Approaching any salary reductions from a district-as-a-whole basis would be unbalanced in its application.

If days were to be reduced from the 2014-15 or future calendars, it is assumed that one day is worth approximately one half of 1% for each unit.



Class Size Changes Another option for reducing spending is to reduce staff. For teaching staff, this means fewer teachers for the same number of students. And, since the number of students is declining, that reduction in staffing would be even greater. The analysis below indicates current class sizes, which range from 23.3:1 at K-3, to 27.5:1 grades 4-6. The average class sizes are well below the statutory limits in the education code, with the exception of independent study. The number of teachers that could be reduced to meet legal class sizes (and 35:1 for 9-12) would be 30 FTE! Those calculated savings would be 10.5 FTE K-6, 2.5 FTE 7-8, and 18 FTE at the high school (granted, this doesn’t take small schools or student demographics into consideration; it is a numerical calculation based only on numbers of students and legal class size limits). At the average salaries and benefits of the district's newest teachers, that would be savings of approximately $1,500,000.

• These teacher reductions would not necessarily have to come in the form of layoffs - there could be retirements, long-term leaves, and teachers leaving the district for other reasons. While it isn’t reasonable to expect that all of these reductions could or would be implemented, this is definitely not an option to be ignored.

Other Savings A list of other potential budget reductions has been generated,, and the board has committed to reducing another $875,000 in the current fiscal year, by January 31, in order to balance next year’s budget. Note that one additional administrative position (a VP at the high school) is slated to be added to the budget, so additional budget cuts must be identified to offset this budget addition. At this time, the list consists of the following:



Every district has their unique spending patterns and priorities. These must be examined in Calaveras and cuts must be made. They may be in the areas of staffing, compensation, purchases, attracting new students to the district, health and welfare benefits, retirement incentives, or programmatic changes. Budget reductions have been made in the past, however, it has not been enough. But, changes must be made if the district is to retain its autonomy. Negotiating compensation changes takes time. If negotiated changes cannot be implemented or agreed to prior to the January 31 CCOE-required certificated layoff deadline, then all Phase II personnel cuts will need to be made by layoff in order to capitalize on the one time per year that these changes can be made. Timeline

CUSD Resolution 2014/15-03 • Board already passed Phase I of the resolution (on 8/23) • Board will vote on the Resolution overall on Tuesday, September 2, with the changes to the

Phase II list • Phase II items are not dictated by the CCOE; the COE is assisting with calculating the amount of

cuts needed – the types of cuts and specifics are up to the district

Fiscal Recovery Plan—per district timeline • September 2…Board approves Fiscal Recovery Plan/Resolution and Revised 2014/15 Budget • September 8…Fiscal Recovery Plan and Revised 2014/15 Budget due to CCOE • September 16…Unaudited Actuals (adjust budget and recovery plan if applicable) • October 31…Preliminary Layoff Notices issued to certificated/classified staff (Phase I cuts/

reductions) • December 2014---1st Interim Report • January 2015…Phase II cuts decided and implementation process initiated (school closures,

layoffs certificated/classified staff) • January 31, 2015 – layoff notices issued • March 2015…any additional preliminary notices issued to applicable certificated/classified staff,

final notices to applicable administration • March 15, 2015…2nd Interim Report • May 14, 2015…final layoff notices to applicable certificated and classified staff



Concurrent efforts planned by the district: • CUSD Budget Committee (reps from multiple stakeholder groups---set to meet late

September/early October)---analyzing budget, looking for ideas/options to reduce expenditures and/to increase revenues

• Negotiations---seeking concessions (salary/benefit decreases, furlough days) • Overall---internal/external work to seek options to mitigate cuts/reductions (as well as

prepare/position for 1 million in cuts for 2016/17 implementation) Conclusions The Calaveras County Office of Education has been working with the district for the last two years, voicing their concerns at the salary disclosures and deficit spending, and warning that the district was ill-equipped to deal with the on-going declining enrollment and the potential of additional State budget cuts.

• Enrollment has been declining for years, along with ADA, yet the district has continued with small class sizes and not decreased staffing accordingly.

• Variances between budgets and actual results have been greater than expected, for whatever reason, resulting in a lack of confidence in the budgeted figures.

• Cash balances are dangerously low. If the district were to run out of cash (from all funds), that constitutes fiscal insolvency and is only fixed by a State bailout.

• After conducting the FCMAT Fiscal Health Review, there were seven findings indicating a moderate to high risk of fiscal distress for the district.

• District budgeting practices, especially in the area of position control, should be implemented to reduce the unexpected levels of budget savings at the end of each year.

The district has a dramatic, structural budget deficit that requires immediate attention and action by the board and staff so that local control can be maintained.

There is a lot of information in this report and there may be a number of questions. Analysis was based on data provided by district staff, by the Calaveras County Office of Education, by Ryland School Business Consulting, and various on-line CDE resources. Attachments: Multi-Year Projections FCMAT Predictors of Fiscal Crisis Going Concern Flowchart FCMAT Fiscal Health Risk Analysis

Calaveras USDRevised Budget and MYP as of "45-day" Budget Revision and Phase I Budget Reductions

8/30/2014 CUSD MYP for rvised budget 09.02.14 MYP 45-day.phase I

Unrestricted Restricted Combined Unrestricted Restricted Combined Unrestricted Restricted Combined Unrestricted Restricted Combined Revenue gap 29% gap 20.6% gap 25.5%LCFF Funding 20,401,869 638,366 21,040,235 22,554,999 0 22,554,999 1 22,890,753 0 22,890,753 1 23,493,649 0 23,493,649 Federal Revenue 32,059 974,767 1,006,826 0 743,452 743,452 0 743,452 743,452 0 743,452 743,452State Revenue 502,647 740,305 1,242,952 702,907 99,635 802,542 3 502,267 99,635 601,902 502,267 99,635 601,902Local Revenue 387,301 1,080,071 1,467,372 1,021,384 204,530 1,225,914 331,209 204,530 535,739 331,209 204,530 535,739Total Revenue 21,323,876 3,433,509 24,757,385 24,279,290 1,047,617 25,326,907 23,724,229 1,047,617 24,771,846 24,327,125 1,047,617 25,374,742

ExpendituresCertificated Salaries 9,720,061 2,254,598 11,974,659 10,863,790 1,678,090 12,541,880 10,133,109 1,712,092 11,845,201 5 10,187,649 1,767,003 11,954,652Classified Salaries 3,198,009 1,290,647 4,488,656 3,263,430 1,274,048 4,537,478 3,091,747 1,284,328 4,376,075 5 3,108,146 1,304,328 4,412,474Benefits 4,972,163 1,198,879 6,171,042 4,934,530 1,095,099 6,029,629 4 5,136,193 1,095,099 6,231,292 4,5 5,435,851 1,095,099 6,530,950 4 Books and Supplies 1,038,596 1,002,784 2,041,380 941,620 541,416 1,483,036 941,620 541,416 1,483,036 941,620 510,277 1,451,897Other Services & Oper. Expenses 1,841,532 710,826 2,552,358 1,582,288 458,937 2,041,225 1,582,288 125,713 1,708,001 1,582,288 125,713 1,708,001Capital Outlay 168,401 29,004 197,405 0 0 0 0 0 0 0 0 0Other Outgo 7xxx 730,456 10,000 740,456 702,560 10,000 712,560 702,560 10,000 712,560 702,560 10,000 712,560Transfer of Indirect 73xx (184,212) 94,538 (89,674) (94,873) 29,883 (64,990) (94,873) 29,883 (64,990) (94,873) 29,883 (64,990)Unidentified Budget (Cuts)/(Savings) 0 0 (900,000) 0 (900,000) 6 (1,600,000) 0 (1,600,000) 6 Total Expenditures 21,485,006 6,591,276 28,076,282 22,193,345 5,087,473 27,280,818 20,592,644 4,798,531 25,391,175 20,263,242 4,842,303 25,105,544

Deficit/Surplus (161,130) (3,157,767) (3,318,897) 2,085,945 (4,039,856) (1,953,911) 3,131,585 (3,750,914) (619,329) 4,063,883 (3,794,686) 269,197

Other Sources/(uses) 0 0 0 0 0 0 0 0Transfers in/(out ) (189,370) (189,370) (143,444) 0 (143,444) (143,444) 0 (143,444) (143,444) 0 (143,444)Contributions to Restricted (3,021,980) 3,021,980 0 (2,565,493) 2,565,493 0 (3,719,775) 3,719,775 0 (3,794,686) 3,794,686 0

(3,372,480) (135,787) (3,508,267) (622,992) (1,474,363) (2,097,355) (731,634) (31,139) (762,773) 125,753 0 125,753

Beginning Balance 5,418,928 1,641,289 7,060,217 2,046,448 1,505,502 3,551,950 1,423,456 31,139 1,454,595 691,822 0 691,822

Ending Balance 2,046,448 1,505,502 3,551,950 1,423,456 31,139 1,454,595 691,822 0 691,822 817,575 0 817,575

Revolving/Stores/Prepaids 0 20,000 20,000 20,000 20,000 20,000 20,000

Designated for Econ Uncertainty (3%) 847,970 847,970 822,728 822,728 766,039 766,039 757,470 757,470

Assigned/Designated 11 150,000 150,000 0 0 0 0 0 0LCFF Reserve (up to 3%) 0 0 0 0 0Restricted Designations 1,505,502 1,505,502 31,139 31,139 0 0 0 0

Unappropriated Fund Balance 1,048,479 0 1,048,479 580,728 0 580,728 (94,216) 0 (94,216) 40,106 0 40,1063.7% 2.1% -0.4% 0.2%

Reflected Phase I Budget Reductions, and adjusted additional reductions still needed

Net increase (decrease) in Fund Balance

Changes made to LCFF Funding, State Revenue and STRS costs per separate

Projection2013-14 2014-15 2016-17

Estimated Actuals 2 Budget Projection2015-16

Calaveras USDRevised Budget and MYP as of "45-day" Budget Revision and Phase I Budget Reductions

8/30/2014 CUSD MYP for rvised budget 09.02.14 MYP 45-day.phase I

Notes:1 adjusted LCFF funding for State revenue adjustments and DoF gap funding estimate changes

3 one-time mandated cost reimbursement reflected in revised 2014-15 budget at $66 per ADA4 STRS rate increases were reduced creating savings in all three years5 Board-approved budget reductions, Phase I, reflected in the 2015-16 projections6 budget reductions needed to meet State minimum 3% reserve for economic uncertainties

2 Once the books are closed, estimated actual numbers will be replaced with unaudited actual figures, and the ending fund balance from 2014 will become the beginning fund balance for 2014-15.

The following 11 conditions represent those school agency problems most commonly encountered by the Fiscal Crisis

and Management Assistance Team (FCMAT). The presence of any one condition is not necessarily an indication of a

school agency in trouble. Unavoidable short-term situations such as key administrative vacancies can result in brief and

acceptable periods of exposure to one or more of the following conditions. Exceeding acceptable limits of exposure in one

or more of the following conditions is often the blueprint for districts nearing or presently in a crisis situation.

GOING CONCERNEducation Code Section 42127.6

If at any time during the fiscal year the County Superintendent of Schools determines that the school district may be unable to meet its financial obligation in current or two subsequent fiscal years, the County Superintendent shall notify the district governing board and SPI in writing {E.C. 42127.6 (a)}.

The written notice shall include the basis for the determination, and assumptions used in this notice shall be made available to the public {E.C. 42127.6 (a)}.

The county superintendent shall do any or all of the following: E.C. 42127.6 (a)(1) (A)(B)(C)(D)(E)(F)(G). These code sections apply to a qualified certification as well.

If the county superintendent determines that the LEA will be unable to meet financial obligations: for the current or subsequent fiscal year :• COE notifies SPI and district board in writing.• In consultation with SPI & LEA, COE shall take at

least one action described in paragraphs 1 to 5.1. Develop & impose revisions to budget.2. Stay and rescind action inconsistent with revisions.3. E.C. 42127.6 (e)(3)4. E.C. 42127.6 (e)(4)5. E.C. 42127.6 (e)(5)

Approval pathDisapproval path

Within five days of the county superintendent making the determination, a school district may appeal to the SPI. The SPI shall sustain or deny any or all part of the appeal within 10 days.

LEA AppealE.C. 42127.6 (b)(d)(e)

This section does not authorize the county superintendent to abrogate any prior provision of a collective bargaining agreement {E.C. 42127.6 (g)}.

The school district shall pay 75% and the COE shall pay 25% of the administrative expenses or costs associated with improving the district’s financial management practices.

Within five days of receipt of notice that the county superintendent is proposing changes to the district’s budget, a school district may appeal to the SPI. The SPI shall deny or uphold the appeal within five days.

LEA AppealE.C. 42127.9

Fiscal Health Risk AnalysisKey Fiscal Indicators

Is the district’s fiscal health acceptable in the following areas? Yes No N/A

1. Deficit Spending o o o

• Isthedistrictavoidingdeficitspendinginthecurrentyear? o o o

• Isthedistrictavoidingdeficitspendinginthetwosubsequentfiscalyears? o o o

• Hasthedistrictcontrolleddeficitspendingoverthepasttwofiscalyears? o o o

• Istheissueofdeficitspendingaddressedbyfundbalance,ongoingrevenues,orexpenditurereductions? o o o

- Hastheboardapprovedaplantoeliminatedeficitspending?

2. Fund Balance o o o

• Isthedistrict’sfundbalanceatorconsistentlyabovetherecommendedreserveforeconomicuncertainty? o o o

• Isthefundbalancestableorincreasingduetoongoingrevenuesand/orexpenditurereductions? o o o

• Doesthefundbalanceincludeanydesignatedreservesforunfundedliabilitiesoronetimecostsabovetherecommendedreservelevel? o o o

3. Reserve for Economic Uncertainty o o o

• Isthedistrictabletomaintainitsreserveforeconomicuncertaintyinthecurrentandtwosubsequentyearsbasedoncurrentrevenueandexpendituretrends? o o o

• DoesthedistricthaveadditionalreservesinFund17,SpecialReserveforNonCapitalProjects? o o o

•Ifnot,isthereaplantorestorethereserveforeconomicuncertaintiesinthedistrict’smultiyearfinancialprojection? o o o

The Fiscal Health and Risk Analysis was developed by FCMAT as a management tool to evaluate key fiscal indicators that will assist a school district in measuring its financial solvency for the current and two subsequent fiscal years as recommended by AB 1200. The presence of any single criteria is not necessarily an indication of a district in fiscal crisis. However, districts exceeding the risk threshold of six or more “No” responses may have cause for concern and require some level of fiscal intervention. Diligent planning will enable a district to better understand its financial objectives and strategies to sustain its financial solvency. A district must continually update its budget as new information becomes available from within the district or from other funding and regulatory agencies.

The Fiscal Health and Risk Analysis includes 17 components of key fiscal indicators to measure a district’s potential risk. Any of the 17 individual components receiving a simple majority of “No” responses to the questions it contains should be rated with an overall “No” response.

4. Enrollment o o o

• Hasthedistrict’senrollmentbeenincreasingorstableformultipleyears? o o o

• Isthedistrict’senrollmentprojectionupdatedatleastsemiannually? o o o

• Arestaffingadjustmentsforcertificatedandclassifiedemployeegroupsconsistentwiththeenrollmenttrends? o o o

• Doesthedistrictanalyzeenrollmentandaveragedailyattendance(ADA)data? o o o

• DoesthedistricttrackhistoricaldatatoestablishfuturetrendsbetweenP-1andP-2forprojectionpurposes? o o o

•HasthedistrictimplementedanyattendanceprogramstoincreaseADA? o o o

•Haveapprovedcharterschoolshadlittleornoimpactonthedistrict’sstudentenrollment? o o o

•Doesthedistricthaveaboardpolicythatattemptstoreducetheeffectthattransfersoutofthedistricthaveonthedistrict’senrollment? o o o

5. Interfund Borrowing o o o

• Canthedistrictmanageitscashflowinallfundswithoutinterfundborrowing? o o o

• IsthedistrictrepayingthefundswithinthestatutoryperiodinaccordancewithEducationCodesection42603? o o o

6. Bargaining Agreements o o o

• HasthedistrictsettledthetotalcostofthebargainingagreementsatorunderCOLAduringthecurrentandpastthreeyears? o o o

• Didthedistrictconductapre-settlementanalysisidentifyinganongoingrevenuesourcetosupporttheagreement? o o o

• DidthedistrictcorrectlyidentifytherelatedcostsabovetheCOLA,(i e statutorybenefits,stepandcolumn)? o o o

• Didthedistrictaddressbudgetreductionsnecessarytosustainthetotalcompensationincreaseincludingaboard-adoptedplan? o o o

• DidthesuperintendentandCBOcertifytheagreementpriortoratification? o o o

• Isthegoverningboard’sactionconsistentwiththesuperintendent’s/CBO’scertification? o o o

• DidthedistrictsubmittothecountyofficeofeducationtheAB1200\2756fulldisclosureasrequired? o o o


7. General Fund o o o

• Isthepercentageofthedistrict’sgeneralfundunrestrictedbudgetallocatedtosalariesandbenefitsatorunderthestatewideaverage? o o o

Salary and Benefit Expense as a Percentage of Total Expense Unrestricted General Fund Total General Fund

Statewide Averages 2006-07 2007-08 2008-09 2006-07 2007-08 2008-09

Unified 90 84% 91 77% 92 16% 82 14% 82 12% 83 00%

Elementary 89 56% 90 51% 90 77% 80 94% 80 96% 82 05%

HighSchool 87 83% 89 19% 89 20% 79 61% 80 60% 81 81% Source: School Services of California

• Isthedistrictmakingsurethatonlyongoingrestricteddollarspayforpermanentstaff? o o o

• Doesthebudgetincludereductionsinexpendituresproportionatetoone-timerevenuesources,suchasparceltaxes,thatwillterminateinthecurrentortwosubsequentfiscalyears? o o o

• IfthedistrictreceivesredevelopmentrevenuethatissubjecttoAB1290andSB617,hasitmadetherequiredoffsettotherevenuelimit? o o o

8. Encroachment o o o

• IsthedistrictawareoftheContributionstoRestrictedProgramsinthecurrentyear?(Identifycost,programsandfunds) o o o

• Doesthedistricthaveareasonableplantoaddressincreasedencroachmenttrends? o o o

• DoesthedistrictmanageencroachmentfromotherfundssuchasAdult,Cafeteria,ChildDevelopment,etc ? o o o

9. Management Information Systems o o o

• Isthedistrict’sfinancialdataaccurateandtimely? o o o

• Arethecountyandstatereportsfiledinatimelymanner? o o o

• Arekeyfiscalreportsreadilyavailableandunderstandable? o o o

• Isthedistrictonthesamefinancialsystemasthecounty? o o o

• Ifthedistrictisonaseparatefinancialsystem,isthereanautomatedinterfacewiththefinancialsystemmaintainedbythecounty? o o o


10. Position Control o o o

•Doesthedistrictmaintainareliablepositioncontrolsystem? o o o

• Ispositioncontrolintegratedwithpayroll? o o o

•Doesthedistrictcontrolunauthorizedhiring? o o o

•Aretheappropriatelevelsofinternalcontrolsinplacebetweenthebusinessandpersonneldepartmentstopreventfraudulentactivity? o o o

•Doesthedistrictusepositioncontroldataforbudgetdevelopment? o o o

•Ispositioncontrolreconciledagainstthebudgetduringthefiscalyear? o o o

11. Budget Monitoring o o o

• Arebudgetrevisionscompletedinatimelymanner? o o o

• Doesthedistrictopenlydiscusstheimpactofbudgetrevisionsattheboardlevel? o o o

• Arebudgetrevisionsmadeorconfirmedbytheboardatthesametimethecollectivebargainingagreementisratified? o o o

• Hasthedistrict’slongtermdebtdecreasedfromthepriorfiscalyear? o o o

• Hasthedistrictidentifiedtherepaymentsourcesforlongtermdebtornonvoter-approveddebt,i e certificatesofparticipation,capitalleases? o o o

• Doesthedistrict’sfinancialsystemhaveahardcodedwarningregardinginsufficientfundsforrequisitionsandpurchaseorders? o o o

• Doesthedistrictencumbersalariesandbenefits? o o o

12. Retiree Health Benefits o o o

• HasthedistrictcompletedanactuarialvaluationtodeterminetheunfundedliabilityunderGASB45requirements? o o o

• Doesthedistricthaveaplanforaddressingtheretireebenefitsliabilities? o o o

• Hasthedistrictconductedare-enrollmentprocesstoidentifyeligibleretirees? o o o

13. Leadership/Stability o o o

• Doesthedistricthaveasuperintendentand/orchiefbusinessofficialthathasbeenwiththedistrictmorethantwoyears? o o o

•Doesthegoverningboardadoptclearandtimelypoliciesandsupporttheadministrationintheirimplementation? o o o


14. Charter Schools o o o

• Hasthedistrictidentifiedaspecificemployeeordepartmenttoberesponsibleforoversightofthecharter? o o o

•Hasthecharterschoolsubmittedtherequiredfinancialreports? o o o

• Hasthecharterschoolcommissionedanindependentaudit? o o o

• Doestheauditreflectfindingsthatwillnotimpactthefiscalcertificationoftheauthorizingagency? o o o

• Isthedistrictmonitoringandreportingthecurrentstatustotheboardtoensurethataninformeddecisioncanbemaderegardingthereauthorizationofthecharter? o o o

15. Audit Report o o o

• Didthedistrictreceiveanauditreportwithoutmaterialfindings? o o o

• Cantheauditfindingsbeaddressedwithoutimpactingthedistrict’sfiscalhealth? o o o

•Hastheauditreportbeencompletedandpresentedwithinthestatutorytimeline? o o o

•Areauditfindingsandrecommendationsreviewedwiththeboard? o o o

•DidtheauditreportmeetbothGAAPandGASBstandards? o o o

16. Facilities o o o

• Hasthedistrictpassedageneralobligationbond? o o o

• HasthedistrictmettheauditandreportingrequirementsofProposition39? o o o

• Isthedistrictparticipatinginthestate’sSchoolFacilitiesProgram? o o o

• Doesthedistricthavesufficientpersonneltoproperlytrackandaccountforfacility-relatedprojects? o o o

• HasthedistrictmetthereportingrequirementsoftheWilliamsAct? o o o

• Isthedistrictproperlyaccountingforthe3%RoutineRepairandMaintenanceAccountrequirementatthetimeofbudgetadoption? o o o

• Ifneeded,doesthedistricthavesurpluspropertythatmaybesoldorusedforleaserevenues? o o o

• Ifneeded,arethereotherpotentialstatutoryoptions? o o o

- JointUse:Canthedistrictenterintoajointuseagreementwithsomeentitieswithoutdeclaringthepropertysurplusandwithoutbidding?

- JointOccupancy:TheEducationCodeprovidesforajointventurethatcanauthorizeprivatedevelopmentofdistrictpropertythatwillresultinsomeeducationaluse


Rev. 5/7/07

• Doesthedistricthaveafacilitiesmasterplanthatwascompletedorupdatedinthelasttwoyears? o o o

17. General Ledger o o o

• Hasthedistrictclosedthegeneralledger(books)withinthetimeprescribedbythecountyofficeofeducation?? o o o

• Doesthedistrictfollowayear-endclosingschedule? o o o

• Havebeginningbalancesinthenewfiscalyearbeenrecordedcorrectlyforeachfundfromthepriorfiscalyear? o o o

• Doesthedistrictadjustprioryearaccrualsiftheamountsactuallyreceived(A/R)orpaid(A/P)aregreaterorlessthantheamountsaccrued? o o o

• Doesthedistrictreconcileallpayrollsuspenseaccountsatthecloseofthefiscalyear? o o o

RISK ANALYSIS 1. Total the number of component areas in which the district’s fiscal health is not acceptable (“No” responses).2. Use the key below to determine the level of risk to the district’s fiscal health. 0 – 4 5 – 9 10 – 14 15 – 17 Low Moderate High Extremely High

Total “No” Responses

budget review for fiscal recovery plan

Documents