Alum Rock Union Elementary School District Report

Fiscal Health Risk Analysis October 30, 2024 Alum Rock Union Elementary School District Michael H. Fine Chief Executive Officer October 30, 2024 German Cerda, Superintendent Alum Rock Union School District 2930 Gay Avenue San Jose, CA 95127 Dear Superintendent Cerda: In September 2024, the Alum Rock Union School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to conduct a Fiscal Health Risk Analysis of the district. The agreement stated that FCMAT would perform the following: Prepare an analysis using the 20 factors in FCMAT’s Fiscal Health Risk Analysis (FHRA) and identify the Client’s specific risk rating for fiscal insolvency. This fiscal health risk analysis was performed in accordance with California’s 2018-19 Budget Act because the district received a downgraded interim report certification from the county superintendent of schools. This final report contains the fiscal health risk analysis with the study team’s findings and recommendations. FCMAT appreciates the opportunity to assist the Alum Rock Union Elementary School District and extends thanks to all the staff for their assistance during fieldwork. Sincerely, Michael H. Fine Chief Executive Officer Michael H. Fine • Chief Executive Officer 1300 17th Street – City Centre, Bakersfield, CA 93301-4533 • Tel. 661-636-4611 • Fax 661-636-4647 www.fcmat.org Fiscal Health Risk Analysis Contents About FCMAT ...................................................................................................3 Introduction ...................................................................................................... 5 Background ...............................................................................................................5 Fiscal Health Risk Analysis Guidelines ...............................................................5 Study Team ................................................................................................................6 Fiscal Health Risk Analysis ...........................................................................7 Summary .................................................................................................................... 7 About the Analysis ...................................................................................................9 Areas of High Risk...................................................................................................10 Budget and Fiscal Status ..................................................................................................10 Material Weakness Questions .........................................................................................10 Score Breakdown by Section ...............................................................................12 Fiscal Health Risk Analysis Questions ...............................................................13 Budget and Fiscal Status ..................................................................................................13 Annual Independent Audit Report ..................................................................................13 Budget Development and Adoption ..............................................................................13 Budget Monitoring and Updates .....................................................................................14 Cash Management ..............................................................................................................15 Charter Schools ...................................................................................................................15 Collective Bargaining Agreements .................................................................................16 Contributions and Transfers .............................................................................................17 Deficit Spending (Unrestricted General Fund) ............................................................17 Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 1 Fiscal Health Risk Analysis Employee Benefits ..............................................................................................................18 Enrollment and Attendance ..............................................................................................18 Facilities .................................................................................................................................19 Fund Balance and Reserve for Economic Uncertainty ..............................................19 General Fund – Current Year .........................................................................................20 Information Systems and Data Management ..............................................................21 Internal Controls and Fraud Prevention ........................................................................21 Leadership and Stability ...................................................................................................22 Multiyear Projections .........................................................................................................23 Non-Voter-Approved Debt and Risk Management ...................................................23 Position Control ..................................................................................................................24 Special Education ...............................................................................................................24 Risk Score, 20 numbered sections only ...........................................................25 District Fiscal Solvency Risk Level, all FHRA factors ....................................25 Appendices ....................................................................................................26 Appendix A: FHRA Results Comparison ..........................................................26 Appendix B: Study Agreement ...........................................................................38 Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 2 Fiscal Health Risk Analysis About FCMAT FCMAT’s primary mission is to assist California’s local TK-14 educational agencies to identify, prevent, and resolve financial, human resources and data management challenges. FCMAT provides fiscal and data management assistance, professional development training, product development and other related school business and data services. FCMAT’s fiscal and management assistance services are used not just to help avert fiscal crisis, but to promote sound financial practices, support the training and development of chief business officials and help to create efficient organizational operations. FCMAT’s data management services are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and inform instructional program decisions. FCMAT may be requested to provide fiscal crisis or management assistance by a school district, charter school, community college, county office of education, the state superintendent of public instruction, or the Legislature. When a request or assignment is received, FCMAT assembles a study team that works closely with the LEA to define the scope of work, conduct on-site fieldwork and provide a written report with findings and recommendations to help resolve issues, overcome challenges and plan for the future. 90 80 70 60 50 40 30 20 10 0 FCMAT has continued to make adjustments in the types of support provided based on the changing dynamics of TK-14 LEAs and the implementation of major educational reforms. FCMAT also develops and provides numerous publications, software tools, workshops and professional learning opportunities to help LEAs operate more effectively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) division of FCMAT assists the California Department of Education with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS). CSIS also hosts and maintains the Ed-Data website (www.ed-data.org) and provides technical expertise to the Ed-Data partnership: the California Department of Education, EdSource and FCMAT. FCMAT was created by Assembly Bill (AB) 1200 in 1991 to assist LEAs to meet and sustain their financial obligations. AB 107 in 1997 charged FCMAT with responsibility for CSIS and its statewide data management work. AB 1115 in 1999 codified CSIS’ mission. AB 1200 is also a statewide plan for county offices of education and school districts to work together locally to improve fiscal procedures and accountability standards. AB 2756 (2004) provides specific responsibilities to FCMAT with regard to districts that have received emergency state loans. In January 2006, Senate Bill 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. On September 17, 2018 AB 1840 was signed into law. This legislation changed how fiscally insolvent districts are administered once an emergency appropriation has been made, shifting the former state-centric system to be more consistent with the principles of local control, and providing new responsibilities to FCMAT associated with the process. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 3 seidutS fo rebmuN Studies by Fiscal Year 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Fiscal Health Risk Analysis Since 1992, FCMAT has been engaged to perform more than 1,400 reviews for LEAs, including school districts, county offices of education, charter schools and community colleges. The Kern County Superintendent of Schools is the administrative agent for FCMAT. The team is led by Michael H. Fine, Chief Executive Officer, with funding derived through appropriations in the state budget and a modest fee sched- ule for charges to requesting agencies. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 4 Fiscal Health Risk Analysis Introduction Background Historically, FCMAT has not engaged directly with school districts showing distress until it has been invited to do so by the district or the county superintendent. The state’s 2018-19 Budget Act provides for FCMAT to offer more proactive and preventive services to fiscally distressed school districts by automatically engaging with a district under the following conditions: • Disapproved budget. • Negative interim report certification. • Three consecutive qualified interim report certifications. • Downgrade of an interim certification by the county superintendent. • Lack of going concern designation. Under these conditions, FCMAT will perform a fiscal health risk analysis to determine the level of risk for insolvency. FCMAT has updated its Fiscal Health Risk Analysis (FHRA) tool that weights each question based on high, moderate and low risk. The analysis will not be performed more than once in a 12-month period per district, and the engagement will be coordinated with the county superintendent and build on their oversight process and activities already in place per Assembly Bill (AB) 1200. There is no cost to the county superintendent or to the district for the analysis. This fiscal health risk analysis is being conducted because the district had the following condition, under which an analysis is required by the 2018-19 State Budget Act. • Downgrade of an interim certification by the county superintendent. The Alum Rock Union Elementary School District has a five-member board of trustees serving approximately 7,300 students in transitional kindergarten (TK) through grade 8 in one early learning center, 12 elementary schools, four TK- 8th grade schools and five middle schools. The district is located within the city of San Jose in the Greater Bay Area of California. The district serves a particularly needy student population. According to data available through the California Department of Education (CDE) for 2022-23, approximately 44.4% of the district’s students are English learners, and the district’s Unduplicated Pupil Percentage (UPP)1 is 81.76% of its student population. FCMAT performed a fiscal health risk analysis to determine the district’s level of risk for insolvency. The analysis is based on the district’s 2023-24 second interim budget report. Fiscal Health Risk Analysis Guidelines FCMAT entered into a study agreement with Alum Rock Union School District on September 10, 2024, and a FCMAT study team visited the district on August 27-29, 2024 to conduct interviews, collect data and review documents. Following fieldwork, the study team continued to review and analyze documents. This report is the result of those activities. FCMAT’s reports focus on systems and processes that may need improvement; it does not generally comment on those that may be functioning well. In writing its reports, FCMAT uses the Associated Press Stylebook and its own short, internal style guide, which emphasize plain language, capitalize relatively few terms, and strive for conciseness, clarity and simplicity. 1 This is the percentage of students who qualify for free or reduced-price meals, are English learners, or are foster youth. Each student is counted only once even if they fall into more than one of these categories. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 5 Fiscal Health Risk Analysis Study Team The team was composed of the following members: Marcus Wirowek, CFE Jeff Potter, CFE Intervention Specialist Intervention Specialist John Lotze FCMAT Technical Writer Each team member reviewed the draft report to confirm its accuracy and to achieve consensus on the analysis. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 6 Fiscal Health Risk Analysis Fiscal Health Risk Analysis For K-12 School Districts Dates of fieldwork: August 27–29, 2024 District: Alum Rock Union Elementary School District Summary FCMAT conducted this FHRA based on the Santa Clara County Superintendent of Schools’ downgrade of the district’s 2023-24 second interim report certification from positive to qualified. The county superintendent’s letter to the district stated that the district is projecting “serious deficit spending,” with its projected unrestricted ending fund balance decreasing from $39.1 million in 2023-24 to $4.7 million in 2025-26. This is a decrease of approximately $34.4 million in three years. The district has a long history of declining enrollment. At the time of FCMAT’s fieldwork, the district’s 2026-27 enrollment was projected to be approximately 47% of what it was two decades ago. In addition, enrollment in the late 1990s was significantly higher, at more than 16,000. FCMAT’s FHRAs typically review a district’s current and two subsequent fiscal years. However, because of the district’s declining enrollment, FCMAT noted the historical magnitude of the enrollment losses over many years, because this has a direct correlation to the district’s funding. The chart below shows the enrollment decline since 2003-04. Figure 1: Alum Rock Union Elementary School District Prior and Projected Enrollment 14,000 12,000 10,000 8,000 6,000 4,000 2,000 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 7- 8- 9- 0- 1- 2- 3- 4- 5- 6- 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 The cost to maintain partially-occupied school buildings is placing a significant strain on the district’s resources. If the district does not develop and implement long-term budget balancing solutions, it will continue to experience financial difficulties. To further show the decrease in students at each school and the district’s low use of facilities, below is a table that includes the total capacity of each school, its 2023-24 enrollment, and the resulting percentage of capacity being used. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 7 Fiscal Health Risk Analysis Table 1: Facilities Usage 2023-24 DataQuest Enrollment at Each Current School School Total Capacity School Usage A. J. Dorsa Elementary 696 286 41% Adelante Dual Language Academy 539 498 92% Adelante Dual Language Academy II 619 350 57% Alpha: Blanca Alvarado Aptitude Community Academy at Goss 582 409 70% Ben Painter Elementary 688 324 47% Cesar Chavez Early Learning Center 797 50 6% Donald J. Meyer Elementary 727 259 36% Horace Cureton Elementary 783 266 34% Joseph George Middle 899 361 40% KIPP Heartwood Academy KIPP Prize Preparatory Academy Learning in an Urban Community with High Achievement (L.U.C.H.A.) 336 232 69% Linda Vista Elementary 810 456 56% Lyndale Elementary 775 284 37% Millard McCollam Elementary 674 394 58% O. S. Hubbard Elementary 1,036 453 44% Ocala Middle 971 401 41% Renaissance Academy 1,260 365 29% Renaissance at Mathson 1,126 318 28% Russo/McEntee Academy 835 313 37% San Antonio Elementary 558 351 63% Sylvia Cassell Elementary 710 253 36% Thomas P. Ryan Elementary 558 276 49% William Sheppard Middle 1,085 463 43% Total 17,064 7362 43% In addition, the district has experienced a significant increase in its contribution to special education from its unrestricted general fund. In its 2023-24 second interim financial report, the district’s anticipated contribution to special education was 23% of its unrestricted general fund revenues and 89.39% of the total cost of the special education program. The contribution has increased over the last three fiscal years, as shown in the table below. Table 2: General Fund Contributions to Special Education Special Education Total Unrestricted General Percentage of Unrestricted Fiscal Year Contribution Fund Revenue General Fund Contributed 2021-22 $ 18,157,676 $ 114,129,273 16% 2022-23 $ 22,753,464 $ 124,616,851 18% 2023-24 $ 29,535,942 $ 124,356,555 23% As it did with enrollment, FCMAT reviewed historical information regarding the district’s unrestricted general fund contribution to special education, as well as the total cost of the special education program. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 8 Fiscal Health Risk Analysis The table below shows the increase in the contribution from the unrestricted general fund from 2016-17 through 2024- 25 (projected). The data indicates that during this time the contribution from the unrestricted general fund will have approximately doubled. In addition, the district’s contribution as a percentage of total special education costs far exceeds the statewide average in all years, For example, the statewide average contribution for 2022-23 was 56.5% while the district’s was 81.34% for that year and 89.39% for 2023-24. Table 3: General Fund Contributions to Special Education, 2016 Through 2026 Contribution from Percent Contribution Year Unrestricted General Fund Total Cost of Total Cost 2016-17 $16,082,466 $19,701,029 81.63% 2017-18 $18,058,578 $21,593,051 83.63% 2018-19 $18,560,588 $21,859,778 84.91% 2019-20 $18,414,841 $21,631,011 85.13% 2020-21 $17,450,101 $21,708,701 80.38% 2021-22 $18,157,676 $23,586,652 76.98% 2022-23 $22,753,464 $27,971,940 81.34% 2023-24 $29,535,942 $33,041,022 89.39% 2024-25 $32,067,011 $35,023,426 91.56% 2025-26 $32,483,541 $35,405,655 91.75% In 2020, FCMAT conducted an FHRA for the district because the district had three consecutive qualified interim financial report certifications. Appendix A includes an analysis detailing the changes in responses to FHRA questions from 2020 to this report. Cumulatively, the number of “no” responses decreased by 13. This suggests internal improvements in the district’s processes and procedures. Moreover, the district’s risk percentage decreased from 37.2% in 2020 to 24.7% in this report. Despite these improvements, the district faces the significant ongoing challenges of declining enrollment and increasing special education costs. Budget balancing solutions will need to be applied to restore the district to a positive certification status. Although FCMAT used the district’s 2023-24 second interim financial report as the basis for this FHRA, two events occurred after that time that affected the district’s stability: both the superintendent and the assistant superintendent of business services resigned from the district before the end of 2023-24. District Fiscal Solvency Risk Level: High About the Analysis The Fiscal Crisis and Management Assistance Team has developed the Fiscal Health Risk Analysis (FHRA) as a tool to help evaluate a school district’s fiscal health and risk of insolvency in the current and two subsequent fiscal years. The FHRA includes 20 sections, each of which contains specific questions. Each section and specific question is included based on FCMAT’s work since the inception of AB 1200; they are the common indicators of risk or potential insolvency for districts that have neared insolvency and needed assistance from outside agencies. Each section of this analysis is critical, and a lack of attention to these critical areas will eventually contribute to the deterioration of a district’s fiscal health. The analysis focuses on essential functions and processes to determine the level of risk at the time of assessment. The greater the number of “no” answers to the questions in the analysis, the greater the potential risk of insolvency or fiscal issues for the district. Not all sections in the analysis and not all questions within each section carry equal weight; some areas carry higher risk and thus count more heavily in calculating a district’s fiscal stability score. To help the district, narratives are included for responses that are marked as a “no” so the district can better understand the reason for the response and actions that may be needed to obtain a “yes” answer. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 9 Fiscal Health Risk Analysis Identifying issues early is the key to maintaining fiscal health. Diligent planning will enable a district to better understand its financial objectives and strategies to sustain a high level of fiscal efficiency and overall solvency. A district should consider completing the FHRA annually to assess its own fiscal health risk and progress over time. Areas of High Risk The following sections on this page and the next duplicate certain questions and answers given in the Fiscal Health Risk Analysis Questions later in this document and identify conditions that create significant risk of fiscal insolvency. The existence of an identified budget or fiscal status or a material weakness indicated by a “no” answer to any of these items supersedes all other scoring and will elevate the district’s overall risk level. Budget and Fiscal Status Is the district currently without the following?: Yes No Disapproved budget ✓ ☐ Negative interim report certification ✓ ☐ Three consecutive qualified interim report certifications ✓ ☐ Downgrade of an interim certification by the county superintendent ☐ ✓ Lack of going concern designation ✓ ☐ Material Weakness Questions Yes No N/A 2 5 Has the district’s budget been approved unconditionally by its county office of education in the current and two prior fiscal years? ✓ ☐ ☐ 3 4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs in accordance with Education Code Section 42142? ✓ ☐ ☐ 3 6 Has the district addressed any deficiencies the county office of education has identified in its oversight letters in the most recent and two prior fiscal years? ☐ ✓ ☐ 4 3 Does the district forecast its general fund cash flow for the current and subsequent year and update it as needed to ensure cash flow needs are known? ☐ ✓ ☐ 4 4 If the district’s cash flow forecast shows insufficient cash in its general fund to support its current and projected obligations, does the district have a reasonable plan to address its cash flow needs for the current and subsequent year? ☐ ☐ ✓ 5 2 Has the district fulfilled and does it have evidence showing fulfillment of its oversight responsibilities in accordance with Education Code Section 47604 32? ☐ ✓ ☐ 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? ✓ ☐ ☐ 6 3 Does the district accurately quantify the effects of collective bargaining agreements and include them in its budget and multiyear projections? ✓ ☐ ☐ 6 4 Did the district conduct a presettlement analysis and identify related costs or savings, if any (e g , statutory benefits, and step and column salary increase), for the current and subsequent years, and did it identify ongoing revenue sources or expenditure reductions to support the agreement? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 10 Fiscal Health Risk Analysis 7 2 If the district has deficit spending in funds other than the general fund, has it included in its multiyear projection any transfers from the unrestricted general fund to cover any projected negative fund balance? ☐ ☐ ✓ 8 3 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending to ensure fiscal solvency? ☐ ✓ ☐ 10 6 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable considerations? ✓ ☐ ☐ 11 2 Does the district have sufficient and available capital outlay and/or bond funds to cover all contracted obligations for capital facilities projects? ✓ ☐ ☐ 12 1 Is the district able to maintain the minimum reserve for economic uncertainty in the current year (including Fund 01 and Fund 17) as defined by criteria and standards? ✓ ☐ ☐ 12 2 Is the district able to maintain the minimum reserve for economic uncertainty in the two subsequent years? ☐ ✓ ☐ 12 3 If the district is not able to maintain the minimum reserve for economic uncertainty, does the district’s multiyear financial projection include a board-approved plan to restore the reserve? ☐ ✓ ☐ 19 1 Does the district account for all positions and costs? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 11 Fiscal Health Risk Analysis Score Breakdown by Section Because the score is not calculated by category, category values provided are subject to minor rounding error and are provided for information only. 1. Annual Independent Audit Report 0.0% 2. Budget Development and Adoption 0.0% 3. Budget Monitoring and Updates 1.0% 4. Cash Management 1.0% 5. Charter Schools 0.3% 6. Collective Bargaining Agreements 1.0% 7. Contributions and Transfers 1.0% 8. Deficit Spending (Unrestricted General Fund) 2.9% 9. Employee Benefits 0.6% 10. Enrollment and Attendance 1.0% 11. Facilities 0.2% 12. Fund Balance and Reserve for Economic Uncertainty 3.7% 13. General Fund - Current Year 2.7% 14. Information Systems and Data Management 0.0% 15. Internal Controls and Fraud Prevention 1.4% 16. Leadership and Stability 3.9% 17. Multiyear Projections 1.0% 18. Non-Voter-Approved Debt and Risk Management 0.0% 19. Position Control 1.0% 20. Special Education 2.3% Score 24 7% Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 12 Fiscal Health Risk Analysis Fiscal Health Risk Analysis Questions Budget and Fiscal Status Is the district currently without the following?: Yes No Disapproved budget ✓ ☐ Negative interim report certification ✓ ☐ Three consecutive qualified interim report certifications ✓ ☐ Downgrade of an interim certification by the county superintendent ☐ ✓ Lack of going concern designation ✓ ☐ 1. Annual Independent Audit Report Yes No N/A 1 1 Has the district corrected the most recent and prior two years’ audit findings without affecting its fiscal health? ✓ ☐ ☐ 1 2 Has the audit report for the most recent fiscal year been completed and presented to the board within the statutory timeline? (Extensions of the timeline granted by the State Controller’s Office should be explained ) ✓ ☐ ☐ 1 3 Were the district’s most recent and prior two audit reports free of findings of material weaknesses? ✓ ☐ ☐ 1 4 Has the district corrected all reported audit findings from the most recent and prior two audits? ✓ ☐ ☐ 2. Budget Development and Adoption Yes No N/A 2 1 Does the district develop and use written budget assumptions and multiyear projections that are reasonable, are aligned with the county office of education instructions, and have been clearly articulated? ✓ ☐ ☐ 2 2 Does the district use a budget development method other than a prior-year rollover budget, and, if so, does that method include tasks such as review of prior year estimated actuals by major object code and removal of one-time revenues and expenses? ✓ ☐ ☐ 2 3 Does the district use position control data for budget development? ✓ ☐ ☐ 2 4 Does the district calculate the Local Control Funding Formula (LCFF) revenue correctly? ✓ ☐ ☐ 2 5 Has the district’s budget been approved unconditionally by its county office of education in the current and two prior fiscal years? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 13 Fiscal Health Risk Analysis 2 6 Does the budget development process include input from staff, administrators, the governing board, the community, and the budget advisory committee (if there is one)? ✓ ☐ ☐ 2 7 Does the district budget and expend restricted funds before unrestricted funds? ✓ ☐ ☐ 2 8 Have the Local Control and Accountability Plan (LCAP) and the budget been adopted within statutory timelines established by Education Code Sections 42103 and 52062 and filed with the county superintendent of schools no later than five days after adoption or by July 1, whichever occurs first, for the current and one prior fiscal year? ✓ ☐ ☐ 2 9 Has the district refrained from including carryover funds in its adopted budget? ✓ ☐ ☐ 2 10 Other than objects in the 5700s and 7300s and appropriate abatements in accordance with the California School Accounting Manual, does the district avoid using negative or contra expenditure accounts? ✓ ☐ ☐ 2 11 Does the district have a documented policy and/or procedure for evaluating the proposed acceptance of grants and other types of restricted funds and the potential multiyear impact on the district’s unrestricted general fund? ✓ ☐ ☐ 2 12 Does the district adhere to a budget calendar that includes statutory due dates, major budget development tasks and deadlines, and the staff members/departments responsible for completing them? ✓ ☐ ☐ 3. Budget Monitoring and Updates Yes No N/A 3 1 Are actual revenues and expenses consistent with the most current budget? ✓ ☐ ☐ 3 2 Are budget revisions posted in the financial system at each interim report, at a minimum? ✓ ☐ ☐ 3 3 Are clearly written and articulated budget assumptions that support budget revisions communicated to the board at each interim report, at a minimum? ✓ ☐ ☐ 3 4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs in accordance with Education Code Section 42142? ✓ ☐ ☐ 3 5 Do the district’s responses fully explain the variances identified in the criteria and standards? ✓ ☐ ☐ 3 6 Has the district addressed any deficiencies the county office of education has identified in its oversight letters in the most recent and two prior fiscal years? ☐ ✓ ☐ Although the county superintendent of schools agreed with the district’s positive certification for the 2023-24 first interim reporting period, the county superintendent requested a detailed board-approved plan to address the district’s ongoing budget deficit. At the time of FCMAT’s fieldwork, no such plan had yet been provided to the county superintendent. Although interviews indicated that the district’s governing board approved a resolution to close nine schools, FCMAT was not provided with a copy of the resolution and could not locate the resolution in the board minutes. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 14 Fiscal Health Risk Analysis 3 7 Does the district prohibit processing of requisitions or purchase orders when the budget is insufficient to support the expenditure? ✓ ☐ ☐ 3 8 Does the district encumber and adjust encumbrances for salaries and benefits? ✓ ☐ ☐ 3 9 Are all balance sheet accounts in the general ledger reconciled at least at each interim report and at year end close? ✓ ☐ ☐ 3 10 For the most recent and two prior fiscal years, have the interim reports and the unaudited actuals been adopted and filed with the county superintendent of schools within the timelines established in Education Code? ✓ ☐ ☐ 4. Cash Management Yes No N/A 4 1 Are accounts held by the county treasurer reconciled with the district’s and county office of education’s reports monthly? ✓ ☐ ☐ 4 2 Does the district reconcile all bank (cash and investment) accounts with bank statements monthly? ✓ ☐ ☐ 4 3 Does the district forecast its general fund cash flow for the current and subsequent year and update it as needed to ensure cash flow needs are known? ☐ ✓ ☐ As of the district's 2023-24 second interim financial report, the district was completing a cash flow projection for the current year only. No cash flow was provided for the subsequent fiscal year. 4 4 If the district’s cash flow forecast shows insufficient cash in its general fund to support its current and projected obligations, does the district have a reasonable plan to address its cash flow needs for the current and subsequent year? ☐ ☐ ✓ 4 5 Does the district have sufficient cash resources in its other funds to support its current and projected obligations in those funds? ✓ ☐ ☐ 4 6 If interfund borrowing is occurring, does the district comply with Education Code Section 42603? ☐ ☐ ✓ 4 7 If the district is managing cash in any fund(s) through external borrowing, does the district’s cash flow projection include repayment based on the terms of the loan agreement? ☐ ☐ ✓ 5. Charter Schools Yes No N/A 5 1 Does the district have a board policy or other written document(s) regarding charter oversight? ✓ ☐ ☐ 5 2 Has the district fulfilled and does it have evidence showing fulfillment of its oversight responsibilities in accordance with Education Code Section 47604 32? ☐ ✓ ☐ Although documents indicated that the business office has identified certain positions as having responsibility for charter school oversight, FCMAT did not receive sufficient evidence to demonstrate that the district is fulfilling all oversight responsibilities in accordance with Education Code Section 47604.32. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 15 Fiscal Health Risk Analysis 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? ✓ ☐ ☐ 5 4 Has the district identified specific employees in its various departments (e g , human resources, business, instructional, and others) to be responsible for oversight of all approved charter schools? ☐ ✓ ☐ Documents indicated that the business office has identified certain positions as having responsibility for charter school oversight; however, FCMAT did not receive sufficient evidence to demonstrate that the staff or the district is fulfilling all oversight responsibilities in accordance with Education Code 47604.32. 6. Collective Bargaining Agreements Yes No N/A 6 1 Has the district settled with all its bargaining units for the past two fiscal years? ✓ ☐ ☐ 6 2 Has the district settled with all its bargaining units for the current year? ✓ ☐ ☐ 6 3 Does the district accurately quantify the effects of collective bargaining agreements and include them in its budget and multiyear projections? ✓ ☐ ☐ 6 4 Did the district conduct a presettlement analysis and identify related costs or savings, if any (e g , statutory benefits, and step and column salary increase), for the current and subsequent years, and did it identify ongoing revenue sources or expenditure reductions to support the agreement? ✓ ☐ ☐ 6 5 In the current and prior two fiscal years, has the district settled the total cost of the bargaining agreements including step and column increases at or under the funded cost of living adjustment (COLA)? ☐ ✓ ☐ In addition to step-and-column increases, the district has agreed to settlements with its bargaining units that exceeded the funded COLA, as shown below. Table 4: Settlement Agreements Fiscal Statutory Year Settlement Agreements COLA 2021-22 6.25% 1.70% 2022-23 5.00% 6.56% 2023-24 8.20% (Teachers)/9.10% (other units) 8.22% Note: all of the settlements in the table exceed the state COLA when the step-and-column increases are included. 6 6 If settlements have not been reached in the past two years, has the district identified resources to cover the costs of the district’s proposal(s)? ☐ ☐ ✓ 6 7 Did the district comply with public disclosure requirements under Government Code Sections 3540 2 and 3547 5, and Education Code Section 42142? ✓ ☐ ☐ 6 8 Did the superintendent and CBO certify the public disclosure of collective bargaining agreement prior to board approval? ✓ ☐ ☐ 6 9 Is the governing board’s action consistent with the superintendent’s and CBO’s certification? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 16 Fiscal Health Risk Analysis 7. Contributions and Transfers Yes No N/A 7 1 Does the district have a board-approved plan to eliminate, reduce or control any contributions/transfers from the unrestricted general fund to other restricted programs and funds? ☐ ✓ ☐ The district lacks a plan to control special education expenditures. The district's contribution from its unrestricted general fund to special education increased from $18.2 million in 2021-22 to an estimated $28.6 million in 2023-24. This contribution represents approximately 23% of the district's projected unrestricted general fund revenue and 89.39% of the total cost of the special education program in 2023-24. 7 2 If the district has deficit spending in funds other than the general fund, has it included in its multiyear projection any transfers from the unrestricted general fund to cover any projected negative fund balance? ☐ ☐ ✓ 7 3 If any contributions/transfers were required for restricted programs and/or other funds in either of the two prior fiscal years, and there is a need in the current year, did the district budget for them at reasonable levels? ✓ ☐ ☐ 8. Deficit Spending (Unrestricted General Fund) Yes No N/A 8 1 Is the district avoiding deficit spending in the current fiscal year? ☐ ✓ ☐ Based on the district's 2023-24 second Interim financial report, the district is projecting to have deficit spent $35.5 million in 2023-24. 8 2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? ☐ ✓ ☐ Based on the district's 2023-24 second interim financial report, the district is projecting to deficit spend $20.8 million in 2024-25 and $10.9 million in 2025-26. 8 3 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending to ensure fiscal solvency? ☐ ✓ ☐ At the time of FCMAT’s fieldwork, the district had discussed some school consolidations in recent meetings. However, it had not adopted a formal plan that clearly identifies how this will occur and includes a specific timeline for implementation. 8 4 Has the district decreased deficit spending over the past two fiscal years? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 17 Fiscal Health Risk Analysis 9. Employee Benefits Yes No N/A 9 1 Has the district completed an actuarial valuation in accordance with Governmental Accounting Standards Board (GASB) requirements to determine its unfunded liability for other post-employment benefits (OPEB)? ☐ ☐ ✓ 9 2 Does the district have a plan to fund its liabilities for retiree health and welfare benefits with the total of annual required service payments no greater than 2% of the district’s unrestricted general fund revenues? ☐ ☐ ✓ 9 3 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? ✓ ☐ ☐ 9 4 Within the last five years, has the district conducted a verification and determination of eligibility for benefits for all active and retired employees and dependents? ☐ ✓ ☐ In interviews, employees indicated that the district has not conducted a determination of eligibility for benefits in the last five years, though a verification of benefits may have occurred in the past 10 years. 9 5 Does the district track, reconcile and report employees’ compensated leave balances? ✓ ☐ ☐ 10. Enrollment and Attendance Yes No N/A 10 1 Has the district’s enrollment been increasing or remained stable for the current and two prior years? ☐ ✓ ☐ Excluding charter schools, district enrollment has decreased from 7,590 students in 2021-22 to 7,367 in 2023-24, though enrollment did increase by 260 students from 2022-23 to 2023-24. 10 2 Does the district monitor and analyze enrollment and average daily attendance (ADA) data at least monthly through the second attendance reporting period (P2)? ✓ ☐ ☐ 10 3 Does the district track historical enrollment and ADA data to establish future trends? ✓ ☐ ☐ 10 4 Do school sites maintain an accurate record of daily enrollment and attendance that is reconciled monthly at the site and district levels? ✓ ☐ ☐ 10 5 Has the district certified its California Longitudinal Pupil Achievement Data System (CALPADS) data by the required deadlines (Fall 1, Fall 2, EOY) for the current and two prior years? ✓ ☐ ☐ 10 6 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable considerations? ✓ ☐ ☐ 10 7 Do all applicable sites and departments review and verify their respective CALPADS data and correct it as needed before the report submission deadlines? ✓ ☐ ☐ 10 8 Has the district planned for enrollment losses to charter schools? ✓ ☐ ☐ 10 9 Does the district follow established board policy to limit outgoing interdistrict transfers and ensure that only students who meet the required qualifications are approved? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 18 Fiscal Health Risk Analysis 10 10 Does the district meet the student-to-teacher ratio requirement of no more than 24-to-1 for each school in grades TK-3 classes, or, if not, does it have and adhere to an alternative collectively bargained agreement? ✓ ☐ ☐ 11. Facilities Yes No N/A 11 1 If the district participates in the state’s School Facilities Program, has it met the required contribution for the Routine Restricted Maintenance Account? ✓ ☐ ☐ 11 2 Does the district have sufficient and available capital outlay and/or bond funds to cover all contracted obligations for capital facilities projects? ✓ ☐ ☐ 11 3 Does the district properly track and account for facility-related projects? ✓ ☐ ☐ 11 4 Does the district use its facilities fully in accordance with the Office of Public School Construction’s loading standards? ☐ ✓ ☐ Because of the district's long-term decline in enrollment as identified in the summary section of this report, many of its facilities are underused. 11 5 Does the district include facility needs (maintenance, repair and operating requirements) when adopting a budget? ✓ ☐ ☐ 11 6 Has the district met the facilities inspection requirements of the Williams Act and resolved any outstanding issues? ✓ ☐ ☐ 11 7 If the district passed a Proposition 39 general obligation bond, has it met the requirements for audit, reporting, and a citizens’ bond oversight committee? ☐ ✓ ☐ Interviewees indicated that a citizens' bond oversight committee had become dormant because of a lack of interest and participation, in part because of the pandemic. However, the district indicated that it was planning to restart the oversight committee. 11 8 Does the district have a long-range facilities master plan that reflects its current and projected facility needs? ✓ ☐ ☐ 12. Fund Balance and Reserve for Economic Uncertainty Yes No N/A 12 1 Is the district able to maintain the minimum reserve for economic uncertainty in the current year (including Fund 01 and Fund 17) as defined by criteria and standards? ✓ ☐ ☐ 12 2 Is the district able to maintain the minimum reserve for economic uncertainty in the two subsequent years? ☐ ✓ ☐ Although the district's multiyear financial projection appears to indicate that it will meet the required reserve for economic uncertainties in 2025-26, the ability to meet the reserve is contingent on an unspecified expenditure reduction of $12.5 million in that year. At the time of fieldwork, the district had not adopted a detailed list of expenditures to be reduced or a timeline for implementation. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 19 Fiscal Health Risk Analysis 12 3 If the district is not able to maintain the minimum reserve for economic uncertainty, does the district’s multiyear financial projection include a board-approved plan to restore the reserve? ☐ ✓ ☐ At the time of fieldwork, the district had not adopted a detailed list of expenditure reductions totaling $12.5 million in 2025-26 or a timeline for implementation. 12 4 Is the district’s projected unrestricted fund balance stable or increasing in the two subsequent fiscal years? ☐ ✓ ☐ Based on the district's 2023-24 second interim financial report, its unrestricted general fund balance is projected to decrease by $20.8 million in 2024-25, and to further decrease by $10.9 million in 2025-26. 12 5 If the district has unfunded or contingent liabilities or one-time costs other than post-employment benefits, does the unrestricted general fund balance include sufficient assigned or committed reserves above the recommended reserve level? ☐ ✓ ☐ With the passage of Assembly Bill (AB) 218 and the ability of current and former students and employees to seek damages for events that occurred before the original statute of limitations, the district faces an unknown potential liability that could have a significant impact on its fiscal health. Interviewees indicated that the district faces several claims of misconduct by former staff. 13. General Fund – Current Year Yes No N/A 13 1 Does the district ensure that one-time revenues do not pay for ongoing expenditures? ☐ ✓ ☐ As identified by the county office following its review of the district's 2023-24 second interim financial report, the district has included in its multiyear financial projection an unspecified expenditure reduction of $12.5 million in 2025-26 to meet the minimum required reserve for economic uncertainties. The district explained that it intends to use one-time funds from the Learning Recovery Emergency Block Grant to fund ongoing expenditures in 2025-26 to meet the required reserve. However, once these funds are depleted, no additional one-time funds will be available to balance the budget in subsequent years. 13 2 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below the statewide average for the current year? ☐ ✓ ☐ According to Ed-Data, the percentage of the district's unrestricted general fund used for salaries and benefits in 2022-23 was 87%. This is slightly higher than the statewide average of 86% for elementary school districts. 13 3 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below the statewide average for the two prior years? ☐ ✓ ☐ According to Ed-Data, the percentage of the district’s unrestricted general fund used for salaries and benefits was 90% in 2020-21 which was slightly higher than the statewide average of 87% in 2020-21. 13 4 If the district has received any uniform complaints or legal challenges regarding local use of supplemental and concentration grant funding in the current or two prior years, is the district addressing the complaint(s)? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 20 Fiscal Health Risk Analysis 13 5 Does the district either ensure that restricted dollars are sufficient to pay for staff assigned to restricted programs or have a plan to fund these positions with unrestricted funds? ✓ ☐ ☐ 13 6 Is the district using its restricted dollars fully by expending allocations for restricted programs within the required time? ✓ ☐ ☐ 13 7 Does the district account for program costs, including the maximum allowable indirect costs, for each restricted resource and other funds? ☐ ✓ ☐ Although the district charges the appropriate rate for indirect costs, it does not charge any special education transportation to the special education resource. Therefore, its total cost of special education is understated. 14. Information Systems and Data Management Yes No N/A 14 1 Does the district use an integrated financial and human resources system? ✓ ☐ ☐ 14 2 Does the district use the system(s) to provide key financial and related data, including personnel information, to help the district make informed decisions? ✓ ☐ ☐ 14 3 Has the district accurately identified students who are eligible for free or reduced-price meals, English learners, and foster youth, in accordance with the LCFF and its LCAP? ✓ ☐ ☐ 14 4 Is the district using the same financial system as its county office of education? ✓ ☐ ☐ 14 5 If the district is using a separate financial system from its county office of education, is there an automated interface with the financial system used by the county office of education? ☐ ☐ ✓ 14 6 If the district is using a separate financial system from its county office of education, has the district provided the county office with direct access so the county office can provide oversight, review and assistance? ☐ ☐ ✓ 15. Internal Controls and Fraud Prevention Yes No N/A 15 1 Does the district have controls that limit access to its financial system and include multiple levels of authorization? ✓ ☐ ☐ 15 2 Are the district’s financial system’s access and authorization controls reviewed and updated upon employment actions (e g , resignations, terminations, promotions or demotions) and at least annually? ✓ ☐ ☐ 15 3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored?: • Accounts payable (AP) ✓ ☐ ☐ • Accounts receivable (AR) ✓ ☐ ☐ • Purchasing and contracts ✓ ☐ ☐ • Payroll ✓ ☐ ☐ • Human resources (i e , duties relative to position control and payroll processes) ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 21 Fiscal Health Risk Analysis 15 4 Are beginning balances for the new fiscal year posted and reconciled with the ending balances for each fund from the prior fiscal year? ✓ ☐ ☐ 15 5 Does the district review and work to clear prior year accruals throughout the year? ✓ ☐ ☐ 15 6 Has the district reconciled and closed the general ledger (books) within the time prescribed by the county office of education? ✓ ☐ ☐ 15 7 Does the district have processes and procedures to discourage and detect fraud? ☐ ✓ ☐ Although the district has a board policy and administrative regulation that specifically addresses fraud (BP/AR 3400), staff indicated they were unaware of this policy and regulation. Interviewees indicated that the district has no formal process or procedure to discourage or detect fraud. 15 8 Does the district have a process for collecting reports of possible fraud (such as an anonymous fraud reporting hotline) and for following up on such reports? ☐ ✓ ☐ The district lacks a fraud reporting hotline or other mechanism to collect and investigate reports of possible fraud. 15 9 Does the district have an internal audit process? ☐ ✓ ☐ The district lacks a formal internal auditing process or department. 16. Leadership and Stability Yes No N/A 16 1 Does the district have a chief business official who has been with the district as chief business official for more than two years? ☐ ✓ ☐ At the time of fieldwork, the chief business official was in his final week of employment with the district. 16 2 Does the district have a superintendent who has been with the district as superintendent for more than two years? ☐ ✓ ☐ Following approval of the district’s 2023-23 second interim financial report, the district superintendent left the district. At time of fieldwork, the district had an interim superintendent. 16 3 Does the superintendent meet on a scheduled and regular basis with all members of their administrative cabinet? ✓ ☐ ☐ 16 4 Is training on financial management and budget provided to site and department administrators who are responsible for budget management? ✓ ☐ ☐ 16 5 Does the governing board adopt and revise policies and administrative regulations annually? ☐ ✓ ☐ The district did not provide evidence that it updates board policies and administrative regulations at regular intervals. 16 6 Are newly adopted or revised policies and administrative regulations implemented, communicated and available to staff? ☐ ✓ ☐ The district did not provide evidence that it communicates updates to board policies and administrative regulations to staff. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 22 Fiscal Health Risk Analysis 16 7 Do all board members attend training on the budget and governance at least every two years? ☐ ✓ ☐ The district did not provide evidence that board members regularly attend training on budget and governance. 16 8 Is the superintendent’s evaluation performed according to the terms of the contract? ☐ ✓ ☐ On October 12, 2023, the district’s board agenda included an item titled “11.07 PUBLIC EMPLOYEE PERFORMANCE EVALUATION Title: Superintendent.” However, FCMAT reviewed board meeting minutes and found nothing regarding completion of the evaluation. No other agenda items related to the superintendent’s evaluation were found. 17. Multiyear Projections Yes No N/A 17 1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards? ✓ ☐ ☐ 17 2 To help calculate its multiyear projections, did the district prepare an accurate LCFF calculation with multiyear considerations? ✓ ☐ ☐ 17 3 Does the district use its most current multiyear projection in making financial decisions? ✓ ☐ ☐ 17 4 If the district uses a broad adjustment category in its multiyear projection (such as line B10, B1d, B2d Other Adjustments, in the SACS Form MYP/MYPI), is there a detailed list of what is included in the adjustment amount and are the adjustments reasonable? ☐ ✓ ☐ In the district's 2023-24 second interim financial report, the district included an unspecified expenditure reduction of $12.5 million. No detailed list of expenditure reductions or formal board action was found to support this adjustment. 18. Non-Voter-Approved Debt and Risk Management Yes No N/A 18 1 Are the sources of repayment for non-voter-approved debt {such as certificates of participation (COPs), bridge financing, bond anticipation notes (BANS), revenue anticipation notes (RANS) and others} stable, predictable, and other than unrestricted general fund? ✓ ☐ ☐ 18 2 If the district has issued non-voter-approved debt, has its credit rating remained stable or improved during the current and two prior fiscal years? ✓ ☐ ☐ 18 3 If the district is self-insured, has the district completed an actuarial valuation as required and have a plan to pay for any unfunded liabilities? ☐ ☐ ✓ 18 4 If the district has non-voter-approved debt (such as COPs, bridge financing, BANS, RANS and others), is the total of annual debt service payments no greater than 2% of the district’s unrestricted general fund revenues? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 23 Fiscal Health Risk Analysis 19. Position Control Yes No N/A 19 1 Does the district account for all positions and costs? ✓ ☐ ☐ 19 2 Does the district analyze and adjust staffing based on staffing ratios and enrollment? ☐ ✓ ☐ Interviews with staff and district-provided documents indicate that staffing ratios are analyzed with enrollment. However, because the district continues to operate some schools at less than 50% of capacity, it is overstaffed at certain schools. 19 3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim reporting periods? ✓ ☐ ☐ 19 4 Does the district identify a budget source for each new position before the position is authorized by the governing board? ✓ ☐ ☐ 19 5 Does the governing board approve all new positions and extra assignments (e g , stipends) before positions are posted? ✓ ☐ ☐ 19 6 Do managers and staff responsible for the district’s human resources, payroll and budget functions meet regularly to discuss issues and improve processes? ✓ ☐ ☐ 20. Special Education Yes No N/A 20 1 Does the district monitor, analyze and adjust staffing ratios, class sizes and caseload sizes to align with statutory requirements and industry standards? ☐ ✓ ☐ Although FCMAT found no complaints or findings to indicate the district is not meeting statutory requirements or industry standards, no documents were provided that enabled FCMAT to determine whether the district is meeting caseload requirements or standards for various services. 20 2 Does the district access available funding sources for costs related to special education (e g , excess cost pool, legal fees, mental health)? ☐ ✓ ☐ In interviews, special education staff indicated that the district uses all available funding sources for costs related to special education; however, no documents were provided to support this assertion. 20 3 Does the district use appropriate tools to help it make informed decisions about whether to add services (e g , special circumstance instructional assistance process and form, transportation decision tree)? ☐ ✓ ☐ Special education staff indicated that the district uses a structured process to identify and meet student needs; however, no documents were provided to support this assertion. 20 4 Does the district budget and account correctly for all costs related to special education (e g , transportation, due process hearings, indirect costs, nonpublic schools and/or nonpublic agencies)? ☐ ✓ ☐ Interviewees indicated that the district is not charging transportation costs to special education. Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 24 Fiscal Health Risk Analysis 20 5 Is the district’s contribution rate to special education at or below the statewide average contribution rate? ☐ ✓ ☐ For the 2023-24 fiscal year, the unrestricted general fund contribution to special education was approximately 89.39% of the total cost of the special education program. The most recent statewide data indicates that the average unrestricted general fund contribution is 64.3% of special education costs. 20 6 Is the district’s rate of identification of students as eligible for special education at or below the countywide and statewide average rates? ☐ ✓ ☐ According to DataQuest, in 2023-24, the district’s identification rate was 13.5%, compared to the county's rate of 12.05%. However, the district's rate is lower than the statewide average rate of 13.7%. 20 7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim reporting period? ✓ ☐ ☐ Risk Score, 20 numbered sections only 24 7% Key to Risk Score from 20 numbered sections only: High Risk: 40% or more Moderate Risk: 25-39.9% Low Risk: 24.9% and lower District Fiscal Solvency Risk Level, all FHRA factors High (The existence of any condition from the Budget and Fiscal Status section, and/or a material weakness, will supersede the score above because it elevates the district’s risk level.) Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 25 Fiscal Health Risk Analysis Appendices Appendix A: FHRA Results Comparison 1. Annual Independent Audit Report 2020 2024 1 1 Has the district corrected the most recent and prior two years’ audit findings without affecting its fiscal health? Yes Yes 1 2 Has the audit report for the most recent fiscal year been completed and presented to the board within the statutory timeline? (Extensions of the timeline granted by the State Controller’s Office should be explained ) Yes Yes 1 3 Were the district’s most recent and prior two audit reports free of findings of material weaknesses? No No 1 4 Has the district corrected all reported audit findings from the most recent and prior two audits? Yes No 1. Annual Independent Audit Report 2020 2024 Change in number of “No” responses Yes 3 2 No 1 2 Increased by one N/A 0 0 2. Budget Development and Adoption 2020 2024 2 1 Does the district develop and use written budget assumptions and multiyear projections that are reasonable, are aligned with the county office of education instructions, and have been clearly articulated? No Yes 2 2 Does the district use a budget development method other than a prior-year rollover budget, and, if so, does that method include tasks such as review of prior year estimated actuals by major object code and removal of one-time revenues and expenses? No Yes 2 3 Does the district use position control data for budget development? Yes Yes 2 4 Does the district calculate the Local Control Funding Formula (LCFF) revenue correctly? Yes Yes 2 5 Has the district’s budget been approved unconditionally by its county office of education in the current and two prior fiscal years? No Yes 2 6 Does the budget development process include input from staff, administrators, the governing board, the community, and the budget advisory committee (if there is one)? Yes Yes 2 7 Does the district budget and expend restricted funds before unrestricted funds? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 26 Fiscal Health Risk Analysis 2 8 Have the Local Control and Accountability Plan (LCAP) and the budget been adopted within statutory timelines established by Education Code Sections 42103 and 52062 and filed with the county superintendent of schools no later than five days after adoption or by July 1, whichever occurs first, for the current and one prior fiscal year? Yes Yes 2 9 Has the district refrained from including carryover funds in its adopted budget? Yes Yes 2 10 Other than objects in the 5700s and 7300s and appropriate abatements in accordance with the California School Accounting Manual, does the district avoid using negative or contra expenditure accounts? No Yes 2 11 Does the district have a documented policy and/or procedure for evaluating the proposed acceptance of grants and other types of restricted funds and the potential multiyear impact on the district’s unrestricted general fund? No Yes 2 12 Does the district adhere to a budget calendar that includes statutory due dates, major budget development tasks and deadlines, and the staff members/departments responsible for completing them? Yes Yes 2. Budget Development and Adoption 2020 2024 Change in number of “No” responses Yes 7 12 No 5 0 Decreased by five N/A 0 0 3. Budget Monitoring and Updates 2020 2024 3 1 Are actual revenues and expenses consistent with the most current budget? No Yes 3 2 Are budget revisions posted in the financial system at each interim report, at a minimum? Yes Yes 3 3 Are clearly written and articulated budget assumptions that support budget revisions communicated to the board at each interim report, at a minimum? No Yes 3 4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs in accordance with Education Code Section 42142? Yes Yes 3 5 Do the district’s responses fully explain the variances identified in the criteria and standards? No Yes 3 6 Has the district addressed any deficiencies the county office of education has identified in its oversight letters in the most recent and two prior fiscal years? No No 3 7 Does the district prohibit processing of requisitions or purchase orders when the budget is insufficient to support the expenditure? Yes Yes 3 8 Does the district encumber and adjust encumbrances for salaries and benefits? Yes Yes 3 9 Are all balance sheet accounts in the general ledger reconciled at least at each interim report and at year end close? No Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 27 Fiscal Health Risk Analysis 3 10 For the most recent and two prior fiscal years, have the interim reports and the unaudited actuals been adopted and filed with the county superintendent of schools within the timelines established in Education Code? No Yes 3. Budget Monitoring and Updates 2020 2024 Change in number of “No” responses Yes 4 9 No 6 1 Decreased by five N/A 0 0 4. Cash Management 2020 2024 4 1 Are accounts held by the county treasurer reconciled with the district’s and county office of education’s reports monthly? Yes Yes 4 2 Does the district reconcile all bank (cash and investment) accounts with bank statements monthly? No Yes 4 3 Does the district forecast its general fund cash flow for the current and subsequent year and update it as needed to ensure cash flow needs are known? No No 4 4 If the district’s cash flow forecast shows insufficient cash in its general fund to support its current and projected obligations, does the district have a reasonable plan to address its cash flow needs for the current and subsequent year? N/A N/A 4 5 Does the district have sufficient cash resources in its other funds to support its current and projected obligations in those funds? Yes Yes 4 6 If interfund borrowing is occurring, does the district comply with Education Code Section 42603? No N/A 4 7 If the district is managing cash in any fund(s) through external borrowing, does the cash flow projection include repayment on the terms of the loan agreement? N/A N/A 4. Cash Management 2020 2024 Change in number of “No” responses Yes 2 3 No 3 1 Decreased by two N/A 2 3 5. Charter Schools 2020 2024 5 1 Does the district have a board policy or other written document(s) regarding charter oversight? Yes Yes 5 2 Has the district fulfilled and does it have evidence showing fulfillment of its oversight responsibilities in accordance with Education Code Section 47604 32? Yes No 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 28 Fiscal Health Risk Analysis 5 4 Has the district identified specific employees in its various departments (e g , human resources, business, instructional, and others) to be responsible for oversight of all approved charter schools? No No 5. Charter Schools 2020* 2024 Change in number of “No” responses Yes 3 2 No 1 2 Increased by one N/A 0 0 *In 2020, item 5.5 was included in this section, but it is not part of the 2024 FHRA. 6. Collective Bargaining Agreements 2020 2024 6 1 Has the district settled with all its bargaining units for the past two fiscal years? Yes Yes 6 2 Has the district settled with all its bargaining units for the current year? No Yes 6 3 Does the district accurately quantify the effects of collective bargaining agreements and include them in its budget and multiyear projections? Yes Yes 6 4 Did the district conduct a presettlement analysis and identify related costs or savings, if any (e g , statutory benefits, and step and column salary increase), for the current and subsequent years, and did it identify ongoing revenue sources or expenditure reductions to support the agreement? Yes Yes 6 5 In the current and prior two fiscal years, has the district settled the total cost of the bargaining agreements including step and column increases at or under the funded cost of living adjustment (COLA)? No No 6 6 If settlements have not been reached in the past two years, has the district identified resources to cover the costs of the district’s proposal(s)? N/A N/A 6 7 Did the district comply with public disclosure requirements under Government Code Sections 3540 2 and 3547 5, and Education Code Section 42142? Yes Yes 6 8 Did the superintendent and CBO certify the public disclosure of collective bargaining agreement prior to board approval? Yes Yes 6 9 Is the governing board’s action consistent with the superintendent’s and CBO’s certification? Yes Yes 6. Collective Bargaining Agreements 2020 2024 Change in number of “No” responses Yes 6 7 No 2 1 Decreased by one N/A 1 1 Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 29 Fiscal Health Risk Analysis 7. Contributions and Transfers 2020 2024 7 1 Does the district have a board-approved plan to eliminate, reduce or control any contributions/transfers from the unrestricted general fund to other restricted programs and funds? No No 7 2 If the district has deficit spending in funds other than the general fund, has it included in its multiyear projection any transfers from the unrestricted general fund to cover any projected negative fund balance? No N/A 7 3 If any contributions/transfers were required for restricted programs and/or other funds in either of the two prior fiscal years, and there is a need in the current year, did the district budget for them at reasonable levels? No Yes 7. Contributions and Transfers 2020 2024 Change in number of “No” responses Yes 3 1 No 0 1 Increased by one N/A 0 1 8. Deficit Spending (Unrestricted General Fund) 2020 2024 8 1 Is the district avoiding deficit spending in the current fiscal year? No No 8 2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? No No 8 3 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending to ensure fiscal solvency? No No 8 4 Has the district decreased deficit spending over the past two fiscal years? Yes Yes 8. Deficit Spending 2020 2024 Change in number of “No” responses Yes 3 3 No 1 1 No change N/A 0 0 9. Employee Benefits 2020 2024 9 1 Has the district completed an actuarial valuation in accordance with Governmental Accounting Standards Board (GASB) requirements to determine its unfunded liability for other post-employment benefits (OPEB)? N/A N/A Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 30 Fiscal Health Risk Analysis 9 2 Does the district have a plan to fund its liabilities for retiree health and welfare benefits with the total of annual required service payments (legal, contractual or locally defined such as pay-as-you-go premiums, trust agreement obligations, or a board adopted commitment) no greater than 2% of the district’s unrestricted general fund revenues? N/A N/A 9 3 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? No Yes 9 4 Within the last five years, has the district conducted a verification and determination of eligibility for benefits for all active and retired employees and dependents? Yes No 9 5 Does the district track, reconcile and report employees’ compensated leave balances? Yes Yes 9. Employee Benefits 2020 2024 Change in number of “No” responses Yes 2 2 No 1 1 No change N/A 2 2 10. Enrollment and Attendance 2020 2024 10 1 Has the district’s enrollment been increasing or remained stable for the current and two prior years? No No 10 2 Does the district monitor and analyze enrollment and average daily attendance (ADA) data at least monthly through the second attendance reporting period (P2)? Yes Yes 10 3 Does the district track historical enrollment and ADA data to establish future trends? Yes Yes 10 4 Do school sites maintain an accurate record of daily enrollment and attendance that is reconciled monthly at the site and district levels? Yes Yes 10 5 Has the district certified its California Longitudinal Pupil Achievement Data System (CALPADS) data by the required deadlines (Fall 1, Fall 2, EOY) for the current and two prior years? Yes Yes 10 6 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable considerations? Yes Yes 10 7 Do all applicable sites and departments review and verify their respective CALPADS data and correct it as needed before the report submission deadlines? Yes Yes 10 8 Has the district planned for enrollment losses to charter schools? Yes Yes 10 9 Does the district follow established board policy to limit outgoing interdistrict transfers and ensure that only students who meet the required qualifications are approved? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 31 Fiscal Health Risk Analysis 10 10 Does the district meet the student-to-teacher ratio requirement of no more than 24-to-1 for each school in grades TK-3 classes, or, if not, does it have and adhere to an alternative collectively bargained agreement? Yes Yes 10. Enrollment and Attendance 2020 2024 Change in number of “No” responses Yes 9 9 No 1 1 No change N/A 0 0 11. Facilities 2020 2024 11 1 If the district participates in the state’s School Facilities Program, has it met the required contribution for the Routine Restricted Maintenance Account? No Yes 11 2 Does the district have sufficient and available capital outlay and/or bond funds to cover all contracted obligations for capital facilities projects? No Yes 11 3 Does the district properly track and account for facility-related projects? No Yes 11 4 Does the district use its facilities fully in accordance with the Office of Public School Construction’s loading standards? No No 11 5 Does the district include facility needs (maintenance, repair and operating requirements) when adopting a budget? No Yes 11 6 Has the district met the facilities inspection requirements of the Williams Act and resolved any outstanding issues? No Yes 11 7 If the district passed a Proposition 39 general obligation bond, has it met the requirements for audit, reporting, and a citizens’ bond oversight committee? Yes No 11 8 Does the district have a long-range facilities master plan that reflects its current and projected facility needs? No Yes 11. Facilities 2020 2024 Change in number of “No” responses Yes 1 6 No 7 2 Decreased by five N/A 0 0 12. Fund Balance and Reserve for Economic Uncertainty 2020 2024 12 1 Is the district able to maintain the minimum reserve for economic uncertainty in the current year (including Fund 01 and Fund 17) as defined by criteria and standards? Yes Yes 12 2 Is the district able to maintain the minimum reserve for economic uncertainty in the two subsequent years? No No Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 32 Fiscal Health Risk Analysis 12 3 If the district is not able to maintain the minimum reserve for economic uncertainty, does the district’s multiyear financial projection include a board-approved plan to restore the reserve? No No 12 4 Is the district’s projected unrestricted fund balance stable or increasing in the two subsequent fiscal years? No No 12 5 If the district has unfunded or contingent liabilities or one-time costs other than post-employment benefits, does the unrestricted general fund balance include sufficient assigned or committed reserves above the recommended reserve level? N/A No 12. Fund Balance and Reserve for Economic Uncertainty 2020 2024 Change in number of “No” responses Yes 1 1 No 3 4 Increased by one N/A 1 0 13. General Fund – Current Year 2020 2024 13 1 Does the district ensure that one-time revenues do not pay for ongoing expenditures? No No 13 2 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below the statewide average for the current year? No No 13 3 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below the statewide average for the two prior years? No No 13 4 If the district has received any uniform complaints or legal challenges regarding local use of supplemental and concentration grant funding in the current or two prior years, is the district addressing the complaint(s)? N/A N/A 13 5 Does the district either ensure that restricted dollars are sufficient to pay for staff assigned to restricted programs or have a plan to fund these positions with unrestricted funds? Yes Yes 13 6 Is the district using its restricted dollars fully by expending allocations for restricted programs within the required time? Yes Yes 13 7 Does the district account for program costs, including the maximum allowable indirect costs, for each restricted resource and other funds? No No 13. General Fund – Current Year 2020 2024 Change in number of “No” responses Yes 2 2 No 4 4 No change N/A 1 1 14. Information Systems and Data Management 2020 2024 14 1 Does the district use an integrated financial and human resources system? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 33 Fiscal Health Risk Analysis 14 2 Does the district use the system(s) to provide key financial and related data, including personnel information, to help the district make informed decisions? Yes Yes 14 3 Has the district accurately identified students who are eligible for free or reduced-price meals, English learners, and foster youth, in accordance with the LCFF and its LCAP? Yes Yes 14 4 Is the district using the same financial system as its county office of education? Yes Yes 14 5 If the district is using a separate financial system from its county office of education, is there an automated interface that allows data to be sent and received by both the district and county financial systems? N/A N/A 14 6 If the district is using a separate financial system from its county office of education, has the district provided the county office with direct access so the county office can provide oversight, review and assistance? N/A N/A 14. Information Systems and Data Management 2020 2024 Change in number of “No” responses Yes 4 4 No 0 0 No change N/A 2 2 15. Internal Controls and Fraud Prevention 2020 2024 15 1 Does the district have controls that limit access to its financial system and include multiple levels of authorization? Yes Yes 15 2 Are the district’s financial system’s access and authorization controls reviewed and updated upon employment actions (e g , resignations, terminations, promotions or demotions) and at least annually? Yes Yes 15 3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored?: • Accounts payable (AP) No Yes • Accounts receivable (AR) Y es Yes • Purchasing and contracts Y es Yes • Payroll Y es Yes • Human resources (i e , duties relative to position control and payroll processes) No Yes 15 4 Are beginning balances for the new fiscal year posted and reconciled with the ending balances for each fund from the prior fiscal year? Yes Yes 15 5 Does the district review and work to clear prior year accruals throughout the year? No Yes 15 6 Has the district reconciled and closed the general ledger (books) within the time prescribed by the county office of education? Yes Yes 15 7 Does the district have processes and procedures to discourage and detect fraud? Yes No 15 8 Does the district have a process for collecting reports of possible fraud (such as an anonymous fraud reporting hotline) and for following up on such reports? No No Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 34 Fiscal Health Risk Analysis 15 9 Does the district have an internal audit process? No No 15. Internal Controls and Fraud Prevention 2020 2024 Change in number of “No” responses Yes 8 10 No 5 3 Decreased by two N/A 0 0 16. Leadership and Stability 2020 2024 16 1 Does the district have a chief business official who has been with the district as chief business official for more than two years? Yes No 16 2 Does the district have a superintendent who has been with the district as superintendent for more than two years? Yes No 16 3 Does the superintendent meet on a scheduled and regular basis with all members of their administrative cabinet? Yes Yes 16 4 Is training on financial management and budget provided to site and department administrators who are responsible for budget management? Yes Yes 16 5 Does the governing board adopt and revise policies and administrative regulations annually? Yes No 16 6 Are newly adopted or revised policies and administrative regulations implemented, communicated and available to staff? Yes No 16 7 Do all board members attend training on the budget and governance at least every two years? Yes No 16 8 Is the superintendent’s evaluation performed according to the terms of the contract? No No 16. Leadership and Stability 2020 2024 Change in number of “No” responses Yes 7 2 No 1 6 Increased by five N/A 0 0 17. Multiyear Projections 2020 2024 17 1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards? Yes Yes 17 2 To help calculate its multiyear projections, did the district prepare an accurate LCFF calculation with multiyear considerations? Yes Yes 17 3 Does the district use its most current multiyear projection in making financial decisions? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 35 Fiscal Health Risk Analysis 17 4 If the district uses a broad adjustment category in its multiyear projection (such as line B10, B1d, B2d Other Adjustments, in the SACS Form MYP/MYPI), is there a detailed list of what is included in the adjustment amount and are the adjustments reasonable? No No 17. Multiyear Projections 2020 2024 Change in number of “No” responses Yes 3 3 No 1 1 No change N/A 0 0 18. Non-Voter-Approved Debt and Risk Management 2020 2024 18 1 Are the sources of repayment for non-voter-approved debt {such as certificates of participation (COPs), bridge financing, bond anticipation notes (BANS), revenue anticipation notes (RANS) and others} stable, predictable, and other than unrestricted general fund? No Yes 18 2 If the district has issued non-voter-approved debt, has its credit rating remained stable or improved during the current and two prior fiscal years? No Yes 18 3 If the district is self-insured, has the district completed an actuarial valuation as required and have a plan to pay for any unfunded liabilities? No N/A 18 4 If the district has non-voter-approved debt (such as COPs, bridge financing, BANS, RANS and others), is the total of annual debt service payments no greater than 2% of the district’s unrestricted general fund revenues? No N/A 18. Non-Voter-Approved Debt and Risk Management 2020 2024 Change in number of “No” responses Yes 0 2 No 4 0 Decreased by four N/A 0 2 19. Position Control 2020 2024 19 1 Does the district account for all positions and costs? Yes Yes 19 2 Does the district analyze and adjust staffing based on staffing ratios and enrollment? Yes No 19 3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim reporting periods? Yes Yes 19 4 Does the district identify a budget source for each new position before the position is authorized by the governing board? Yes Yes 19 5 Does the governing board approve all new positions and extra assignments (e g , stipends) before positions are posted? Yes Yes Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 36 Fiscal Health Risk Analysis 19 6 Do managers and staff responsible for the district’s human resources, payroll and budget functions meet regularly to discuss issues and improve processes? No Yes 19. Position Control 2020 2024 Change in number of “No” responses Yes 5 5 No 1 1 No change N/A 0 0 20. Special Education 2020 2024 20 1 Does the district monitor, analyze and adjust staffing ratios, class sizes and caseload sizes to align with statutory requirements and industry standards? No No 20 2 Does the district access available funding sources for costs related to special education (e g , excess cost pool, legal fees, mental health)? Yes No 20 3 Does the district use appropriate tools to help it make informed decisions about whether to add services (e g , special circumstance instructional assistance process and form, transportation decision tree)? No No 20 4 Does the district budget and account correctly for all costs related to special education (e g , transportation, due process hearings, indirect costs, nonpublic schools and/or nonpublic agencies)? Yes No 20 5 Is the district’s contribution rate to special education at or below the statewide average contribution rate? No No 20 6 Is the district’s rate of identification of students as eligible for special education at or below the countywide and statewide average rates? No No 20 7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim reporting period? Yes Yes 20. Special Education Change in number of “No” 2020 2024 responses Yes 3 1 No 4 6 Increased by two N/A 0 0 Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 37 Fiscal Health Risk Analysis Appendix B: Study Agreement Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 38 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 39 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 40 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 41 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 42 Fiscal Health Risk Analysis Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 43 Fiscal Health Risk Analysis Digitally signed by Michael H. Fine Michael H. Fine Date: 2024.09.10 10:06:17 -07'00' Fiscal Crisis and Management Assistance Team Alum Rock Union Elementary School District 44