Glendale Unified School District Management Letter

March 26, 2026 Darneika Watson, Ph.D., Superintendent Glendale Unified School District 223 N. Jackson St. Glendale, CA 91206 Dear Superintendent Watson, The purpose of this letter is to provide the Glendale Unified School District with an update on the progress it has made on each item for which it had a “No” response in the fiscal health risk analysis report dated October 7, 2024. In August 2024, the Glendale Unified School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to conduct a fiscal health risk analysis. The agree- ment stated that FCMAT would perform the following: Prepare an analysis using the 20 factors in FCMAT’s Fiscal Health Risk Analysis and identify the district’s specific risk rating for fiscal insolvency. The report issued in October 2024 contained 54 “No” responses that contributed to the district’s risk for insolvency. FCMAT interviewed district personnel again on February 25-27, 2026, collected data, reviewed supporting documents, and evaluated the district’s status on each item that had a “No” response in the October 2024 report. The following comments summarize the district’s progress. About the Fiscal Health Risk Analysis The Fiscal Crisis and Management Assistance Team (FCMAT) 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 the 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 dis- trict’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. 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 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 over- all solvency. A district should consider completing the FHRA annually to assess its own fiscal health risk and progress over time. Background In October 2024, FCMAT conducted an FHRA for the Glendale Unified School District and found that the district had a high risk of fiscal insolvency. In November 2025, the district requested a follow-up review. This review was limited in scope and focused exclusively on the 54 FHRA questions that originally received a “No” response, each of which contributed to the district’s assessed risk of insolvency. Those questions are outlined below. Consistent with the original analysis, FCMAT did not comment on questions marked “Yes” and included narrative only for questions that continued to receive a “No” response. Because the full FHRA was not reassessed, the follow-up review did not analyze and cannot determine whether the dis- trict’s overall fiscal risk has changed since the original FHRA. FCMAT entered into a study agreement with the Glendale Unified School District on January 14, 2026, and a FCMAT study team conducted virtual fieldwork interviews on February 25-27, 2026. In addition, FCMAT collected data and reviewed documents. Following interviews, the study team continued to review and analyze documents. This management letter is a result of those activities. Study Team The team was composed of the following members: Shayleen Harte Erin Lillibridge, CFE FCMAT Deputy Executive Officer FCMAT Chief Analyst John Lotze FCMAT Technical Writer Each team member reviewed the draft management letter to confirm its accuracy and to achieve consensus on the analysis. Original “No” Responses and Status 1. Annual Independent Audit Report 2024 2026 1.4 Has the district corrected all reported audit findings from the most recent and prior two audits? ................................................................................. No No The district did not correct its 2023-24 state compliance audit finding, which found that some transportation expenses that should have been coded to “other miles” per the California School Accounting Manual were incorrectly coded to home-to-school transportation. This finding was repeated in the 2024-25 audit report. 2 2. Budget Development and Adoption 2024 2026 2.3 Does the district use position control data for budget development? .............................. No No As discussed in section 19 below, the district's position control system lacked sufficient controls and reconciliation to ensure that position data used for developing the 2025-26 budget was complete and accurate. 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)? ................. No Yes 2.7 Does the district budget and expend restricted funds before unrestricted funds? ................... No No The district has not consistently spent restricted funds before unrestricted funds, even as its overall fiscal position has improved. The district's unrestricted general fund balance increased from $19.1 million in 2022-23 to $48.1 million in 2024-25, while the restricted fund balance decreased only slightly, from $66.4 million to $61.7 million, over the same period. The continued carryover of program-specific and discretionary restricted balances shows that the district is still not effectively planning to use restricted funds before relying on unrestricted resources. The district’s 2025-26 first interim financial report shows unspent balances in the Educator Effectiveness Grant and the A-G grants, all of which must be spent by June 30, 2026. The A-G Learning Loss Mitigation Grant balance of $415,452, for example, has remained unspent since 2022-23. The first interim financial report also shows a $5.6 million balance in the Student Support and Professional Development Discretionary Block Grant, which may be used for any general fund purpose. The district has also carried forward approximately $132,000 in the Classified School Employee Professional Development Block Grant since 2022-23. These persistent program-level balances demonstrate that, despite overall increases in reserves, the district needs to improve its prioritization of restricted dollars to ensure their timely expenditure. 2.9 Has the district refrained from including carryover funds in its adopted budget? .................... 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 No Staff reported that grant opportunities are reviewed during executive cabinet meetings; however, the district does not have a documented procedure for evaluating the acceptance of grants or other restricted funds, including their potential multiyear impact on the unrestricted general fund. Although Board Policy 3290 includes some written guidance, it is not well known or sufficient to support consistent day-to-day practice. 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? ........................................................................ No No The district has a budget planning calendar that outlines monthly activities related to budget development, but it does not assign responsibility for these tasks to specific departments or staff members. 3 3. Budget Monitoring and Updates 2024 2026 3.1 Are actual revenues and expenses consistent with the most current budget? ....................... No Yes 3.5 Do the district’s responses fully explain the variances identified in the criteria and standards? .............................................................................. No Yes 3.7 Does the district prohibit processing of requisitions or purchase orders when the budget is insufficient to support the expenditure? ...................................................... No No The district's financial system can prohibit the processing of requisitions or purchase orders when the budget is insufficient to support the expenditure. However, staff reported that this control is not consistently enforced and is often overridden. 3.8 Does the district encumber and adjust encumbrances for salaries and benefits? .................... No No The district's financial system does not encumber salaries and benefits. 6. Collective Bargaining Agreements 2024 2026 6.1 Has the district settled with all its bargaining units for the past two fiscal years? ................... No Yes 6.2 Has the district settled with all its bargaining units for the current year? ........................... No 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? ................................................................... No 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 In November 2024, the district settled with all three bargaining units for a three-year period: 2022-23, 2023-24, and 2024-25. The salary increase was 0% for 2022-23, a 4% ongoing increase retroactive to July 1, 2023 for 2023-24, and a 2% off-schedule payment for 2024-25. In addition, the Glendale Teachers Association (GTA) received 0.2% ongoing increase for stipends and other compensation for 2024-25, and the California School Employees Association (CSEA) received 0.92% ongoing for classification changes for 2024-25. The funded COLA in 2024-25 was 1.07%. The Assembly Bill (AB) 1200 disclosure shows that the total compensation average cost per bargaining unit employee was 8.68% for GTA, 10.92% for CSEA, and 8.97% for the Glendale Schools Management Association (GSMA). In June 2025, the district settled with all three bargaining units for a 4.5% ongoing salary increase effective July 1, 2025. The funded COLA for 2025-26 was 2.3%. The AB 1200 disclosure included GTA, CSEA and GSMA and shows that the total compensation average cost per bargaining unit employee was 1.78%. Savings of approximately $6.8 million from the district changing health insurance providers was used to partially fund the increase in compensation. 4 6.7 Did the district comply with public disclosure requirements under Government Code Sections 3540.2 and 3547.5, and Education Code Section 42142? ............................... No No The district’s 2025-26 settlement with all bargaining units, approved by the governing board on June 24, 2025, did not comply with Government Code 3547.5, which requires the superintendent and chief business official to certify in writing that the district can meet the costs it will incur under the agreement during the term of the agreement. The public disclosure included in the board packet was not signed by either the superintendent or chief business official; instead, it was signed the day after the board took action. 7. Contributions and Transfers 2024 2026 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 The special education program requires a large contribution from the unrestricted general fund annually because of insufficient funding from federal and state resources. This condition is present in all school districts; however, the district does not have a board-approved plan to reduce or control the contribution to the special education program. 8. Deficit Spending (Unrestricted General Fund) 2024 2026 8.1 Is the district avoiding deficit spending in the current fiscal year? ................................. No No The district’s 2025-26 first interim financial report projects deficit spending of $2.1 million in the unrestricted general fund. 8.2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? ................................................................................ No No The 2025-26 first interim financial report projects no deficit spending in the unrestricted general fund for 2026-27; however, it projects deficit spending of $2.8 million in the unrestricted general fund for 2027-28. 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 The district does not have a board-approved plan to reduce and/or eliminate deficit spending. 8.4 Has the district decreased deficit spending over the past two fiscal years? ......................... No No The district’s 2023-24 and 2024-25 unaudited actuals reports show that the district had no deficit spending in the unrestricted general fund for those years; however, the district’s 2025-26 first interim financial report shows that the district is projected to deficit spend approximately $2.1 million in the unrestricted general fund for 2025-26. 5 9. Employee Benefits 2024 2026 9.3 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? .......................................................................... No No The district provided FCMAT with a current report detailing employee leave balances. The report shows many employees with a vacation accrual in excess of the collectively bargained agreement to limit accrued vacation balances to two years of actual earned vacation for its classified staff. 9.5 Does the district track, reconcile and report employees’ compensated leave balances? ................. No No Interviewees indicated that leave balances on employee paychecks are sometimes inaccurate and not up to date. The district is implementing Frontline Time and Attendance, which allows employees to access their leave balances in real time. 11. Facilities 2024 2026 11.4 Does the district use its facilities fully in accordance with the Office of Public School Construction’s loading standards? ............................................................ 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? ................................... No Yes 11.8 Does the district have a long-range facilities master plan that reflects its current and projected facility needs? ..................................................................... No No The district does not have a board-approved long-range facilities master plan completed within the last five years. A new plan is in development and is tentatively scheduled to be presented to the board for review and approval at its April 7, 2026 meeting. 12. Fund Balance and Reserve for Economic Uncertainty 2024 2026 12.2 Is the district able to maintain the minimum reserve for economic uncertainty in the two subsequent years? ....................................................................... No Yes 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 N/A 12.4 Is the district’s projected unrestricted fund balance stable or increasing in the two subsequent fiscal years? ..................................................................... No Yes 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? ................. No Yes 6 13. General Fund – Current Year 2024 2026 13.1 Does the district ensure that one-time revenues do not pay for ongoing expenditures? .............. No Yes 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 Yes 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 Yes 13.6 Is the district using its restricted dollars fully by expending allocations for restricted programs within the required time? ............................................................ No 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 The 2024-25 unaudited actuals report shows that although the district charges the maximum allowable indirect cost rate for most restricted programs, it does not do so for its food services program, and it charges no indirect costs to some of its special education resources. 14. Information Systems and Data Management 2024 2026 14.1 Does the district use an integrated financial and human resources system? ........................ No No The district’s financial and human resources systems are not integrated; therefore, additional procedures are required to synchronize and reconcile data between the systems to ensure timeliness and accuracy. 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? .............................. No Yes 15. Internal Controls and Fraud Prevention 2024 2026 15.3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored? • Accounts receivable (AR) .................................................................. No No One staff member continues to generate invoices, receive payments, and prepare deposits. To create segregation of duties, the individual responsi- ble for generating invoices should not have access to payments received for those invoices. District staff reported that schools and departments forward certain cash receipts (e.g., donations, child development payments) to the district office for deposit in the county treasury. These deposits often include cash, but only one individual in the district office counts the cash receipts to prepare the deposit. Two people should perform and confirm the cash count. 7 • Payroll .................................................................................. No No Payroll staff continue to edit positions and pay rates in the payroll system based on information provided by the Human Resources Department. Although financial services staff audit payroll after it is paid, the district should ensure proper segregation of duties so that the employee who processes payroll does not also add or change employee pay and position information in the system. Payroll warrants are printed at the county office of education and continue to be collected and distributed by the district staff members who process them. To strengthen segregation of duties, an employee responsible for processing payroll should not have access to any completed and printed payroll warrants that they processed. • Human resources (i.e., duties relative to position control and payroll processes) ................. No No As noted above, payroll rather than human resources staff enter employee position and payroll information into the financial system. 15.7 Does the district have processes and procedures to discourage and detect fraud? .................. No No The district continues to lack adequate internal controls to discourage and detect fraud, and it has no clear process for reporting concerns. The persistent control weaknesses in accounts receivable and payroll discussed in this report increase the risk of 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? ......................... No No The district maintains a tip line promoted as, "If You See Something, Say Something!" However, interviews with both new and longtime staff indicated that it is not well known. The district also lacks a formal documented process for collecting, tracking and following up on potential fraud reports. 16. Leadership and Stability 2024 2026 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? ...................................................... No No The district’s assistant superintendent of business services (chief business official) started July 1, 2025. 16.2 Does the district have a superintendent who has been with the district as superintendent for more than two years? ..................................................................... No Yes 17. Multiyear Projections 2024 2026 17.3 Does the district use its most current multiyear projection in making financial decisions? .......................................................................... No Yes 8 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 The district’s 2025-26 first interim financial report included adjustments in Form MYP, specifically in lines B1d and B2d. Section F, Assumptions, of the Form MYP stated, “B1d reflects projected savings, step increases, enrollment changes, retiree savings, attrition savings. B2d reflects projected salary savings, attrition savings, step and column increases.” However, the information included in Section F lacked pertinent details to ensure the adjustments were reasonable. 19. Position Control 2024 2026 19.1 Does the district account for all positions and costs? ............................................ No Yes 19.3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim reporting periods? ....................................................... No No The district uses two systems for its position control processes. Since the last review, the Human Resources Department has transitioned to mainly using Frontline to track positions, while the Business Services Department continues to rely on HRS. Staff reported progress in reconciling data between the systems, leading to adjustments in the 2025-26 first interim financial report. These adjustments reduced certificated salary costs by approximately $4.5 million and classified salary costs by approximately $1.4 million, because the district stopped its practice of budgeting for certain vacant positions. These actions show improvement; however, the district has not fully established regular reconciliation at budget adoption and interim reporting periods; rather, this remains a work in progress. 19.5 Does the governing board approve all new positions and extra assignments (e.g., stipends) before positions are posted? .................................................................. No Yes 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 20. Special Education 2024 2026 20.2 Does the district access available funding sources for costs related to special education (e.g., excess cost pool, legal fees, mental health)? ............................................... No Yes 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 Yes 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)? ........................................................................ No No 9 According to the district’s 2025-26 first interim financial report, it does not charge indirect costs to all its special education resources. This results in an undervaluation of the true cost of the program. 20.7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim reporting period? ................................................................ No Yes October 2024……………………………..54 “No” responses March 2026……………..…………………28 “No” responses Thank you for choosing FCMAT to be of service. We hope this management letter will benefit your district and the students we all serve. Sincerely, Michael H. Fine FCMAT Chief Executive Officer 10 Appendix Study Agreement 11 12 13 14 15 16 17 16. CLIENT CONTACT PERSON The Client's contact person designated below shall be the primary contact person for FCMAT to use in communicating with the Client on matters related to this Agreement. At any time when this Agreement orF CMA T's process requires that FCMAT send information, document request lists, draft management letter or final management letter, or whenF CMAT makes other requests for the Client to act upon, this is the person whom FCMAT will contact. The Client may change the contact person upon written notice to FCMA T's job lead assigned to the study. Name: William Young Telephone: (818) 241-3111 Email: williamyoung@gusd.net 17. SIGNATURES Each individual executing this Agreement on behalf of a party hereto represents and warrants that he or she is duly authorized by all necessary and appropriate action to execute this Agreement o ehalf of such rty and does so with full legal authority. ika Watson, h.D. Date perintendent Glendale Unified School District ForFCMAT: Digitally signed by Michael H. Fine Michael H. Fine Date: 2026.01.13 18:15:34 -08'00' Michael H. Fine, Date Chief Executive Officer Fiscal Crisis and Management Assistance Team 7 V010262024 18