Los Angeles County Office of Education Report

Annual Review December 17, 2024 Los Angeles County Office of Education Michael H. Fine Chief Executive Officer December 17, 2024 Debra Duardo, Superintendent Los Angeles County Office of Education 9300 Imperial Highway Downey, CA 90242 Dear Superintendent Duardo: In June 2020, the Los Angeles County Superintendent of Schools entered into an agreement with the Fiscal Crisis and Management Assistance Team (FCMAT) for FCMAT to perform the following: Prepare an initial analysis of the county office fiscal oversight provided to the Inglewood Unified School District using FCMAT’s County Office Evaluation Tool [County Superintendent of Schools Oversight Evaluation Tool], and make recommendations for improvement, if any. The June 2020 study agreement also covers annual follow-up evaluations. This report contains the FCMAT study team’s findings and recommendations from the third annual eval- uation of the Los Angeles County Superintendent of Schools’ oversight of the Inglewood Unified School District. FCMAT appreciates the opportunity to serve the Los Angeles County Office of Education and extends thanks to its staff for their cooperation and assistance during this review. 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 Table of Contents Table of Contents About FCMAT ...................................................................................................ii Introduction .......................................................................................................1 Background .............................................................................................................................1 County Superintendent of Schools Oversight Evaluation Guidelines ......................1 Study Team .............................................................................................................................2 County Superintendent of Schools Oversight Evaluation Tool ..........3 Summary ...........................................................................................................3 Findings ............................................................................................................5 Conclusions and Recommendations .......................................................14 Appendices .....................................................................................................15 Appendix A – Administrator Roles and Responsibilities ..............................16 Appendix B – Study Agreement .........................................................................19 Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education i 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 ser- vices 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 1992 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. seidutS fo rebmuN AB 1840 Annual Evaluation About FCMAT 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 Crisis and Management Assistance Team Los Angeles County Office of Education ii AB 1840 Annual Evaluation About FCMAT 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 responsibili- ties 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 dis- tricts 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. 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 Los Angeles County Office of Education iii AB 1840 Annual Evaluation Introduction Introduction Background In September 2018, Governor Brown signed Assembly Bill (AB) 1840 (Chapter 426, Statutes of 2018), introduc- ing a significant change in the administration of insolvent school districts that receive state emergency appro- priations. Under this legislation, codified in Education Code (EC) 41326(l), the Fiscal Crisis and Management Assistance Team (FCMAT) is tasked with reviewing the fiscal oversight performed by the county superinten- dent of schools for any school district receiving an emergency apportionment. FCMAT must report its find- ings to the Legislature and provide a copy of the oversight evaluation report to the Department of Finance, the superintendent of public instruction, and the State Board of Education president or their designee. Each report must include findings regarding the fiscal oversight actions that were or were not taken and may con- tain recommendations for legislative measures to improve fiscal oversight of school districts. In the years following the initial FCMAT report on the fiscal oversight performed by the county superin- tendent, FCMAT will conduct annual reviews until the school district exits receivership. These reviews will assess the effectiveness of the county superintendent’s oversight and their involvement with the school district, including during the period that led to the district’s declaration of insolvency. In February 2012, the Inglewood Unified School District governing board declared the district fiscally insolvent. On September 14, 2012, the governor approved Senate Bill 533 (Chapter 325, Statutes of 2012), bringing the district under state receivership with a state-approved emergency appropriation of $55 mil- lion. This declaration occurred after several years of financial struggles and intense monitoring by the Los Angeles County Superintendent of Schools. The issues that eventually led to the district’s insolvency were many but included consistently overstating average daily attendance (ADA), understating California State Teachers’ Retirement System payments, understating certificated salary expenses, continued deficit spend- ing, and declining enrollment. In addition, the district experienced mismanagement, frequent and ongoing turnover in senior staff, and flawed facilities management. The district’s administration and governing board tried to avoid the takeover with last-minute expenditure reductions, but after years of deficit spending, the structural budget imbalance was too large, and the district projected a negative cash balance would occur on March 31, 2013. County Superintendent of Schools Oversight Evaluation Guidelines FCMAT entered into a study agreement with the Los Angeles County Superintendent of Schools on February 4, 2020 for both the initial and annual evaluations required by EC 41326(l). A study team visited the county superintendent’s office on October 28, 2020 for the initial evaluation, on March 10, 2022 for the first annual evaluation, on September 13, 2023 for the second annual evaluation, and on October 2, 2024 for the current evaluation, to conduct interviews, collect data and review documents. Following the field- work, the study team continued to review and analyze the documents and data. This report is the result of those activities and actions related to the current evaluation. FCMAT’s reports focus on systems and processes that may need improvement. Those that may be func- tioning well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Associated Press Stylebook and its own short internal style guide, which emphasize plain language, capital- ize relatively few terms, and strive for conciseness, clarity and simplicity. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 1 AB 1840 Annual Evaluation Introduction Study Team The team was composed of the following members: Debbie Riedmiller Misty Key FCMAT Chief Analyst FCMAT Consultant Leonel Martinez Sheldon Smith FCMAT Technical Writer FCMAT Consultant Nicolas Schweizer FCMAT Consultant Those members of this study team who are otherwise employed by a local educational agency were not representing their respective employers but were working solely as independent contractors for FCMAT. Each team member reviewed the draft report to confirm accuracy and achieve consensus on the analysis. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 2 AB 1840 Annual Evaluation Introduction County Superintendent of Schools Oversight Evaluation Tool FCMAT has developed the County Superintendent of Schools Oversight Evaluation Tool for both initial and annual evaluations. This tool is designed to help assess the effectiveness of a county superintendent of schools’ fiscal oversight and support of school districts that have received emergency apportionments. The annual oversight evaluation tool comprises 23 questions and is intended to satisfy the requirements of EC 41326(l) for reviewing and assessing the county superintendent’s fiscal oversight and support related to a school district’s recovery from insolvency. This tool focuses on the status of the district’s recovery, the ongoing implementation of its long-range recovery plan (LRRP), its multiyear financial projection, the role of the administrator or trustee, and how the county superintendent is addressing elements that received an answer of “No” in the initial evaluation. FCMAT used the annual oversight evaluation tool during interviews with multiple staff members from both the district and the county superintendent’s office, as well as the administrator. The oversight evaluation tool identifies the key oversight responsibilities of the county superintendent in their fiscal oversight and support of the district, as well as their ability to communicate effectively with the administrator, district staff, and advisory board. FCMAT also gathered information through an initial docu- ment request before the on-site interviews. The team’s conclusions are compiled in the report as a narra- tive, with recommendations included where appropriate. In addition, the team addressed questions related to the overall implementation of EC 41326(l) and made recommendations to support that process, including a restatement of the administrator’s specific roles and responsibilities. The county superintendent’s objective, supported by the administrator and other components of an insolvency recovery team (including FCMAT, the California Collaborative for Educational Excellence, the California Department of Education, and the Los Angeles County Superintendent of Schools staff), is to facilitate the full recovery of the Inglewood Unified School District. This involves addressing the major elements of the LRRP to ensure the district can govern independently, maintain solvency, and effectively support the education of its students. County Office Name: Los Angeles County Office of Education Date(s) of Fieldwork: October 2, 2024 Summary The Los Angeles County Superintendent of Schools provides fiscal oversight to all the county’s school dis- tricts pursuant to Assembly Bill 1200 (Chapter 1213, Statutes of 1991), which was signed into law in 1991. This responsibility is outlined in Article 2, Chapter 6 of Part 24 of the Education Code, beginning with Section 42120 and/or Section 1240(b). During the initial evaluation under EC 41326(l), FCMAT assessed the county superintendent’s involvement with the district throughout the course of their normal oversight responsibilities, up to and including the date of evaluation, and specifically during the period leading up to the district’s declaration of insolvency. The assessment involved analyzing historical and current documents prepared by county office staff, as well as asking a series of questions related to the time leading up to the insolvency. FCMAT also reviewed the county superintendent’s oversight practices and conducted interviews with district staff and other key individuals involved in the oversight process. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 3 AB 1840 Annual Evaluation Introduction The annual evaluation focuses on the status of the district’s recovery, assessing the progress made since the last review and evaluating the effectiveness of the county superintendent in supporting the district’s staff, advisory board, and administrator in their efforts to help the district return to fiscal solvency. In addi- tion, the annual evaluation examines any areas that were marked as “No” on the initial evaluation to deter- mine if those issues are being addressed. FCMAT’s findings indicate that the fiscal oversight actions taken by the county superintendent during the study period complied with the Education Code. The county superintendent’s process for reviewing budget and interim reports is thorough and well-documented and complies with the State Standards and Criteria for Fiscal Solvency. The full recovery of the Inglewood Unified School District is clearly a top priority for the county superin- tendent. When oversight shifted from the state superintendent to the county superintendent, the county superintendent implemented a comprehensive support model for the district that included providing a county office support team to the district to work closely with district staff focused on building district staff capacity. As district staff gained capacity, full-time county office staff members were withdrawn. At the time of fieldwork, no full-time county office staff members were based in the district; however, various county office staff members visit the district at least twice a month to provide support and build capacity. County office and district staff meet regularly to review FCMAT reports and develop action plans. In addi- tion, county office business services staff have separate regular meetings with the district CBO to monitor and support the district’s fiscal department’s implementation of actions to address issues identified in the FCMAT reports, audit reports, and other fiscal issues. The current administrator, appointed in January 2023, has been particularly successful in making conten- tious but necessary decisions while still building positive relationships with the advisory board and com- munity. The administrator continues to build trust within the district and the community and has cultivated partnerships with various community service and governmental organizations to benefit the district. Over the last year, the county superintendent has been supportive and communicates often with the county administrator. The county superintendent and administrator meet frequently to discuss the actions and plans needed to accomplish the goals of the comprehensive review with the primary objective of improving student outcomes, restoring fiscal solvency, and returning the district to local control. The district made progress toward implementing the recommendations of the comprehensive review over the last year in each of the four operational areas reviewed. However, additional progress is needed before the restoration of governing authority to the board and appointment of a trustee. Progress toward recovery is hindered by a variety of factors including staff turnover, declining enrollment, low attendance rates, and increasing special education costs. The district’s 2024-25 adopted budget and multiyear projection (MYP) reports show deficit spending in the current and two subsequent years, with the unrestricted general fund ending balance projecting a decline from $69.8 million at the beginning of 2024-25 to $11.4 million by the end of 2026-27. The projected defi- cit spending is partly due to the spend down of supplemental and concentration grant carryover funds (unspent funds received in a prior year) and expiring one-time COVID relief funds, but is also caused by overstaffing, underutilized facilities, and overbudgeted expenditures. The expenditure reductions included in the district’s fiscal stabilization plan (FSP) submitted with its 2024-25 adopted budget do not appear to be reasonable and attainable. The county superintendent directed the district to revise the FSP and submit it with the 2024-25 first interim report. The failure to implement components of the FSP is an ongoing concern. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 4 AB 1840 Annual Evaluation Findings Findings This section focuses on FCMAT’s review of the Los Angeles County Superintendent of Schools’ fiscal over- sight actions. Each assessed area is listed below along with an associated narrative, and where applicable, recommendations for improvement. Any material deficits identified in these areas are noted within the narrative. 1) Did the administrator develop the long-range recovery plan (LRRP) within the statutory timelines? Alternatively, did the county superintendent of schools adopt the FCMAT Comprehensive Review in lieu of the LRRP? The county superintendent and the county administrator use the FCMAT Comprehensive Review in lieu of the LRRP. The last comprehensive review is dated July 2024 and indicates that the district has made progress in all four operational areas reviewed (personnel management, pupil achievement, financial management, and facilities management). The operational area of commu- nity relations and governance is no longer reviewed since the district reached the minimum mile- stone score of six, with no individual standard scoring less than four for two consecutive years. In July 2024, the district reached the minimum score of six with no individual standard scoring less than four in the operational areas of personnel management and pupil achievement. If the district maintains its scores for the next comprehensive review, those operational areas will exit review. Progress was made in the areas of financial management and facilities management, but each area still has several standards scoring below four. 2) What role has the county superintendent played in supporting the district with the LRRP or com- prehensive review? What process has the county superintendent used to monitor the progress of implementing the recommendations from the LRRP or comprehensive review? The county superintendent appointed a very competent, experienced, and driven school admin- istrator to the county administrator role in January 2023 to lead the district. Further, the county superintendent has made it explicitly clear that the district’s recovery is a top priority. The county administrator established a positive, productive working relationship with county office staff and is recognized as a consistent, reputable, and effective intermediary between the county office and the district. Since AB 1840 was enacted, transferring oversight of the district from the state to the county, the county superintendent has provided numerous staff to support the district, at one time having five county office staff members assigned full-time in the district. Over the last year, several county office staff have been assigned to the district to provide training in the areas of business and facilities. As district staff gained capacity, the county superintendent withdrew the full-time staff. County office legal services staff continue to advise the district regarding lawsuits and contracts. At the time of fieldwork, no full-time county office staff were stationed in the district; however, county office staff visit the district frequently to provide support. The county office business services director and business services consultant meet with the school district at least two times a month. Agenda topics at the standing meeting include issues related to multiyear projection (MYP) assumptions, fiscal stabilization plan, school closure and consolidation plan, cash flow monitoring, audit findings, facilities, and other day-to-day business services func- tions. Other county office staff are available as needed. Interviews indicated that the county superintendent does not use a formal documentation or track- ing document to monitor the district’s progress of implementing the recommendations from the Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 5 AB 1840 Annual Evaluation Findings comprehensive review; however, county office technology services staff created a dashboard that provides a snapshot view of the district’s annual progress since 2013. The snapshot shows the average rating for all standards combined for each year and the average rating each year for each individual operational area. At the time of fieldwork, the dashboard had not yet been updated to include the 2024 scores. The dashboard replicates and summarizes the comprehensive review results but does not report on monthly changes or progress leading to the next comprehensive review evaluation. The county superintendent monitors the district’s progress in implementing the recommendations of the comprehensive review via ongoing updates from the county administrator. The county super- intendent and administrator have regular, biweekly meetings and also communicate frequently as issues arise. The district does not use a formal tracking tool, but the new district CBO plans to develop and deploy a Google tracking document tied to each position in the business office to measure progress against the comprehensive review’s findings. The district’s tracking document should also include audit findings and monitor implementation of the auditor’s recommendations. 3) Does the county superintendent have a plan for restoring governance authority to the district's advisory board? The district’s five-member advisory board will continue to serve in an advisory capacity until the following two events occur: • The district shows adequate progress in implementing the comprehensive review recommendations in the five operational areas of community relations and gover- nance, personnel management, pupil achievement, financial management, and facilities management. • The county superintendent, with concurrence from the state superintendent of instruc- tion and president of the State Board of Education, determines that the district has built sufficient capacity to self-govern. The district has not shown adequate progress in implementing the comprehensive review recom- mendations in all five operational areas. At this time, there is inadequate progress for the return of governance authority to the district’s advisory board. 4) Has the administrator developed a multiyear financial recovery plan for the district in collabora- tion with the county superintendent? Has this plan been implemented? The county administrator meets with district cabinet members to develop the Fiscal Stabilization Plan (FSP). The district submits an updated FSP to the county superintendent at each financial reporting period. The FSP submitted with the district’s 2024-25 budget included expenditure reduc- tions of $14.2 million for 2024-25, $8.5 million for 2025-26 and $1.7 million for 2026-27. The FSP was developed by the district’s former CBO, and no detail was provided to support the expenditure reductions. County office staff and the new district CBO are not confident that the reductions listed in the plan are realistic and attainable. The county office business services director and the county office chief financial officer worked with the district’s new CBO over the summer to develop a more reasonable plan. A revised FSP will be submitted with the district’s 2024-25 first interim report. The district has not fully implemented previous FSPs. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 6 AB 1840 Annual Evaluation Findings The district continues to make expenditure reductions. Pandemic funding received in recent years has allowed the district to minimize reductions because some unrestricted expenditures were tem- porarily moved to restricted funding sources. Moving forward, without the one-time pandemic fund- ing, the district will need to implement the reductions outlined in its FSP. The district formed the school closure/consolidation committee to evaluate recommendations regarding school closures and consolidations. The committee met six times between October 2022 and January 2023. The district closed one school in January 2024, and in March 2024, the county administrator announced the closure or consolidation of five schools at the end of the 2024-25 school year. In June 2024, the administrator approved a resolution establishing the equity impact analysis metrics for the consider- ation of school closures and consolidations pursuant to EC 41329. The district’s asset management advisory committee continues to meet to provide the district with recommendations about the use or disposition of district property. 5) What is the status of the district’s budget concerning deficit spending, fund balance, and reserve for economic uncertainties? The district’s 2024-25 adopted budget and MYP show deficit spending in the unrestricted general fund of $26.5 million in 2024-25, $13.5 million in 2025-26 and $18.4 million in 2026-27. The district projects the unrestricted general fund balance to decline from $69.8 million at the beginning of 2024-25 to $11.4 million by the end of 2026-27. The district’s required reserve amount in 2024-25 is $5.9 million. The district projects a reserve percentage of 3% in the current and two subsequent fiscal years. The projected deficit spending is partly due to the spend down of prior year supple- mental and concentration grant carryover funds (unspent funds received in a prior year) and expir- ing one-time COVID relief funds, but is also caused by overstaffing, underutilized facilities, and overbudgeting for expenditures. The district’s 2024-25 adopted budget showed estimated unre- stricted expenditures of $92.2 million for 2023-24; the 2023-24 unaudited actuals report showed $78.0 million. Instead of a projected surplus of $2.9 million, the district ended fiscal year 2023-24 with a surplus of $17.2 million (unaudited). This is a pattern that FCMAT has observed over the past several years and calls into question the district’s approach to budgeting, monitoring and finan- cial projections. The district’s unrestricted ending fund balance has grown over the last several years because of the influx of one-time pandemic relief funds; however, those resources are nearly depleted, and the district must make significant reductions to its ongoing expenditures to maintain long-term fiscal solvency. 6) What process does the county superintendent use to assess the district’s cash flow, and how fre- quently do they perform this assessment? County office staff review the district’s cash flow projections for reasonability at each financial reporting period. In addition, the county office requires the district to submit an updated, board-ap- proved general fund cash flow projection monthly. County office staff review cash balances in the financial system weekly. The oversight review checklist indicates that county office business ser- vices staff verify that no cash shortfalls are projected in any month, and the projection reflects suf- ficient cash balances to meet its financial obligations in the current fiscal year. The checklist notes the amount of cash in other funds available for borrowing. The district routinely adopts an annual resolution to authorize temporary interfund borrowing. The district has not needed to use interfund borrowing in the last year. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 7 AB 1840 Annual Evaluation Findings 7) In the prior year, did the county superintendent, in coordination with other state agencies, autho- rize additional draws against the district’s emergency appropriation? If so, how were the draws used? No draws against the emergency appropriation have been made since 2013. 8) If the district authorized additional draws against the emergency appropriation, is the receipt of the additional cash aligned with the cash flow projections? Not applicable. 9) Has the county superintendent performed a thorough examination of the district’s adopted budget and interim reports for compliance with the State Standards and Criteria for Fiscal Solven- cy, as evidenced by fiscal oversight review checklists or other documentation? Does the county superintendent identify and communicate to the district any necessary technical corrections? County office staff thoroughly review the district’s adopted budget and interim reports for compli- ance with the State Standards and Criteria for Fiscal Solvency and the process is well documented. The budget and interim review process includes checking if the district included requested action items. The budget and interim review letters to the district note concerns such as deficit spending, declining unrestricted general fund ending balance, declining enrollment and attendance and the resulting decline in state funding and increasing contributions to the special education program. The letters remind the district to assess staffing and facilities needs and adjust them based on the decline in enrollment. Technical corrections are not communicated to the district in writing, but instead are communicated verbally. It is a common practice for county superintendents to communicate technical corrections to districts in a separate technical corrections letter. The county superintendent should communi- cate technical corrections in writing to the district CBO. 10) Does the county superintendent evaluate whether the district’s budget aligns with its financial recovery plan and will enable the district to meet its financial obligations? This includes ensur- ing the budget will allow the district to satisfy its multiyear financial commitments and maintain a combined assigned and unassigned ending fund balance that meets or exceeds the minimum recommended reserve for economic uncertainties. The county superintendent performs this evaluation and communicates concerns to the district through budget and interim report letters. Documentation shows that the financial review by county office staff includes an evaluation of the reasonableness of the district’s budget and MYP assump- tions, budgeted revenue and expenditure estimates, and whether the minimum reserve for eco- nomic uncertainties is met for the current and two subsequent fiscal years. The district is projecting deficit spending in each of the three years of its MYP, and it projects a decline of $58.4 million in its unrestricted general fund ending balance over three years. However, the district has a beginning fund balance of $69.8 million (35% of its total expenditures and other financing uses). The deficit partly reflects the spend down of carryover supplemental and concen- tration grant funds and expiring COVID relief funds but can also be attributed to declining reve- nues due to declining enrollment and attendance. While the district’s 2024-25 budget MYP shows a reserve percentage of 3% in each of the three years of the projection, the calculated reserve including Fund 17 and assigned and committed amounts is 27.31% in 2024-25, 23.07% in 2025-26 and 12.62% in 2026-27. The county superintendent’s budget and interim review letters continue to Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 8 AB 1840 Annual Evaluation Findings remind the district to implement the reductions outlined in the FSP and require the district to submit an updated FSP with each reporting period. 11) If the district is deficit spending, does the county superintendent note the levels of deficit spend- ing and communicate their concerns to the district advisory board through the budget and/or interim report letters? The county superintendent identifies the projected deficit amounts for the current and two subse- quent years and communicates this to the county administrator through budget and interim review letters. The advisory board president is copied on this communication. These letters also outline any additional concerns, such as a declining general fund ending balance, declining enrollment and average daily attendance and the related reduction in state funding, and escalating special educa- tion program costs. In her letters to the district, the county superintendent reminds the district to follow through with the implementation of expenditure reductions outlined in the FSP and to evalu- ate and align staffing and facilities with declining enrollment. FCMAT recommends that the county superintendent address the budget and interim review letters to both the county administrator and the advisory board president. The district’s historical failures to implement all the components of past FSPs is an ongoing concern that requires attention. The county superintendent has the authority to implement the components of the FSP through direction to the county administrator. 12) Does the county superintendent verify whether the district’s budgeted expenditures are sufficient to implement its Local Control Accountability Plan (LCAP)? The county superintendent’s budget review process includes verifying whether the district’s bud- geted expenditures are sufficient to implement the planned actions and services identified in its LCAP. The county superintendent encourages the district to submit a draft LCAP to the county office for review prior to placing it on the board agenda for public review so that any needed adjustments may be made. A county office cabinet member is assigned to assist the district with the implemen- tation of the plans and actions included in its LCAP and visits the district once or twice a month. 13) Does the county superintendent verify whether the district identified the amount of carryover of prior year supplemental and concentration grant funds in its LCAP? If these funds are being carried over, does the county superintendent verify whether the district has either included their expenditure in the LCAP for the subsequent year and in its budget and multiyear projection, or reserved the funds in its fund balance? The district has a large carryover of supplemental and concentration grant funds because over the past several years, it has used one-time pandemic relief funds to serve students. The county superintendent and staff work closely with the county administrator and district staff to ensure that the budget includes these carryover funds. The county superintendent’s letter to the district indi- cates that the budget includes sufficient expenditures to implement the LCAP and the calculation and implementation of carryover is included. The letter reminds the district that supplemental and concentration grant funding, including carryover, should be fully expended in each fiscal year to increase and improve services to targeted student groups. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 9 AB 1840 Annual Evaluation Findings 14) Does the county superintendent review the accuracy of the district’s public disclosure of collec- tive bargaining agreements, provide comments on the viability and affordability of these agree- ments, and verify whether the district has adopted all necessary budget revisions in the current fiscal year to meet the costs of the agreements? On May 22, 2024 the county administrator approved the public disclosure of collective bargaining agreements and tentative agreements with its classified, certificated, and classified management employee groups. The settlement was for a 5% off-schedule retention bonus for those employed as of March 1, 2024. The county superintendent reviewed the public disclosure of collective bar- gaining agreements, and the letter to the district dated May 3, 2024 stated that the bonus is funded with Elementary and Secondary School Emergency Relief (ESSER) III funds, and the district is able to maintain the reserve for economic uncertainty. The letter reminded the district to adopt budget revisions within 45 days. On August 7, 2024, the county superintendent provided a letter regarding the district’s tentative collective bargaining agreements with its certificated, classified, and management employees for a 2% increase to the salary schedule, and noted that projections show the district would meet its required reserves during the term of the agreement. The letter reminded the district that it need- ed to send to the county superintendent any revisions to the district’s current budget to fulfill the agreement within 45 days of adoption. Budget adjustments were included in the district’s 45-day budget revision. 15) Does the county superintendent review information provided by the district regarding the is- suance of non-voter-approved debt and provide comment to the district advisory board on the district’s ability to repay its obligations within 15 days of receiving the information? The district has not issued any non-voter-approved debt since the last review. 16) Has the county superintendent performed timely evaluations of the administrator? The county superintendent signed the county administrator’s annual evaluation on May 30, 2024. The county superintendent expressed “complete confidence and trust” in the county administra- tor’s ability to lead the district out of receivership. The county superintendent set specific goals for the county administrator with a timeline for implementation. The evaluation reflects the prog- ress toward those goals. 17) Has the administrator, in collaboration with the county superintendent, created a plan to develop the governing capacity of the district advisory board? Is this plan being implemented? No evidence was provided of a written plan developed by the administrator and county superin- tendent to develop the district advisory board’s governing capacity. However, the county admin- istrator indicated that the district’s advisory board is developing the skills needed to assume gov- ernance of the district. Each advisory board member has completed the California School Boards Association’s Masters in Governance program, which has increased their knowledge and skills related to governance standards. The advisory board also participates in board retreats led by the county administrator. The district advisory board president indicated that each advisory board member serves on a district committee related to audit, budget, LCAP and other committees. The county administrator indicated that he treats the advisory board members much like gov- erning board members to prepare them to resume governance. The county administrator offers Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 10 AB 1840 Annual Evaluation Findings regular one-on-one meetings with advisory board members to review agenda items before meetings. The county administrator often includes them in the closed session of board meetings to talk through decisions regarding property negotiations and student expulsions, and they are included in the final round of interviews for cabinet-level positions. The county administrator is working to help the advisory board members understand their role and function so when gover- nance is returned to the board, the practices and capacity remain. 18) Has the county superintendent submitted the district’s adopted budget and interim reports to the State Superintendent of Public Instruction (SPI), the State Board of Education president or their designee, the Legislature, and the Director of Finance in accordance with Education Code (EC) 41327.2? Has the county superintendent documented the district’s fiscal and administrative status, particularly regarding the implementation of the LRRP or comprehensive review? After reviewing the district’s budget and interim reports, the county superintendent is required to submit reports to the appropriate agencies. In compliance with the Education Code, the reports: … shall document the fiscal and administrative status of the qualifying school district, partic- ularly in regard to the implementation of fiscal and management recovery plans. Each report shall also include a determination of whether the revenue streams to the school district ap- pear to be consistent with its expenditure plan, according to the most recent data available at the time of the report. During fieldwork, no evidence was provided that the county superintendent submits these re- ports to each of the appropriate agencies after reviewing the district’s budget and interim reports. However, the SPI and state controller are copied on all budget and interim review letters. FCMAT recommends that the county superintendent submit the required reports to the named agencies in accordance with EC 41327.2 and copy the SBE, the Legislature, and the director of finance on the county superintendent’s budget and interim review letters. A cover letter summa- rizing the fiscal and administrative status of the district regarding the implementation of recov- ery plans and whether district revenues appear to be consistent with its expenditures would be helpful. The county superintendent submitted an update on the district’s progress of implementing the recommendations of the comprehensive review to the appropriate agencies on August 21, 2024. On November 15, 2024, the county superintendent forwarded a copy of the county adminis- trator’s annual report required by EC 41327(a)(3) to the SBE, the Legislature, and the director of finance. 19) Has the administrator prepared or obtained a multiyear financial recovery plan for the district by July 1, including a plan to repay any state loans owed by the district, and secured the county superintendent’s approval for the plan in accordance with EC 41327(a)(2)? On June 26, 2024, the county administrator approved an updated FSP and the 2024-25 adopted budget. The FSP was developed in collaboration with district cabinet members. It includes reduc- tions and cost-saving measures to be implemented over the next three years. The FSP shows ex- penditure reductions to certificated and classified salaries and benefits, supplies, and services of $14.2 million in 2024-25, $8.5 million in 2025-26, and $1.7 million in 2026-27. The district’s 2024- 25 adopted budget narrative indicates that the reductions have been included in the budget and Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 11 AB 1840 Annual Evaluation Findings MYP. The district’s MYP still shows deficit spending, and the district has not fully implemented previous FSPs. The county superintendent’s budget and interim review letters remind the district that it is required to submit a revised FSP with each reporting period with updates on implemen- tation. The annual debt service payment on the state emergency loan is included in each budget and MYP. 20) Has the administrator prepared an annual report on the district’s financial condition that includes all the elements required by EC 41327(a)(3)? The annual report on the district’s financial condition was prepared by the administrator and sent to the county superintendent on September 18, 2024. The report listed and included the documents requested by FCMAT for its annual county superintendent oversight evaluation. This technically complied with the requirements of the Education Code but could be more succinctly presented given the recipients. The report is required to include the following: A. Specific actions taken to reduce school district expenditures or increase income to the school district, and the amount of the resulting cost savings and increases in income. B. A copy of the adopted school district budget for the current fiscal year. C. The amount of the school district budgetary reserve. D. The status of employee contracts. E. Any obstacles to the implementation of the recovery plans. The county superintendent sent the annual report to the superintendent of public instruction on September 20, 2024. 21) Has the administrator, with the county superintendent’s approval, entered into agreements and contractual obligations for the district, and/or changed existing district rules, regulations, policies or practices, to implement the district’s recovery plan in accordance with EC 41327(c)? The administrator continues to work on elements of the comprehensive review and implement policies and practices recommended in the review. The district contracted with School Services of California to conduct an organizational structure and staffing review of its educational services, special education, student support services, human resources and business services (including fiscal, food services, and facilities, maintenance and transportation) departments. The review was completed on August 26, 2024. The administrator has begun to implement some of the recommen- dations from the review. In March 2024, the administrator announced plans to close or consolidate five schools at the end of the 2024-25 school year. In June 2024, the county administrator approved a resolution establish- ing the equity impact analysis metrics for the consideration of school closures and consolidations. Various options for the use of unused sites and properties are being discussed. The Core Knowledge Language Arts (CKLA) program was implemented at four schools in 2023-24 and will be expanded to all TK-8 schools in 2024-25. All teachers received training over this past Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 12 AB 1840 Annual Evaluation Findings summer. The three Comprehensive School Improvement (CSI) schools that implemented the CKLA program successfully exited CSI. The Professional Learning Community model was implemented at all school sites. 22) What is the status of the district's recovery? The district made progress in all four remaining operational areas of the comprehensive review. However, 19 standards remain at a score of four or below. The areas of personnel management and pupil achievement met the criteria of an average score of six or above with no standard less than four in July 2024. The district needs to maintain or increase the scores in those two oper- ational areas in the 2025 comprehensive review, and then they will no longer be reviewed. The average score for the area of facilities management increased from 5.06 with seven standards under four in 2023 to 5.81 with five standards below four in 2024. The average score for the area of financial management increased from 4.00 with 19 standards below four in 2023 to 4.49 with 14 standards scoring below four in 2024. Each chief cabinet member holds “FCMAT Friday” meet- ings to track the progress toward implementation of the recommendations in the last comprehen- sive review, concentrating on standards scoring less than four. The district continues to experience turnover of business office staff, which hinders progress toward implementing sustainable improvements in operational processes and procedures. The district con- tinues to over rely on consultants in this area for support. The district’s 2024-25 adopted budget FSP included ongoing expenditure reductions of $14.2 million in 2024-25, $8.5 million in 2025-26 and $1.7 million in 2026-27. Despite these planned reductions, the 2024-25 MYP projects deficit spending of $26.5 million in 2024-25, $13.5 million in 2025-26, and $18.4 million in 2026-27. Interviews indicated that the FSP would be revised for the first interim reporting period. It is imperative that the district implement the expenditure reductions to maintain fiscal solvency. The district has not fully implemented prior FSPs. One-time funds received as a result of AB 1840 and pandemic relief have allowed the district to shift ongoing expenditures from the unrestricted general fund to these one-time funding sources, and the district’s unrestricted general fund balance has grown over the past several years. Therefore, it will be able to withstand some deficit spending in the short term, but it must reduce expenditures and facilities in alignment with the reduction in enrollment and revenues to maintain long-term fiscal stability. The county administrator indicated that he plans to stay with the district until local governance has been restored. 23) How has the county superintendent addressed the fiscal oversight actions that were designated as "No" on the initial evaluation? County office staff have continued to ensure that the areas identified as deficiencies in the initial review continue to be addressed in the fiscal review checklists and oversight documents. FCMAT verified that all the review elements identified in the initial evaluation as a “No” have been appropriately addressed and mitigated, as evidenced in the documents provided by the county superintendent of schools, which the county superintendent used to perform the AB 1200 oversight reviews. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 13 AB 1840 Annual Evaluation Conclusions and Recommendations Conclusions and Recommendations The Inglewood Unified School District has been under a combination of state and county administration since 2012. The district has had nine state or county administrators in 12 years, creating instability in orga- nizational development and inconsistency in developing and implementing long-range recovery plans. Changes in cabinet-level positions have occurred frequently and have created instability throughout the district. The current county administrator, appointed in January 2023, is committed to serving in the district until local control has been restored and believes that current cabinet members are committed as well. The administrator and county office staff are confident the new district CBO (who returned to the role after a two-year absence) will bring stability to the business office, successfully implement industry standard prac- tices, and ensure progress toward implementation of the recommendations of the comprehensive review. The district’s 2024-25 adopted budget shows an ongoing structural deficit that, if not corrected, will deplete its cash and threaten its fiscal recovery. The expenditure reductions included in the FSP submitted by the district with the 2024-25 adopted budget lacked specificity and do not seem feasible. Previous FSPs have not been fully implemented. Deficit spending, declining enrollment, low attendance and high special education costs continue to challenge the district. The county superintendent and administrator are addressing many of the issues that have burdened the district for years. They have a clear understanding of the actions and procedural changes required to move the district to self-governance with county trusteeship (which is the next step toward exiting state receivership) and are motivated to do so. The county administrator’s goals include con- tinuous improvement in implementing the recommendations of the comprehensive review, consolidation or closure of schools to align facility use with declining enrollment, identifying opportunities for using surplus property to generate ongoing revenue, improving student attendance, and increasing student achievement. Since the last county superintendent oversight review, the county superintendent and administrator have continued to focus on implementing the recommendations of the comprehensive review, with specific attention on the standards with a score below four. Progress was made over the last year. The county superintendent should continue to work with the administrator to: 1. Implement the recommendations of the comprehensive review, with the goal of exiting the operational areas of pupil achievement and personnel management in 2025 by maintaining or increasing the average scores with no standard scoring below four. Increase the scores in the operational areas of facilities and financial management and significantly reduce the number of standards scoring below four. 2. Address the district’s ongoing deficit by adjusting expenditures to align with current and projected revenues and executing the school closure/consolidation plans to adjust facility size to match enrollment. Ensure that the district’s FSP is realistic and achievable and that it is implemented. 3. Use the recommendations of the California Collaborative for Educational Excellence and the comprehensive review to increase pupil achievement and improve pupil attendance. 4. Create a plan and timeline to develop the governance capacity of the district’s advisory board, allowing the board to practice proper governance in preparation for the return of local control. The next annual review, which will occur approximately one year from the publication of this report, will assess the district’s progress toward these goals. Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 14 AB 1840 Annual Evaluation Appendices Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 15 AB 1840 Annual Evaluation Appendices Appendix A — Administrator Roles and Responsibilities Administrator Roles and Responsibilities When a school district becomes insolvent and requires an emergency state apportionment 200% or greater of the recommended reserve amount based on the standards and criteria, the county superintendent of schools, under the supervision of the state Superintendent of Public Instruction (SPI), assumes control of the district to ensure its return to fiscal solvency. The county superintendent of schools, with concurrence from both the SPI and the president of the State Board of Education, will appoint an administrator in accordance with relevant Education Code sections, including 41325, 41326, and 41327. The administrator serves under the direction and supervision of the county superintendent of schools, with concurrence from both the SPI and the president of the state board, until terminated by the county superintendent of schools, with concurrence from both the SPI and the president of the state board. On behalf of the county superintendent of schools, the administrator shall perform the following functions: 1. Assume all legal rights, duties, and powers of the district’s governing board, superintendent, and personnel commission, if applicable. 2. Assume control and oversight of all district fiscal, educational, programmatic and operational functions, with the primary objective of restoring fiscal solvency and returning the district to local control and governance. 3. Implement substantial changes in the district’s fiscal policies and practices, including, if necessary, the filing of a bankruptcy petition (Chapter 9) to restructure the district’s indebtedness. 4. Revise the educational program of the district to reflect realistic income projections and to improve pupil performance relative to state standards. 5. Represent the district in consultation with the governing board, the exclusive representatives of the employees, parents, other citizens, the community, and governmental agencies. 6. Encourage all members of the school community to accept a fair share of the burden of the district’s fiscal recovery. 7. Consult with, and seek recommendations from, the county superintendent of schools, the SPI, and the Fiscal Crisis and Management Assistance Team (FCMAT) in ensuring the fiscal recovery and solvency of the district. 5/18/2023 Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 16 AB 1840 Annual Evaluation Appendices 8. Request the advice and assistance, as needed, of the California Collaborative for Educational Excellence. 9. Upon approval by the county superintendent of schools, enter into agreements on behalf of the district and, subject to any contractual obligations of the district, change existing district rules, regulations, policies, or practices as necessary for the effective implementation of fiscal recovery plans. 10. Certify that all necessary collective bargaining agreements have been negotiated and ratified, and that the agreements are consistent with the terms of the fiscal recovery plan. 11. Ensure that the district has completed all reports required by the county superintendent of schools and the administrator. 12. Determine, with concurrence from the county superintendent of schools and SPI, that future compliance by the district with the approved fiscal recovery plan is probable. 13. Discuss options for resolving the fiscal problems of the district with all the following groups within 30 days of assuming authority, and consider, monthly or more frequently, information from one or more of the following groups: a) The governing board of the school district b) Any advisory council of the school district c) Any parent-teacher organization of the school district d) Representatives from the community in which the school district is located e) The district administrative team f) The Fiscal Crisis and Management Assistance Team g) Representatives of employee bargaining units h) The county superintendent of schools 14. Prepare or obtain the following reports and plans for approval by the county superintendent of schools and the SPI: a) A management review and fiscal recovery plan. b) A multiyear financial recovery plan, including a plan, to be submitted annually on or before July 1, to repay to the state any and all loans owed by the district. c) An annual report on the financial condition of the district, including, but not necessarily limited to, all the following information: i. Specific actions taken to reduce district expenditures or increase income, and the amount of the resulting cost savings and increases in income. ii. A copy of the adopted district budget for the current fiscal year. iii. The amount of the district’s budgetary reserve. iv. The status of employee contracts. v. Any obstacles to the implementation of the fiscal recovery plan. 5/18/2023 Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 17 AB 1840 Annual Evaluation Appendices 15. Conduct, in consultation with FCMAT, comprehensive assessments in the following areas: i. Financial management ii. Pupil achievement iii. Personnel management iv. Facilities management v. Community relations 16. Evaluate employees who report directly to the administrator and oversee the evaluation of other employees as defined by California law and district policy. 17. Review all district policies and procedures and make appropriate decisions for addition, deletion, or modification. 18. Provide leadership and direction in planning and financing school site additions or improvements, as needed, to meet growth needs, or in strategically identifying and coordinating school site consolidations and/or closures. 19. Identify and assess all potential and actual lawsuits against the district and determine potential settlement options or other resolutions. 20. Assist in related matters, as needed, regarding the district’s fiscal recovery and solvency, with the intent to return the district to local control and governance. 21. Perform any additional duties or address additional goals as may be outlined in the emergency appropriation legislation. Related Education Code Sections: 41325, 41326, 41326.1, 41327 5/18/2023 Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 18 AB 1840 Annual Evaluation Appendices Appendix B — Study Agreement Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 19 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 20 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 21 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 22 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 23 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 24 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 25 AB 1840 Annual Evaluation Appendices Fiscal Crisis and Management Assistance Team Los Angeles County Office of Education 26