San Francisco Unified School District Report

Fiscal Health Risk Analysis April 26, 2024 San Francisco Unified School District Michael H. Fine Chief Executive Officer April 26, 2024 Matt Wayne, Ed.D., Superintendent San Francisco Unified School District 555 Franklin St. San Francisco, CA 94102-5207 Dear Superintendent Wayne, In December 2023, the San Francisco 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 of the district. The agreement stated that FCMAT would perform the following: 1. 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. This fiscal health risk analysis is required by California’s 2018-19 Budget Act because the district has been designated a lack of going concern by the state superintendent of public instruction (SPI). This final report contains the fiscal health risk analysis with the study team’s findings and recommendations. FCMAT appreciates the opportunity to assist the San Francisco Unified 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 ...................................................................................................8 Areas of High Risk....................................................................................................9 Budget and Fiscal Status ....................................................................................................9 Material Weakness Questions ...........................................................................................9 Score Breakdown by Section ................................................................................11 Fiscal Health Risk Analysis Questions ...............................................................12 Budget and Fiscal Status ..................................................................................................12 Annual Independent Audit Report ..................................................................................12 Budget Development and Adoption ..............................................................................13 Budget Monitoring and Updates .....................................................................................15 Cash Management ..............................................................................................................17 Charter Schools ...................................................................................................................18 Collective Bargaining Agreements .................................................................................18 Contributions and Transfers .............................................................................................19 Deficit Spending (Unrestricted General Fund) ............................................................19 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 1 Fiscal Health Risk Analysis Employee Benefits ............................................................................................................20 Enrollment and Attendance ..............................................................................................21 Facilities ................................................................................................................................23 Fund Balance and Reserve for Economic Uncertainty .............................................24 General Fund – Current Year ..........................................................................................24 Information Systems and Data Management .............................................................25 Internal Controls and Fraud Prevention .......................................................................26 Leadership and Stability ...................................................................................................28 Multiyear Projections .........................................................................................................28 Non-Voter-Approved Debt and Risk Management ...................................................29 Position Control ..................................................................................................................29 Special Education ..............................................................................................................30 Risk Score, 20 numbered sections only ............................................................31 District Fiscal Solvency Risk Level, all FHRA factors .....................................31 Appendices ....................................................................................................32 Appendix A: Risk Analysis Results Comparison ............................................32 Appendix B: Study Agreement ...........................................................................44 Fiscal Crisis and Management Assistance Team San Francisco Unified 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 San Francisco Unified 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 San Francisco Unified 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(s), under which an analysis is required by the 2018-19 State Budget Act: • Lack of going concern designation after the adoption of the 2023-24 budget. The San Francisco Unified School District has an enrollment of 55,537 students and is in San Francisco, California. Approximately 30% of school-age children within the district’s boundaries attend private schools. The number of students leaving the district to attend private schools is increasing by approximately 500 per year. This is in addition to the natural declining enrollment most districts in the state are experiencing. As one of the few single-district counties in California, the district and its county office of education share an administration. The district and county office report their financial information to their governing board combined at the time of budget adoption but separately at the interim financial reporting periods. Because of the single-district county configuration, the California Department of Education (CDE) is the oversight agency for this local educational agency (LEA). The CDE has expressed many concerns while performing oversight in recent years. The areas of concern are outlined in Section 3.6 of this report. The district is in a qualified budget status, which means that it may not meet its financial obligations in the current and two subsequent fiscal years. The CDE has also designated the district a lack of going concern and is providing two fiscal experts to work with the district. Both FCMAT and the CDE have concerns about the district’s ability to implement the fiscal stabilization plan it has developed. FCMAT performed a fiscal health risk analysis to determine the district’s level of risk for insolvency in 2022 and is doing so again with this report in 2024. A comparison of the results of the two FHRA studies is included in the Appendix A. Fiscal Health Risk Analysis Guidelines FCMAT entered into a study agreement with the San Francisco Unified School District on December 4, 2023, and a study team visited the district on January 23 -25, 2024 to conduct interviews, collect data and review documents. Following fieldwork, the FCMAT 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. Those that may be functioning well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Associated Press Stylebook, a comprehensive guide to usage and accepted style that emphasizes conciseness and clarity. In addition, this guide emphasizes plain language, discourages the use of jargon and capitalizes relatively few terms. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 5 Fiscal Health Risk Analysis Study Team The team was composed of the following members: Tamara Montero, CFE, SFO Roslynne Manansala-Smith FCMAT Chief Analyst FCMAT Intervention Specialist Jennifer Nerat John Lotze FCMAT Intervention Specialist 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 San Francisco Unified School District 6 Fiscal Health Risk Analysis Fiscal Health Risk Analysis For TK-12 School Districts Dates of fieldwork: January 23-25, 2024 District: San Francisco Unified School District Summary The San Francisco Unified School District faces tremendous fiscal challenges. Of the 20 sections reviewed in the Fiscal Health Risk Analysis (FHRA), Budget Monitoring, Cash Management, Collective Bargaining, Internal Controls, Enrollment and Attendance and Position Control are the areas in which the district needs the most improvement. More detail about specific concerns can be found in those sections of this report. When preparing this FHRA, FCMAT used the period of the original approved 2023-24 budget for all budget-related questions except those in Section 3, Budget Monitoring, for which it used the district’s 2023-24 first interim budget. This is common practice in FCMAT reports. The district has many consultants in various positions. Although it is good to have personnel in positions rather than vacancies, it would be optimal for the district’s long-term stability to have permanent employees in all positions. The district’s administration indicated that this is a goal; however, the district has lacked a qualified chief business official for several years. This has led to a lack of leadership, a lack of understanding of critical elements of school finance, and poor monitoring of the district’s overall fiscal solvency. In addition, per Education Code 45318, nearly all of the district’s classified positioins, including managers, are hired through the City and County of San Francisco’s civil services system, which signifcantly hinders the district’s ability to hire for such positions. Many staff in the district could benefit from training. One area of concern is the district’s lack of collaboration with other districts in the state. The district prefers to collaborate solely with a national organization because there is a perception that the district is different from other local educational agencies (LEAs) in California. However, this is not the case. All divisions in the district could benefit by learning from and/or collaborating with other LEAs in the state. Examples of missed opportunities include FCMAT’s email listserves, regional trainings, and leadership opportunities with various professional educational organizations. The district’s financial system is a significant barrier that prevents the district from conducting business in an accurate, effective and efficient manner. During fieldwork, it became clear to FCMAT that only one or two individuals in the district know how to generate reports that all individuals in the budget and accounting divisions should be able to run. The payroll and human resources modules are not part of the financial system, and this has caused significant errors in payroll and benefits, the impact of which the district is unable to estimate. The errors have been pervasive for years, and tracing them in such a large system would be an enormous task so has not been done. For example, payroll staff shared that when the warrants for payroll are run in the system, the accuracy is not guaranteed and that an exception report is used to make sure that payroll is close to what it should be. Staff stated that in some cases payroll warrants in the millions of dollars have been issued to individuals but that these large amounts have been caught before being paid to staff. At the same time, other employees have been underpaid, and income tax and retirement reporting have been inaccurate and not timely, adversely affecting individuals and the district alike. The per-school funding allocation that the district uses hinders the district’s ability to implement a position control system. As outlined in Section 19 of this report, the district is not following industry standards or best practices in this area, which has a great impact on the district’s fiscal solvency. The individual schools have great autonomy in how the per-school allocation is spent. This makes the position control system a record of staff as requested by the schools, rather than a true position control system that informs the district how many positions are available based on staffing allocations and how many are filled. An inadequate position control system also affects the district’s ability to comply with complex state and federal program regulations regarding how these funds are usually to supplement rather than supplant existing funding, jeopardizing millions in funding. At the time of this report, the district has notified 110 administrators, 134 nonmanagement certificated staff and 102 nonmanagement classified staff of layoffs as of March 15, 2024. If the district does not finalize this action by May 15, 2024 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 7 Fiscal Health Risk Analysis and implement other budget reductions it has proposed, based on the details included in the 2023-24 second interim report, it could become insolvent sometime in the 2025-26 fiscal year. Significant Subsequent Events Regarding Deficit Spending The reporting period that this FHRA is based on is the 2023-24 adopted budget. However, as a result of the 2023-24 first interim report, FCMAT noted the following changes, which would affect item 7.2 of this FHRA: • The district's 2023-24 first interim report includes reporting for 14 other funds, 11 of which are deficit spending. For eight of these funds (funds 11, 13, 14, 25, 30, 35, 40 and 67), the projected ending fund balance can cover the deficit spending and remain positive. For three of these funds (funds 21, 49 and 51), the district is deficit spending and projects negative ending fund balances. For Fund 21, Building Fund, and Fund 51, Bond Interest and Redemption Fund, the district did not project any revenue for 2023-24. • The district has projected transfers out from the unrestricted general fund to Fund 67, Self-Insurance Fund, and from the restricted general fund to Fund 12, Child Development Fund. The district’s multiyear financial projection includes only continued projected transfers out from the restricted general fund. Because of these changes, the first interim data completely alters the adopted budget and calls into question the accuracy of the adopted budget. Regarding Multiyear Projections In this report (see item 17.4), based on the 2023-24 adopted budget, the district has refrained from using line B10. With the 2023-24 first interim report, the district is using line B10 on the multiyear projection as a positive number. The district states in the multiyear projection narrative that the amounts entered on line B10 reflect salary settlements. It is best practice for districts to refrain from using line B10. Regarding Available Funding for Facilities Projects The reporting period that this FHRA is based on is the 2023-24 adopted budget. However, as a result of the 2023-24 first interim report, FCMAT notes the following change, which would affect item 11.2 of this FHRA: The district’s 2023-24 first interim financial report includes ending fund balances of negative $48 million in Fund 21 and negative $619,000 in Fund 49. These negative ending fund balances must be corrected by modifying expenditures or showing the amount that the general fund will need to contribute to facilities projects. Without showing the amount that the general fund may need to contribute, the deficit spending and true ending fund balance for the general fund are not known. District Fiscal Solvency Risk Level: High About the 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 (Chapter 1213, Statutes of 1991); 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 Crisis and Management Assistance Team San Francisco Unified School District 8 Fiscal Health Risk Analysis 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. 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 self-assess its 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? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 9 Fiscal Health Risk Analysis 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? ✓ ☐ ☐ 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 San Francisco Unified School District 10 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 0.5% 2. Budget Development and Adoption 3.5% 3. Budget Monitoring and Updates 6.5% 4. Cash Management 7.4% 5. Charter Schools 0.0% 6. Collective Bargaining Agreements 3.1% 7. Contributions and Transfers 1.0% 8. Deficit Spending (Unrestricted General Fund) 0.0% 9. Employee Benefits 2.2% 10. Enrollment and Attendance 6.7% 11. Facilities 0.4% 12. Fund Balance and Reserve for Economic Uncertainty 0.0% 13. General Fund - Current Year 2.3% 14. Information Systems and Data Management 1.0% 15. Internal Controls and Fraud Prevention 5.9% 16. Leadership and Stability 2.5% 17. Multiyear Projections 2.0% 18. Non-Voter-Approved Debt and Risk Management 0.0% 19. Position Control 5.5% 20. Special Education 0.4% Score 50 7% Fiscal Crisis and Management Assistance Team San Francisco Unified School District 11 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? ☐ ✓ ☐ The district’s 2021-22 audit was issued with a disclaimer opinion, which means that the auditor was unable to confirm the district’s financial condition. The audit states that this was “due to the inability to obtain sufficient appropriate audit evidence and material weakness in internal control over financial reporting,” and further states, “the District did not provide sufficient appropriate evidence to support that the financial statements are free from material misstatement.” This determination is more serious than any normal findings because it states that the auditor was unable to complete the audit because of the lack of proper fiscal conditions at the district. The audit lists several areas in which the district’s fiscal health is suspect. 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 ) ☐ ✓ ☐ The district’s 2022-23 fiscal year audit deadline had received an extension until March 31, 2024 at the time of FCMAT’s fieldwork. The stated reasons for the extension were a lack of staff at the district and the fact that a new auditor was brought in to complete the audit. The normal statutory deadline for audits is December 15. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 12 Fiscal Health Risk Analysis 1 3 Were the district’s most recent and prior two audit reports free of findings of material weaknesses? ☐ ✓ ☐ The audits for 2019-20 and 2020-21 both had material weakness findings related to comprehensive school safety plans. The 2021-22 audit had material weakness findings in the following areas: • Education Stabilization Fund. • Child Care and Development Block Grant. • Child nutrition cluster. • School safety plan. • Expanded Learning Opportunities Program (ELOP). • Pension contributions, bond premiums. • The district’s inability to prepare its financial statements. 1 4 Has the district corrected all reported audit findings from the most recent and prior two audits? ☐ ✓ ☐ The district’s 2020-2021 and 2021-22 audits had repeat findings regarding comprehensive school safety plans. The 2019-20 audit was free of repeat findings. 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? ☐ ✓ ☐ The district used industry best practices for the assumptions for the cost-of-living adjustment (COLA) and other state factors in its adopted budget; however, local assumptions about enrollment and staffing levels are not clearly articulated or well defined. The state superintendent of public instruction’s (SPI’s) budget review letter dated September 15, 2023 notes concern that the district and county office project to transfer the following: $33 million of unrestricted costs, including 242 positions, to one-time restricted funding sources in 2023-24 & 2024-25. The multi-year assump- tions for the unrestricted general fund do not consider the return of these expenditures in 2025-26, when the one-time restricted funding expires. Although Board resolution #236-6Sp2, adopted June 20, 2023, commits to eliminating the structural deficit, additional Board action is needed to elim- inate these expenditures and positions when the one-time funding expires or find additional ongoing funding sources to support them. 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? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 13 Fiscal Health Risk Analysis 2 3 Does the district use position control data for budget development? ☐ ✓ ☐ The district maintains a detailed position control report; however, staff indicated during interviews that the district uses an average cost by position rather than the actual cost by position when developing school budgets. 2 4 Does the district calculate the Local Control Funding Formula (LCFF) revenue correctly? ☐ ✓ ☐ The district did not adjust enrollment projections in the LCFF Calculator in the current and two subsequent years to account for its continuing trend of declining enrollment. Overstating enrollment and associated average daily attendance (ADA) results in overstated projected LCFF revenue. 2 5 Has the district’s budget been approved unconditionally by its county office of education in the current and two prior fiscal years? ✓ ☐ ☐ 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? ☐ ✓ ☐ The district’s Board Policy 3290 broadly addresses gifts, grants and bequests; however, it does not establish a procedure for staff to follow when evaluating the acceptance of funding from grant sources. Information obtained from staff interviews indicates that the evaluation process occurs in various departments without consistent communication with the business office before the board accepts the funding. Because the business office is not involved in evaluating the funding, the multiyear impact on the unrestricted general fund is not accounted for. 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? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 14 Fiscal Health Risk Analysis 3. Budget Monitoring and Updates Yes No N/A 3 1 Are actual revenues and expenses consistent with the most current budget? ☐ ✓ ☐ The district’s 2023-24 first interim report includes multiple instances in which actual revenues and expenses for the reporting period differed from projected totals in the following areas: unrestricted miscellaneous revenue, restricted other classified salaries, restricted operations and housekeeping services, and prior year’s taxes. The 2023-24 first interim report should include budget revisions for all funds by object code to show changes since the budget’s adoption in June 2023. These revisions typically include items such as prior year carryover funds, revised funding allocations, updated enrollment and ADA estimates, and salaries and full-time equivalent (FTE) staffing adjustments. The district should also review actuals to date for accuracy and consistency with the most current budget. 3 2 Are budget revisions posted in the financial system at each interim report, at a minimum? ☐ ✓ ☐ Although the district’s governing board approved budget transfer revisions at interim reporting periods for 2022-23 and 2023-24, the district did not provide FCMAT with any evidence from its financial system that these budget revisions were posted in the financial system at each interim report. 3 3 Are clearly written and articulated budget assumptions that support budget revisions communicated to the board at each interim report, at a minimum? ☐ ✓ ☐ FCMAT reviewed the district’s 2023-24 first interim report and 2022-23 first and second interim reports. Because the board-approved operating budget (column b) matched the projected totals (column d) rather than the last board-approved budget, the Standardized Account Code Structure (SACS) forms did not show any differences (column e) for the budget revisions associated with the reporting period. The district did not provide any evidence that clearly written and articulated budget assumptions (e.g., enrollment and attendance projections, staffing projections, retirement rates and LCFF funding rates) were presented to the board at each interim reporting period for 2022-23 and 2023-24. 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? ☐ ✓ ☐ The San Francisco Unified School District and the San Francisco County Office of Education are served by the same governing board and superintendent. Because of this, the state superintendent of public instruction (SPI) is legally responsible for overseeing the fiscal solvency of both organizations. Because the two organizations operate as one, the SPI’s oversight letters make no distinction between the solvency of the two organizations. For financial reporting purposes, the county office of Fiscal Crisis and Management Assistance Team San Francisco Unified School District 15 Fiscal Health Risk Analysis education budget is tracked separately from the school district’s in the county school service fund. Below is a summary of deficiencies the SPI identified in its oversight letters, items the district has addressed to date, and items it must still adress. Deficiency: Issues with implementation of EMPowerSF Personnel and Payroll System remain District must: District has addressed the following: • Determine and resolve 2021-22 and • System issues related to 403(b) plan 2022-23 over/underpayments. contributions. • Reconcile state teachers’ retirement • Decided to transition to a new enterprise system contributions, both STRS & resource planning (ERP) software that will 403(b). help it automate, manage and integrate the payroll, human resources, budget, and accounting systems. Deficiency: Need to Fully Address Structural Deficit Spending and Declining Enrollment District must: District has addressed the following: • Fully implement its new staffing • Board-approved budget balancing solutions model to align staff with enrollment. at the December 12, 2023 board meeting. Track positions that were shifted from the unrestricted general fund to one- time restricted funding sources, and eliminate or find funding for positions when funding expires in 2025-26. Deficiency: Inadequate Position Control District must: District has addressed the following: • Implement a position control system • Identified 700 positions to eliminate from the that identifies budgeted, filled and current year general fund budget. vacant positions. • Stopped including large numbers of vacant positions in its budget. Deficiency: Accuracy of Financial Projections District must include in each budget report: District has addressed the following: • Updated revenues, expenditures and • Updated revenues included with the 2022- budget revisions. 23 second interim report. • Salaries based on actual staff salaries rather than district averages. Deficiency: Organizational Structure and Hire for Vacant Head Financial Officer1 Position District must: District has addressed the following: • Begin recruiting to hire a permanent • Created and filled a new executive director, head financial officer by the time of budget and accounting position. the 2023-24 adopted budget. • Hired an interim associate superintendent of business services. Deficiency: Significant delay of 2021-22 audit report and disclaimer of opinion issued by auditor, resulting in an inability to rely on reported beginning fund balances District must: District has: • By December 15, 2023, submit its • Not submitted its 2022-23 audit report by 2022-23 audit report to the California December 15, 2023. Instead, the district Department of Education (CDE). requested an extension of the deadline to complete the 2022-23 audit to March 31, 2024. Its 2021-22 audit was submitted and approved. 1This is the district’s term for what is known as the chief business official (CBO) position in most districts and in most of this report. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 16 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? ☐ ✓ ☐ Because the district’s financial, payroll and human resources systems are not integrated, the district does not encumber 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? ☐ ✓ ☐ Although the district has made progress reconciling some balance sheet accounts in the general ledger, it did not provide evidence that all balance sheet accounts are reconciled at each interim reporting period 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? ☐ ✓ ☐ The CDE’s oversight letter for the 2021-22 second interim report indicated that the district submitted its report on March 25, 2022, but the statutory deadline was March 17, 2022. 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? ☐ ✓ ☐ Reports provided by the district indicate that accounts are not reconciled regularly. Account activity from August through October of 2023 was not reconciled until January 2024. The district did not provide reconciliation reports for November through December of 2023. 4 2 Does the district reconcile all bank (cash and investment) accounts with bank statements monthly? ☐ ✓ ☐ The district did not provide FCMAT with reconciliation reports for all of its bank accounts or any evidence that these accounts are reconciled 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? ☐ ✓ ☐ The district did not provide FCMAT with a cash flow projection 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? ☐ ✓ ☐ The district is showing sufficient cash in the current year, but it does not create cash flows for more than the current year, so the cash needs for the subsequent year are not known. 4 5 Does the district have sufficient cash resources in its other funds to support its current and projected obligations in those funds? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 17 Fiscal Health Risk Analysis 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? ✓ ☐ ☐ 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? ✓ ☐ ☐ 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? ☐ ✓ ☐ Negotiations remain open for the following bargaining units for the current year: • Common Crafts. • International Brotherhood of Electrical Workers, Local 6. • International Union of Operating Engineers, Local 39. • United Administrators of San Francisco. 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)? ☐ ✓ ☐ It was not possible to calculate the cost of settlements in the current and prior two fiscal years using the information provided to FCMAT. FCMAT made multiple requests for additional information but did not receive it. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 18 Fiscal Health Risk Analysis 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? ☐ ✓ ☐ Neither the CBO nor the superintendent certified in writing the public disclosure statements for the tentative agreements between the LEA and the Service Employees International Union and United Educators of San Francisco, which were presented to the governing board on December 12, 2023. The district indicated that these items were not signed before the board meeting because the board needed to approve budget balancing solutions before the CBO and superintendent could certify the agreement’s affordability. 6 9 Is the governing board’s action consistent with the superintendent’s and CBO’s certification? ☐ ✓ ☐ The board approved the tentative agreement as presented on December 12, 2023, despite the lack of signatures from the superintendent and CBO on the public disclosure statements. 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 has a board-approved budget balancing plan, but it does not address the need to eliminate, reduce or control any contributions or transfers from the unrestricted general fund to restricted programs and funds. 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)2 Yes No N/A 8 1 Is the district avoiding deficit spending in the current fiscal year? ✓ ☐ ☐ 8 2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? ✓ ☐ ☐ 2 Updated information on deficit spending can be found in the Significant Subsequent Events section of this report Fiscal Crisis and Management Assistance Team San Francisco Unified School District 19 Fiscal Health Risk Analysis 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? ✓ ☐ ☐ 8 4 Has the district decreased deficit spending over the past two fiscal years? ✓ ☐ ☐ 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 (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? ☐ ✓ ☐ The district uses object code range 37xx to account for post-employment benefit costs. At 2022-23 fiscal year end, these costs totaled $31.4 million, which is 4.5% of the district’s unrestricted general fund revenues for the same period. 9 3 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? ☐ ✓ ☐ Various collective bargaining agreements with the district specify maximum accumulated vacation hours depending on years of service; however, the district does not follow these maximums. In interviews, staff indicated that employees are allowed to accrue more hours than are stipulated in the agreements. The district did not provide a report showing available vacation balances for each employee. 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? ☐ ✓ ☐ The system of record for health and vision benefits is managed by the City and County of San Francisco. The district reported that the City and County of San Francisco conducted a verification and determination of eligibility in 2017. The district manages its own dental benefits and does not have any record of performing a verification and determination of eligibility for benefits. 9 5 Does the district track, reconcile and report employees’ compensated leave balances? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 20 Fiscal Health Risk Analysis 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? ☐ ✓ ☐ According to Ed-Data, and as shown in the charts below, total enrollment declined by 5,494 from 2019-20 to 2022-23. The total enrollment decline for charter schools from 2019-20 to 2021-22 was 1,865, which was partially offset by a small increase of 364 in 2022-23. The total enrollment decline for noncharter schools was 3,993. Total Census Day Enrollment 62,000 61,000 61,031 60,000 60,263 60,390 59,000 58,705 58,000 57,000 56,000 55,000 55,592 55,537 54,000 53,000 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Annual Enrollment by Charter/Non-Charter 70,000 60,000 50,000 40,000 30,000 20,000 10,000 - 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 Non-Charter 52,592 52,468 52,778 51,756 49,204 48,785 Charter 7,671 7,922 8,253 6,949 6,388 6,752 Charter Non-Charter 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)? ☐ ✓ ☐ No evidence was provided to show that the district monitors and analyzes enrollment and attendance monthly. In interviews, staff indicated that it is not clear how or if this is tracked and monitored. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 21 Fiscal Health Risk Analysis 10 3 Does the district track historical enrollment and ADA data to establish future trends? ☐ ✓ ☐ The district did not provide documentation to demonstrate that enrollment and ADA are being tracked and used 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? ☐ ✓ ☐ Staff reported that attendance and enrollment are reconciled at schools. The school staff receive assistance from the enrollment center staff to complete their enrollment reconciliation. No evidence was provided to indicate this was happening monthly. It was also not clear whether any monthly reconciliation of attendance is being performed at the district level. 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? ☐ ✓ ☐ Based on records from California School Information Services (CSIS), the district has been on the certification delinquent list regularly for the two prior years. In 2021-22, the CALPADS Fall 1 and Fall 2 deadlines were February 11, 2022 and March 11, 2022, respectively. The district did not certify until February 13, 2022 and March 20, 2022, respectively. In 2022-23, the CALPADS Fall 1 and Fall 2 deadlines were January 27, 2023 and March 10, 2023, respectively. The district did not certify until January 28, 2023 and March 11, 2023, respectively. The data certified in the CALPADS annual submissions are used for many purposes, including funding calculations for various state and federal programs and accountability metrics. Failure to certify this data on time can negatively affect the district’s LCFF funding and its data posted on the California School Dashboard. 10 6 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable considerations? ☐ ✓ ☐ The district did not provide evidence of its method(s) for projecting enrollment. 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? ☐ ✓ ☐ Staff interviewed indicated that although central office departments review and verify their CALPADS data and make corrections as needed before submission deadlines, schools do not. 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? ☐ ✓ ☐ Although the district’s Board Policy and Administrative Regulation 5117 states the district’s policy for interdistrict attendance, it does not clarify how the district would limit outgoing interdistrict transfers. Staff reported that common practice is to approve outgoing interdistrict transfers, because of the understanding that historically incoming interdistrict transfershave exceeded outgoing transfers. FCMAT was not Fiscal Crisis and Management Assistance Team San Francisco Unified School District 22 Fiscal Health Risk Analysis provided with a list of transfers in and out of the district, so the team could not confirm the validity of this assumption. Staff reported that the district’s current focus is to monitor the number of students leaving the district to attend private schools. The district’s most recent information reported to the CDE identifies the number of students attending private schools in San Francisco County, from 2019-20 through 2022-2023. The estimated percentage of San Francisco’s K-12 students attending private schools is 30%. Information on private schools can be found on the CDE website at: https://www.cde.ca.gov/ds/si/ps/ psastatcountsbycnty.asp. 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? ☐ ✓ ☐ The district’s 2023-24 adopted budget Form 01CS indicates that the district did not meet the required minimum contribution. 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? ☐ ✓ ☐ Facility use varies significantly throughout the district because of its enrollment of choice policy, which allows families to choose the school they want their children to attend. 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? ☐ ✓ ☐ The district’s October 20, 2023 quarterly Williams report indicates that two complaints were not resolved within 30 working days as required. In addition, the district was remedying 12 open Williams complaints within the required timeline and fulfilling the obligation to respond within 45 working days. 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? ✓ ☐ ☐ 11 8 Does the district have a long-range facilities master plan that reflects its current and projected facility needs? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 23 Fiscal Health Risk Analysis 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? ✓ ☐ ☐ 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? ☐ ☐ ✓ 12 4 Is the district’s projected unrestricted fund balance stable or increasing in the two subsequent fiscal years? ✓ ☐ ☐ 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? ✓ ☐ ☐ 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? ☐ ✓ ☐ The district's 2023-24 adopted budget includes as budget-balancing measures the shifting of $33 million in unrestricted costs to restricted resources and the commitment of $50 million in one-time funds for unsettled labor negotiation costs. The CDE budget review letter dated September 15, 2023 notes concern that the district projects to transfer the following: $33 million of unrestricted costs, including 242 positions, to one-time restricted funding sources in 2023-24 & 2024-25. The multi-year assump- tions for the unrestricted general fund do not consider the return of these expenditures in 2025-26, when the one-time restricted funding expires. Although Board resolution #236-6Sp2, adopted June 20, 2023, commits to eliminating the structural deficit, additional Board action is needed to elim- inate these expenditures and positions when the one-time funding expires or find additional ongoing funding sources to support them. In addition, with the 2023-24 negotiations settlement, the district has identified that it will move an additional $48 million from unrestricted to one-time restricted funds in 2023-24. These expenditures must be addressed in the district’s 2024-25 budget reductions. 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? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 24 Fiscal Health Risk Analysis 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, In 2021-22, the district allocated 93% of its general fund unrestricted expenditure budget to salaries and benefits. The statewide average for districts as of 2021-22 (the latest data available) was 87%. In 2022-23, the district was at the statewide average of 87%. 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)? ☐ ☐ ✓ 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? ☐ ✓ ☐ The district's 2023-24 adopted budget includes an ending balance of $3,702 for the California Clean Energy Jobs Act (Proposition 39). These funds were available for encumbrance only through June 30, 2019. All projects were required to have been fully installed and completed by June 30, 2021. These unspent funds may need to be returned to the state. 13 7 Does the district account for program costs, including the maximum allowable indirect costs, for each restricted resource and other funds? ☐ ✓ ☐ The district's unaudited actuals for the three prior fiscal years (2020-21, 2021-22 and 2022-23) indicate that it charges the maximum indirect cost rate to most restricted resources but excludes the special education program, which receives a contribution from unrestricted resources. Charging the maximum allowable rate would allow the district to track the full, actual cost of each program. The district should charge the full indirect costs rate to all allowable restricted programs, including the special education program, even when it results in or increases the contribution from unrestricted funds. 14. Information Systems and Data Management Yes No N/A 14 1 Does the district use an integrated financial and human resources system? ☐ ✓ ☐ The district’s human resources and payroll system (EMPowerSF) is separate from its financial system (PeopleSoft). 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? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team San Francisco Unified School District 25 Fiscal Health Risk Analysis 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? ☐ ☐ ✓ 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? ☐ ✓ ☐ According to staff interviews, the district provides access and authorization controls upon request but does not consistently update access and authorization controls when employees resign, leave employment, or are demoted. 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 ☐ ✓ ☐ Based on interviews and a review of the district's organizational chart, segregation of duties exists for purchasing and contracts. The Procurement, Budget, and Technology departments are under the Business Services Division. These departments are where most purchasing and contracts are managed. Within the Technology department, the Operations for Projects and Partnership unit manages its own purchasing and contracts. Although duties may be segregated in these departments, it is unclear who supervises and monitors this activity at the district level. Interviews also indicated that controls could be weak because school staff and administrators may be able to circumvent procurement processes. • Payroll ☐ ✓ ☐ Since the district implemented its EMPowerSF personnel and payroll systems, it has experienced major issues and errors in payroll and retirement functions. The district’s governing board has prioritized resolving these payroll and retirement issues and errors. Consequently, the district has hired consultants and directed all district payroll staff to prioritize corrective actions. Because of the prioritization of this work and the large number of corrective actions needed, the district has taken an all-hands-on-deck approach. Although the district's department structure allows for adequate segregation of duties, the district is not maintaining adequate segregation of duties for payroll. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 26 Fiscal Health Risk Analysis • Human resources (i e , duties relative to position control and payroll processes) ☐ ✓ ☐ Although the district’s organizational chart appears to provide for segregation of duties, staff indicated that the district does not have adequate supervision over position control and that new positions and stipends are added and paid without board approval. 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? ☐ ✓ ☐ FCMAT reviewed the district’s SACS fund forms from the close of the prior year to the first interim report of the new year for 2021-22, 2022-23, and 2023-24. FCMAT compared the ending fund balance from the prior year to the beginning fund balance for the new year. The district posted beginning balances for the new year but provided no documents to show how beginning balances were reconciled with the prior years’ ending fund balances. For funds 12, 14, 40 and 49, the 2021-22 ending fund balances did not match the 2022-23 beginning fund balances. The larger variances showed $326,000 more in Fund 40 and $6.9 million more in Fund 49. All beginning fund balances for 2023-24 matched the ending fund balances from 2022-23. In addition, in the audit from fiscal year 2021-22, the district received a "disclaimer of opinion due to the inability to obtain sufficient appropriate audit evidence and material weakness in internal control over financial reporting." The audit firm was not able to obtain reasonable assurance about whether the financial statements were free from material misstatement. Some of the possible effects on the district's financial statements mentioned in the audit included possible material overstatement of the general fund ending fund balance, including the restricted ending fund balance on June 30, 2022, understatement of payroll liabilities, and possible errors in reported cafeteria fund revenues. The county office and district requested an extension of its 2022-23 audit deadline from December 15, 2023 to March 31, 2024. 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? ☐ ✓ ☐ Interviews with staff and documents received by FCMAT did not provide evidence that the district has fraud detection controls. 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? ☐ ✓ ☐ Interviews with staff and documents received by FCMAT did not provide evidence that the district has a process for collecting reports of possible fraud. 15 9 Does the district have an internal audit process? ☐ ✓ ☐ The district does not have a formal internal audit department or a documented auditing process. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 27 Fiscal Health Risk Analysis 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? ☐ ✓ ☐ The district is without a permanent chief business official; there is an outside consultant acting as interim. Interviews indicate that the district hopes to hire a permanent chief business official in the coming fiscal year, and the interim chief business official will help train the new hire. 16 2 Does the district have a superintendent who has been with the district as superintendent for more than two years? ☐ ✓ ☐ At the time of FCMAT’s fieldwork, the superintendent had been with the district since July 1, 2022, which was less than two years. 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? ☐ ✓ ☐ Policies are brought to the board only as needed. There is no formal method for monitoring board policies for updates when statutes or other factors change. In interviews, staff indicated that the district uses resolutions in place of policies, which does not help the district keep board policies relevant and current. FCMAT’s review of board policies revealed that most were updated from 2013 through 2022. 16 6 Are newly adopted or revised policies and administrative regulations implemented, communicated and available to staff? ✓ ☐ ☐ 16 7 Do all board members attend training on the budget and governance at least every two years? ✓ ☐ ☐ 16 8 Is the superintendent’s evaluation performed according to the terms of the contract? ✓ ☐ ☐ 17. Multiyear Projections Yes No N/A 17 1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards? ☐ ✓ ☐ As it did for its budget assumptions, the district used industry best practices for the assumptions used for COLA and other state factors in its adopted budget; however, local assumptions regarding enrollment and staffing levels are not clearly articulated or well defined. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 28 Fiscal Health Risk Analysis 17 2 To help calculate its multiyear projections, did the district prepare an accurate LCFF calculation with multiyear considerations? ☐ ✓ ☐ The district did not adjust enrollment projections in the LCFF Calculator in the current and two subsequent years to account for its continuing trend of declining enrollment. Overstating enrollment and associated ADA results in overstated projected LCFF revenue. 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? ☐ ☐ ✓ 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? ☐ ☐ ✓ 19. Position Control Yes No N/A 19 1 Does the district account for all positions and costs? ☐ ✓ ☐ The district uses an average salary method to account for positions and costs, which does not reflect the actual cost per position. The schools are charged for this average salary cost, and the difference is eventually covered by the district office. 19 2 Does the district analyze and adjust staffing based on staffing ratios and enrollment? ☐ ✓ ☐ The district adjusts allocations to schools based on the levels of multitiered system of supports, not based solely on school enrollment. As a result, staffing ratios vary considerably from school to school. At the time of interviews, staff informed FCMAT that the district will be changing to a new staffing model based on ratios and enrollment in fiscal year 2024-25. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 29 Fiscal Health Risk Analysis 19 3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim reporting periods? ☐ ✓ ☐ FCMAT was not provided with evidence in interviews or documents that budget, payroll and position control reconciliations are performed regularly. However, given the significant and documented problems of the last two years, there is clear evidence that the district does not reconcile these important position control elements. 19 4 Does the district identify a budget source for each new position before the position is authorized by the governing board? ☐ ✓ ☐ Although the district verifies a budget source for new positions, the new positions are not taken to the board for authorization before individuals are hired. 19 5 Does the governing board approve all new positions and extra assignments (e g , stipends) before positions are posted? ☐ ✓ ☐ Schools and departments are allocated an annual budget with which to fund their positions. Staffing determinations and assignments are made at the school or department level and approved internally by fiscal services and human resources for posting if there is sufficient funding in the budget. Board approval occurs after individuals are hired and placed in new positions or assignments. 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? ☐ ✓ ☐ FCMAT was not provided with documents that show regular meetings between human resources and payroll and budget personnel. 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? ✓ ☐ ☐ 20 2 Does the district access available funding sources for costs related to special education (e g , excess cost pool, legal fees, mental health)? ☐ ☐ ✓ 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)? ✓ ☐ ☐ 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)? ✓ ☐ ☐ 20 5 Is the district’s contribution rate to special education at or below the statewide average contribution rate? ✓ ☐ ☐ 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? ✓ ☐ ☐ 20 7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim reporting period? ☐ ✓ ☐ The district does not analyze the special education maintenance of effort at each interim reporting period. Fiscal Crisis and Management Assistance Team San Francisco Unified School District 30 Fiscal Health Risk Analysis Risk Score, 20 numbered sections only: 50 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 San Francisco Unified School District 31 Fiscal Health Risk Analysis Appendices Appendix A: Risk Analysis Results Comparison 1. Annual Independent Audit Report 2022 2024 1 1 Has the district corrected the most recent and prior two years’ audit findings without affecting its fiscal health? Yes No 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 No 1 3 Were the district’s most recent and prior two audit reports free of findings of material weaknesses? Yes No 1 4 Has the district corrected all reported audit findings from the most recent and prior two audits? No No 1. Annual Independent Audit Report 2022 2024 Change in Number of “No” Responses Yes 3 0 No 1 4 Increased by 3 N/A 0 0 2. Budget Development and Adoption 2022 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? Yes No 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? Yes Yes 2 3 Does the district use position control data for budget development? No No 2 4 Does the district calculate the Local Control Funding Formula (LCFF) revenue correctly? No No 2 5 Has the district’s budget been approved unconditionally by its county office of education in the current and two prior fiscal years? Yes 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? No Yes Fiscal Crisis and Management Assistance Team San Francisco Unified School District 32 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? Yes No 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 2022 2024 Change in Number of “No” Responses Yes 8 8 No 4 4 No Change N/A 0 0 3. Budget Monitoring and Updates 2022 2024 3 1 Are actual revenues and expenses consistent with the most current budget? No No 3 2 Are budget revisions posted in the financial system at each interim report, at a minimum? No No 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 No 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? Yes 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? No No 3 9 Are all balance sheet accounts in the general ledger reconciled at least at each interim report and at year end close? No No Fiscal Crisis and Management Assistance Team San Francisco Unified School District 33 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? Yes No 3. Budget Monitoring and Updates 2022 2024 Change in Number of “No” Responses Yes 4 3 No 6 7 Increased by 1 N/A 0 0 4. Cash Management 2022 2024 4 1 Are accounts held by the county treasurer reconciled with the district’s and county office of education’s reports monthly? Yes No 4 2 Does the district reconcile all bank (cash and investment) accounts with bank statements monthly? Yes No 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? Yes No 4 5 Does the district have sufficient cash resources in its other funds to support its current and projected obligations in those funds? No Yes 4 6 If interfund borrowing is occurring, does the district comply with Education Code Section 42603? No Yes 4 7 If the district is managing cash in any fund(s) through external borrowing, does the district’s cash flow projection include repayment on the terms of the loan agreement? No N/A* 4. Cash Management 2022 2024 Change in Number of “No” Responses Yes 3 2 No 4 4 No Change N/A 0 1 *N/A = Not Aplicable 5. Charter Schools 2022 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 Yes Fiscal Crisis and Management Assistance Team San Francisco Unified School District 34 Fiscal Health Risk Analysis 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? Yes Yes 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? Yes Yes 5. Charter Schools 2022 2024 Change in Number of “No” Responses Yes 4 4 No 0 0 No Change N/A 0 0 6. Collective Bargaining Agreements 2022 2024 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 No 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)? Yes 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? No No 6 9 Is the governing board’s action consistent with the superintendent’s and CBO’s certification? No No 6. Collective Bargaining Agreements 2022 2024 Change in Number of “No” Responses Yes 4 4 No 5 4 Decreased by 1 N/A 0 1 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 35 Fiscal Health Risk Analysis 7. Contributions and Transfers 2022 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 Yes 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? Yes Yes 7. Contributions and Transfers 2022 2024 Change in Number of “No” Responses Yes 1 2 No 2 1 Decreased by 1 N/A 0 0 8. Deficit Spending (Unrestricted General Fund) 2022 2024 8 1 Is the district avoiding deficit spending in the current fiscal year? Yes Yes 8 2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? No Yes 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 Yes 8 4 Has the district decreased deficit spending over the past two fiscal years? No Yes 8. Deficit Spending 2022 2024 Change in Number of “No” Responses Yes 1 4 No 3 0 Decreased by 3 N/A 0 0 9. Employee Benefits 2022 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)? Yes Yes Fiscal Crisis and Management Assistance Team San Francisco Unified School District 36 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? No No 9 3 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? Yes No 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? No No 9 5 Does the district track, reconcile and report employees’ compensated leave balances? Yes Yes 9. Employee Benefits 2022 2024 Change in Number of “No” Responses Yes 3 2 No 2 3 Increased by 1 N/A 0 0 10. Enrollment and Attendance 2022 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 No 10 3 Does the district track historical enrollment and ADA data to establish future trends? Yes No 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 No 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 No 10 6 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable considerations? Yes No 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 No 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 No Fiscal Crisis and Management Assistance Team San Francisco Unified School District 37 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 2022 2024 Change in Number of “No” Responses Yes 9 2 No 1 8 Increased by 7 N/A 0 0 11. Facilities 2022 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? Yes No 11 2 Does the district have sufficient and available capital outlay and/or bond funds to cover all contracted obligations for capital facilities projects? Yes Yes 11 3 Does the district properly track and account for facility-related projects? Yes 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? Yes Yes 11 6 Has the district met the facilities inspection requirements of the Williams Act and resolved any outstanding issues? Yes No 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 Yes 11. Facilities 2022 2024 Change in Number of “No” Responses Yes 5 5 No 3 3 No Change N/A 0 0 12. Fund Balance and Reserve for Economic Uncertainty 2022 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 Yes Fiscal Crisis and Management Assistance Team San Francisco Unified School District 38 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 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? Yes Yes 12. Fund Balance and Reserve for Economic Uncertainty 2022 2024 Change in Number of “No” Responses Yes 2 4 No 3 0 Decreased by 3 N/A 0 1 13. General Fund – Current Year 2022 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 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? Yes 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? No No 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 2022 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 2022 2024 14 1 Does the district use an integrated financial and human resources system? Yes No Fiscal Crisis and Management Assistance Team San Francisco Unified School District 39 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? No Yes 14 4 Is the district using the same financial system as its county office of education? Yes N/A 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 2022 2024 Change in Number of “No” Responses Yes 3 2 No 1 1 No Change N/A 2 3 15. Internal Controls and Fraud Prevention 2022 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 No 15 3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored?: • Accounts payable (AP) Yes Yes • Accounts receivable (AR) Yes Yes • Purchasing and contracts Yes No • Payroll Yes No • Human resources (i e , duties relative to position control and payroll processes) Yes No 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 No 15 5 Does the district review and work to clear prior year accruals throughout the year? Yes 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? No 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 San Francisco Unified School District 40 Fiscal Health Risk Analysis 15 9 Does the district have an internal audit process? No No 15. Internal Controls and Fraud Prevention 2022 2024 Change in Number of “No” Responses Yes* 10 5 No 3 8 Increased by 5 N/A 0 0 *Item 15.3 includes sub-items, so the total number of possible “yes”, “no,” or “N/A” responses is greater than the number of section items. 16. Leadership and Stability 2022 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 Yes 16 7 Do all board members attend training on the budget and governance at least every two years? No Yes 16 8 Is the superintendent’s evaluation performed according to the terms of the contract? No Yes 16. Leadership and Stability 2022 2024 Change in Number of “No” Responses Yes 6 5 No 2 3 Increased by 1 N/A 0 0 17. Multiyear Projections 2022 2024 17 1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards? Yes No 17 2 To help calculate its multiyear projections, did the district prepare an accurate LCFF calculation with multiyear considerations? No No 17 3 Does the district use its most current multiyear projection in making financial decisions? No Yes Fiscal Crisis and Management Assistance Team San Francisco Unified School District 41 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? Yes N/A 17. Multiyear Projections 2022 2024 Change in Number of “No” Responses Yes 2 1 No 2 2 No Change N/A 0 1 18. Non-Voter-Approved Debt and Risk Management 2022 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 N/A 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 N/A 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? Yes Yes 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? Yes N/A 18. Non-Voter-Approved Debt and Risk Management 2022 2024 Change in Number of “No” Responses Yes 2 1 No 2 0 Decreased by 2 N/A 0 3 19. Position Control 2022 2024 19 1 Does the district account for all positions and costs? Yes No 19 2 Does the district analyze and adjust staffing based on staffing ratios and enrollment? No No 19 3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim reporting periods? Yes No 19 4 Does the district identify a budget source for each new position before the position is authorized by the governing board? Yes No 19 5 Does the governing board approve all new positions and extra assignments (e g , stipends) before positions are posted? Yes No Fiscal Crisis and Management Assistance Team San Francisco Unified School District 42 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? Yes No 19. Position Control 2022 2024 Change in Number of “No” Responses Yes 5 0 No 1 6 Increased by 5 N/A 0 0 20. Special Education 2022 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 Yes 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 N/A 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 Yes 20 5 Is the district’s contribution rate to special education at or below the statewide average contribution rate? No Yes 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? Yes Yes 20 7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim reporting period? No No 20. Special Education 2022 2024 Change in Number of “No” Responses Yes 2 5 No 5 1 Decreased by 4 N/A 0 1 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 43 Fiscal Health Risk Analysis Appendix B: Study Agreement FISCAL CRISIS & MANAGEMENT ASSISTANCE TEAM STUDY AGREEMENT November 17, 2023 The Fiscal Crisis and Management Assistance Team (FCMAT), hereinafter referred to as the team, and the San Francisco Unified School District, hereinafter referred to as the district, mutually agree as follows: 1. BASIS OF AGREEMENT The team provides a variety of services to local education agencies (LEAs). In accordance with the 2018-19 Budget Act, the team has been assigned to study the district’s fiscal health because the district received a lack of going concern designation from the California Department of Education (CDE). The team may include staff from FCMAT, county offices of education, the CDE, other school districts, or private contractors. All work shall be performed in accordance with the terms, standards and conditions of this agreement. The CDE will be notified of this agreement between the district and FCMAT and will receive a copy of the final report. The final report will also be published on the FCMAT website. 2. SCOPE OF THE WORK A. Scope and Objectives of the Study 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. B. Services and Products to be Provided 1. Orientation Meeting – If on-site review is needed, the team will conduct an orientation session at the district to brief district management and supervisory personnel on the team’s procedures and the purpose and schedule of the study. 2. On-site Review – The team will conduct an on-site review at the district office and at school sites if necessary. 3. Draft Report – Electronic copies of a preliminary draft report will be delivered to the district’s administration for review and comment. 4. Final Report – Electronic copies of the final report will be delivered to the district’s administration and to the county superintendent following completion of the review. Printed copies are available from FCMAT upon request. 5. Board Presentation – The team will make a presentation regarding the final report at a district board meeting. 1 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 44 Fiscal Health Risk Analysis 3. PROJECT PERSONNEL The FCMAT study team may include: A. Tami Montero, CFE FCMAT Staff B. Roslynne Manansala-Smith FCMAT Staff C. Jennifer Nerat FCMAT Staff 4. PROJECT COSTS Pursuant to the 2018-19 Budget Act, costs for the study shall be as follows: A. All staff member and consultant daily rates and expenses will be covered by a specific state apportionment for this purpose. B. Based on the elements noted in section 2A, the total cost of the services is $0. 5. RESPONSIBILITIES OF THE DISTRICT A. The district will provide office and conference room space during on-site reviews. B. The district will provide the following items: 1. Current or proposed detailed organizational charts. 2. Any documents requested on a supplemental list. Documents requested on the supplemental list should be provided to FCMAT only in electronic format; if only hard copies are available, they should be scanned by the district and sent to FCMAT in electronic format. 3. Documents should be provided in advance of fieldwork; any delay in the receipt of the requested documents may affect the start date and/or completion date of the project. Upon approval of the signed study agreement, access will be provided to FCMAT’s online SharePoint document repository, where the district will upload all requested documents. C. The district’s administration will review a draft copy of the report resulting from the study. Any comments regarding the accuracy of the data presented in the report or the practicability of the recommendations will be reviewed with the team prior to completion of the final report. All such comments should be provided to the team within five working days after receipt of the draft. Pursuant to Education Code (EC) 45125.1(c), representatives of FCMAT will have limited contact with pupils. The district shall take appropriate steps to comply with EC 45125.1(c). 6. PROJECT SCHEDULE The schedule of services will be determined jointly by FCMAT and the district. 2 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 45 Fiscal Health Risk Analysis 7. COMMENCEMENT AND COMPLETION OF WORK FCMAT will begin work as soon as it has assembled an available and appropriate study team consisting of FCMAT staff and independent consultants, taking into consideration other jobs FCMAT has previously undertaken and assignments from the state. The team will work expeditiously to complete its work and deliver its report, subject to the cooperation of the district and any other parties from which, in the team’s judgment, it must obtain information. Once the team has completed its fieldwork, it will proceed to prepare a draft report and a final report. The district understands and agrees that FCMAT is a state agency and all FCMAT reports are published on the FCMAT website and made available to interested parties in state government. In the absence of extraordinary circumstances, FCMAT will not withhold preparation, publication and distribution of a report once fieldwork has been completed, and the district shall not request that it do so. 8. INDEPENDENT CONTRACTOR FCMAT is an independent contractor and is not an employee or engaged in any manner with the district. The manner in which FCMAT’s services are rendered shall be within its sole control and discretion. FCMAT representatives are not authorized to speak for, represent, or obligate the district in any manner without prior express written authorization from an officer of the district. 9. INSURANCE During the term of this agreement, FCMAT shall maintain liability insurance of not less than $1 million unless otherwise agreed upon in writing by the district, automobile liability insurance in the amount required under California state law, and workers’ compensation as required under California state law. Upon the request of the district and the receipt of the signed study agreement, FCMAT shall provide certificates of insurance, with San Francisco Unified School District named as additional insured, indicating applicable insurance coverages. 10. HOLD HARMLESS FCMAT shall hold the district, its board, officers, agents, and employees harmless from all suits, claims and liabilities resulting from negligent acts or omissions of FCMAT's board, officers, agents and employees undertaken under this agreement. Conversely, the district shall hold FCMAT, its board, officers, agents, and employees harmless from all suits, claims and liabilities resulting solely from negligent acts or omissions of the district’s board, officers, agents and employees undertaken under this agreement. 11. COVID-19 PANDEMIC Because of the existence of COVID-19 and the resulting shelter-at-home orders, local educational agency closures and other related considerations, at FCMAT’s sole discretion, the Scope of Work, Project Costs, Responsibilities of the District (Sections I, IV and V herein) and other provisions herein may be revised. Examples of such revisions may include, but not be limited to, the following: 3 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 46 Fiscal Health Risk Analysis A. Orientation and exit meetings, interviews and other information-gathering activities may be conducted remotely via telephone, videoconferencing, etc. References to on-site work or fieldwork shall be interpreted appropriately given the circumstances. B. Activities performed remotely that are normally performed in the field shall be billed hourly as provided as if performed in the field (excluding out-of-pocket costs). C. The district may be relieved of its duty to provide conference and other work area facilities for the team. 12. FORCE MAJEURE Neither party will be liable for any failure of or delay in the performance of this study agreement due to causes beyond the reasonable control of the party, except for payment obligations by the district. 13. CONTACT PERSON Name: Candi Clark, Interim Associate Superintendent Telephone: (415) 241-1629 E-Mail: clarkc@sfusd.edu 12/1/23 ______________________________________________________________________ Dr. Matt Wayne, Superintendent Date San Francisco Unified School District 12/4/23 ______________________________________________________________________ Michael H. Fine Date Chief Executive Officer Fiscal Crisis and Management Assistance Team 4 Fiscal Crisis and Management Assistance Team San Francisco Unified School District 47