FCMAT
South Bay Union School District Report
fiscal review
Read the report at South Bay Union School District ↗
South Bay Union School District
Fiscal Review
August 19, 2011
Joel D. Montero
Chief Executive Officer
Fiscal crisis & ManageMent assistance teaM
August 19, 2011
Carol Parish, Ed.D., Superintendent
South Bay Union School District
601 Elm Avenue
Imperial Beach, CA 91932
Dear Superintendent Parish:
In February 2011, the South Bay Union School District and the Fiscal Crisis and Management
Assistance Team (FCMAT) entered into an agreement to provide a review of the district’s budget
assumptions and multiyear financial projection and to provide recommendations for expenditure
reductions or revenue enhancements. Specifically, the agreement states that FCMAT will perform the
following:
Review the district’s 2010-11 general fund budget, validate the district’s budget assumptions
and provide a multiyear financial projection for the current and two subsequent fiscal years
utilizing the district’s 2nd interim financial report as the baseline for the projection. The
MYFP will be developed using FCMAT’s Budget Explorer and include a cash flow compo-
nent for the same time period to project the district’s cash balances at the end of each fiscal
year. The MYFP and cash flow analysis will also include the impact of other funds including
alternative strategies for cash management from both internal and external sources.
1. The FCMAT team will provide recommendations for expenditure reductions or revenue
enhancements to assist the district in maintaining their financial solvency under AB
1200.
2. The FCMAT team will review staffing ratios by department and make recommenda-
tions to ensure continuity of service.
This report contains the study team’s findings and recommendations. We trust that this information
will be beneficial to all concerned.
FCMAT appreciates the opportunity to serve you and extends its thanks to all the staff of the South
Bay Union School District for their cooperation and assistance during fieldwork.
Sincerely,
Joel D. Montero
Chief Executive Officer
FCMAT
Joel D. Montero, Chief Executive Officer
. .
1300 17th Street - CITY CENTRE, Bakersfield, CA 93
.
301-4533 Telephone 661-6
.
36-4611 Fax 661-63
.
6-4647
422 Petaluma Blvd North, Suite. C, Petaluma, CA 94952 Telephone: 707-775-2850 Fax: 707-775-2854 www.fcmat.org
Administrative Agent: Christine L. Frazier - Office of Kern County Superintendent of Schools
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TABLE OF CONTENTS
Table of Contents
About FCMAT .........................................................................................iii
Introduction ............................................................................................1
Executive Summary ..............................................................................3
Findings and Recommendations .....................................................5
Multiyear Financial Projections ................................................................5
Staffing ...........................................................................................................21
Revenue Augmentation .............................................................................25
Expenditure Reductions ............................................................................31
Appendix ..........................................................................................35
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TABLE OF CONTENTS
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ABOUT FCMAT
About FCMAT
FCMAT’s primary mission is to assist California’s local K-14 educational agencies to identify,
prevent, and resolve financial 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 and efficient
operations. FCMAT’s data management services are used to help local educational agencies
(LEAs) meet state reporting responsibilities, improve data quality, and share information.
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 local education agency 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.
Studies by Fiscal Year
90
80
70
60
50
40
30
20
10
0
92/93 93/94 94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11* 10/11**
*Projected
**Actual
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FCMAT also develops and provides numerous publications, software tools, workshops and
professional development opportunities to help local educational agencies operate more effec-
tively and fulfill their fiscal oversight and data management responsibilities. The California
School Information Services (CSIS) arm of FCMAT assists the California Department of
Education with the implementation of the California Longitudinal Pupil Achievement Data
System (CALPADS) and also maintains DataGate, the FCMAT/CSIS software LEAs use for
CSIS services. FCMAT was created by Assembly Bill 1200 in 1992 to assist LEAs to meet and
sustain their financial obligations. Assembly Bill 107 in 1997 charged FCMAT with responsi-
bility for CSIS and its statewide data management work. Assembly Bill 1115 in 1999 codified
CSIS’ mission.
AB 1200 is also a statewide plan for county office of education and school districts to work
together locally to improve fiscal procedures and accountability standards. Assembly Bill 2756
(2004) provides specific responsibilities to FCMAT with regard to districts that have received
emergency state loans.
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ABOUT FCMAT
In January 2006, SB 430 (charter schools) and AB 1366 (community colleges) became law and
expanded FCMAT’s services to those types of LEAs.
Since 1992, FCMAT has been engaged to perform nearly 850 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 Joel D.
Montero, Chief Executive Officer, with funding derived through appropriations in the state
budget and a modest fee schedule for charges to requesting agencies.
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INTRODUCTION
Introduction
Background
The South Bay Union School District is located in the southwestern portion of San Diego
County, bordered by the Pacific coast and the border of Mexico. Composed of 11 K-6 elemen-
tary schools and one K-8 charter school, the district is governed by a five-member board of
trustees and serves 8,352 students in the communities of Imperial Beach, San Ysidro and South
San Diego.
According to 2009-10 data, 49.4% of the district’s students are English learners, 74.3% qualify
for free or reduced-price meals, and 58.8% are identified as low-achieving students from low-
income families. California’s Student Testing and Reporting (STAR) results for 2010 identified
47% of students as proficient or advanced in English Language Arts and 59% as proficient or
advanced in Mathematics. The district did not meet adequate yearly progress (AYP) requirements
in 2009-10 and was placed in year 3 of Program Improvement.
All Title I funded schools and local educational agencies (LEAs) that do not make adequate
yearly progress (AYP) are identified for Program Improvement under the Elementary and
Secondary Education Act (ESEA).
The ESEA requires all states to implement statewide accountability systems based on state stan-
dards in reading and mathematics, annual testing for all students in grades three through eight,
and annual statewide progress objectives ensuring that all groups of students reach proficiency
within 12 years. Assessment results are disaggregated by socioeconomic status, race, ethnicity,
disability, and limited English proficiency. LEAs and schools that fail to make AYP toward state-
wide proficiency goals are subject to improvement and corrective action measures. In California,
Program Improvement is the formal designation for Title I-funded schools and LEAs that fail to
make AYP for two consecutive years.
In 2008, voters in the district passed Proposition X, a $59.4 million general obligation bond
to completely modernize seven of the district’s 12 elementary schools that are eligible for state
matching funds. Also included in the ballot language for the bond were improvements for
windows, replace sewers and remodel bathrooms at the remaining five school sites. A general
obligation bond is a municipal bond and is secured by legally available resources, including
property tax revenues, to repay bond holders
In addition, in 2010 the district attempted to pass a parcel tax, which would have generated
approximately $1.7 million per year for four years. Parcel tax is the common term in California
for a qualified special tax imposed by a school district. Special taxes are permitted by the state
constitution, requiring approval at an election of at least two-thirds of those voting on the
measure. Parcel taxes can be used for any type of spending, construction costs, employee salaries,
and other projects or spending needs. However, this tax received 59.7% of the vote, short of the
66.7% required for passage.
The district has faced the same fiscal challenges as other districts because of the decline and
uncertainty of state education funding. In addition, the district has experienced a consistent
decline in student enrollment since 2000.
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INTRODUCTION
In February 2011, the district and the Fiscal Crisis and Management Assistance Team (FCMAT)
entered into an agreement to provide a review of the district’s budget assumptions and multiyear
financial projection and to provide recommendations for expenditure reductions or revenue
enhancements. Specifically, the agreement states that FCMAT will perform the following:
1. Review the district’s 2010-11 general fund budget, validate the district’s budget
assumptions and provide a multiyear financial projection for the current and two
subsequent fiscal years utilizing the district’s 2nd interim financial report as the
baseline for the projection. The MYFP will be developed using FCMAT’s Budget
Explorer and include a cash flow component for the same time period to project
the district’s cash balances at the end of each fiscal year. The MYFP and cash flow
analysis will also include the impact of other funds including alternative strategies
for cash management from both internal and external sources.
2. The FCMAT team will provide recommendations for expenditure reductions
or revenue enhancements to assist the district in maintaining their financial
solvency under AB 1200.
3. The FCMAT team will review staffing ratios by department and make recom-
mendations to ensure continuity of service.
Study Guidelines
FCMAT visited the district on March 30 and 31, 2011 to conduct interviews, collect data and review
documents. This report is the result of those activities and is divided into the following sections:
I. Executive Summary
II. Multiyear Financial Projections
III. Staffing
IV. Revenue Augmentation
V. Expenditure Reductions
IV. Appendix
Study Team
The study team was composed of the following members:
John F. Von Flue Julie Auvil
FCMAT Fiscal Intervention Specialist FCMAT Fiscal Intervention Specialist
Bakersfield, CA Bakersfield, CA
John Lotze
Public Information Specialist
FCMAT
Bakersfield, CA
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EXECUTIVE SUMMARY
Executive Summary
Assembly Bill (AB) 1200 and AB 2756 require multiyear financial projections (MYFPs) to
ensure fiscal accountability and authorize fiscal oversight by county office of education to prevent
districts from experiencing fiscal insolvency. MYFPs are part of the financial reporting process
and require districts to identify whether they are able to maintain fiscal solvency for the current
and two subsequent fiscal years. The governor recently signed AB 114, which changed the over-
sight requirement so that in the 2011-12 fiscal year, districts need only demonstrate that they can
meet the financial obligations for the current fiscal year. Although it is no longer a requirement,
FCMAT recommends that districts continue projecting the impact of current decisions and fiscal
conditions on subsequent fiscal years.
FCMAT used its Web-based Budget Explorer software to create the MYFP and cash flow analysis for the
district. After reviewing district information and interviewing staff, FCMAT adjusted the district’s 2010-11
second interim financial report to project the year-end revenues and expenses. The adjustments in current
year salaries, benefits, supplies, and operating expenses were significant. The district’s past practice is to
designate budget amounts to sites and programs that exceed the actual expenditure requirements.
During FCMAT’s review, there were multiple revisions to state budget information and factors.
These changes in budget factors require revisions to the district’s projections and result in signifi-
cant differences in the district’s budget and cash reserves.
Although the MYFP identifies a growing trend of deficit spending, FCMAT projects that the
district will be able to meet its recommended reserve for economic uncertainties for the current
and two subsequent fiscal years. However, if the district continues under the current budget
assumptions, deficit spending may lead to financial insolvency soon after the projection years.
Multiyear Financial Projection Summary
General Fund
Unrestricted Resources Only
Description Base year 2010-11 Year 1 2011-12 Year 2 2012-13
Total Revenues $40,806,294 $39,240,830 $39,917,359
Total Expenditures $37,176,221 $36,977,866 $37,612,068
Total Other Financing sources/Uses $(1,688,009) $(3,931,746) $(5,368,548)
Net Increase (Decrease) in Fund Balance $1,942,064 $(1,668,782) $(3,063,257)
Fund Balance:
Beginning Balance $10,255,861 $12,197,925 $10,529,143
Audit Adjustments $ - $ - $ -
Other Restatements $ - $ - $ -
Total Ending Balance $12,197,925 $10,529,143 $ 7,465,886
Components of Ending Fund Balance:
Revolving Cash $20,000 $20,000 $20,000
Stores $130,523 $130,523 $130,523
Other Designations $ - $ - $ -
3% Reserve Requirement $1,858,671 $1,778,149 $1,814,011
Other Reservations $5,208,272 $ - $ -
Undesignated/Unappropriated $4,980,459 $8,600,471 $ 5,501,352
Negative shortfall $ - $ - $ -
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EXECUTIVE SUMMARY
The state budget also included an additional $2.1 billion in apportionment deferrals. According
to FCMAT’s cash flow projection, the district will be able to maintain a positive cash balance;
however, the totality of the deferrals combined with the district’s deficit spending is projected to
reduce the district’s $14 million cash balance to $110, 920 by June 2013.
FCMATs student enrollment analysis indicated that the district’s kindergarten enrollment will
begin to increase; however, grades K through 3 currently have a low enrollment, and this will
continue to affect the district’s overall enrollment. The district’s charter school has added grades 7
and 8, which should increase total enrollment.
In response to declining enrollment and continued budget cuts, the district has continued to
reduce staff positions and hours. Class sizes have increased, and classroom and office support,
grounds, maintenance, and cleaning staff positions have been reduced or eliminated. The district
is attempting to maintain a high level of service to the students with fewer and possibly inad-
equate resources.
The district has a number of potential options for augmenting revenues and reducing expen-
ditures further. Revenues may be increased through transportation and facilities fees, deferred
maintenance program transfer, seeking an attendance waiver, a parcel tax measure and other
options. Expenditure reductions may be found through improved stores inventory and indirect
cost calculation procedures, energy efficiency, and other measures.
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MULTIYEAR FINANCIAL PROJECTIONS
Findings and Recommendations
Multiyear Financial Projections
Assembly Bill (AB) 1200 (1991) defines a system of fiscal accountability for school districts and
county offices of education to prevent financial insolvency. AB 2756 (2004) further strengthened
the financial accountability and oversight used to monitor the fiscal position of school districts
and county offices. These laws required multiyear financial projections (MYFPs) to be a part
of districts’ budget reporting process and required districts to identify whether they are able to
maintain financial solvency for the current and two subsequent fiscal years.
Recently, Governor Brown signed AB 114, which changed this requirement for fiscal year
2011-12. The bill states: “For the 2011-12 fiscal year, the school district shall not be required to
demonstrate that it is able to meet its financial obligations for the two subsequent fiscal years.”
However, in letter to the California Assembly, the governor supported prudent decision making
at the local level and stated, “AB 114 does not interfere with these local school board decisions.
School boards should take all reasonable steps to balance their budgets and maintain positive cash
balances.”
MYFPs are necessary for decision making and to project the district’s future fiscal status. A
district’s management should use MYFPs regularly to evaluate the effects of current decisions and
local factors on the district, with the objective of achieving the district’s goals while maintaining
a balanced budget and a sustainable fiscal plan. It is also best practice to use MYFPs to help the
district identify trends, analyze the effects of past decisions, and help align the district’s funds
with its goals.
MYFPs are based on assumptions that are likely to fluctuate. Included in the assumptions are
factors that affect the district’s revenues and expenditures, including enrollment and atten-
dance rates, cost-of-living adjustments, negotiated bargaining unit agreements, and economic
conditions at the local, state, and federal levels. As a result, the MYFP should be viewed as an
indication of a trend and not a prediction of exact figures. The greater the change in the MYFP
assumptions, the greater the variance in outcomes will be and the more frequently a district will
need to monitor and update its MYFP.
To help protect local educational agencies against economic uncertainties, the state requires all
school districts with an average daily attendance (ADA) of between 1,001 and 30,000 to set aside
reserves of not less than 3% of their unrestricted general fund. This reserve, although helpful,
is not sufficient to prevent fiscal insolvency in the current economy. Districts that have set their
reserve target at this minimum have struggled greatly to maintain solvency during recent and
current economic decline.
When developing a budget and MYFP, both FCMAT and the district used the most current
economic factors and state budget information available at the time. FCMAT also reviewed
revenue and expenditure trends during recent years, assessed district assumptions, and used
industry-standard variables to forecast the district’s finances.
During FCMAT’s review, there were multiple revisions to this information. The district’s second
interim report used the governor’s January 2011 budget proposal; the district’s 2011-12 budget
was based on the governor’s May revision to the state budget; and FCMAT’s budget was based
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MULTIYEAR FINANCIAL PROJECTIONS
on the adopted 2011-12 state budget. These changes in budget factors require revisions to the
district’s projections and result in significant differences in the district’s budget and cash reserves.
The MYFP indicates that the district will be able to maintain its required reserve of 3% through
fiscal year 2012-13. However, the district has and continues to deficit spend. Absent the curtail-
ment of deficit spending, the district risks financial insolvency in the years following 2012-13.
Multiyear Financial Projection Tool
FCMAT used its Budget Explorer Web-based MYFP software to create the district’s MYFP. The
software was designed for California school districts and is available free to local educational
agencies (LEAs).
Budget Explorer allows school districts to create and update financial projections by interfacing
with the state’s standardized account code structure (SACS) software or importing data directly
from a district’s financial system. With its comprehensive modeling capabilities, multiyear finan-
cial projections can be produced efficiently, accurately and more rapidly than with conventional
spreadsheets. Budget Explorer can be used to make more informed budget decisions and incor-
porate educational goals and objectives into multiple financial scenarios. The MYFP used in this
report will be available to the district online upon completion the report.
State Budget 2011-12
The 2011-12 California state budget was approved by Governor Brown on June 30, 2011,
becoming only the sixth on-time budget in the last 20 years. The timeliness of the budget was
made possible by Proposition 25, passed in November 2010, which allows the budget to be
adopted by the Legislature with a simple majority vote.
The budget includes the following assumptions, triggers and actions:
• Assumes an increase of $4 billion in general fund revenues from the May revise.
• Triggers a cut to public education should revenues fall more than $2 billion below the
revenue forecast.
• Authorizes a shorter school year (subject to collective bargaining) should the cuts above
be triggered.
• Reinstates $2.1 billion in deferrals as proposed in the January budget proposal.
• Requires districts to budget and project the same level of revenue per ADA as received in
the 2010-11 fiscal year.
• States that districts will not be required to demonstrate fiscal solvency past the current
budget year.
• Extends SBX3 4 categorical flexibility for two additional years and provides a one-year
extension of the continuous appropriation for class size reduction (CSR).
• Suspends the August 15 layoff window for 2011-12.
Flexibility provisions are to continue, including the following:
• Categorical Flexibility
SBX3 4 authorizes complete flexibility of several categorical programs for any educational
purpose through 2014-15.
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MULTIYEAR FINANCIAL PROJECTIONS
• K-3 CSR
SBX3 4 established a new schedule of reduced funding penalties. This schedule has been
extended through 2013-14.
• Routine Restricted Maintenance Account Contribution
The contribution to the routine restricted maintenance account (RRMA), required for LEAs
participating in the state school facility program, has been eliminated through 2014-15.
• Deferred Maintenance Program (DM)
DM funding is unrestricted and available for district purposing. The local matching
contribution normally required as a condition of eligibility for the deferred maintenance
basic grant funding is eliminated for 2008-09 through 2014-15.
Multiyear Financial Projection Assumptions
FCMAT prepared the MYFP using the adjusted base year budget, budget assumptions from
the district’s 2011-12 budget, and School Services of California’s (SSC’s) Financial Dartboard
assumptions updated in July 2011. FCMAT’s MYFP excludes any future staffing changes and
salary adjustments not in effect or confirmed at the time of the review.
When building the multiyear projection, FCMAT did the following:
• Compared certificated, classified and management salary and benefit information budgeted
at second interim to position control records and actual year-to-date salary expense activity.
FCMAT adjusted the future year budgets based on variances found in the base year budget.
• Reviewed internal and third party support documentation to verify the district’s current
year revenue and project future years. FCMAT adjusted revenues as necessary to align
with the documentation and projected future years based on the SSC dartboard.
• Reviewed the district’s actual revenue and expenditure detail for each resource and major
object code to identify encroachment and carryover. FCMAT adjusted in the general
fund as necessary to reflect their impact.
The following table shows the financial assumption factors included in the projection years.
Projection Rules
Base Year
Rule description 2010-11 2011-12 2012-13
Statutory Cola -0.39% 2.24% 3.10%
Revenue Limit Deficit 17.963% 19.754% 19.754%
Net Revenue Limit Change 5.17% 0% 3.10%
Special Ed COLA (state and local only) 0% 0% 3.10%
State Categorical funding 0% 0% 3.10%
Federal funding 0% 0% 0%
CA Consumer Price Index 1.80% 3.20% 2.80%
CA Lottery - base $111.75 $111.75 $111.75
CA Lottery - Prop 20 $17.00 $17.00 $17.00
Interest Rate 3.10% 3.50% 4.00%
Certificated step/column 2.00% 2.00% 2.00%
Classified step 2.00% 2.00% 2.00%
Health and Welfare n/a 0.00% 0.00%
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MULTIYEAR FINANCIAL PROJECTIONS
• FCMAT adjusted budget lines proportionate to ADA, staffing, and other influencing factors.
• FCMAT further assumed that the district’s ongoing costs such as utilities, contributions
to special education and transportation, and routine repair will continue.
Base Year Budget Adjustments
FCMAT reviewed the district’s 2010-11 second interim budget and compared it against position
control, budget reports, and the year-to-date general ledger to ensure the accuracy of the current
year budget.
FCMAT also examined district documents to develop a baseline and future assumptions for the
MYFP, including the following:
• Letters from the county office regarding conditional approval of the district’s adopted
budget and concurrence with the district in its positive certifications for the 2010-11 first
and second interim financial reports.
• Financial system budget comparative reports.
• Financial summary reports showing general ledger balance sheet accounts.
• Revenue limit worksheets, including all supporting schedules for 2010-11.
• Historical enrollment information, including CBEDS data, for the current and prior
fiscal years, and projections for the subsequent two years.
• Period one (P-1), period two (P-2), and annual attendance reports for 2005-06 through 2010-11.
• Identification of any one-time revenues (including American Recovery and Reinvestment Act
(ARRA) federal funds) and expenditures included in the 2010-11 second interim budget.
• Long-term debt schedules.
• Current collective bargaining agreements for all employee groups.
• AB 1200 disclosure documents for the most recent salary settlement for all employee groups.
• Information on the health and welfare cap adjustments as stated in the collective
bargaining agreements.
• Independent audit reports for fiscal years 2008-09 and 2009-10.
FCMAT then adjusted the budget for the end-of-year revenues and expenses based on this evalu-
ation to create the base year budget for the MYFP. The following table highlights the differences
between the district’s second interim budget and FCMAT’s has calculation of the base year budget.
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MULTIYEAR FINANCIAL PROJECTIONS
FCMAT and District Second Interim Budget Compared
Fiscal year 2010-11 District 2nd Interim FCMAT estimated Difference
Beginning Fund Balance $16,553,339 $16,553,339 ($0)
Revenue
Revenue Limit Sources $ 34,277,514 $ 34,305,851 $ 28,337
Federal Revenue 9,751,468 10,021,611 270,143.00
State Revenue 10,905,521 11,268,270 362,749.00
Local Revenue 7,603,889 7,478,130 (125,759.00)
Total Revenue $ 62,538,392 $ 63,073,862 $ 535,470
Expenses -
Certificated Salaries $30,755,981 $29,586,348 $(1,169,633)
Classified Salaries 9,704,381 8,959,182 (745,199)
Employee Benefits 13,372,082 12,313,832 (1,058,250)
Books and Supplies 9,410,311 2,371,558 (7,038,753)
Service, Operating Expenses 6,847,574 5,719,484 (1,128,090)
Capital Outlay 1,966,754 2,468,600 501,846
Other Outgo 215,000 287,846 72,846
Direct Support/Indirect Costs (321,239) (321,239) -
Total Expenses $71,950,844 $ 61,385,611 $ (10,565,233)
Revenue minus Expenses $ (9,412,452) $1,688,251 $11,100,703
Other Financing Sources and Uses -
Transfers In and Other Sources $2,284,080 $2,791,043 $ 506,963
Transfers Out and Other Uses (390,583) (390,583) -
Contributions - - -
Total Other Financing Sources and Uses $1,893,497 $2,400,460 $ 506,963
Net Decrease in Fund Balance $(7,518,955) $4,088,711 $ 11,607,666
2010-2011 Projected Ending Fund Balance $9,034,384 $20,642,050 $ 11,607,667
Revenue Limit Sources
The district’s revenue limit for 2010-11 was calculated using prior year P-2 ADA and the current
year budget factors. FCMAT made minor adjustments to the district’s revenue limit calculation
to adjust the $21.14 add on per ADA, update the unemployment expense, and amend the
charter school enrollment factor.
Federal and State Revenue
FCMAT reviewed the district’s current consolidated application (Con App), grant award letters
and other source documents to verify revenues. FCMAT also reviewed funds received through
June 14, 2011, the unspent and remaining one-time funds, and the prior year deferred revenue
and carryover. As a result of this review, FCMAT made significant adjustments to increase the
budgeted revenue while maintaining a conservative estimate of funding.
Local Revenue
FCMAT reviewed local revenues including rentals, interest and other local revenues. Local
revenues were decreased to reflect current year receipts and a reasonable expectation for the
collection of additional revenues.
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MULTIYEAR FINANCIAL PROJECTIONS
Salaries and Benefits
Salary and benefits expenses account for approximately 83% of the district’s total expenses for
2010-11. FCMAT reviewed and used position control, monthly payroll records, and the district’s
general ledger data through June 14, 2011 to help project the total cost of salary and benefits for
fiscal year 2010-11.
Supplies, Operating Costs, Capital Outlay, and Other Outgo.
FCMAT reviewed expenditures and encumbrances for supplies, operating costs, services, capital
outlay and other outgo through June 14, 2011. Because the district’s purchasing deadline had
passed, expenditures and encumbrances recorded as of that time should closely represent the
annual expenditures for those objects.
Budget Adjustments
As identified in the comparison, FCMAT made significant budget adjustments to reduce
salaries and benefits, books and supplies, and operating expenses. These adjustments totaled
$11,139,925, or approximately 15% of the budgeted expenditures. Consistent with this adjust-
ment, the 2009-10 annual audit identified a budget variance of $11,990,726.
These variances are largely due to the way the district designates funds to individual sites and
programs. The funds are budgeted to each site in the categories mentioned above. The site may
or may not use the funds during the fiscal year, and any funds remaining at the end of the year
are collected and redistributed the following year. Unused funds are carried over from year to year
and have accumulated to a significant amount. The intent of this practice is to allow the site or
program long-term control of their funds and to allow them to save funds toward a larger goal.
Although most of these funds are recognized by outside authorities as unrestricted, the district
places a local restriction on these funds because of its commitment to this practice and to honor
the allocated budgets.
FCMAT’s adjustments to the base year budget remove these designations and attempt to project
the actual revenues and expenditures.
Enrollment and Average Daily Attendance
Enrollment and average daily attendance projections play a fundamental role in a school district’s
budget planning. The number of students enrolled provides a basis for identifying staffing and
facility needs and provides a target for ADA, which determines most of the district’s revenue
sources and fiscal health indicators, including required reserves. Accurate tracking and analysis
of enrollment and ADA allows the district to more accurately project future revenues, control
staffing and expenditures, and plan accordingly to maintain fiscal solvency.
Any enrollment forecast has inherent limitations because it is based on certain criteria and
assumptions rather than exact calculations. Limitations include issues such as the unpredictable
timing of housing trends, unanticipated changes in enrollment, and changing local, state and
federal economic conditions. Therefore, the cohort forecasting model should be viewed as a trend
rather than as a prediction of exact numbers. To maintain the most accurate and meaningful
data, enrollment projections need to be updated at least at each interim financial reporting period.
When enrollment and ADA are unchanged or declining, as is the case with the district over the
past decade, the district must exercise extreme caution regarding collective bargaining, staffing,
deficit spending and other issues that affect the budget so that it can maintain fiscal solvency.
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MULTIYEAR FINANCIAL PROJECTIONS
Diligent planning will enable the district to gain a better understanding of its financial objectives
and develop strategies to achieve them. .
When developing the MYFP, FCMAT reviewed the district’s enrollment and ADA trends for all
grades from 2005-06 through 2010-11.
Kindergarten Enrollment
Birthrate statistics are commonly used to project future kindergarten enrollment. A strong
correlation can be made between birthrates in the zip codes within a district’s boundaries and
kindergarten enrollment five years later. Birthrate data by zip code is readily available from the
California Department of Public Health’s website at www.cdph.ca.gov
FCMAT projected kindergarten enrollment using birthrate data from the zip codes within the
district’s boundaries: 92154, 91932, and 92173. The California Department of Public Health
data source provided total births by zip code for each year from 1998 through 2009.
Birthrates by Zip Code for Kindergarten Enrollment Projection
Birth Rates
Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Zip Code
92154 1080 1182 1258 1275 1345 1486 1526 1549 1589 1533 1593 1484
91932 620 575 565 539 512 490 481 475 455 508 532 500
92173 816 903 908 902 871 865 939 844 912 877 935 815
Total 2516 2660 2731 2716 2728 2841 2946 2868 2956 2918 3060 2799
Kindergarten Enrollment actual projected
1165 1136 1143 1070 1025 1000 1023 975 1069 1059 1050 1095
% = No. of births in birth year to No. of enrollment (birth year + 5 years) Weighted Average
46.3037% 42.7068% 41.8528% 39.3962% 37.5733% 35.1989% 34.7251% 33.9958% 36.1523% 36.2897% 35.9762% 35.7714%
The birthrate data shows a recent increase in births within the district’s boundaries. Based on the
correlation, that analysis and the previous table show between birthrates and kindergarten enroll-
ment, the same trend found in birthrates can be projected for kindergarten enrollment.
Grades 1-6 Enrollment
The cohort survival method is one of the most reliable and frequently used methods of fore-
casting school enrollment. This method compares enrollment in each grade with enrollment
the next higher grade one year later and establishes a relationship between enrollments in the
two grades. The relationship that is developed for each grade becomes a reliable indicator of
enrollments in future years. This method is one of the most reliable because it more accurately
accounts for the various individual variables that influence the size of the grade cohort as it
progresses through each grade.
The relationships used to project future enrollment outcomes are based on historical experience. They
must be indicative of present and future trends and other enrollment influencing factors. It is critical
that projections be updated at least annually, and more frequently if assumptions and factors change.
The following table was developed using Budget Explorer and shows the district’s historical
enrollment trends and FCMAT’s projections for enrollment and ADA.
south Bay union school District
12
MULTIYEAR FINANCIAL PROJECTIONS
Historical and Project Enrollment and ADA LEA: P S ro o j u e t c h tio B n a : y W U o n r i k o i n ng E P le r m oj e e n c t t a io r n y
Enrollment,P2ADA&EnrollmentFactors
Enrollment Historical5 Historical4 Historical3 Historical2 Historical1 BaseYear Year1 Year2
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
K 1143 1070 1025 1000 1023 975 1069 1059
1 1151 1204 1120 1090 1023 924 929 967
2 1201 1150 1183 1140 1066 933 897 901
3 1223 1186 1128 1192 1117 970 904 868
4 1301 1210 1219 1152 1176 1056 966 899
5 1268 1261 1213 1209 1126 1074 1018 929
Subtotal(K-5) 7287 7081 6888 6783 6531 5932 5783 5623
6 1295 1271 1259 1223 1221 1053 1063 1007
Subtotal(6-8) 1295 1271 1259 1223 1221 1053 1063 1007
UngradedElementary 0 0 0 0 0 0 0 0
UngradedSecondary 0 0 0 0 0 0 0 0
SubtotalExcludingCharterSchools 8582 8352 8147 8006 7752 6985 6846 6630
CharterSchools(tocalculatein-lieupropertytaxes) 0 0 0 0 0 773 870 870
Total 8582 8352 8147 8006 7752 7758 7716 7500
P2ADA Historical5 Historical4 Historical3 Historical2 Historical1 BaseYear Year1 Year2
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
ExcludingCharterSchools 8129.73 7906.84 7718.47 7615.31 7317.11 6560.94 6466.05 6259.38
CharterSchools(tocalculatein-lieupropertytaxes) 0.00 0.00 0.00 0.00 0.00 744.77 838.25 838.25
COECommSchs/SpEd 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 8129.73 7906.84 7718.47 7615.31 7317.11 7305.71 7304.30 7097.63
EnrollmentFactors Historical5 Historical4 Historical3 Historical2 Historical1 BaseYear Year1 Year2
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
ExcludingCharterSchools 0.9473 0.9467 0.9474 0.9512 0.9439 0.9393 0.9445 0.9441
CharterSchools(tocalculatein-lieupropertytaxes) 0.0000 0.0000 0.0000 0.0000 0.0000 0.9635 0.9635 0.9635
As indicated in the above table, the increases in kindergarten enrollment do not compensate for
the decreases in enrollment in the remaining grades, and total enrollment continues to fall. In
the base year, grades K- 3 have the lowest enrollment and grades 4- 6 have a greater enrollment.
As grades K-3 progress through the district and grades 4-6 exit the district, enrollment decreases.
Projected increases in kindergarten enrollment may eventually offset the district’s total enroll-
ment reduction and potentially reverse this trend in the future.
Interdistrict Transfers
District records for 2009-10 indicate that there were 447 interdistrict transfers in to the district
and 477 interdistrict transfers out from the district. For 2010-11, incoming transfers totaled
451 and outgoing transfers totaled 442. FCMAT’s enrollment projections assume no change to
the current trend in interdistrict transfers. The district hopes the opening of Nestor Language
Academy Charter, which includes including grades 7 and 8, will increase enrollment and attract
and retain more students from neighboring districts. The district is also considering opening
additional similar charter schools in an effort to increase total enrollment.
Demographic Study
During this study, FCMAT was informed that the district had commissioned a demographic study
to project future enrollment. That extensive evaluation should assist the district by identifying current
and future housing developments, vacancy rates, employment prospects, population changes, and
other factors that influence enrollment. The district will need to evaluate results of that study when
Printedby:JohnVonFlue Printdate:7/14/20118:23AM Page1of1
they become available and incorporate them into the its plans for facilities, staffing and finances.
Multiyear Financial Projection Analysis
The MYFP’s primary purpose is to project the district’s budget over several fiscal years to allow
the district to identify and achieve a balanced budget and meet the required minimum reserve for
economic uncertainties. Evaluation of the multiyear projection focuses on the district’s ability to
meet its reserve requirement in each fiscal year and demonstrate a positive, unappropriated fund
balance. FCMAT analyzed all funding sources and expenditure categories by resource.
Fiscal crisis & ManageMent assistance teaM
13
MULTIYEAR FINANCIAL PROJECTIONS
The MYFP developed by FCMAT for the district indicates that the district will be able to main-
tain its minimum reserve for economic uncertainties through 2012-13. However, the MYFP also
indicates that the district’s general fund expenditures will exceed its revenues by $3,648,362 in
fiscal year 2011-12 and by more than $4 million in fiscal year 2012-13.
The district is budgeting to transfer a total of $1,699,778 into the general fund from funds 9, 17,
and 40 for fiscal years 2011-12 and 2012-13. In addition, the district is budgeting a transfer of
$390,583 per year to fund 14, the deferred maintenance fund.
As a result of the deficit spending and interfund transfers, the fund balance for the general fund is
anticipated to be reduced by $2,339,167 and $2,715,116 in 2011-12 and L2EA0:S1out2hB-a1yU3nio,n Erleemsenptareyctively.
Projection:WorkingProjection
GeneralFund/CountySchoolServiceFund
UnrestrictedResourcesOnly
Revenues,Expenditures,andChangesintheFundBalance
Name ObjectCode BaseYear Year1 Year2
2010-11 2011-12 2012-13
Revenues
RevenueLimitSources 8010-8099 $32,990,023.48 $32,019,477.15 $32,519,719.61
FederalRevenues 8100-8299 $43,742.00 $43,742.00 $43,742.00
OtherStateRevenues 8300-8599 $7,224,319.00 $6,609,943.56 $6,761,746.67
OtherLocalRevenues 8600-8799 $548,210.00 $567,667.50 $592,151.12
TotalRevenues $40,806,294.48 $39,240,830.21 $39,917,359.40
Expenditures
CertificatedSalaries 1000-1999 $19,721,686.00 $20,411,593.76 $20,828,652.14
ClassifiedSalaries 2000-2999 $4,667,325.00 $4,768,203.60 $4,871,099.77
EmployeeBenefits 3000-3999 $8,274,912.00 $8,161,657.65 $8,257,054.74
BooksandSupplies 4000-4999 $1,072,568.00 $1,090,840.27 $1,085,499.51
ServicesandOtherOperating 5000-5999 $3,074,774.00 $3,132,130.55 $3,156,321.79
CapitalOutlay 6000-6900 $1,250,556.00 $68,948.00 $68,948.00
OtherOutgo 7000-7299 $91,871.33 $91,871.33 $91,871.33
DirectSupport/IndirectCost 7300-7399 ($977,471.00) ($747,379.00) ($747,379.00)
DebtService 7430-7439 $0.00 $0.00 $0.00
TotalExpenditures $37,176,221.33 $36,977,866.16 $37,612,068.28
Excess(Deficiency)ofRevenuesOverExpenditures $3,630,073.15 $2,262,964.05 $2,305,291.12
OtherFinancingSources\Uses
InterfundTransfersIn 8900-8929 $2,791,043.00 $1,699,778.00 $1,699,778.00
InterfundTransfersOut 7600-7629 $111,298.00 $111,298.00 $111,298.00
AllOtherFinancingSources 8930-8979 $0.00 $0.00 $0.00
AllOtherFinancingUses 7630-7699 $0.00 $0.00 $0.00
Contributions 8980-8999 ($4,367,754.00) ($5,520,226.12) ($6,957,028.30)
TotalOtherFinancingSources\Uses ($1,688,009.00) ($3,931,746.12) ($5,368,548.30)
NetIncrease(Decrease)inFundBalance $1,942,064.15 ($1,668,782.07) ($3,063,257.18)
FundBalance
BeginningFundBalance 9791 $10,255,860.86 $12,197,925.01 $10,529,142.94
AuditAdjustments 9793 $0.00 $0.00 $0.00
OtherRestatements 9795 $0.00 $0.00 $0.00
AdjustedBeginningFundBalance $10,255,860.86 $12,197,925.01 $10,529,142.94
EndingFundBalance $12,197,925.01 $10,529,142.94 $7,465,885.76
ComponentsofEndingFundBalance
ReservedBalances 9700 $0.00 $0.00 $0.00
RevolvingCash 9711 $20,000.00 $20,000.00 $20,000.00
Stores 9712 $130,523.00 $130,523.00 $130,523.00
PrepaidExpenditures 9713 $0.00 $0.00 $0.00
OtherPrepay 9719 $0.00 $0.00 $0.00
GeneralReserve 9730 $0.00 $0.00 $0.00
LegallyRestrictedBalance 9740-9759 $0.00 $0.00 $0.00
EconomicUncertaintiesPercentage 3.00% 3.00% 3.00%
DesignatedforEconomicUncertainties 9770 $1,858,671.25 $1,778,149.18 $1,814,011.14
DesignatedfortheUnrealizedGainsofInvestmentsandCashinCountyTreasury 9775 $0.00 $0.00 $0.00
OtherDesignated 9780 $5,208,272.00 $0.00 $0.00
Undesignated/Unappropriated 9790 $4,980,458.76 $8,600,470.76 $5,501,351.62
NegativeShortfall 9790 $0.00 $0.00 $0.00
Unrestricted General Fund
The effect of the deficit spending is more pronounced when looking at the MYFP for unrestricted
funds only, in part because the reserve for economic uncertainty must consist entirely of unrestricted
and unobligated funds. The unrestricted fund balance is projected to decrease by more $4.7 million in
the next two years, which will leave the district with an undesignated reserve of $5.5 million.
south Bay union school District
Printedby:JohnVonFlue Printdate:7/15/20117:32AM Page2of3
14
MULTIYEAR FINANCIAL PROJECTIONS
Moreover, the unrestricted funding deficit increases from $1.6 million in fiscal year 2011-12 to
more than $3 million in 2012-13: an increase of more than 80%.
If this deficit spending is allowed to continue uncurtailed, the district will encounter fiscal insol-
vency soon after fiscal year 2012-13.
LEA:SouthBayUnionElementary
Projection:WorkingProjection
GeneralFund/CountySchoolServiceFund
RestrictedResourcesOnly
Revenues,Expenditures,andChangesintheFundBalance
Name ObjectCode BaseYear Year1 Year2
2010-11 2011-12 2012-13
Revenues
RevenueLimitSources 8010-8099 $1,315,828.00 $1,315,828.00 $1,350,495.00
FederalRevenues 8100-8299 $9,976,444.00 $4,561,364.00 $4,561,364.00
OtherStateRevenues 8300-8599 $4,043,902.00 $3,758,519.73 $3,866,773.03
OtherLocalRevenues 8600-8799 $6,922,065.00 $6,356,152.00 $6,356,152.00
TotalRevenues $22,258,239.00 $15,991,863.73 $16,134,784.03
Expenditures
CertificatedSalaries 1000-1999 $9,864,662.00 $8,657,922.36 $8,868,256.92
ClassifiedSalaries 2000-2999 $4,291,857.00 $4,385,066.02 $4,480,139.21
EmployeeBenefits 3000-3999 $4,038,920.00 $3,737,750.10 $3,788,239.34
BooksandSupplies 4000-4999 $1,298,990.00 $780,472.68 $772,954.37
ServicesandOtherOperating 5000-5999 $2,644,710.00 $2,434,558.82 $2,637,652.44
CapitalOutlay 6000-6900 $1,218,044.00 $1,077,870.00 $1,077,870.00
OtherOutgo 7000-7299 $195,975.00 $215,000.00 $215,000.00
DirectSupport/IndirectCost 7300-7399 $835,746.00 $614,550.12 $624,274.28
DebtService 7430-7439 $0.00 $0.00 $0.00
TotalExpenditures $24,388,904.00 $21,903,190.10 $22,464,386.56
Excess(Deficiency)ofRevenuesOverExpenditures ($2,130,665.00) ($5,911,326.37) ($6,329,602.53)
OtherFinancingSources\Uses
InterfundTransfersIn 8900-8929 $0.00 $0.00 $0.00
InterfundTransfersOut 7600-7629 $279,285.00 $279,285.00 $279,285.00
AllOtherFinancingSources 8930-8979 $0.00 $0.00 $0.00
AllOtherFinancingUses 7630-7699 $0.00 $0.00 $0.00
Contributions 8980-8999 $4,367,754.00 $5,520,226.12 $6,957,028.30
TotalOtherFinancingSources\Uses $4,088,469.00 $5,240,941.12 $6,677,743.30
NetIncrease(Decrease)inFundBalance $1,957,804.00 ($670,385.25) $348,140.77
FundBalance
BeginningFundBalance 9791 $6,297,477.73 $8,255,281.73 $7,584,896.48
AuditAdjustments 9793 $0.00 $0.00 $0.00
OtherRestatements 9795 $0.00 $0.00 $0.00
AdjustedBeginningFundBalance $6,297,477.73 $8,255,281.73 $7,584,896.48
EndingFundBalance $8,255,281.73 $7,584,896.48 $7,933,037.25
ComponentsofEndingFundBalance
ReservedBalances 9700 $0.00 $0.00 $0.00
RevolvingCash 9711 $0.00 $0.00 $0.00
Stores 9712 $0.00 $0.00 $0.00
PrepaidExpenditures 9713 $0.00 $0.00 $0.00
OtherPrepay 9719 $0.00 $0.00 $0.00
GeneralReserve 9730 $0.00 $0.00 $0.00
LegallyRestrictedBalance 9740-9759 $8,255,281.73 $7,584,896.48 $7,933,037.25
DesignatedforEconomicUncertainties 9770 $0.00 $0.00 $0.00
DesignatedfortheUnrealizedGainsofInvestmentsandCashinCountyTreasury 9775 $0.00 $0.00 $0.00
OtherDesignated 9780 $0.00 $0.00 $0.00
Undesignated/Unappropriated 9790 $0.00 $0.00 $0.00
NegativeShortfall 9790 $0.00 $0.00 $0.00
Restricted General Fund
The district receives funds for 47 restricted federal, state and local programs. Total annual
revenue for all of these programs is projected to be approximately $16 million. However, these
programs are also projected to be underfunded and in need of approximately $6 million per year
in contributions from the unrestricted funds, and the amount of the contribution increases in the
projection years.
This growth in unrestricted general fund contributions is partly due to the MYFP’s assumption that
no action will be taken and that positions paid from a given resource will continue even as funding
isP rrineteddbyu:JcohendVo noFlure eliminated. As funding chanPrgintedast,e: 7t/1h5/e20 1d17i:3s2tArMict will need to respond accordinglyP.age3of3
Fiscal crisis & ManageMent assistance teaM
15
MULTIYEAR FINANCIAL PROJECTIONS
A review of all contributions to restricted programs is a best practice that can help districts
maintain control and ensure that restricted programs are self-sustaining to the greatest extent
possible. The only exceptions should be the routine restricted maintenance, special education,
home-to-school transportation, and special education transportation programs. Special education
and transportation programs typically have insufficient state and federal funding support, and
state and federal funding is not specifically provided for routine restricted maintenance.
LEA:SouthBayUnionElementary
Projection:WorkingProjection
GeneralFund/CountySchoolServiceFund
UnrestrictedandRestrictedResources
Revenues,Expenditures,andChangesintheFundBalance
Name ObjectCode BaseYear Year1 Year2
2010-11 2011-12 2012-13
Revenues
RevenueLimitSources 8010-8099 $34,305,851.48 $33,335,305.15 $33,870,214.61
FederalRevenues 8100-8299 $10,020,186.00 $4,605,106.00 $4,605,106.00
OtherStateRevenues 8300-8599 $11,268,221.00 $10,368,463.29 $10,628,519.70
OtherLocalRevenues 8600-8799 $7,470,275.00 $6,923,819.50 $6,948,303.12
TotalRevenues $63,064,533.48 $55,232,693.94 $56,052,143.43
Expenditures
CertificatedSalaries 1000-1999 $29,586,348.00 $29,069,516.12 $29,696,909.06
ClassifiedSalaries 2000-2999 $8,959,182.00 $9,153,269.62 $9,351,238.98
EmployeeBenefits 3000-3999 $12,313,832.00 $11,899,407.75 $12,045,294.08
BooksandSupplies 4000-4999 $2,371,558.00 $1,871,312.95 $1,858,453.88
ServicesandOtherOperating 5000-5999 $5,719,484.00 $5,566,689.37 $5,793,974.23
CapitalOutlay 6000-6900 $2,468,600.00 $1,146,818.00 $1,146,818.00
OtherOutgo 7000-7299 $287,846.33 $306,871.33 $306,871.33
DirectSupport/IndirectCost 7300-7399 ($141,725.00) ($132,828.88) ($123,104.72)
DebtService 7430-7439 $0.00 $0.00 $0.00
TotalExpenditures $61,565,125.33 $58,881,056.26 $60,076,454.84
Excess(Deficiency)ofRevenuesOverExpenditures $1,499,408.15 ($3,648,362.32) ($4,024,311.41)
OtherFinancingSources\Uses
InterfundTransfersIn 8900-8929 $2,791,043.00 $1,699,778.00 $1,699,778.00
InterfundTransfersOut 7600-7629 $390,583.00 $390,583.00 $390,583.00
AllOtherFinancingSources 8930-8979 $0.00 $0.00 $0.00
AllOtherFinancingUses 7630-7699 $0.00 $0.00 $0.00
Contributions 8980-8999 $0.00 $0.00 $0.00
TotalOtherFinancingSources\Uses $2,400,460.00 $1,309,195.00 $1,309,195.00
NetIncrease(Decrease)inFundBalance $3,899,868.15 ($2,339,167.32) ($2,715,116.41)
FundBalance
BeginningFundBalance 9791 $16,553,338.59 $20,453,206.74 $18,114,039.42
AuditAdjustments 9793 $0.00 $0.00 $0.00
OtherRestatements 9795 $0.00 $0.00 $0.00
AdjustedBeginningFundBalance $16,553,338.59 $20,453,206.74 $18,114,039.42
EndingFundBalance $20,453,206.74 $18,114,039.42 $15,398,923.01
ComponentsofEndingFundBalance
ReservedBalances 9700 $0.00 $0.00 $0.00
RevolvingCash 9711 $20,000.00 $20,000.00 $20,000.00
Stores 9712 $130,523.00 $130,523.00 $130,523.00
PrepaidExpenditures 9713 $0.00 $0.00 $0.00
OtherPrepay 9719 $0.00 $0.00 $0.00
GeneralReserve 9730 $0.00 $0.00 $0.00
LegallyRestrictedBalance 9740-9759 $8,255,281.73 $7,584,896.48 $7,933,037.25
EconomicUncertaintiesPercentage 3.00% 3.00% 3.00%
DesignatedforEconomicUncertainties 9770 $1,858,671.25 $1,778,149.18 $1,814,011.14
DesignatedfortheUnrealizedGainsofInvestmentsandCashinCountyTreasury 9775 $0.00 $0.00 $0.00
OtherDesignated 9780 $5,208,272.00 $0.00 $0.00
Undesignated/Unappropriated 9790 $4,980,458.76 $8,600,470.76 $5,501,351.62
NegativeShortfall 9790 $0.00 $0.00 $0.00
Other District Funds
The district maintains funds in addition to the general fund. These funds are designated for
specific purpose and are separated from the general fund for fiscal accountability. The district is
responsible to maintain fiscal solvency in all funds; an overdrawn fund may affect the district’s
general fund and thus its overall fiscal health.
Although FCMAT did not perform a thorough analysis of the district’s other funds, FCMAT
reviewed all the district’s funds for indications of fiscal instability or insolvency and, based on the
current status and budget plans, found no fund to be of immediate concern.
Printedby:JohnVonFlue Printdate:7/15/20117:32AM Page1of3
south Bay union school District
16
MULTIYEAR FINANCIAL PROJECTIONS
The table below shows current and projected balances, revenues and expenditures for the
district’s other funds
Other Funds
July 2011 begin- Revenues & Expenses & June 2012 ending
Governmental Funds
ning balance transfers in transfers out balance
12 Child Development $ - $2,853,918 $2,853,918 $ -
13 Cafeteria $1,862,416 $3,739,142 $3,747,708 $1,853,850
14 Deferred Maintenance $60,478 $318,669 $379,147 $ -
17 Special Reserve Other than capital outlay $4,348,799 $37,000 $105,362 $4,280,437
20 Special Reserve OPEB $1,160,381 $6,500 $ - $1,166,881
21 Building $3,467,520 $7,000 $3,324,670 $149,850
25 Capital Facilities $78,056 $18,500 $18,500 $78,056
35 County School Facilities $448,953 $3,500 $452,452 $1
40 Special Reserve Capital outlay $495,319 $432,940 $264,000 $664,259
Cash Flow
The state of California, in an effort to manage its own cash flow issues, has imposed numerous
intra-year and inter-year deferrals of principal apportionment funding. Because the state
apportionment accounts for more than 50% of the district’s funding, this delay in funding has
a significant effect on the district’s cash flow and makes it critical for the district to diligently
monitor and plan for its cash needs. The state’s 2011-12 budget defers an additional $2.1 billion
in apportionments to schools. The following table shows the schedule on which districts should
receive their principal apportionment funding for fiscal year 2011-12.
State Apportionment Deferrals Schedule
2010-11 2011-12
2011 Percentage of Apportionment
July 9.10% 0.00%
August 12.10% 0.00%
September 7.10% 11.70%
October 2011 0.00%
November 9.00%
December 9.00%
2012
January 25.30%
February 0.50%
March 0.00%
April 4.60%
May 1.50%
June 0.00%
July 22.60%
August 15.80%
28.30% 100.00%
Fiscal crisis & ManageMent assistance teaM
17
MULTIYEAR FINANCIAL PROJECTIONS
It is crucial that the district manage its cash in order to pay its obligations and maintain fiscal
solvency. Close and frequent analysis of its schedule of income and disbursements will help the
district maintain a positive cash position and identify potential shortfalls. Should the district
anticipate a cash position that is inadequate to meet its obligations, the district would need to
seek other sources of cash, including internal and external borrowing.
The next two tables provide the district’s projected cash flow for fiscal years 2011-12 and 2012-
13, respectively, indicating that the district’s general fund will be able to maintain a positive cash
position through June 30, 2013.
south Bay union school District
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40.424,335,1$
00.0$
35.676,661$
02.238,334,8$
64.771,000,3$
64.771,000,3$
00.0$
07.032,009,3$
00.0$
00.0$
51.503,533,33$
- 9 0 9 1 0 0 8 8
timiL e s u e n c e ru ve o R S
00.0$
00.601,506,4$
35.872,097$
74.728,418,3$
38.517,401$
52.071,513$
02.657,746$
02.377,838$
48.934,261$
04.211,096$
02.377,838$
00.0$
09.488,7$
56.102,902$
00.0$
00.0$
00.601,506,4$
- 9 0 9 0 2 1 8 8
seuneveR laredeF
00.0$
92.364,863,01$
31.988,602,1$
61.475,161,9$
88.067,706$
97.531,716$
35.103,144,2$
64.651,143$
30.901,912,1$
83.038,998$
24.394,026$
24.394,026$
30.276,485$
24.394,026$
09.365,492$
09.365,492$
92.364,863,01$
- 9 0 9 0 5 3 8 8
eta s t e S u r n e e h v t e O R
00.0$
05.918,329,6$
94.181,296,1$
10.836,132,5$
78.608,651$
83.016,196,1$
00.0$
00.0$
57.785,366,1$
36.220,82$
00.0$
00.0$
36.220,82$
57.785,366,1$
00.0$
00.0$
05.918,329,6$
- 9 0 9 0 7 6 8 8
lac s o e L u r n e e h v t e O R
00.0$
00.877,996,1$
00.0$
00.877,996,1$
00.877,996,1$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.877,996,1$
- 9 0 2 0 9 9 8 8
nI s d r n e u f f s r n e a t r n T I
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
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00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
- 9 0 7 3 9 9 8 8
secruoS r g e n h ic tO na n ll i A F
00.0$
49.174,239,65$
33.601,094,61$
16.563,244,04$
85.160,965,2$
00.649,321,3$
77.184,226,4$
66.929,971,1$
51.318,112,3$
16.797,150,01$
80.444,954,4$
88.076,026,3$
65.975,026$
25.315,393,6$
09.365,492$
09.365,492$
49.174,239,65$
stpieceR latoT stnemesrubsiD
00.0$
21.615,960,92$
23.093,185$
08.521,884,82$
36.159,609,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
46.087,261,1$
84.580,278$
21.615,960,92$
- 9 0 9 0 9 0 1 1
detac s fi ei i r tr a e la C S
00.0$
26.962,351,9$
63.560,381$
62.402,079,8$
69.623,519$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
87.031,663$
90.895,472$
26.962,351,9$
- 9 0 9 0 9 0 2 2
seiralaS defiissalC
00.0$
57.704,998,11$
31.889,732$
26.914,166,11$
87.049,981,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
13.679,574$
32.289,653$
57.704,998,11$
- 9 0 9 0 9 0 3 3
ee s y t o fie lp n m eB E
00.0$
59.213,178,1$
19.199,031$
40.123,047,1$
00.0$
00.0$
78.114,13$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
15.936,492$
15.936,492$
15.936,492$
59.213,178,1$
- 9 0 9 0 9 0 4 4
dn s a e s il k p o p o u B S
00.0$
73.986,665,5$
24.847,924$
59.049,631,5$
48.247,912$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
73.986,665,5$
- 9 0 9 0 9 0 5 5
gnita d re n p a O se r c e iv h r t e O S
00.0$
00.818,641,1$
62.772,08$
47.045,660,1$
00.0$
00.0$
80.908,86$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
07.220,271$
07.220,271$
07.220,271$
00.818,641,1$
- 0 0 0 0 9 0 6 6
yaltuO latipaC
00.0$
33.178,603$
00.0$
33.178,603$
52.473,16$
72.473,16$
72.473,16$
72.473,16$
72.473,16$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
33.178,603$
- 9 0 9 0 2 0 7 7
ogtuO rehtO
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)88.828,231$(
00.0$
)88.828,231$(
)88.828,231$(
00.0$
00.0$
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00.0$
00.0$
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00.0$
00.0$
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00.0$
)88.828,231$(
- 9 0 9 0 3 3 7 7
/tro ts p o p C u S t c t e c r e i r d i n D I
00.0$
00.0$
00.0$
00.0$
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00.0$
00.0$
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- 9 0 3 3 4 4 7 7
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00.385,093$
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00.385,093$
00.385,093$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.385,093$
- 9 0 2 0 6 6 7 7
tuO s d r n e u f f s r n e a t r n T I
00.0$
00.0$
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00.0$
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- 9 0 9 3 6 6 7 7
sesU r g e n h ic tO na n ll i A F
00.0$
62.936,172,95$
04.164,346,1$
68.771,826,75$
85.090,155,5$
07.983,910,5$
56.016,911,5$
04.561,732,5$
04.561,732,5$
31.197,571,5$
31.197,571,5$
31.197,571,5$
31.197,571,5$
46.776,424,5$
59.765,819,2$
20.643,714,2$
62.936,172,95$
stnemesru l b at s o iD T stessA
00.0$
00.000,02$
00.0$
00.000,02$
00.0$
00.0$
00.0$
00.0$
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00.0$
00.0$
00.0$
00.0$
00.0$
00.000,02$
00.000,02$
0319
hsaC gn tn iv u l o o c v c e A R
00.0$
00.000,05$
00.0$
00.000,05$
00.0$
00.0$
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5319
lacs e i e F t a s u h r t T iw /t n h e sa g C A
00.0$
75.710,308,7$
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75.710,308,7$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
14.755,859,1$
10.097,533,3$
51.076,805,2$
75.710,308,7$
0029
e l s b t a n v u i o e c c c e A R
00.0$
00.0$
00.0$
00.0$
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0139
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75.710,378,7$
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75.710,378,7$
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00.0$
00.0$
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14.755,859,1$
10.097,533,3$
51.076,875,2$
75.710,378,7$
stessA latoT seitilibaiL stnuoccA
00.0$
03.185,647,1$
00.0$
03.185,647,1$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
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00.0$
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03.185,647,1$
03.185,647,1$
0059
tnerruC( elbayaP )seitilibaiL
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00.0$
00.0$
00.0$
00.0$
00.0$
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00.0$
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0959
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0169
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0569
d e e u r n re ev fe e D R
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03.185,647,1$
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03.185,647,1$
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00.0$
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03.185,647,1$
03.185,647,1$
seitilibaiL latoT
20.601,358,6$
20.531,538,9$
27.875,037,11$
06.707,722,21$
43.349,482,61$
95.592,013,81$
11.982,434,31$
61.636,051,41$
14.657,507,51$
89.769,062,02$
96.475,333,71$
37.887,126,61$
hsaC e g c n n i a d la n B E
18
MULTIYEAR FINANCIAL PROJECTIONS
Fiscal crisis & ManageMent assistance teaM
21-1102
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lacsiF
,noitcejorP
wolF hsaC
21-1102
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20.531,538,9$
27.875,037,11$
06.707,722,21$
43.349,482,61$
95.592,013,81$
11.982,434,31$
61.636,051,41$
14.657,507,51$
89.769,062,02$
96.475,333,71$
37.887,126,61$
00.284,219,71$
hsaC gn e in c n n i a g l e a B B stpieceR
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51.503,533,33$
81.757,008,21$
79.745,435,02$
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85.920,005$
40.424,335,1$
00.0$
35.676,661$
02.238,334,8$
64.771,000,3$
64.771,000,3$
00.0$
07.032,009,3$
00.0$
00.0$
51.503,533,33$
- 9 0 9 1 0 0 8 8 timiL e s u e n c e ru ve o R S
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00.601,506,4$
35.872,097$
74.728,418,3$
38.517,401$
52.071,513$
02.657,746$
02.377,838$
48.934,261$
04.211,096$
02.377,838$
00.0$
09.488,7$
56.102,902$
00.0$
00.0$
00.601,506,4$
- 9 0 9 0 2 1 8 8 seuneveR laredeF
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92.364,863,01$
31.988,602,1$
61.475,161,9$
88.067,706$
97.531,716$
35.103,144,2$
64.651,143$
30.901,912,1$
83.038,998$
24.394,026$
24.394,026$
30.276,485$
24.394,026$
09.365,492$
09.365,492$
92.364,863,01$
- 9 0 9 0 5 3 8 8 eta s t e S u r n e e h v t e O R
00.0$
05.918,329,6$
94.181,296,1$
10.836,132,5$
78.608,651$
83.016,196,1$
00.0$
00.0$
57.785,366,1$
36.220,82$
00.0$
00.0$
36.220,82$
57.785,366,1$
00.0$
00.0$
05.918,329,6$
- 9 0 9 0 7 6 8 8 lac s o e L u r n e e h v t e O R
00.0$
00.877,996,1$
00.0$
00.877,996,1$
00.877,996,1$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
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00.0$
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00.0$
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00.877,996,1$
- 9 0 2 0 9 9 8 8 nI s d r n e u f f s r n e a t r n T I
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00.0$
00.0$
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00.0$
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00.0$
00.0$
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00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
- 9 0 7 3 9 9 8 8 secruoS r g e n h ic tO na n ll i A F
00.0$
49.174,239,65$
33.601,094,61$
16.563,244,04$
85.160,965,2$
00.649,321,3$
77.184,226,4$
66.929,971,1$
51.318,112,3$
16.797,150,01$
80.444,954,4$
88.076,026,3$
65.975,026$
25.315,393,6$
09.365,492$
09.365,492$
49.174,239,65$
stpieceR latoT stnemesrubsiD
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21.615,960,92$
23.093,185$
08.521,884,82$
36.159,609,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
54.652,616,2$
46.087,261,1$
84.580,278$
21.615,960,92$
- 9 0 9 0 9 0 1 1 detac s fi ei i r tr a e la C S
00.0$
26.962,351,9$
63.560,381$
62.402,079,8$
69.623,519$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
72.497,328$
87.031,663$
90.895,472$
26.962,351,9$
- 9 0 9 0 9 0 2 2 seiralaS defiissalC
00.0$
57.704,998,11$
31.889,732$
26.914,166,11$
87.049,981,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
07.649,070,1$
13.679,574$
32.289,653$
57.704,998,11$
- 9 0 9 0 9 0 3 3 ee s y t o fie lp n m eB E
00.0$
59.213,178,1$
19.199,031$
40.123,047,1$
00.0$
00.0$
78.114,13$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
44.894,731$
15.936,492$
15.936,492$
15.936,492$
59.213,178,1$
- 9 0 9 0 9 0 4 4 dn s a e s il k p o p o u B S
00.0$
73.986,665,5$
24.847,924$
59.049,631,5$
48.247,912$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
10.810,744$
73.986,665,5$
- 9 0 9 0 9 0 5 5 gnita d re n p a O se r c e iv h r t e O S
00.0$
00.818,641,1$
62.772,08$
47.045,660,1$
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80.908,86$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
62.772,08$
07.220,271$
07.220,271$
07.220,271$
00.818,641,1$
- 0 0 0 0 9 0 6 6 yaltuO latipaC
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33.178,603$
00.0$
33.178,603$
52.473,16$
72.473,16$
72.473,16$
72.473,16$
72.473,16$
00.0$
00.0$
00.0$
00.0$
00.0$
00.0$
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33.178,603$
- 9 0 9 0 2 0 7 7 ogtuO rehtO
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)88.828,231$(
00.0$
)88.828,231$(
)88.828,231$(
00.0$
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)88.828,231$(
- 9 0 9 0 3 3 7 7 /tro ts p o p C u S t c t e c r e i r d i n D I
00.0$
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00.385,093$
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00.385,093$
- 9 0 2 0 6 6 7 7 tuO s d r n e u f f s r n e a t r n T I
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- 9 0 9 3 6 6 7 7 sesU r g e n h ic tO na n ll i A F
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62.936,172,95$
04.164,346,1$
68.771,826,75$
85.090,155,5$
07.983,910,5$
56.016,911,5$
04.561,732,5$
04.561,732,5$
31.197,571,5$
31.197,571,5$
31.197,571,5$
31.197,571,5$
46.776,424,5$
59.765,819,2$
20.643,714,2$
62.936,172,95$
stnemesru l b at s o iD T stessA
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00.000,02$
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00.000,02$
00.000,02$
0319 hsaC gn tn iv u l o o c v c e A R
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00.000,05$
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00.000,05$
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hsaC e g c n n i a d la n B E
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ecnalaB hsaC gnidnE
19
MULTIYEAR FINANCIAL PROJECTIONS
south Bay union school District
20
MULTIYEAR FINANCIAL PROJECTIONS
Although the district’s cash balance as of July 2011 is approximately $18 million, the projected
cash balance on June 30, 2013 will be approximately $4 million. This cash flow is predicated
on multiple assumptions including budgeted revenue and expenditures and scheduled income
and disbursements. Even a small change that negatively affects the district’s cash may require the
district to seek cash from other sources.
Interfund borrowing
Education Code 42603 permits a district to temporarily borrow cash from one or more of its
own funds to meet its cash flow needs. If the district needs to temporarily borrow cash and has
cash available in another fund, the governing board may pass a resolution to authorize an inter-
fund loan.
Recommendations
The district should:
1. Continue to evaluate its ability to maintain fiscal solvency for the current and
subsequent two years. Take all reasonable steps to balance its budgets and
maintain a positive cash balance.
2. Regularly evaluate external and internal factors affecting the districts fiscal
health and use an MYFP to project their effect on the district.
3. Regularly review enrollment and attendance records to identify and respond
to trends. Continue to seek opportunities to increase enrollment and atten-
dance.
4. Evaluate resources to identify potential contributions to restricted program
funds from the unrestricted general fund and work to ensure that restricted
programs are self-sustaining to the greatest extent possible.
5. Consider reviewing site and program carryover policies for program funds.
Require site plans to identify uses that align with the district’s priorities and
to return unused funds annually. Ensure that all current funding is used for
current students and that any carryover is available to the district as a whole.
6. Continue and expand the use of categorical flexibility as allowed for and
extended by the current state budget.
7. Closely monitor cash flow and apply for Tax and Revenue Anticipation Notes
(TRANS) annually as a safeguard against additional apportionment funding
deferrals or other unanticipated cash needs. Participate in a TRANS pool if
one is available.
8. Monitor other district funds to ensure their fiscal solvency.
9. Pass an interfund borrowing resolution annually to ensure approval is avail-
able should the district have immediate need to transfer funds.
Fiscal crisis & ManageMent assistance teaM
21
STAFFING
Staffing
As is the case with almost all LEAs, staffing costs account for the majority of the district’s
budgeted expenditures. It is impossible to make significant budget or expenditure reductions
without affected staffing. The district has an extensive budget process that includes various stake-
holders with the board of trustees as the final decision makers. The process is transparent and the
district’s priorities are to minimize the effects on direct student services. Nonetheless, staffing in
all areas has been reduced during recent years of declining enrollment and state funding reduc-
tions.
Certificated Staff
For 2010-11, the district employed approximately 365 full time equivalent (FTE) teachers
for the regular education program. In addition, the district employs 52 impact teachers using
categorical funding.
According to Ed Data (www.ed-data.k12.ca.us), the district maintained a pupil-to-teacher ratio
of less than 21:1 from 2000 through 2010. In an effort to curtail expenses without laying off
staff, the district offered a retirement incentive and the certificated bargaining unit agreed to
reduce the work year by seven days. Twenty-one teachers accepted the retirement incentive prior
to fiscal year 2009-10, and an additional 16 teachers accepted it through July 2010. For the
2011-12 school year, in further response to budget cuts and preparation for possible additional
reductions, the district reduced its teaching staff with the objective of having 25 students per
teacher in kindergarten, 27 in grades 1- 3 and 33 students per teacher in grades 4-6.
Educators throughout the state agree that it is important to manage student-to-teacher ratios
because smaller class sizes allow students to have more personalized attention and teachers to
have better working conditions. Because teacher compensation is the majority of any district’s
budget, districts have found it necessary to seek budget reductions in this area. While the increase
in class size for the district appears dramatic, many districts in the state have increased their class
sizes to more than 30 students for grades K-3 and to the maximum allowable for higher grades.
Classified Staff
The district also sought savings through an extensive reduction in classified positions. The district
offered retirement incentives for classified personnel and received nine responses through June
2010. To further mitigate decreases in revenue, the district and the classified bargaining unit have
agreed to furlough days through 2013. However, these actions have not prevented the district
from reducing hours, laying off positions and leaving vacant positions unfilled.
The district’s custodial and maintenance services are very efficient. The district determines its
custodial staffing needs using the California Association of School Business Officials’ (CASBO’s)
industry-standard guidelines, and cleaning practices are standardized districtwide. The cleaning
staff has been reduced by 25% and current staffing allows for vacuuming of classrooms only
every other day. Staff indicated that cleaning levels are understandable given the current budget
conditions and are not an issue. FCMAT found no complaints from staff or public regarding
cleanliness of facilities or restrooms. The annual school facility conditions evaluation conducted
in August of 2010 listed overall cleanliness as good but cited a few instances of dirty floors and
exhaust vents in the student restrooms. FCMAT neither found nor heard any issues regarding the
overall maintenance of facilities. The annual facility evaluations rated all school sites reviewed in
south Bay union school District
22
STAFFING
“good” condition. Only one site received a “poor” rating in one category mostly because several
classrooms had lights that did not function.
District Office
Staffing at the district office has been highly scrutinized and targeted in the budget reduc-
tion process. The district office cut its receptionist and two administrative assistant positions,
including the superintendent’s assistant. The district’s fiscal services and human resources offices
have also seen extensive reductions in staff and have led the way through the budget reduc-
tions by reducing staff before and to a greater degree than was requested of sites, and by taking
compensation reductions.
The fiscal services department has experienced a 50% reduction in staff, from 12 staff positions
to six. The human resources department has been reduced from 6.75 FTE positions to 4.5
and took over the additional work of handling employee benefits. In an effort to create greater
efficiencies, the district purchased and is in process of implementing Infinite Visions, a new
fiscal and personnel management software. Staff indicated difficulties with the transition to the
new software including the need to maintain the old system to access historical data because the
two systems did not interact and staff have been unable to generate some reports using the new
software.
The staffing of the district’s human resources and fiscal services departments is low compared to
that of school districts of similar size and in FCMAT’s opinion is at best minimally adequate.
Each position is essential to meet the district’s daily needs, and each position requires a highly
knowledgeable and efficient person to fulfill daily work requirements. Because of the level of
knowledge and skill needed, it is unlikely that a substitute can adequately fulfill the require-
ments of a position when an employee is absent or goes on vacation. As a result, processes and
information vital to the district may be overlooked. In addition, these positions are important to
the district’s fiscal evaluation and planning processes. Little opportunity is available for proactive
fiscal review because the daily routines require the vast majority of staff members’ time and atten-
tion. FCMAT found it difficult to obtain information because staff availability was limited and
staff members were engaged in necessary daily tasks.
The fiscal services and human resources staff are highly knowledgeable and skilled in their areas
of expertise, but are in need of more support as well as ongoing training to engage in proactive
planning and evaluation while meeting all of the district’s routine needs.
To mitigate the need for further staffing cuts, agreements have been reached to implement
furlough days for fiscal year 2010-11 through 2012-13. All units, including certificated, classi-
fied, confidential, and management, agree to implement furlough days to cut expenses rather
than making all reductions though layoffs. The certificated unit has agreed to seven furlough days
in 2010-11, six furlough days in 2011-12 and seven furlough days in 2012-13. The classified
unit has agreed to five or six furlough days for 2010-11, five or six furlough days in 2011-12, and
six to 10 furlough days for 2012-13. The confidential and management staff have agreed to take
eight or nine furlough days for 2010-11, seven or eight days in 2011-12, and eight or nine days
in 2012-13.
Fiscal crisis & ManageMent assistance teaM
23
STAFFING
Recommendations
The district should:
1. Continue the budget review process to evaluate the best use of district funds
to serve students.
2. Continue to evaluate and adapt staffing to changes in student enrollment and
funding flexibility.
3. Maintain custodial and maintenance services to provide a clean and safe
learning environment and to increase the longevity of school facilities.
4. Review district fiscal services and human resources staffing to ensure adequate
training and support.
5. Invest in additional training and support for the Infinite Visions software,
including training additional staff to maintain and extract information from
the system so that the software can be used fully and maintained at all times.
6. Further explore the potential for the Infinite Visions software to efficiently
produce staffing reports and projections, detailed expenditure reports,
comparative budget reports and other reports to help the district’s leadership
make informed and effective decisions.
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STAFFING
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REVENUE AUGMENTATION
Revenue Augmentation
Transportation Fees
California Education Code section 39807.5 states that when a district offers home-to-school
transportation for its students, it may require the parents of students transported to pay a portion
of the cost of the transportation in an amount determined by the governing board but not greater
than the statewide average non-subsidized cost of providing the transportation to a student on a
publicly owned or operated transit system.
The State Superintendent of Public Instruction’s February 11, 2011 letter regarding fees for
pupil transportation states that the maximum allowable rate for fiscal year 2011-12 is $8.50 per
student, per day for a round trip. Therefore, if the district had a 180-day instructional calendar,
the maximum that could be charged to parents would be $1,530 ($8.50 x 180).
Although the education code allows school districts to levy these pupil transportation fees, it is a
common best practice for districts to first analyze their current ridership to determine if charging
fees would generate sufficient revenue to implement such a program. For example, if the vast
majority of current riders receive free meals at school, the district would not be able to charge
those students’ parents for transportation. Parents of student riders who are eligible for reduced
price meals could be charged only a reduced fee for transportation. Only the parents of students
who do not qualify for free or reduced price meals could be charged the full transportation fee.
After determining the number of riders who could be charged the full fee, a district would need
to estimate the number of students who would no longer attend the district’s schools because of
the fees. The total estimated revenue could then be compared to the revenue limit funding lost to
determine whether it would be feasible to implement transportation fees.
Facility Fees
As permitted by Education Code section 38134, the district has developed a fee schedule for
individuals and groups that use the district’s facilities; however, staff indicated that the fee
schedule has not been revised in more than four years. The above-mentioned education code
section also regulates the amounts the district can charge and includes such items as supplies,
utilities, janitorial services and salaries of district employees necessitated by the organization’s
use of the facility. Many, if not all, of these costs have risen since the district last revised its fee
schedule.
Deferred Maintenance Program Transfer
Each year, the State Allocations Board (SAB) apportions funding for the deferred maintenance
program (DMP) payment to school districts. The district’s allocation for the fiscal year 2009-10
(paid in the subsequent fiscal year) was $279,131. Before fiscal year 2008-09, these funds were
deposited directly into the deferred maintenance fund and the district was required to match
those funds. Beginning in fiscal year 2008-09 and continuing through fiscal year 2014-15, the
DMP payment is deposited into the general fund, may be used for “any educational purpose,”
and no matching component is required.
FCMAT’s reviewed of the district’s unaudited actuals report revealed that although the district
receives the DMP payment into the general fund, this payment and additional funding was
transferred to the deferred maintenance fund to be used for major repair or replacement projects.
After reducing the beginning fund balance and revenues by the expenditures for the year, the
deferred maintenance fund ended fiscal year 2009-10 with an ending balance of $692,890,
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which is equal to two and a half times the current annual SAB contribution. The district is
permitted to keep the annual DMP payment in the general fund to be used for educational
programs and allow the deferred maintenance fund to use its fund balance for major repair or
replacement projects. If it later finds that the deferred maintenance fund balance is not sufficient
to support its projects, any transfer to the deferred maintenance fund could be restricted to the
funding required for the specific project.
Categorical Carryover
The district’s revenue and fund balances in the 2009-10 Form CAT from the unaudited actuals
indicated that although there was a reduction in the carryover/fund balances in most programs,
some program balances had increased since 2008-09 (see Form CAT analysis below).
For example, the district reports a $244,753.28 increase in the carryover balance in Title II, Part
A. This program is in the list of federal programs that allow funding to be transferred in or out to
better align resources to the district’s needs. If the district’s technology needs are not being met,
the district might consider taking advantage of the federal flexibility rules and transfer funds from
Title II, Part A to Title II, Part D.
Districts that are not in Program Improvement have greater federal flexibility options than
Program Improvement districts. In addition to the transferability of the funds to a select group
of federal programs, the excess funding in Title II, Part A can be used to reduce general fund
contributions to the K-3 Class Size Reduction program.
Analysis of Form CAT
Resources with Increasing Deferred Revenue/Carryover Balances
Excluding American Recovery and Reinvestment Act and State Fiscal Stabilization Funds
Beginning Ending
Carryover Carryover Carryover
Resource Program Name Balance Balance Increase
3180 Improvement Grant, QEIA $ - $659,150.89 $659,150.89
4035 Title II, Part A $127,410.58 $372,163.96 $244,753.38
7386 Fiscal Solvency - GASB 45 OPEB $ - $7,832.00 $7,832.00
9010 Resource Centers - Donations $18,870.58 $33,884.04 $15,013.46
9010 Sweetwater UHSD - LEA Medi-Cal $54,846.89 $94,785.36 $39,938.47
TOTAL $966,688.20
Resources with Increasing Fund Balances
Beginning Ending
Fund Fund Fund Balance
Resource Program Name Balance Balance Increase
5640 LEA Medi-Cal $99,110.38 $161,688.26 $62,577.88
7090 Economic Impact Aid $1,158,115.02 $1,386,827.60 $228,712.58
7091 Economic Impact Aid - LEP/ELL $932,223.52 $1,308,827.04 $376,603.52
7400 Quality Education Investment Act $783,600.84 $1,003,959.06 $220,358.22
9010 Microsoft Settlement $39,622.97 $437,100.73 $397,477.76
TOTAL $1,285,729.96
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REVENUE AUGMENTATION
Ending Fund Balance
FCMAT’s review of the district’s 2009-10 unaudited actuals report and 2010-11 second interim
report revealed that a portion of the fund balance was designated for such items as an additional
2% for economic uncertainties and various carryovers for sites, departments and purchase orders.
For the 2009-10 unaudited actuals this amounted totaled $7,741,286, and for the 2010-11
second interim report the amount ranged from $5,208,272 in fiscal year 2010-11 to $1,585,013
in 2012-13 year. Although it is commendable that the district is seeking to follow the board’s
goal of a 5% reserve and allow sites and departments to keep carryover funding from year to year,
given the state’s economic crisis and the effect of that crisis on school funding, the district would
benefit from suspending designations of this type to help eliminate its deficit spending.
Special Reserve
The district also maintains special revenue funds which are available for transfer to the general
fund in the case of shortfalls in the general fund. The first of these is the Special Revenue Fund
for Other Than Capital Outlay Projects (Fund 17) which, pursuant to the California School
Accounting Manual (CSAM), Procedure 305, “…is used primarily to provide for the accu-
mulation of general fund moneys for general operating purposes other than for capital outlay
(Education Code Section 42840).”
The district’s other special revenue fund from which it can provide funding to the general fund is
the Special Reserve Fund for Postemployment Benefits (Fund 20), which is a fund that is used as
follows, according to CSAM Procedure 305:
…pursuant to Education Code Section 42840 to account for amounts the LEA has
earmarked for the future cost of postemployment benefits but has not contributed irre-
vocably to a separate trust for the postemployment benefit plan. Amounts accumulated
in this fund must be transferred back to the general fund for expenditure (Education
Code Section 42842).
As of June 30, 2010, the district reported balances of $4,417,161.22 for Fund 17 and
$1,153,380.54 for Fund 20. The district reports that it plans to transfer a total of $2,527,043
from funds 9, 17 and 40 to the general fund during fiscal year 2010-11, and it would benefit
from continuing to draw upon these funds as needed to maintain its 3% reserve requirement.
Attendance Waiver
More than 50% of the district’s revenues are generated from state apportionment, which is deter-
mined based on student attendance or ADA. During the 2009-10 school year, many districts
suffered a decline in attendance due to the H1N1 flu outbreak. Under such circumstances
and pursuant to Education Code section 46392, a district may file a Request for Allowance of
Attendance Because of Emergency Conditions in order to recapture the ADA lost. Normally,
an epidemic must be declared in order to recapture ADA based on illness; however, this require-
ment was waived by the California Department of Education (CDE) for the 2009-10 H1N1 flu
outbreak. However, district staff were not aware of this CDE’s waiver of the epidemic require-
ment. If the district is still permitted to file the Request for Allowance is still open, it could
recapture this lost ADA.
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REVENUE AUGMENTATION
Medi-Cal Administrative Activities
The Medi-Cal Administrative Activities (MAA) program allows government entities such as
school districts to submit claims and receive reimbursements for activities that are defined as
administration of the federal Medicaid program. School personnel submit claims for adminis-
trative costs associated with school-based health and outreach activities that are not claimable
under the Medi-Cal billing option or another Medi-Cal program. In most cases these costs are
associated with referring students or families for Medi-Cal eligibility determinations, providing
health care information and referral, coordinating and monitoring health services, and coordi-
nating between agencies. MAA claims are submitted based on time surveys completed by district
personnel such as site administrators, nurses, counselors and psychologists and are based on the
normal day-to-day activities that these employees provide to students.
The district has recently implemented the reimbursement process under the MAA program
and received approximately $5,000 for time studies submitted for the first quarter of fiscal year
2010-11 and approximately $20,000 for the second quarter. This revenue is entirely dependent
on employees completing the paperwork required for the district to receive reimbursement
for job duties that employees normally provide to students. Annual reimbursement can total
hundreds of thousands of dollars for a district the size of the South Bay Union School District.
Parcel Taxes
As state resources for school districts have continued to decline, many districts have sought
increased operating funds from local voters by implementing a parcel tax. Parcel taxes are
normally levied at a flat rate per parcel and must be uniformly applied to all real property owners
except for senior citizens and federal supplemental security income disability benefit recipients,
for whom exemptions are permitted. Parcel taxes can be extremely difficult to pass because they
require a two-thirds vote of the electorate; however, the parcel tax the district placed on the ballot
in 2010 fell short by only 8 percentage points.
Enrollment and Attendance
Because a majority of the district’s revenue is generated by student enrollment and attendance,
the district needs to be attentive to ways to increase enrollment and encourage attendance.
Incentives of various kinds are widely used by districts to encourage students to attend school
and encourage staff to assist in getting the students to school. Aligning the school calendar with
those of other districts and with families’ needs can help increase enrollment and attendance. The
newly formed Nestor charter academy has encouraged students looking for a language academy
and has allowed the district to serve students in grades 7 and 8. The district music program
promotes the district and encourages students to enroll in and attend the district’s schools.
Recommendations
The district should:
1. Analyze the student population using home-to-school transportation to determine if
charging fees would generate sufficient revenue to justify implementation. Consider
implementing fees if the analysis indicates that it is feasible.
2. Update its fee schedule for the use of its facilities to fully recoup the actual costs of
the facilities use.
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REVENUE AUGMENTATION
3. Consider suspending or reducing the transfer of the annual deferred maintenance
program payment from the State Allocation Board to the deferred maintenance fund.
4. Fully use categorical funding to better align resources with the district’s needs and
goals. Consider transferring funding from Title II, Part A to Title II, Part D for use
in technology, or using Title II, Part A funding to support additional teaching posi-
tions and reduce general fund contributions to the K-3 CSR program.
5. To reduce deficit spending, consider suspending the practice of designating fund
balances for such items as additional reserves for economic uncertainties and carry-
over for sites, departments and purchase orders.
6. Continue to draw on its special revenue funds as needed to maintain its 3% reserve
requirement.
7. Immediately determine if it can still file the Request for Allowance of Attendance
Because of Emergency Conditions for the ADA lost in the 2009-10 H1N1 flu virus
outbreak, and if so, file the request as soon as possible.
8. Ensure that all employees who are providing MAA services complete the necessary
paperwork so that the district can receive the maximum reimbursement.
9. Seek the advice of experienced financial advisors and legal counsel to help determine
the feasibility of placing another parcel tax measure on the ballot.
10. Continue looking for and implanting ways to increase enrollment and attendance,
including the following:
a. Implement attendance incentives.
b. Thoroughly examine the school calendar and compare it to those of
neighboring district and daily attendance rates.
c. Consider opening additional charter schools to expand grades served
and promote specialized learning opportunities.
d. Use the music program to promote the school district. Evaluate and
expand the program if this would benefit the district.
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EXPENDITURE REDUCTIONS
Expenditure Reductions
Stores Inventory
At the end of each fiscal year the district conducts a year-end (June 30) inventory to determine
the amount and value of items being held in the cafeteria stores. This amount is recorded in the
district’s financial accounts and reported as an asset on the balance sheet. However, using these
stores instead of purchasing via the purchase order (PO) process would reduce expenditures in
the year in which stores are used.
Stores inventories for both the district’s general fund and cafeteria fund have been increasing.
For the general fund, stores have increased from $182,622 on June 30, 2009 to $229,867 on
June 30, 2010. Stores in the cafeteria fund have increased from $190,276 on June 30, 2009 to
$262,533 on June 30, 2010.
Nurses
The district has five nurses and one health clerk to help address students’ medical issues that
require administration of medications for allergies, asthma, diabetes and other conditions. To
provide necessary services while keeping costs in check, many districts use one nurse to lead the
program and LVNs and health clerks to perform various duties.
Indirect Costs
A school district’s costs can be categorized as direct or indirect. The activity associated with the
cost determines if it is a direct or indirect cost. Direct costs can be identified with a particular
instructional program or support service necessary to maintain the program.
Indirect costs are more global in nature. They are the costs of general management that are
districtwide and consist of expenditures for administrative activities needed for the general opera-
tion of the district (e.g., accounting, budgeting, payroll preparation, personnel management,
purchasing, and centralized data processing). Each district establishes an annual indirect cost
rate based on its individual expenditures as applied to the California Department of Education’s
(CDE) federally approved indirect cost plan. This indirect cost rate is then multiplied by each
program’s actual allowable expenditures to determine how much the program is to be charged for
its share of the cost of general administrative activities.
As a rule, individual programs are charged the district’s CD- approved indirect cost rate unless
the program specifically requires a different rate or none at all. For example, the Federal
Education Jobs Funding allows no indirect costs while Economic Impact Aid (EIA) allows a 3%
indirect cost rate. In addition, Education Code sections 38101(c) and 52616.4(a)(3) limit school
district indirect costs to amounts derived from the lesser of a school district’s indirect rate (as
approved by the CDE) or the statewide average indirect cost rate for food service programs. For
fiscal year 2010-11, the district’s CDE-approved indirect cost rate was 5.37%. For food services,
the district was limited to the lesser of either this rate or the food services rate of 4.44% for fiscal
year 2010-11. FCMAT reviewed the district’s comparative budget report for fiscal year 2010-11
and found the following:
• Some programs to which the district is allowed to charge indirect costs were not charged
for their share of the district’s general administrative costs through the application of the
district’s CDE-approved indirect cost rate. These included such programs as Title I, part
B; special education – IDEA preschool part B; special education – IDEA preschool local
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EXPENDITURE REDUCTIONS
entitlement; Title IV, EIA – limited English proficient special education apportionment;
home-to-school transportation; special education transportation; and the fiscal solvency
program. The special education apportionment, home-to-school transportation, and
special education transportation programs all require contributions from the unrestricted
general fund and thus charging them indirect costs would increase the general fund
contribution; however, it is important that the full cost of the program be reported.
• Some programs were charged more than the district’s CDE- approved indirect cost rate.
For example, the following programs were charged the indirect cost rates listed below
rather than the district’s allowed 5.37% indirect cost rate.
• ARRA Title I/Part A: 5.49%
• Title I – School Improvement Grant – QEIA: 7.02%
• ARRA Title I – School Improvement Grant – QEIA: 9.79%
• Special education – IDEA/part B basic: 7.92%
• Title II/part A: 5.59%
• Some programs were charged less than the district’s CDE-approved indirect cost rate of
5.37%, including the following:
• Title I/Part A: 5.29%
• ARRA: 1.93%
• Special Ed – IDEA Preschool Local Entitlement: 1.8%
• Title III, Medi-Cal Billing: 1.95%
• Quality Education Investment Act (QEIA) program: 2.86%
• In addition, the Food Service program is being charged 4.39% instead of the 4.44%
allowed, and the Education Investment Act (EIA) program is being charged 1.9% rather
than the 3% rate allowed.
In addition to charging indirect costs to programs, Government Code section 65005.6 allows the
district to use up to 3% of the developer fees collected in a fiscal year for reimbursement of the
administrative costs incurred in collecting these fees. The district’s 2010-11 comparative budget
report does not budget any indirect costs .
The result of the misapplication of the district’s CDE-approved indirect cost rate to its programs
is that the unrestricted general fund is bearing an unequal burden of the administrative costs even
though restricted and other programs are using those services. Unfortunately, the district cannot
recover the costs that were not charged correctly in prior years; however, the district can review
its processes for applying indirect costs and revise its closing procedures for the unaudited actual
reporting to ensure that it is charging indirect costs at the correct rate to each program for which
this is allowed.
Food Services
At the end of fiscal year 2009-10 the district’s food service program had revenues that exceeded
its expenditures, resulting in a fund balance of $1,899,664. Although the cafeteria fund cannot
permanently transfer funds to the general fund, the district can ensure that the food service
program is paying for all of the costs associated with its operations. For example, the district has
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EXPENDITURE REDUCTIONS
already reviewed positions that provide services to multiple programs (such as the warehouse and
custodial services) to ensure that the fair share of those services are being charged to food services.
The food service program operates four kitchens; however, FCMAT’s review of the utilities costs
for that program found that $3,984.59 was charged in fiscal year 2009-10 and the budget for
fiscal year 2010-11 was $4,200. These figures seem slightly low for utility costs for four kitchens;
the district may benefit from confirming the calculation of these costs.
Energy conservation
The district has an approved energy conservation policy. In accordance with the policy, the
district has installed energy management systems on every campus and is working on an energy
retrofit for all portables. District staff indicated that although the district is diligent in seeking
energy and cost savings, staff are allowed to have personal appliances such as microwaves, refrig-
erators and coffee makers in their work areas. These personal appliances are not efficient and can
be costly to the district.
Recommendations
The district should:
1. Consider monitoring and reducing stores inventory in the general fund and the
cafeteria fund.
2. Consider reconfiguring its nursing program to incorporate the use of LVNs as
nursing staff retire or leave the district.
3. Review its processes for applying indirect costs and revise its closing procedures for
the unaudited actual reporting to ensure that each program that it is allowed to
charge an indirect cost rate is charged the correct rate.
4. Confirm the calculation of the utility costs for the food service program to ensure
that the program is fully paying all of its costs.
5. Seek additional utility cost savings by reviewing, communicating and enforcing its
energy conservation policy, including monitoring or eliminating the use of personal
appliances.
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APPENDIX
Appendix
A. Study Agreement
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