Stockton Unified School District Report

Fiscal and Facilities Review January 25, 2022 Stockton Unified School District Michael H. Fine Chief Executive Officer January 25, 2022 John Ramirez, Jr., Superintendent Stockton Unified School District 701 North Madison Street Stockton, CA 95202 Dear Superintendent Ramirez: In March 2021, the Stockton Unified School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to conduct a review of the district’s budget and some facilities projects. The agreement states that FCMAT would perform the following: 1. Review the district’s 2021-22 adopted general fund budget and use it as a baseline to develop an independent multiyear financial projection (MYFP) for the current and two subsequent fiscal years. The MYFP will be a snapshot in time of the district’s current financial status. Make recommendations for expenditure reductions and/or revenue increases to help the district eliminate its structural budget deficit and maintain fiscal solvency. 2. Review the district’s long-range facilities master plan and projects specified in the 2018 Measure C general obligation bond, evaluate the allocation of resources and completion of projects outlined in these documents, and make recommendations for improvements, if any. This final report contains the study team’s findings and recommendations. FCMAT appreciates the opportunity to serve the Stockton Unified School District and extends thanks to all the staff for their assistance during fieldwork. Sincerely, Michael H. Fine Chief Executive Officer Michael H. Fine • Chief Executive Officer 1300 17th Street – City Centre, Bakersfield, CA 93301-4533 • Tel. 661-636-4611 • Fax 661-636-4647 www.fcmat.org Table of Contents Table of Contents About FCMAT ..................................................................................................iii Introduction .......................................................................................................v Background ............................................................................................................................v Study and Report Guidelines .............................................................................................v Study Team .............................................................................................................................v Executive Summary ........................................................................................1 Findings and Recommendations................................................................4 Assembly Bill (AB) 1200 Oversight ......................................................................4 Budget and Multiyear Financial Projections ......................................................5 Enrollment and Average Daily Attendance ....................................................................6 Multiyear Financial Projection Assumptions ..................................................................7 Multiyear Financial Projection Analysis ..........................................................................17 Other Items to Consider ....................................................................................................21 Other Funds .........................................................................................................................22 Revenue Increases and Expenditure Reductions ..........................................28 2018 Measure C ......................................................................................................32 Appendices ....................................................................................................44 Appendix A: Sample Facilities Priorities Template ........................................45 Appendix B: Sample Master Program Budget Template .............................48 Appendix C: Sample Programwide Budget and Expenditure Report Template .................................................................................................................. 50 Appendix D: Sample Project Budget and Expenditure Report Template .............................................................................54 Fiscal Crisis and Management Assistance Team Stockton Unified School District i Table of Contents Appendix E: Study Agreement ...........................................................................58 Fiscal Crisis and Management Assistance Team Stockton Unified School District ii About FCMAT FCMAT’s primary mission is to assist California’s local K-14 educational agencies to identify, prevent, and resolve financial, human resources and data management challenges. FCMAT provides fiscal and data management assistance, professional development training, product development and other related school business and data services. FCMAT’s fiscal and management assistance services are used not just to help avert fiscal crisis, but to promote sound financial practices, support the training and development of chief business officials and help to create efficient organizational operations. FCMAT’s data management ser- vices are used to help local educational agencies (LEAs) meet state reporting responsibilities, improve data quality, and inform instructional program decisions. FCMAT may be requested to provide fiscal crisis or management assistance by a school district, charter school, community college, county office of education, the state superintendent of public instruction, or the Legislature. When a request or assignment is received, FCMAT assembles a study team that works closely with the LEA to define the scope of work, conduct on-site fieldwork and provide a written report with findings and recommendations to help resolve issues, overcome challenges and plan for the future. Studies by Fiscal Year 90 80 70 60 50 40 30 20 10 0 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 11/12 12/13 13/14 14/15 15/16 16/17 17/18 18/19 19/20 FCMAT has continued to make adjustments in the types of support provided based on the changing dynamics of K-14 LEAs and the implementation of major educational reforms. FCMAT also develops and provides numerous publications, software tools, workshops and professional learning opportunities to help LEAs operate more effectively and fulfill their fiscal oversight and data management responsibilities. The California School Information Services (CSIS) division of FCMAT assists the California Department of Edu- cation with the implementation of the California Longitudinal Pupil Achievement Data System (CALPADS). CSIS also hosts and maintains the Ed-Data website (www.ed-data.org) and provides technical expertise to the Ed-Data partnership: the California Department of Education, EdSource and FCMAT. FCMAT was created by Assembly Bill (AB) 1200 in 1992 to assist LEAs to meet and sustain their financial obligations. AB 107 in 1997 charged FCMAT with responsibility for CSIS and its statewide data management work. AB 1115 in 1999 codified CSIS’ mission. seidutS fo rebmuN About FCMAT Fiscal Crisis and Management Assistance Team Stockton Unified School District iii About FCMAT AB 1200 is also a statewide plan for county offices of education and school districts to work together locally to improve fiscal procedures and accountability standards. AB 2756 (2004) provides specific responsibili- ties to FCMAT with regard to districts that have received emergency state loans. In January 2006, Senate Bill 430 (charter schools) and AB 1366 (community colleges) became law and expanded FCMAT’s services to those types of LEAs. On September 17, 2018 AB 1840 was signed into law. This legislation changed how fiscally insolvent dis- tricts are administered once an emergency appropriation has been made, shifting the former state-centric system to be more consistent with the principles of local control, and providing new responsibilities to FCMAT associated with the process. Since 1992, FCMAT has been engaged to perform more than 1,400 reviews for LEAs, including school districts, county offices of education, charter schools and community colleges. The Kern County Superin- tendent of Schools is the administrative agent for FCMAT. The team is led by Michael H. Fine, Chief Execu- tive Officer, with funding derived through appropriations in the state budget and a modest fee schedule for charges to requesting agencies. Fiscal Crisis and Management Assistance Team Stockton Unified School District iv Introduction Introduction Background Located in San Joaquin County, the Stockton Unified School District has a seven-member governing board and serves approximately 34,320 students at 49 schools. The district has also authorized five district-oper- ated charter schools and 13 independent charter schools. According to data from the California Department of Education (CDE), student enrollment peaked at 35,258 in 2017-18 and remained relatively stable each year since that time until 2020-21, when enrollment decreased to 33,943 during the COVID-19 pandemic. The district’s California Longitudinal Pupil Achievement Data System (CALPADS) records indicate that its 2021-22 unduplicated pupil count of students who qualify for free or reduced price meals, are foster youth, or are English learners, was 28,878, or 84.14% of enrollment. Study and Report Guidelines In March 2021, the Stockton Unified School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to provide management assistance by conducting a review of the district’s budget and some facilities projects. FCMAT visited the district on September 20-24, 2021 to conduct interviews, collect data and begin review- ing documents. Following fieldwork, FCMAT continued to receive, review and analyze documents. This report is the result of those activities. FCMAT’s reports focus on systems and processes that may need improvement. Those that may be function- ing well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Asso- ciated Press Stylebook, a comprehensive guide to usage and accepted style that emphasizes conciseness and clarity. In addition, this guide emphasizes plain language, discourages the use of jargon and capitalizes relatively few terms. Study Team The study team was composed of the following members: Diane Branham Debbie Riedmiller, CFE FCMAT Chief Analyst FCMAT Intervention Specialist Colleen Patterson, MBA, CMA Leigh Coop FCMAT Consultant FCMAT Consultant John Lotze FCMAT Technical Writer Each team member reviewed the draft report to confirm accuracy and achieve consensus on the final recommendations. Fiscal Crisis and Management Assistance Team Stockton Unified School District v Executive Summary Executive Summary Financial planning is crucial for every local educational agency (LEA) and helps a district strategically align its budget with its instructional goals, programs and the Local Control and Accountability Plan (LCAP). Rec- ognizing financial trends is essential to maintaining a district’s fiscal health, and monitoring and analyzing year-to-year trends in key budget areas helps a district evaluate its budget direction and highlight possible areas of concern. Given the COVID-19 pandemic’s uncertainties, the continuing changes being made to address it, and resulting ongoing economic impacts, LEAs must be prepared for possible additional financial issues that extend beyond 2021-22. Regular and frequent budget monitoring becomes even more important in times of fiscal uncertainty. Multiyear financial projections (MYFPs) can become somewhat less reliable in a time of fiscal instability, particularly for the subsequent fiscal years, because projected revenues from the state and federal government, and their related expenditures, may frequently change. Nonetheless, the district will need to ensure that multiyear financial and cash flow projections are kept up to date and that the informa- tion they contain is accurate and based on the most current budget assumptions available. One-time funding, such as that provided by the state in prior years and federal and state COVID-19 relief funds, can temporarily mask an ongoing operational deficit. Maintaining fiscal solvency while maximizing services to students with available financial resources will be a continuing challenge for LEAs and their governing boards, which have a fiduciary duty to ensure solvency. At the time of FCMAT’s fieldwork, there had been significant employee turnover and the elimination of some management positions in the Business Services Department. Key budget management personnel had been in their positions for only a brief time; therefore, there was a lack of historical institutional knowl- edge about the district’s 2021-22 budget development and 2020-21 financial closing processes. The district does not use the same financial software system as the county office of education, so staff who are unfamil- iar with the district’s system are not able to ask the county office for the assistance and training needed to readily access key financial reports needed for efficient budget analysis. These factors make analysis of the district’s budget and MYFP laborious and inefficient. It would benefit the district to build capacity by train- ing and cross training staff in the budget development and closing processes and in the use of its financial software system. The district’s 2020-21 unaudited actuals report shows deficit spending of $5.8 million in the unrestricted general fund, and the MYFP developed by FCMAT indicates deficit spending of $9.9 million in 2022-23. However, the district has moved many ongoing expenses, including salaries and benefits, into one-time funds. In interviews, district personnel indicated that the Assembly Bill (AB) 86 Expanded Learning Opportunities Grant Plan will be ongoing; however, the income is one-time. Information from interviews also indicated that the funding for positions currently paid from the Elementary and Secondary School Emergency Relief (ESSER) funds will shift to the unrestricted general fund and/or other ongoing funding sources, or will be eliminated when ESSER funds are no longer available. Some positions charged to the ESSER funds appear to be essential to the organization, and they will likely need to continue when these one-time funds are no longer available. In addition, components of the ESSER III Plan include items that are not in the district’s budget but that should be added to the ongoing cost of that plan. Based on the information and documents provided by the district, FCMAT’s estimated ongoing costs of these plans, beginning in 2024-25 after the one-time funds expire, is $26.3 million per year. Numerous other items, which may also be ongoing, are included in the ESSER III Plan, but their cost is unknown; therefore, they are not included in FCMAT’s estimate. FCMAT strongly recommends that the district track ongoing commitments and monitor ending Fiscal Crisis and Management Assistance Team Stockton Unified School District 1 Executive Summary balances for these one-time resources to ensure they do not result in an ongoing structural deficit. The district should not use one-time funds for ongoing costs unless it has a board-approved plan to fund such ongoing costs or eliminate them when the one-time funds are no longer available. The district should anticipate fiscal challenges related to issues such as declining student enrollment and average daily attendance, potential increases in costs for health and welfare benefits, and increased employer contributions for pension plans. Challenges such as these will require the governing board and administration to continue making and implementing difficult decisions to ensure that the district does not deficit spend and become fiscally insolvent. The 2021-22 state budget increased the Local Control Funding Formula (LCFF) concentration grant from 50% to 65% of base LCFF funding. The additional 15% is to be used to increase the number of credentialed and/or classified staff who provide direct services to students. Also, beginning in 2021-22, if the quantita- tive and qualitative increases and improvements in services are insufficient to meet the prior-year minimum proportionality percentage (MPP), any unused portion of supplemental and concentration grant funds must be designated and spent on specific actions to meet the MPP. Therefore, it will be important for the district to identify its core programs so that it can properly track the use of supplemental and concentration grant funds. The district has implemented a complex multiyear, multifund facilities program since 2005, when voters approved its first Proposition 39 general obligation bond. Several general obligation bonds have passed since that time, which have provided millions of dollars of funding for facilities projects. The district’s most recent Proposition 39 bond, Measure C, passed in 2018. The district does not have a long-range facilities master plan, and its March 2008 Implementation Plan is outdated. The district should develop a comprehensive long-range facilities master plan to help it develop and meet the goals of its facilities program, help provide justification for how projects are selected and funded, and help avoid last-minute changes after projects have been selected. It would also benefit the district to develop a current long-range and a current short-term implementation plan. Program planning, plan implementation, budget and expenditure tracking, cash flow analyses, and com- pliance with a myriad of laws, regulations and policies are complex and important tasks. At the time of FCMAT’s fieldwork, there had been significant employee turnover and the elimination of some management positions in the Facilities and Planning Department, and the director of facilities and planning/transporta- tion had been with the district only for approximately two months. Therefore, there was a lack of historical institutional knowledge about the Measure C Program. The district does not appear to have a mechanism for budgeting and tracking each bond project from planning through closeout. FCMAT was not provided with ongoing and comprehensive reports that show all projects, budgets, commitments, expenditures, the remaining balance for each project, and cash flow projections. This lack of information makes it impossible to complete a comprehensive review and analysis of the Measure C Program. The district should immediately develop a master program budget, a program- wide budget and expenditure report, and individual project budget and expenditure reports for Measure C and all other active projects. An employee in the Facilities and Planning Department should be assigned to update these documents monthly, and the district should ensure other employees are cross trained to maintain and update the reports. Although it is required for Proposition 39 bond measures, the district does not have a citizens’ bond over- sight committee (CBOC), and FCMAT saw no evidence of active recruitment for committee members other than a posting for volunteers on the Facilities and Planning Department link of the district’s website. The district should actively recruit members and form a CBOC; it should update its website to include a link for Measure C and post all CBOC meeting agendas, minutes and reports on that web page. The district should Fiscal Crisis and Management Assistance Team Stockton Unified School District 2 Executive Summary also conduct performance and financial audits for 2018 Measure C, as required, and post them to its web- site. Information from interviews revealed a misconception about the need for board approval or ratification of contracts, specifically a misunderstanding that contracts do not have to be approved or ratified by the board. According to Board Resolution No. 21-06 and Education Code Section 17604, contracts are neither valid nor an enforceable obligation against the district unless and until they have been approved or ratified by the governing board. The district should ensure it complies with these requirements. Fiscal Crisis and Management Assistance Team Stockton Unified School District 3 Findings and Recommendations Assembly Bill (AB) 1200 Oversight Findings and Recommendations Assembly Bill (AB) 1200 Oversight If at any time during the fiscal year a district may be unable to meet its financial obligations for the current or two subsequent fiscal years, or has a qualified or negative budget certification, the county superinten- dent of schools is required to notify the district’s governing board and the state Superintendent of Public Instruction (SPI). The county superintendent is required to follow Education Code Section 42127.6 when assisting a school district in this situation, and to take all actions necessary to ensure the district meets its financial obligations. Assistance includes steps such as assigning a fiscal expert or fiscal advisor to advise the district on financial issues, conducting a study of the district’s financial and budget conditions, and requiring the district to submit a proposal to address its fiscal condition. The district’s 2020-21 and 2021-22 budget and 2020-21 interim report review letters from the county office of education caution the district about ongoing projected deficit spending in its unrestricted general fund. The September 15, 2021 letter from the county office states the following: Although the District currently has unrestricted undesignated reserves to meet the required minimum, the District continues to project unrestricted deficit spending in the current and the two subsequent fiscal years. Therefore, we strongly caution the District to avoid multiyear commitments (on-going costs) that could impact the financial stability of the District. Addition- ally, we note that the deficit reduction was in part due to position eliminations. If any of these positions are restored using one-time funding sources, we remind the district to plan early for how it will fund those positions when the funds are exhausted or expire. The district’s 2020-21 unaudited actuals report shows deficit spending of $5.8 million in the unrestricted general fund, and its 2021-22 adopted budget projects deficit spending of $3.6 million in 2021-22, $8.0 million in 2022-23 and $1.6 million in 2023-24. Regular and frequent budget monitoring becomes even more critical in times of fiscal uncertainty. The district will need to ensure that multiyear financial and cash flow projections are kept up to date and that the information they contain is accurate and based on the most current budget assumptions available. Recommendation The district should: 1. Adopt a budget and MYFPs that include a reserve level sufficient to ensure that cash is available to meet payroll and other expenditure obligations and to avoid any adverse effects related to the requirements of AB 1200 and AB 2756 (see the Budget and Multiyear Financial Projections section of this report). Fiscal Crisis and Management Assistance Team Stockton Unified School District 4 Findings and Recommendations Budget and Multiyear Financial Projections Budget and Multiyear Financial Projections Multiyear financial projections (MYFPs) are required by AB 1200 and AB 2756 and are a part of the adoption budget and interim reporting process. Assembly Bill 2756 was signed into law in June 2004 and made sub- stantive changes to the financial accountability and oversight used to monitor the fiscal position of school districts. Among other things, AB 2756 strengthened the roles of the SPI and county offices of education and their ability to intervene during fiscal crises. In the case of a district that does not meet its required reserve levels, the intent of the MYFP is also to help the county office and the district formulate a plan to regain fiscal solvency and restore the reserve. Multiyear financial projections help local educational agencies (LEAs) make more informed decisions and project the future effects of current decisions. Projections are a required part of annual budget develop- ment and must be evaluated and updated during each interim financial reporting period. They should also be updated before any significant decisions are made that affect the budget, such as salary and benefit increases. In developing and implementing its MYFPs, a district’s main objectives are to achieve and sus- tain a balanced budget, improve academic achievement and maintain local governance. The MYFP helps identify specific planning milestones that will help the district make decisions. Financial planning is crucial for every LEA, regardless of its size or structure. Long-term financial planning helps a district strategically align its budget with its instructional goals and programs. In addition, recog- nizing financial trends is essential to maintaining a district’s fiscal health. Monitoring and analyzing year-to- year trends in key budget areas helps a district evaluate its budget priorities and direction and highlight possible areas of concern. Any projection of financial data has inherent limitations because calculations are based on certain eco- nomic assumptions and criteria, including changes in enrollment trends; cost-of-living adjustments; esti- mates for utilities, supplies and equipment; and changing economic conditions at the state, federal and local levels. Therefore, the budget projection should be viewed and evaluated as a trend based on certain criteria and assumptions rather than as a prediction of exact numbers. Local educational agencies statewide had to update their multiyear assumptions and projections several times during the 2020-21 and 2021-22 budget adoption processes because of the impacts of COVID-19 on the state and federal economy and the subsequent one-time funds to support LEAs and student learning. Multiyear projections can become somewhat less reliable in a time of fiscal instability, especially for the subsequent fiscal years, because projected revenues from the state and federal government, and their related expenditures, may frequently change. However, the MYFP still provides guidance for decisions that affect multiple fiscal years, and the district must continue to update and reassess the ramifications of government-imposed budget adjustments, board-adopted plans, and collective bargaining proposals. Although the MYFP developed for this report indicates deficit spending of $9.9 million in the unrestricted general fund in 2022-23 and an increased fund balance of $8.1 million in 2023-24, the district has moved many ongoing expenses into one-time funds, including approximately $13.6 million in ongoing salaries and benefits and employee vacancies in place before the adoption of the Elementary and Secondary School Emergency Relief (ESSER) III Plan on October 26, 2021. The district’s unrestricted general fund ending balance is projected to decline from $169.4 million (31.1%) in 2021-22 to $159.5 million (24.4%) in 2022-23, and increase to $167.7 million (26.4%) in 2023-24. The district’s 2021-22 adopted budget identifies several “substantiated needs” for the fund balance, including $1.3 million each year as a reserve for lottery carry- over, $10.3 million per year for ESSER funded positions, $2.0 million per year for AB 86 (Expanded Learning Opportunities Grant) funded positions, and $92.2 million in 2021-22, $79.7 million in 2022-23 and $84.3 million in 2023-24 for capital facility project planning. Fiscal Crisis and Management Assistance Team Stockton Unified School District 5 Findings and Recommendations Budget and Multiyear Financial Projections The district should anticipate fiscal challenges related to issues such as declining student enrollment and average daily attendance (ADA), potential increases in costs for health and welfare benefits, and increased employer contributions for pension plans, which will require the governing board and administration to continue to make and implement difficult decisions to ensure the district does not deficit spend. FCMAT strongly recommends that the district track ongoing commitments and monitor ending balances for new programs, particularly those that are exceeding plan estimates and do not have ongoing funding sources, and for one-time resources to ensure they do not result in an ongoing structural deficit. Enrollment and Average Daily Attendance Accurate enrollment tracking and analysis of ADA are essential to providing a solid foundation for budget plan- ning. Because the district’s primary funding is based on the total number of student attendance days, monitoring and projecting student enrollment and attendance is a crucial function and should be done at a minimum at each reporting period to ensure the most recent data is included in budget assumptions. When enrollment and related ADA decline, the district must consider the budgetary effects of the decline on student-to-teacher ratios and plan accordingly. To ensure fiscal solvency, the district must also exercise extreme caution regarding issues such as negotiations, staffing and deficit spending. Accurate tracking and analysis of enrollment and ADA can help the district project future revenues and control staffing expenditures to help maintain fiscal solvency. The study team reviewed county birth rate statistics and used FCMAT’s Projection-Pro software to prepare enrollment, ADA and unduplicated pupil count projections for the current and two subsequent years. The Projection-Pro software uses the cohort survival method, which groups students by grade level upon entry and tracks them through each year that they stay in school. This method evaluates the longitudinal relation- ship of the number of students who pass from one grade to the next in a subsequent year. The study team reviewed the district’s enrollment and ADA trends for 2016-17 through 2020-21. The review compared October CALPADS student enrollment counts, as reported by the CDE, to the second period principal apportionment (P-2) ADA to determine the average ADA-to-enrollment ratios. The COVID-19 pandemic has negatively affected enrollment and ADA statewide, and this is reflected in the district’s significant decline in 2020-21 enrollment and 2021-22 ADA. Average daily attendance is used to calculate the district’s LCFF and many other federal and state revenue sources. District LCFF apportionments are based on the greater of current or prior year P-2 ADA. Because of the COVID-19 pandemic, the state provided a one-time hold harmless on ADA, which allowed the use of 2019-20 ADA as a proxy for 2020-21. The use of this ADA proxy caused the district’s ADA-to-enrollment ratio to be higher than average in 2020-21 (97.02%). However, documents provided by the district indicate that, as of September 2021, the 2021-22 ratio was 86.96%, a dramatic decrease compared to prior years. This was reportedly due to COVID-19 related absences and the struggle to provide an independent study option to hundreds of students as required by the state. The following table shows the district’s historical enrollment, projected enrollment using the cohort survival method, historical and projected P-2 ADA, and ADA-to-enrollment ratio for each year. 2021-22 2022-23 2023-24 2016-17 2017-18 2018-19 2019-20 2020-21 Projected* Projected Projected Enrollment 35,240 35,258 35,255 35,242 33,943 34,320 33,972 33,435 ADA 33,087.54 33,029.36 33,055.66 32,922.90 32,932.46 29,845.02 31,328.76 30,842.35 ADA to Enrollment % 93.89% 93.68% 93.76% 93.42% 97.02% 86.96% 92.22% 92.25% *Sources – District’s 2021-22 uncertified CALPADS reports and ADA percentages as of September 2021. Fiscal Crisis and Management Assistance Team Stockton Unified School District 6 Findings and Recommendations Budget and Multiyear Financial Projections Multiyear Financial Projection Assumptions Local educational agencies use many different software products to prepare MYFPs. For the district’s MYFP, FCMAT used its Projection-Pro web-based MYFP software, which was designed for California school districts and is available to LEAs free of charge. The MYFP prepared by FCMAT uses the district’s 2021-22 adopted budget report as the baseline and includes the impact of the 2021-22 adopted state budget. The study team reviewed district records, inter- viewed staff members, and examined financial documents to gather information to verify the base year (2021-22) and prepare the MYFP. Key planning factors and budget assumptions used by FCMAT to prepare the MYFP are based on the latest information available at the time the projection was completed, as shown in the following table, and are further described in the paragraphs below. Planning Factor 2021-22 2022-23 2023-24 Statutory COLA (Department of Finance) 1.70% 2.48% 3.11% LCFF COLA 5.07% 2.48% 3.11% State Categorical COLA 1.70% 2.48% 3.11% Special Education COLA 4.05% 2.48% 3.11% California Consumer Price Index (CPI) 3.96% 2.65% 2.36% Interest Rate for 10-Year Treasuries 2.14% 2.60% 2.70% California Lottery, Unrestricted per ADA $163.00 $163.00 $163.00 California Lottery, Restricted per ADA (Prop 20) $65.00 $65.00 $65.00 Mandate Block Grant, District (K-8), per ADA $32.79 $33.60 $34.64 Mandate Block Grant, District (9-12), per ADA $63.17 $64.74 $66.75 CalPERS Employer Rate 22.91% 26.10% 27.10% CalSTRS Employer Rate 16.92% 19.10% 19.10% Step and Column, Certificated 1.30% 1.54% 1.54% Step, Classified 1.30% 1.72% 1.72% Health and Welfare Benefits 3.25% 5.90% 5.90% State Unemployment Insurance .50% .50% .20% Indirect Cost Rate 4.35% 4.62% 4.62% Sources: School Services of California (SSC) 2021-22 Enacted State Budget Dartboard, CDE, district records. Revenues Projected revenue was based on validation of funding from the CDE, School Services of California (SSC), grant letters, and analysis of district estimates for any sources that could not be verified independently. Adjustments were made for any one-time funds or carryover from previous years. Local Control Funding Formula Sources The LCFF is the funding model for school district and charter school operational funding. It was imple- mented beginning with the 2013-14 fiscal year and replaced the former revenue limit calculation and Char- ter School Block Grant state apportionment distribution methodologies. The LCFF provides the following: • A base per-pupil grant that varies by grade level. Fiscal Crisis and Management Assistance Team Stockton Unified School District 7 Findings and Recommendations Budget and Multiyear Financial Projections • Supplemental funding that provides an additional 20% of the base grant multiplied by the district’s percentage of disadvantaged pupils (the unduplicated count of low-income students, English learners, and foster youth). • A concentration grant that provides an additional 65% (formerly 50%) of the base grant, multiplied by the district’s percentage of disadvantaged pupils that exceeds 55% of total enrollment. Districts must increase or improve services to unduplicated pupils by the proportion of supplemental and concentration funds to base funds that they receive. This is known as the minimum proportionality percent- age (MPP). Beginning in 2021-22, if the quantitative and qualitative increases and improvements in services are insufficient to meet the prior-year MPP, any unused portion of supplemental and concentration grant funds must be designated and spent on specific actions to meet the MPP. Although many state categorical programs were eliminated with the establishment of the LCFF, the asso- ciated monies were moved to fund the LCFF. Full implementation of the LCFF was expected to take eight years, with districts receiving a proportionate level of funding (referred to as gap funding) during implemen- tation. However, full implementation was achieved in 2018-19, two years earlier than anticipated, with all LEAs receiving their target allocation. After full implementation, LCFF funding is expected to be increased by the cost of living adjustment (COLA) only, calculated with other variable factors, such as changes in attendance and in unduplicated pupil counts. For most districts, including Stockton Unified, the LCFF entitlement is funded through a combination of local property taxes and state aid. A district’s local property tax will be applied first toward the total LCFF entitlement, and the balance is funded through state aid. Proposition 30, passed in 2012, temporarily added a quarter-cent sales tax and increased state income tax rates on high income taxpayers. The sales tax increase expired in 2016; the income tax increase was initially set to expire in 2018, but Proposition 55 extended it through 2030. These revenues are deposited in the state’s Education Protection Account (EPA) and are a component of state aid for the LCFF entitlement. Districts are encouraged to use the FCMAT LCFF Calculator to estimate LCFF funding. The COVID-19 pandemic did not have the severe negative effects on 2020-21 state revenues that were anticipated at the beginning of the pandemic, and state revenues recovered more quickly than expected. The 2021-22 enacted state budget provided a COLA of 5.07% on LCFF base grants, and increased the con- centration grant from 50% to 65%. The additional 15% is to be used to increase the number of credentialed and/or classified staff who provide direct services to students. Many new one-time and ongoing categorical programs were created, with various qualification criteria, reporting requirements and expenditure dead- lines. In addition, the cash deferrals of principal apportionment payments that began in June 2020 were eliminated, and all prior year deferrals were repaid by August 2021. When completing its 2021-22 adopted budget, the district used a spreadsheet provided by the county office to project LCFF revenues for 2021-22 and subsequent years. In completing its analysis, FCMAT used the adopted budget version of its LCFF calculator (updated August 23, 2021). FCMAT projected slightly higher ADA and UPP values for 2021-22 and slightly lower ADA and slightly higher UPP values in sub- sequent years than the district projected. This, coupled with the increased concentration grant factor of 65% used by FCMAT, resulted in an increase of approximately $14.3 million in LCFF revenues in 2021-22. FCMAT’s projections of LCFF revenues are approximately $6.7 million higher in 2022-23 and $8.0 million higher in 2023-24 than those the district shows on its adopted budget Form MYP. Fiscal Crisis and Management Assistance Team Stockton Unified School District 8 Findings and Recommendations Budget and Multiyear Financial Projections 2021-22 2022-23 2023-24 District FCMAT District FCMAT District FCMAT COLA 5.07% 5.07% 2.48% 2.48% 3.11% 3.11% Funded ADA 33,008.39 33,012.46 32,069.70 31,415.85 32,069.70 31,415.85 UPP 82.47% 83.27% 82.38% 83.61% 81.75% 83.40% LCFF Revenues $396,264,285 $410,555,408 $396,276,332 $402,984,258 $406,688,406 $414,655,299 Sources: District LCFF Calculator, District 2021-22 Adopted Budget, FCMAT LCFF Calculator. Federal Revenue FCMAT requested but did not receive district documents for all funding sources, so the team made assump- tions regarding revenues based on information found on the CDE website, analysis of prior year receipts, and district budget amounts. Federal funding amounts were reviewed, verified when possible, and adjusted as appropriate in the base year. According to a list provided by the district, the only one-time revenues included in the budget are the COVID relief funds. Except for these one-time revenues and carryover amounts, FCMAT assumed unchanged funding levels for federal programs, with no COLA in 2022-23 and 2023-24. FCMAT increased federal revenues by a total of $67.5 million in 2021-22. Revenues were increased by $3.3 million in 2021-22 to match budget amounts to award letters and to adjust some budgeted revenues to actual amounts received to date or to align with prior year receipts, including $1.8 million for the Comprehensive Support and Improvement (CSI) program, which FCMAT assumes the district will apply and qualify for in the subsequent years of the projection. An increase of $13.4 million was made in 2021-22 to account for carryover or unearned revenues from prior year grants including $7.9 million in Title I revenues, $3.0 million in CSI revenues, and $1.6 million in Title III English Learner revenues. Smaller increases or decreases were made to various other programs. Carryover and unearned revenues included in the 2021-22 budget were eliminated from FCMAT’s projection in the subse- quent years. An increase of $38.0 million was made to the 2021-22 budget to align budget amounts with federal COVID- 19 relief fund entitlements and to adjust for prior year carryover. Federal revenues were further increased by $12.8 million for new COVID-19 relief funds awarded in 2021-22. Some COVID-19 funds previously iden- tified as state revenues were reclassified as federal revenues. Some revenue sources included in FCMAT’s projection require the district to apply for funds, submit legal assurances, and/or adopt expenditure plans. The district had not filed the required assurances for the ESSER II Expanded Learning Opportunities Grant as of November 24, 2021. The numerous sources of COVID-19 relief funds have various expenditure deadlines ranging from September 30, 2022 to September 30, 2024. Revenues were included in FCMAT’s projection if they were known; however, if the district did not provide FCMAT with an expenditure plan, expenditures were not included and the funds were left in the restricted ending fund balance. One-time and carryover federal COVID-19 relief funds of $236.4 million were eliminated from the projection in 2022- 23. FCMAT reviewed the district’s accounts receivable and unearned revenue balances to determine whether the district was clearing these balance sheet accounts each year in a timely manner. Unearned revenues were cleared each year; however, receivable balances have not been cleared each year. For example, Resource 3310, Special Education Local Assistance, had a 2021-22 accounts receivable beginning balance of $15,403,636, which is approximately double the entitlement for one year. The 2018-19 entitlement was paid in 2019-20, the 2019-20 entitlement was paid in 2020-21, and the receivable set up in 2020-21 was $1,171,620 more than the 2020-21 entitlement. The district needs to review balance sheet accounts monthly, analyze the validity of the balances, and make clearing entries as needed. If it determines that adjustments Fiscal Crisis and Management Assistance Team Stockton Unified School District 9 Findings and Recommendations Budget and Multiyear Financial Projections are needed to correct the accounts receivable balances, the adjustments may have a negative effect on revenues. Other State Revenue FCMAT requested but did not receive district documentation for all funding sources, so the team made some assumptions regarding revenues based on information found on the CDE website, analysis of prior year receipts, and district budget amounts. State grant award amounts for 2021-22 were confirmed when possible and carried forward to 2022-23 and 2023-24, with COLA applied to select revenues. Increases totaling approximately $14.6 million were made to the 2021-22 state revenues. State revenues were increased in 2021-22 by $5.7 million to match budget amounts to award notifica- tions and to adjust some revenues to actual amounts received to date or to align with prior year receipts. Included is $1.1 million for the Career Technical Education Incentive Grant (CTEIG) Program, $703,000 for the Strong Workforce Program, $3.1 million for special education, and $692,000 for the Classified School Employee Summer Assistance Program. Smaller increases or decreases were made to various other pro- grams. Absent information from the district, FCMAT’s projection assumes that the district will apply and qualify for continuing funding for the CTEIG program, the Classified School Employee Summer Assistance Program, the After School Education and Safety (ASES) Program, the California Learning Communities for School Success Program, and all other applicable programs. Carryover revenues of $3.3 million were added to the 2021-22 budget, including $2.0 million for the ASES Program, $0.9 million for the CTEIG program, and smaller amounts in other programs. These carryover revenues were eliminated from the subsequent years of the projection. Revenues were increased by $536,776 for the Classified School Employee Summer Assistance Program. At the close of 2020-21, the district made a contribution from the unrestricted general fund to the program instead of recording a receivable. FCMAT included the 2020-21 funds in its 2021-22 projection, and the projection includes repayment of the contribution to the unrestricted resource. The 2021-22 revenue projection was increased by $17.9 million for the new Expanded Learning Oppor- tunities Program, which is assumed to be ongoing. A reduction of $27.9 million to prior year carryover of state COVID-19 relief funds was made to align the budget to actual award amounts. Some COVID-19 funds previously identified as state revenues were reclassified as federal revenues. New allocations of $15.2 million in COVID-19 relief funds were added to the projection for 2021-22; these funds were assumed to be one-time and were eliminated from the subsequent years of the projection. The FCMAT projection assumes the district will apply for funding, adopt spending plans, and file expenditure reports as required to qualify for funding. For example, FCMAT included $9.0 million for the Educator Effec- tiveness Block Grant in its projection for 2021-22. To be eligible for this funding, the district must adopt a plan by December 30, 2021. The deadline for expenditure is June 30, 2026. In addition, A-G Completion Improvement Grant revenues of $3.0 million were included in FCMAT’s projection. To qualify for the funds, the board must adopt an expenditure plan by April 1, 2022. The funds are available for expenditure through June 30, 2026. The district has balances in several resources representing unspent grant funds, with no expenditures budgeted in 2021-22. Listed below are these programs and their balances as of June 30, 2021. Fiscal Crisis and Management Assistance Team Stockton Unified School District 10 Findings and Recommendations Budget and Multiyear Financial Projections Resource Program Name Balance 6286 English Language Acquisition Program $122,564.77 7311 Classified School Employee Professional Development Block Grant $268,750.00 7338 College Readiness Block Grant $106,045.92 7510 Low-Performing Students Block Grant $190,749.78 TOTAL $688,110.47 Funds that are not spent in a timely manner may need to be returned to the state. The district recorded a payable in 2019-20 to repay unspent College Readiness Block Grant funds. The deadline for expenditure of the Low-Performing Students Block Grant was June 30, 2021; these funds will also need to be returned to the state. Mandate Funding Projections for the ongoing Mandate Block Grant are based on FCMAT’s projection of ADA for 2021-22 and subsequent years. Funding is calculated based on per-ADA amounts from the SSC Dartboard, with COLA applied in the subsequent years. Receipt of Mandate Block Grant funds is contingent on the district filing a funding application each year with the CDE. Lottery FCMAT projected lottery revenues for 2021-22 and subsequent years based on projected annual ADA, multiplied by $163.00 for unrestricted and by $65.00 for restricted lottery instructional materials, per the SSC Dartboard. Lottery funding is initially allocated using the prior year’s annual ADA and adjusted in the subsequent fiscal year based on current year annual ADA. Other Local Revenue The district receives local revenues from interest earnings, leases and rentals, fees and contracts, dona- tions, and other miscellaneous sources. Because these revenues cannot be guaranteed year to year, budgets and MYFPs for these items should be conservative, consider historical trend data and identify revenues that are one-time. These budget items should also be monitored and updated throughout the year based on amounts received to date. The FCMAT study team reviewed the district’s budgeted amounts for reasonableness using the prior two years’ actual revenues and 2021-22 year-to-date actual receipts. Amounts attributed to the sale of equipment and supplies, use of facilities, all other fees and contracts, miscellaneous revenue and other local revenue and donations were adjusted in 2021-22 based on year-to-date actual revenues; these were considered to be one-time and were eliminated in the subsequent years of the projection unless historical receipts justified ongoing treatment. FCMAT increased the budget by $2.0 million for Redevelopment Agency (RDA) revenues not subject to the LCFF deduction based on historical revenues. The amount budgeted for interest revenue was found to be reasonable and was considered to be ongoing in the subse- quent years of the projection, adjusted by the rate of increase in the interest rate for 10-year treasuries per the SSC Dartboard. The district budgeted $1.05 million for facilities rent for charter schools in 2021-22 but failed to collect payments in 2020-21. The FCMAT projection assumes the district will collect these funds in 2021-22 and subsequent years. The district budgeted $2.45 million for charter school oversight fees and central office services to charter schools in 2021-22 but failed to collect these fees in 2020-21. FCMAT’s projection assumes the district will collect these fees in 2021-22 and subsequent years. Fiscal Crisis and Management Assistance Team Stockton Unified School District 11 Findings and Recommendations Budget and Multiyear Financial Projections Expenditures The district’s expense assumptions and projections were reviewed and assessed based on history for the prior three years, expenses to date, and information the district provided for items such as textbook adop- tions, special education expenses, health care costs, and the AB 86 Plan adopted by the district on May 25, 2021. Attempts to attain reliable historical expenses compared to the 2021-22 adopted budget infor- mation by resource and object from the district’s financial software system were unsuccessful. Attempts to reconcile the AB 86 spending plan to the adopted budget were also unsuccessful. Many salaries paid for the first month of the 2021-22 school year were charged to the In-Person Instruction Grant (Resource 7422) but were not included in the AB 86 Plan or the district’s adopted budget. The MYFP developed by FCMAT assumes that these salaries will continue to be paid from Resource 7422 through 2023-24, and that they are part of the AB 86 ongoing costs of $4.7 million that will need to be funded with other ongoing resources beginning in 2024-25. This lack of readily available accurate, consistent data could negatively affect staff’s ability to analyze expenses and may result in the need for additional staff time and resources to complete analysis throughout the year. The FCMAT analysis in the Salaries section includes adjustments only for those positions on the Human Resources (HR) Department list and EdJoin for active recruiting as of October 2021. No other adjustments for position decreases or increases are included other than those for the Special Education Alternative Dis- pute Resolution and Learning Recovery plans, because the other plans provided by staff were of insufficient detail to identify expenses. All nonspecific expenditures in the AB 86 and ESSER III plans have insufficient detail to budget and were included in books and supplies or services in FCMAT’s MYFP. Many of the expenditure variances discussed in the following paragraphs are related to the restructure of the 2019-20, 2020-21 and 2021-22 school years because of COVID-19. Salaries The district’s financial software system does not generate the cost of annual step and column increases. To estimate the annual cost, FCMAT used information provided by the district’s Next Step April 20, 2021 budget development spreadsheet, the CDE J-90 report, and district history related to terminations and retirements. Such detailed information is necessary to accurately estimate the multiyear impact of step and column costs. The FCMAT MYFP applies step and column costs of 1.54% to certificated salaries and step costs of 1.72% to classified salaries in 2022-23 and 2023-24. The district’s documents include various percentages for annual step and column costs. For example, the 2021-22 adopted budget Form MYP includes a projection of 1.3% for certificated step and column costs and 1.3% for classified. However, the district’s spreadsheet used to forecast step costs calculated 1.48% for certificated and 1.72% for classified. Although these variances are minor, a best practice is to explain any variances to ensure information is presented consistently. The financial software system does not properly report and maintain the number of staff positions and vacancies. The Staffing By Name and Object 9-20-21 report lists more than 160 certificated and 200 classi- fied vacancies that were active, new or ESSER funded. These are different from the spreadsheet provided by the HR Department to track recruiting, interviewing and hiring activities: the HR certificated list con- tained approximately 27 vacancies. District staff referred FCMAT to EdJoin for classified vacancies, which showed the district was recruiting for approximately 56 classified positions. According to the district’s 2020-21 2nd Interim vs. 2021-22 Preliminary Budget spreadsheet, the 2021-22 adopted budget included reductions of $6.8 million to certificated staff salaries and $2.9 million to clas- sified staff salaries. Interviews indicated that no revisions had been made to the 2021-22 budget since Fiscal Crisis and Management Assistance Team Stockton Unified School District 12 Findings and Recommendations Budget and Multiyear Financial Projections its adoption, but positions that were reinstated would be funded by ESSER. However, the district did not provide a complete list of salaries to be charged to ESSER funds, and the data that was provided was not consistent. Several positions are charged to the unrestricted general fund or ESSER funds even though they work for a restricted program, including transportation manager, driver trainer, HVAC technician, mechanic and food services managers. In addition, other positions, such as the director of fiscal services, senior payroll techni- cian, technology manager and educational services program director, are charged to ESSER funds. These appear to be positions essential to the organization; however, interviews indicate that all ESSER funded positions are temporary and will terminate at the conclusion of the funding, unless another funding source becomes available. The MYFP developed by FCMAT reverses identifiable expenses related to 15% increases given to employ- ees in 2021 for summer work in fiscal years 2022-23 and 2023-24 since the memoranda of understanding (MOUs) address only 2021 summer work. The analysis does not include potential additional costs related to increases in the state minimum wage, which is scheduled to increase to $15 per hour on January 1, 2022. The scope of FCMAT’s work did not include an analysis to determine if these increases will have a material effect on the district’s budget. Certificated Salaries The FCMAT review of unrestricted general fund expenditures for certificated salaries indicates that the dis- trict’s annual projected expenses are overbudgeted by approximately $1.1 million. The analysis of restricted salaries indicates that annual projected expenses are overbudgeted by $2.5 million. These estimates include partial year savings for positions that had not yet been filled, based on information provided at the time of FCMAT’s fieldwork. The FCMAT projection includes the portion of salaries estimated to be paid as of October 31, 2021, using salaries paid through October 8 plus one month’s estimated payroll, in proportion to actual salaries paid at that time in 2018-19; 2018-19 was used because of one-time savings in 2019-20 and 2020-21 (due to COVID-19), particularly as it relates to part-time hourly employees, extra duty, substitutes, and other such salary items. Classified Salaries The FCMAT review of unrestricted general fund expenditures for classified salaries indicates that annual projected expenses are overbudgeted by approximately $2.1 million. The analysis of restricted salaries indicates that annual projected expenses are underbudgeted by $1.0 million. These estimates include partial year savings for positions that had not yet been filled, based on information provided at the time of FCMAT’s fieldwork. The district charged or encumbered only $0.2 million in classified salaries to the Expanded Learning Opportunities Grant: Paraprofessional Staff (Resource 7426) in 2021-22. However, FCMAT’s projection for the subsequent years assumes that all identifiable paraprofessional salaries charged to state COVID-19 funds will be reclassified to this resource. Charging classified employees to the proper funding source is of particular importance with the passage of Assembly Bill 438, which modifies classified employee reduction in force protocols but continues to allow for 60 days’ notice for layoffs that result from the expiration of a specially funded program. Many of the 2021-22 positions are funded by one-time money, and proper account coding is critical for flexibility to adjust to future financial conditions. The projection developed by FCMAT includes the portion of salaries estimated to be paid as of October 31, 2021, using salaries paid through October 8 plus one month’s estimated payroll, in proportion to actual Fiscal Crisis and Management Assistance Team Stockton Unified School District 13 Findings and Recommendations Budget and Multiyear Financial Projections salaries paid at that time in 2018-19; 2018-19 was used because of one-time savings in 2019-20 and 2020-21 (due to COVID-19) for part-time hourly employees, transportation and instructional aide vacancies, over- time, substitutes, and other such salary items. Employee Benefits FCMAT’s review of the expenditures for unrestricted general fund benefits indicates that annual projected health and welfare expenses are overbudgeted by approximately $1.1 million. This amount is partially offset by various adjustments to other unrestricted fringe benefit accounts, resulting in a net overbudgeted amount of $30,000. The analysis of restricted benefits indicates that annual projected health and welfare expenses are overbudgeted by $1.2 million. This amount is partially offset by various adjustments to other restricted fringe benefit accounts, resulting in a net overbudgeted amount of $1.1 million. Detailed analysis indicates that the district did not budget employee benefits proportional to salaries. Reports provided indicate this data is not maintained in the position control data file, making reconciliation difficult. The rates used in the budget for health and welfare, unemployment insurance and other post-em- ployment benefit (OPEB) liabilities were not distributed uniformly in all resources. Since the majority (72%) of the district’s employees receive benefits from Kaiser, and the most recent rate change for 2022 was 5.9%, and inflation is expected to continue, this rate was used in FCMAT’s MYFP. The assumptions regarding future increases should be reviewed and adjusted annually. Books and Supplies Based on FCMAT’s analysis, $209.1 million of the 2021-22 combined general fund books and supplies budget will not be expended. The district’s budgeting method appears to indicate that carryover funds and funds received with no spending plan are budgeted in books and supplies as a placeholder until the district determines how to expend them. The FCMAT review indicates that the 2021-22 unrestricted general fund expenses for books and supplies are overbudgeted by approximately $4.8 million. The analysis of restricted resources indicates that books and supplies are overbudgeted by $204.3 million. The ESSER and Expanded Learning Opportunities Grant funds account for the majority of this overbudgeted amount, $158.6 million and $37.0 million, respectively. Interviews indicate that there will be a textbook adoption in 2022-23, which was not in the district’s MYFP. FCMAT used the fiscal year 2018-19 expenses to project adoption costs and included $18.3 million for textbook adoptions in 2022-23 from the available Lottery Instructional Materials (Resource 6300) balance and the unrestricted general fund. No other textbook adoptions were included in FCMAT’s MYFP. One-time savings in books and supply costs related to restructure of the 2019-20 and 2020-21 school years due to COVID-19 were added back to FCMAT’s MYFP in 2022-23 as ongoing expenses, using the greater of 2018-19, 2019-20 or 2020-21 expenses as the basis for the projection. FCMAT’s MYFP includes the use of all federal and state COVID-19 relief funds by June 2024, with approxi- mately $3.0 million available in AB 86 and ESSER funds to support summer school in 2024. The ESSER plan expenses not tied to identifiable expenditures were budgeted in the MYFP to books and supplies because plan details provided were insufficient to assign them to specific object codes. The FCMAT MYFP also includes increases based on the consumer price index (CPI). Fiscal Crisis and Management Assistance Team Stockton Unified School District 14 Findings and Recommendations Budget and Multiyear Financial Projections Services and Other Operating Expenditures The district’s 2019-20 and 2020-21 actual expenditures indicated that some of the budgeted professional development expenses did not occur; this may have been exacerbated by the restructure due to COVID-19. FCMAT’s review indicates that the 2021-22 unrestricted general fund expenditures for services are over- budgeted by $1.0 million. The analysis of restricted resources indicates a budget shortfall of $11.5 million. Included in this shortfall is approximately $0.4 million of underbudgeted special education costs related to nonpublic school (NPS) and other contracts. Interviews with staff indicated, and FCMAT analysis supports, that while the NPS population served has decreased, the cost of services per student has increased. One-time savings in services and other operating costs related to restructure of the 2019-20 and 2020-21 school years due to COVID-19 were added back to FCMAT’s MYFP in 2022-23 as ongoing expenses, using the greater of 2018-19, 2019-20 or 2020-21 expenses as the basis for the projection. The FCMAT MYFP also includes increases based on the CPI for all expenses, except for election costs that are budgeted only in election years. Capital Outlay It appears that the district uses a zero-based budget method for capital outlay expenses paid by the unrestricted general fund. The FCMAT review indicates that the 2021-22 unrestricted general fund expendi- tures for capital outlay are underbudgeted by approximately $57,000. The analysis of restricted resources indicates an underbudgeted amount of $2.3 million. One-time savings in capital outlay costs related to restructure of the 2019-20 and 2020-21 school years due to COVID-19 were added back to FCMAT’s MYFP in 2022-23 as ongoing expenses, using the greater of 2018-19, 2019-20 or 2020-21 expenses as the basis for the projection. Capital expenditures from federal funds require preapproval from the CDE, which may take additional planning and time. Other Outgo/Indirect Costs The district did not apply the indirect cost rate to some of its restricted programs, including special educa- tion and COVID-19 resources. The district also did not include any indirect costs in its AB 86 and ESSER plans. The additional income to the unrestricted general fund from the federal and state COVID-19 resources alone could be as much as $1.9 million in 2021-22, $4.5 million in 2022-23 and $4.3 million in 2023-24. The full allowable indirect cost rate should be charged to each restricted program and fund, even those that require a contribution from the unrestricted general fund. Because the district has not routinely charged indirect costs to all special education resources, it should analyze how the special education MOE will be affected before charging indirect costs to each of these resources. The FCMAT MYFP applies an indirect cost rate of 4.35% to all allowable programs, except for state special education resources, in 2021-22 and 4.62% in 2022-23 and 2023-24, based on the 2020-21 unaudited actuals Indirect Cost Rate Worksheet (Form ICR). Other Financing Sources/Uses Transfers In There were no budgeted transfers to the general fund from other funds, and none are projected in the subsequent years. Fiscal Crisis and Management Assistance Team Stockton Unified School District 15 Findings and Recommendations Budget and Multiyear Financial Projections Transfers Out The adopted budget included a transfer of $0.5 million to the capital facilities fund to contribute to the certificates of participation annual debt service payment. FCMAT’s MYFP assumes this transfer is ongoing. Contributions to Restricted and Unrestricted Resources When revenues for restricted programs are insufficient to support program expenditures, a contribution from the unrestricted general fund is required. The 2021-22 adopted budget includes contributions from the unrestricted general fund to support several restricted programs, including federal and state special educa- tion programs, Mental Health Services, WorkAbility, and other restricted federal programs. Ensuring that all qualifying expenditures are coded correctly to the applicable restricted programs helps provide maximum flexibility and availability of unrestricted funding, which can typically be used for any educational purpose. However, all programs that require a contribution from the unrestricted general fund should be reviewed to ensure they are self-sustaining. The only exceptions should be the routine restricted maintenance account (RRMA), special education, and any restricted programs, such as the Classified School Employee Summer Assistance Program, the district has made a deliberate decision to support with unrestricted general funds. The special education program typically has insufficient state and federal funding support, and the district is required to make a 3% contribution to RRMA. When restricted resource expenditure budgets exceeded projected revenue in the subsequent years of the MYFP, FCMAT reduced expenditures in the 4000 (books and supplies) and 5000 (services and other operating) object codes where possible to remain within the projected revenue estimates. However, this action may also affect programs by the reduction of expenditures for these items. No reductions were made in salary and benefit budgets. A contribution was made from the unrestricted general fund to balance any restricted resource for which expenditures still exceeded revenue after these adjustments. Because of increasing costs year over year, the district may need to reduce expenditures in several of its restricted resources in 2022-23 and/or 2023-24 to remain within the projected revenue estimates. Some of the programs that may be affected include Title I, Title IV, and California Partnership Academies. The FCMAT MYFP shows that the EPA (Resource 1400) is building and maintaining a large ending fund balance. To meet the reporting requirements for receipt and use of EPA funds, the district should move allowable expenditures from the unrestricted general fund to Resource 1400. The MYFP also shows that unrestricted lottery (Resource 1100) is projected to have negative ending bal- ances of $1.7 million in 2022-23 and $5.5 million in 2023-24. The district increased classified salaries in the 2021-22 lottery budget by approximately $2.0 million, and it is anticipated the expenses will continue to increase. Expenses should be reduced from this resource for it to be self-sustaining. In addition, the 2020-21 lottery income and ending fund balance shown on the district’s financial system report provided to FCMAT does not match the unaudited actuals Lottery Report (Form L). A year-over-year review of contributions is a good internal control and variance analysis of fiscal reports. However, this fiscal analysis tool becomes obfuscated if contributions are made to unrestricted resources, such as lottery. Many districts reported reduced special education expenses during COVID-19 and have been able to take advantage of rebenching the maintenance of effort (MOE). Based on information from the district, the number of high-cost special needs students is decreasing, which may allow the district to rebench its MOE. Current law allows for four exceptions to reduce the current year MOE, for which the district may qualify. Information regarding the exceptions and an exemption worksheet can be found on the CDE website. The following table shows projected contributions to the district’s restricted resources. Fiscal Crisis and Management Assistance Team Stockton Unified School District 16 Findings and Recommendations Budget and Multiyear Financial Projections Resource Base Year Year 1 Year 2 Code 2021 - 22 2022 - 23 2023 - 24 Unrestricted Resources Unrestricted 0000 ($56,204,203) ($64,134,280) ($66,774,916) Total Unrestricted (56,204,203) ($64,134,280) ($66,774,916) Restricted Resources Department of Rehabilitation: Workability 3410 $260,381 $249,484 $265,522 Other Federal 5810 $166,461 $172,996 $177,301 Mental Health 6512 $27,047 $484,580 $482,324 Classified School Employee Summer Assistance 7415 ($458,967) $79,739 $80,026 Special Education Various $41,885,482 $47,293,931 $50,297,398 Ongoing & Major Maintenance Account (RRMA) 8150 $14,323,799 $ 15,853,550 $ 15,472,345 Total Restricted $56,204,203 $64,134,280 $66,774,916 The district’s 2021-22 adopted budget includes a contribution of $21.4 million to the RRMA. Following adop- tion of the district’s budget, the state budget act and AB 86 excluded certain federal and state COVID relief funds from the 3% RRMA calculation. Based on these exclusions and FCMAT’s adjustments, the contribu- tion was reduced to $14.3 million. Multiyear Financial Projection Analysis The FCMAT study team analyzed all general fund sources and expenditure categories by resource. The unrestricted general fund summary below indicates that, without revenue increases and/or expenditure reductions, deficit spending of $9.9 million is projected in 2022-23. To protect the district’s financial solvency and eliminate deficit spending, the district will need to make dif- ficult choices about which expenditures and programs will continue to be funded and which will be scaled back, reconfigured or eliminated, unless an increase in ongoing funding is provided. Unrestricted General Fund The district’s general fund budget is a combination of unrestricted general purpose dollars and restricted grants and categorical funding. However, when analyzing the district’s budget, much attention is focused on the unrestricted budget, in particular deficit spending and the unappropriated ending fund balance. The unrestricted general fund summary below shows FCMAT’s analysis of the district’s unrestricted resources and includes a column showing the study team’s adjustments to the base year. Unrestricted General Fund Summary Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 A. Revenues LCFF Sources 8010-8099 396,264,285.00 14,291,123.00 402,984,258.00 414,655,299.00 Federal Revenue 8100-8299 - - - - Other State Revenues 8300-8599 6,543,093.00 (327,744.00) 6,612,558.00 6,630,068.00 Other Local Revenues 8600-8799 4,437,975.00 244,051.00 4,846,751.45 4,883,957.85 Total, Revenue 407,245,353.00 14,207,430.00 414,443,567.45 426,169,324.85 B. Expenditures Certificated Salaries 1000-1999 149,162,958.00 (1,044,629.00) 149,581,600.91 149,923,132.06 Classified Salaries 2000-2999 54,311,707.85 (2,069,842.00) 52,711,974.18 53,618,620.13 Fiscal Crisis and Management Assistance Team Stockton Unified School District 17 Findings and Recommendations Budget and Multiyear Financial Projections Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 Employee Benefits 3000-3999 98,668,851.20 (30,071.00) 106,537,516.95 109,165,318.93 Books and Supplies 4000-4999 10,898,399.83 (4,824,502.00) 25,894,403.14 12,076,928.37 Services and Other Operating Expenditures 5000-5999 29,885,728.36 (1,020,675.00) 32,855,065.42 33,520,959.01 Capital Outlay/Depreciation 6000-6999 - 57,389.00 697,699.00 697,699.00 Other Outgo (excluding Transfers of Indirect Costs) 7100-7299, 7400-7499 1,113,137.00 (44,575.00) 1,194,623.00 1,230,096.00 Other Outgo - Transfers of Indirect Costs 7300-7399 (4,881,377.00) (1,754,180.66) (9,796,463.67) (9,485,506.96) Other Adjustments - Expenditures - - Total, Expenditures 339,159,405.24 (10,731,085.66) 359,676,418.93 350,747,246.54 C. Excess (Deficiency) of Revenues over Expenditures before Other Financing Sources and Uses 68,085,947.76 24,938,515.66 54,767,148.52 75,422,078.31 D. Other Financing Sources/Uses Interfund Transfers Transfers In 8900-8929 - - - - Transfers Out 7600-7629 500,000.00 - 500,000.00 500,000.00 Other Sources/Uses Sources 8930-8979 - - - - Uses 7630-7699 - - - - Other Adjustments - Other Financing Uses - - Contributions 8980-8999 (71,171OK 14,967,301.68 (64,134,279.59) (66,774,916.17) Total, Other Financing Sources/Uses (71,671,505.00) 14,967,301.68 (64,634,279.59) (67,274,916.17) E. Net Increase (Decrease) in Fund Balance/Net Position (3,585,557.24) 39,905,817.34 (9,867,131.07) 8,147,162.14 F. Fund Balance, Reserves/Net Position Beginning Fund Balance/Net Position As of July 1 - Unaudited 9791 133,069,421.16 169,389,681.26 159,522,550.19 Audit Adjustments 9793 - - - As of July 1- Audited 133,069,421.16 169,389,681.26 159,522,550.19 Other Restatements 9795 - - - Adjusted Beginning Balance 133,069,421.16 169,389,681.26 159,522,550.19 Ending Balance/Net Position, June 30 169,389,681.26 159,522,550.19 167,669,712.33 Components of Ending Fund Balance (FDs 01-60 only) Nonspendable 9710-9719 1,270,000.00 1,270,000.00 1,270,000.00 Restricted 9740 - - - Committed Stabilization Arrangements 9750 - - - Other Commitments 9760 - - - Assigned Other Assignments 9780 - - - Unassigned/Unappropriated Reserve for Economic Uncertainties 9789 16,237,674.20 12,977,479.67 12,610,986.74 Unassigned/Unappropriated Amount 9790 151,882,007.06 145,275,070.52 153,788,725.59 Restricted General Fund Income for the Expanded Learning Opportunities Program has been included in the MYFP. There is no opt- out option for this program, and it is the intent of the Legislature that all LEAs participate (Education Code Section 46120). However, at this time the penalty for not implementing the program is to return the funds to the state. Some organizations have estimated that the cost to operate it may exceed funding. Interviews with district administration and staff provided varying information regarding whether the district plans to implement this program. Therefore, no program expenses have been included in FCMAT’s MYFP. Funding is also included in FCMAT’s MYFP for Federal Special Ed: Alternative Dispute Resolution, American Rescue Plan-Homeless Children and Youth I and II, Educator Effectiveness Block Grant, Strong Workforce Program, A-G Access/Success Grant and A-G Learning Loss Mitigation Grant, although no district expenditure plan Fiscal Crisis and Management Assistance Team Stockton Unified School District 18 Findings and Recommendations Budget and Multiyear Financial Projections was provided. These programs with income and no expenses accumulate year over year and account for $68.4 million of the 2023-24 restricted ending fund balance. Interviews indicate that the AB 86 Expanded Learning Opportunities Grant Plan will be ongoing, although the income is one-time. Components of the ESSER III Plan, including items such as Positive Behavioral Interventions and Supports (PBIS), increased substitute pool, special education, new assessments, and the print shop, are not in the district’s budget but should be added to the ongoing cost of that plan. The estimate by FCMAT for these ongoing costs beginning in 2024-25 is $16.2 million per year. These ongoing costs will shift to the unrestricted general fund and/or other ongoing funding sources, along with the seven counselor positions included in the AB 86 Plan that are currently funded with other ongoing resources. Numerous other items, which may also be ongoing, are included in the ESSER III Plan, but their cost is unknown; therefore, they are not included in FCMAT’s estimate. In addition to the projected ongoing costs above, projected ongoing salaries and benefits currently charged to one-time ESSER funds for positions already filled and in the process of being filled as of Octo- ber 2021 represent approximately $10.1 million annually beginning in 2024-25. Interviews indicate that the funding for these positions will shift to the unrestricted general fund and/or other ongoing funding sources or will be eliminated when ESSER funds are no longer available. Estimated ESSER III Plan costs used by FCMAT included no other salaries and benefits costs associated with the plan adopted in October 2021, because that detailed information was unavailable at the time of this review. The increases of 15% for 2021 summer work agreed to in collective bargaining MOUs is projected as a one-time occurrence. The FCMAT estimate of the cost of these MOUs is based solely on pay periods between July 1 and August 30, 2021, which align with summer schedules, because all of the salaries and benefit expenses were not charged to ESSER. The restricted general fund summary below shows FCMAT’s analysis of the district’s restricted resources and includes a column showing the study team’s adjustments to the base year. Restricted General Fund Summary Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 A. Revenues LCFF Sources 8010-8099 - - - - Federal Revenue 8100-8299 219,419,167.00 67,519,423.00 36,810,241.00 36,810,241.00 Other State Revenues 8300-8599 100,557,470.00 14,931,696.00 85,346,793.06 85,716,115.16 Other Local Revenues 8600-8799 801,771.00 2,253,229.00 3,055,000.00 3,055,000.00 Total, Revenue 320,778,408.00 84,704,348.00 125,212,034.06 125,581,356.16 B. Expenditures Certificated Salaries 1000-1999 49,270,346.86 (2,515,562.00) 46,580,475.68 47,290,665.06 Classified Salaries 2000-2999 31,689,747.00 1,093,514.09 33,334,565.97 33,902,159.56 Employee Benefits 3000-3999 65,105,261.31 (1,075,575.00) 67,332,348.66 69,012,619.91 Books and Supplies 4000-4999 236,822,680.83 (204,271,726.44) 96,989,928.41 84,482,131.87 Services and Other Operating Expenditures 5000-5999 17,606,884.00 11,547,113.71 33,250,001.94 33,854,227.33 Capital Outlay/Depreciation 6000-6999 350,464.00 2,311,392.00 3,656,391.00 3,517,391.00 Other Outgo (excluding Transfers of Indirect Costs) 7100-7299, 7400-7499 32,468.00 - 32,468.00 32,468.00 Other Outgo - Transfers of Indirect Costs 7300-7399 2,606,298.00 1,754,180.66 7,521,384.67 7,210,427.96 Other Adjustments - Expenditures - - Total, Expenditures 403,484,150.00 (191,156,662.98) 288,697,564.33 279,302,090.69 C. Excess (Deficiency) of Revenues over Expenditures before Other Financing Sources and Uses (82,705,742.00) 275,861,010.98 (163,485,530.27) (153,720,734.53) D. Other Financing Sources/Uses Interfund Transfers Transfers In 8900-8929 - - - - Transfers Out 7600-7629 - - - - Fiscal Crisis and Management Assistance Team Stockton Unified School District 19 Findings and Recommendations Budget and Multiyear Financial Projections Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 Other Sources/Uses Sources 8930-8979 - - - - Uses 7630-7699 - - - - Other Adjustments - Other Financing Uses - - Contributions 8980-8999 71,171,505.00 (14,967,301.68) 64,134,279.59 66,774,916.17 Total, Other Financing Sources/Uses 71,171,505.00 (14,967,301.68) 64,134,279.59 66,774,916.17 E. Net Increase (Decrease) in Fund Balance/Net Position (11,534,237.00) 260,893,709.30 (99,351,250.68) (86,945,818.36) F. Fund Balance, Reserves/Net Position Beginning Fund Balance/Net Position As of July 1 - Unaudited 9791 31,418,444.51 280,777,916.81 181,426,666.13 Audit Adjustments 9793 - - - As of July 1- Audited 31,418,444.51 280,777,916.81 181,426,666.13 Other Restatements 9795 - - - Adjusted Beginning Balance 31,418,444.51 280,777,916.81 181,426,666.13 Ending Balance/Net Position, June 30 280,777,916.81 181,426,666.13 94,480,847.77 Components of Ending Fund Balance (FDs 01-60 only) Nonspendable 9710-9719 - - - Restricted 9740 280,777,916.81 181,426,666.13 94,480,847.77 Committed Stabilization Arrangements 9750 - - - Other Commitments 9760 - - - Assigned Other Assignments 9780 - - - Unassigned/Unappropriated Reserve for Economic Uncertainties 9789 - - - Unassigned/Unappropriated Amount 9790 - - - Combined General Fund The combined general fund summary below shows FCMAT’s analysis of all the district’s unrestricted and restricted general fund sources and includes a column showing the combined adjustments to the base year. Because the district’s projected ADA is less than 30,001 in 2021-22, its required minimum reserve for economic uncertainties increases to 3% for that year. Combined General Fund Summary Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 A. Revenues LCFF Sources 8010-8099 396,264,285.00 14,291,123.00 402,984,258.00 414,655,299.00 Federal Revenue 8100-8299 219,419,167.00 67,519,423.00 36,810,241.00 36,810,241.00 Other State Revenues 8300-8599 107,100,563.00 14,603,952.00 91,959,351.06 92,346,183.16 Other Local Revenues 8600-8799 5,239,746.00 2,497,280.00 7,901,751.45 7,938,957.85 Total, Revenue 728,023,761.00 98,911,778.00 539,655,601.51 551,750,681.01 B. Expenditures Certificated Salaries 1000-1999 198,433,304.86 (3,560,191.00) 196,162,076.59 197,213,797.12 Classified Salaries 2000-2999 86,001,454.85 (976,327.91) 86,046,540.15 87,520,779.69 Employee Benefits 3000-3999 163,774,112.51 (1,105,646.00) 173,869,865.61 178,177,938.84 Books and Supplies 4000-4999 247,721,080.66 (209,096,228.44) 122,884,331.55 96,559,060.24 Services and Other Operating Expenditures 5000-5999 47,492,612.36 10,526,438.71 66,105,067.36 67,375,186.34 Capital Outlay/Depreciation 6000-6999 350,464.00 2,368,781.00 4,354,090.00 4,215,090.00 Other Outgo (excluding Transfers of Indirect Costs) 7100-7299, 7400-7499 1,145,605.00 (44,575.00) 1,227,091.00 1,262,564.00 Other Outgo - Transfers of Indirect Costs 7300-7399 (2,275,079.00) - (2,275,079.00) (2,275,079.00) Other Adjustments - Expenditures - - Total, Expenditures 742,643,555.24 (201,887,748.64) 648,373,983.26 630,049,337.23 Fiscal Crisis and Management Assistance Team Stockton Unified School District 20 Findings and Recommendations Budget and Multiyear Financial Projections Base Year Adjustments Year 2 Year 3 Description Object Code 2021-22 to Base Year 2022-23 2023-24 C. Excess (Deficiency) of Revenues over Expenditures before Other Financing Sources and Uses (14,619,794.24) 300,799,526.64 (108,718,381.75) (78,298,656.22) D. Other Financing Sources/Uses Interfund Transfers Transfers In 8900-8929 - - - - Transfers Out 7600-7629 500,000.00 - 500,000.00 500,000.00 Other Sources/Uses Sources 8930-8979 - - - - Uses 7630-7699 - - - - Other Adjustments - Other Financing Uses - - Contributions 8980-8999 - - - - Total, Other Financing Sources/Uses (500,000.00) - (500,000.00) (500,000.00) E. Net Increase (Decrease) in Fund Balance/Net Position (15,119,794.24) 300,799,526.64 (109,218,381.75) (78,798,656.22) F. Fund Balance, Reserves/Net Position Beginning Fund Balance/Net Position As of July 1 - Unaudited 9791 164,487,865.67 450,167,598.07 340,949,216.32 Audit Adjustments 9793 - - - As of July 1- Audited 164,487,865.67 450,167,598.07 340,949,216.32 Other Restatements 9795 - - - Adjusted Beginning Balance 164,487,865.67 450,167,598.07 340,949,216.32 Ending Balance/Net Position, June 30 450,167,598.07 340,949,216.32 262,150,560.10 Components of Ending Fund Balance (FDs 01-60 only) Nonspendable 9710-9719 1,270,000.00 1,270,000.00 1,270,000.00 Restricted 9740 280,777,916.81 181,426,666.13 94,480,847.77 Committed Stabilization Arrangements 9750 - - - Other Commitments 9760 - - - Assigned Other Assignments 9780 - - - Unassigned/Unappropriated Reserve for Economic Uncertainties 9789 16,237,674.20 12,977,479.67 12,610,986.74 Unassigned/Unappropriated Amount 9790 151,882,007.06 145,275,070.52 153,788,725.59 G. Available Reserves Available Reserves - by Amount 168,119,681.26 158,252,550.19 166,399,712.33 Available Reserves - by Percent 31.06% 24.39% 26.39% Reserve Standard 16,237,674.20 12,977,479.67 12,610,986.74 Reserve Standard Percentage Level 3.00% 2.00% 2.00% Available Reserves Meet Reserve Standard Met Met Met Other Items to Consider Form CAT – Schedule for Categoricals The FCMAT review of the district’s 2020-21 CAT Excel spreadsheet found that some award amounts shown on the spreadsheet did not align with entitlement amounts posted on the CDE website, including those for CSI; Special Ed: IDEA Basic Local Assistance; Special Ed: IDEA Preschool Local Entitlement (beginning in 2018-19 this resource (3320) was consolidated into Resource 3310 and is no longer funded); Special Ed: Alternate Dispute Resolution; Title II Part A; Title IX Part A McKinney-Vento Homeless Assistance; and special education. Not all unearned revenues shown on the district’s CAT spreadsheet aligned with the unearned revenue amounts posted to the general ledger at year end, including those for CTEIG, Partnership Academies Program, In-Person Instruction Grant, and Other Restricted Local. The restricted unearned revenues shown Fiscal Crisis and Management Assistance Team Stockton Unified School District 21 Findings and Recommendations Budget and Multiyear Financial Projections on the district’s 2020-21 unaudited actuals report is $18,004,569, while the unearned revenues shown on the district’s spreadsheet total $13,158,325. Not all accounts receivable amounts shown on the district’s CAT spreadsheet aligned with the accounts receivable amounts posted to the general ledger at year end, including those for Governor’s Emergency Education Relief Fund: Learning Loss Mitigation; Special Ed: IDEA Basic Local Assistance Entitlement; Special Ed: IDEA Local Assistance Early Intervening Services; Special Ed: Mental Health Allocation Plan; Indian Education; Other Restricted Federal; Partnership Academies Program; State Learning Loss Mitiga- tion Funds; and Expanded Learning Opportunities Grant. The amount in the restricted Due from Grantor Government account shown on the district’s 2020-21 unaudited actuals is $24,583,865, while the accounts receivable amounts shown on the district’s spreadsheet total $16,788,541. Current Expense Formula/Minimum Classroom Compensation Education Code Section 41372 prescribes the percentage of expenses that should be expended for class- room salaries and benefits. This law was enacted almost a century ago and has become increasingly diffi- cult for districts to comply with given the evolving changes in services provided to students and economic factors such as the LCFF and one-time COVID relief funds. For a unified school district, the minimum is 55%. Based on information provided in the 2020-21 unaudited actuals Form CEA, the district spent 51.19%. Spending Plans and Deadlines Per Grantor Developing plans to use restricted funds is an integral part of maximizing budgets and spending capacity. Based on the amount of carryover for grants and entitlements, it appears that all restricted funds may not be maximized before expending unrestricted resources. As discussed previously, the district has balances in some programs — including the English Language Acquisition Program, College Readiness Block Grant, and Low-Performing Students Block Grant — for which funds must be returned to the state. In 2020-21 the district was provided COVID-19 relief funds, some of which had to be spent by May 31, 2021. Although the required funds were expended in fiscal year 2020-21, as of October 8, 2021 there was more than $1.5 million of expenses and encumbrances, including ongoing salaries, charged to Resource 3220. The district provided FCMAT a list of one-time expenditures. Absent from that list and with no proposed spending plans were the American Rescue Plan-Homeless Children and Youth I and II programs and the Strong Workforce Program. Best practice is to budget for such programs when funding amounts are pro- vided by the grantor, and to track timelines for expenditures. The Elementary and Secondary Education Act, reauthorized as the Every Student Succeeds Act, limits the amount of carryover for Title I, Parts A, B and D; Title II, Part A; Title III, Part A; Title IV, Parts A and B; Title V, Part B; and the McKinney-Vento Education for Homeless Children and Youth Program to 15% of the total allocation. Although the state of California has been granted a waiver of the 15% carryover limitation for the federal fiscal year 2019 and 2020 funds, the district should develop plans to spend these funds to ensure they are spent appropriately and in a timely manner, based on the extended spending deadlines. Other Funds In addition to analyzing the general fund, FCMAT completed a basic review of the district’s other funds to determine their possible financial impact on the unrestricted general fund. A review of the 2020-21 unau- Fiscal Crisis and Management Assistance Team Stockton Unified School District 22 Findings and Recommendations Budget and Multiyear Financial Projections dited actuals and the 2021-22 adopted budget found that, except for the capital facilities fund, the district does not expect that any of the other funds will require contributions from the unrestricted general fund in the current or two subsequent fiscal years. The district’s adopted budget shows that the 2020-21 estimated actuals and 2021-22 budget amounts were the same for numerous object codes in some funds (e.g., adult education and child development). Best practice is to review every fund and make any necessary budget adjustments for each reporting period. In addition, the 2020-21 estimated actuals are significantly different from the unaudited actuals in some funds (e.g., charter schools, child development and cafeteria). The differences should be reviewed to determine if the unaudited actuals are correct and/or if the 2021-22 budget needs to be adjusted. Charter Schools Fund The charter schools fund (Fund 09) is used for reporting financial transactions of the five district-operated charter schools. The 2021-22 adopted budget projects that Fund 09 will have a positive ending balance of $3.9 million, but projects deficit spending of $21.6 million. The budget for books and supplies has been increased significantly compared to prior years’ actual costs (e.g., 2018-19 unaudited actuals show that $1.4 million was spent on books and supplies, and the 2021-22 budget is $25.9 million, of which $23.1 million is budgeted in unrestricted resources). The documents provided do not indicate why the budget was increased or if the increased budget is for one-time costs; however, these increased costs are not sus- tainable in subsequent years. The FCMAT study team has assumed this is a one-time increase; therefore, FCMAT’s MYFP for the general fund does not include a contribution to Fund 09. As discussed previously, in 2020-21 the district did not collect payments for facilities rent, oversight fees and central office services. The district should work with its charter schools to recoup all applicable fees. Cafeteria Fund The cafeteria fund (Fund 13) is used to account for the food service program. The 2020-21 unaudited actu- als and 2021-22 adopted budget show deficit spending of $0.5 million and $2.6 million, respectively, with a projected ending balance of $5.4 million in 2021-22. The fund needs to be analyzed and monitored to ensure it does not develop a structural deficit and require a contribution from the unrestricted general fund. Districts may charge the cafeteria fund the lesser of the district’s CDE-approved indirect cost rate or the statewide average rate. The 2020-21 unaudited actuals report shows that the district charged the 5% statewide average rate rather than the 3.93% CDE-approved rate. In addition, effective 2021-22, Object 4700 (food) expenditures must be excluded when calculating indirect costs charged to the cafeteria fund and other programs. The district’s 2021-22 budget does not appear to exclude food expenditures from the calculation. Capital Facilities Fund The capital facilities fund (Fund 25), also known as the developer fee fund, is used primarily to account for funds received from fees levied on developers or other agencies as a condition of approving a develop- ment. Expenditures in Fund 25 are restricted to the purposes in Government Code Sections 65970-65981, 65995 and following, and 66001, or to those specified in agreements with developers. The district’s School Facility Fee Justification Report (April 2020) and its School Facility Needs Analysis and Justification Study (June 2021) justify the collection of Level I, II and III developer fees and list the allowable uses for these fees. The district’s Deferred Maintenance Plan 2021/2022 was presented at the September 14, 2021 board meeting and states that the $4.3 million plan will be paid for from Fund 25. Deferred maintenance is not Fiscal Crisis and Management Assistance Team Stockton Unified School District 23 Findings and Recommendations Budget and Multiyear Financial Projections specifically listed in the above statutes or reports as an allowable use of developer fees; therefore, the district will need to consult with the firm that prepared its reports and/or its legal counsel to determine if the funds may be used for this purpose. The district uses Fund 25 to make annual debt service payments of $2.6 million for its certificates of participation (COPs), and the debt service schedule shows that annual payments are to be made through 2036. The 2021-22 adopted budget projects that an annual contribution of $500,000 from the unrestricted general fund is needed to help service the COP debt. Recommendations The district should: 1. Adopt a budget and MYFPs that identify deficit spending and meet reserve requirements in the budget and projection years to prevent fiscal insolvency. 2. Cease using one-time funds for ongoing costs, or have a board-approved plan to fund such ongoing costs or eliminate them when the one-time funds are no longer available. Ensure that these costs are monitored closely and tracked to identify its structural deficit. 3. Plan and budget for expenses that are not eliminated and that thus need to have other funding sources when one-time funding ends. 4. Not use one-time funds to provide ongoing increases in salaries or benefits. 5. Adjust its budget and MYFPs, including any new board-adopted plans and items included in the adopted state budget, within 45 days after the governor signs the annual state budget act. 6. Regularly evaluate external and internal factors that affect its fiscal health, and use an MYFP to project their effect on the district. 7. Monitor and project enrollment and ADA at each reporting period, at a minimum. 8. Ensure it uses the most recently updated LCFF calculator and assumptions available, as well as accurate and current enrollment, ADA and UPP projections, to update budgets and MYFPs. 9. Monitor and project revenue and expenditures using the most current information and assumptions available. Update revenue budgets throughout the year as award amounts become known, ensuring budgets match information provided by the CDE and award letters. 10. Ensure unearned revenues received in the prior year are included in current year budgets upon completion of the unaudited actuals and eliminated from the two subsequent years of the projection. 11. Investigate and clear prior year balance sheet transactions as early as possible each fiscal year. 12. Ensure that it adopts expenditure plans and submits the legal assurances for federal COVID funds as required. 13. Ensure that it is aware of and adheres to the various funding application and expenditure deadlines for COVID funds. Fiscal Crisis and Management Assistance Team Stockton Unified School District 24 Findings and Recommendations Budget and Multiyear Financial Projections 14. Develop and implement program expenditure plans to fully expend grant monies within the fiscal year earned. Ensure funds are spent in a timely manner so they do not have to be returned to the state. 15. Continue to budget local revenues conservatively, and update budgets throughout the year as needed to align with year-to-date actual receipts. 16. Review all budgets monthly and make adjustments as needed to minimize variances between budgeted and actual expenditures at year end. 17. Ensure that facility rents and leases, central office service fees, and oversight fees are collected from charter schools. Work with the charter schools to recoup all applicable fees for 2020-21. 18. Ensure it fulfills, and has evidence showing fulfillment of, its charter school oversight responsibilities. 19. Complete a study to determine its projected annual RDA revenues. 20. Train employees in its financial software system, thereby allowing the district to more readily make data-driven decisions, analyze its budget, calculate the cost of annual step and column increases, report and maintain the number of staff positions and vacancies, and increase accuracy and efficiency. 21. Train and cross train staff in its budget development and closing processes. 22. Determine whether vacant positions will be filled, frozen or eliminated so that any associated savings can be included in the budget. 23. Charge employee positions to the correct funding sources, preserving flexibility to adapt to changing financial circumstances as prescribed in AB 438. 24. Charge food services employees to the cafeteria fund so it can monitor and manage the food service program. Check with its auditor to ascertain how the transfer of cafeteria expenses to ESSER resources should be posted in the general ledger. 25. Annually perform a review of the actual historical costs for employee step and column increases to determine if the percentage applied for forecasting is reasonable or should be updated. 26. Ensure that all applicable costs are charged correctly to ESSER funds, including the 15% one-time summer school salary increase. 27. Annually perform a review of the actual historical costs for health and welfare benefit increases to determine if the percentage applied for forecasting is reasonable or should be updated. 28. Ensure that increases to employer paid health and welfare insurance premiums are included in the total compensation used for collective bargaining. 29. Ensure that employee benefit rates are applied correctly and uniformly to each applicable resource. 30. Review budgets for county office, NPS and other contracted special education services more frequently, and at least at each interim reporting period. Fiscal Crisis and Management Assistance Team Stockton Unified School District 25 Findings and Recommendations Budget and Multiyear Financial Projections 31. Ensure that capital expenditures paid for with federal funds are preapproved by the CDE. 32. Charge each restricted resource and fund the full allowable indirect cost rate. Analyze how the special education MOE will be affected before charging indirect costs to each special education resource. 33. Use the MYFP to identify programs that may require a contribution from the unrestricted general fund in subsequent years, and take action as needed to ensure programs are self- sustaining. 34. Ensure that all expenditures are coded correctly and that restricted funds are allocated appropriately to all qualifying expenditures before expending unrestricted dollars. 35. Increase transparency by disclosing at each budget reporting period all programs that require a contribution from the unrestricted general fund. This will help ensure all stakeholders are aware of the funding allocated to these programs, particularly during budget reduction discussions. 36. Reduce expenses as necessary from unrestricted lottery (Resource 1100) so that it is self- sustaining. 37. Move allowable expenditures from the unrestricted general fund to EPA (Resource 1400), and fully expend the EPA funds each fiscal year. 38. Monitor the special education MOE and complete a CDE LEA MOE exemption worksheet as needed to take advantage of any rebenching opportunities, including decreases in services. 39. Ensure the Lottery Report (Form L) matches the information in the financial software system. 40. Ensure that its CAT spreadsheet and/or the SACS Form CAT is completed correctly, and aligns with award amounts posted on the CDE website and amounts posted to the general ledger. 41. Ensure all allowable funding sources are excluded from the Current Expense Formula/ Minimum Classroom Compensation calculation, plan and monitor its compensation ratios, and work with its auditor and the county office to mitigate any shortfalls. 42. Include an estimated annual budget for ongoing categorical programs at budget adoption, and during the year when new programs are established, and continue to adjust the budgets throughout the fiscal year as new information is provided by the grantor. 43. Analyze and monitor all its other funds to ensure they are self sustaining, unless the governing board has made a decision to provide a contribution to a specific fund. 44. Review every fund and make any necessary budget adjustments at each reporting period. 45. Review the 2020-21 unaudited actuals for other funds to determine if they are correct and/ or if the 2021-22 budget needs to be adjusted. 46. Ensure that Object 4700 is excluded when calculating indirect costs. 47. Continue to review and update its School Facility Fee Justification Report and its School Facility Needs Analysis and Justification Study as necessary to ensure it can collect the maximum allowable fees. Fiscal Crisis and Management Assistance Team Stockton Unified School District 26 Findings and Recommendations Budget and Multiyear Financial Projections 48. Consult with the firm that prepared its School Facility Fee Justification Report and its School Facility Needs Analysis and Justification Study, and/or its legal counsel, to determine if developer fees may be used for deferred maintenance. Fiscal Crisis and Management Assistance Team Stockton Unified School District 27 Findings and Recommendations Revenue Increases and Expenditure Reductions Revenue Increases and Expenditure Reductions Enrollment and Attendance Declining enrollment is occurring statewide. Factors such as decreased birth rates, an aging population, families moving away, and alternate educational options contribute to the decline. Data provided on the CDE’s DataQuest website shows that although school district enrollments are declining, charter schools are growing. As discussed previously, the district’s enrollment had been relatively unchanged for several years but has declined significantly during the pandemic. The district has authorized 13 independent charter schools, and CDE data indicates that the total enrollment for these charter schools has increased each year since 2017-18, with a total enrollment of 4,437 in 2020-21. It would benefit the district to consider actions that may help attract and retain students, such as holding community forums to increase awareness of the opportunities available at its schools, developing marketing materials, consolidating programs at school sites, and developing magnet schools. The district’s primary source of revenue is based on ADA. Information from 2021-22 LCFF calculations indicate that a 1% increase in ADA would provide approximately $4.0 million in additional revenue. When considering ways to increase attendance, the district will need to consider ADA percentage by grade level groups. For example, CDE data shows that in 2018-19 (the last full in-person school year prior to COVID-19) the districtwide ADA as a percentage of total enrollment was 93.76%; the grade level groups varied from a low of 92.06% for grades 9-12 to a high of 95.07% for grades 4-6. Identifying grade level groups with lower ADA percentages allows the district to target efforts to increase attendance. Increasing the attendance rate would provide additional revenue and additional time for student learning. The CDE website (https://www. cde.ca.gov/ls/ai/cw/attendstrategy.asp) identifies several strategies for improving attendance. It would also benefit the district to review interdistrict transfer requests and policies in an effort to minimize the number of outgoing transfers. The transfers spreadsheet provided by the district indicates that, as of September 2021, there were 1,074 outgoing interdistrict transfers in 2020-21 and 959 in 2021-22. Use of Facilities School districts are authorized by Education Code Section 38134 to charge fees to individuals and groups for their use of the school district’s facilities. This code section also regulates the amount that may be charged for facility use. When implementing a facility use fee schedule or increasing fees for facility use, affected parties may not initially understand that although construction funds, such as general obligation bonds, may have been used to build district facilities, the ongoing operational costs, such as utilities and maintenance, are paid by the district’s general operating fund. Therefore, when fees are not charged to outside organizations for the use of a school district’s facilities or if the fees are insufficient to cover all the costs, the district subsidizes the organizations, which in turn reduces the funds available to meet students’ educational needs. When implementing a fee schedule for use of facilities, districts need to develop policies, procedures and standard forms to ensure that the fees comply with the Education Code requirements, that a system is in place to process requests in a consistent manner, and that language regarding the liability the district assumes when allowing outside organizations to use its facilities has been reviewed and approved by the district’s insurance carrier. Board Policy 1330, Use of School Facilities (January 8, 2019), and Administrative Regulation 1330 (Janu- ary 8, 2019), describe the district’s policies and procedures for using its facilities, and the fee schedule Fiscal Crisis and Management Assistance Team Stockton Unified School District 28 Findings and Recommendations Revenue Increases and Expenditure Reductions (undated) is available on the district website. The district uses a third-party online facility request and rental system, Facilitron, to manage use of facility reservations and payments. Facility use revenues were minimal in 2020-21, presumably because of COVID-19 school closures. It would benefit the district to consistently charge a facility use fee that covers no less than the direct costs of the facility use, and to review the facility use fee schedule annually and update it as needed to ensure it recovers the full cost of facility use. Sale of Surplus Equipment It would benefit the district to determine if any unused or obsolete property, such as computers or district vehicles, can be sold as surplus equipment. The best business practices include the ongoing evaluation of surplus equipment to determine if items stored in empty classrooms or a warehouse facility can be used at another school site or if they can be disposed of as surplus. Several private companies provide auction services for the sale of surplus goods, and many districts have found they can generate revenue by using these services rather than paying to dispose of surplus items. This process may also help minimize the cost for storage and potential exposure to theft. Indirect Cost and Administrative Cost As discussed previously, the district does not charge the maximum allowable indirect cost rate to all pro- grams. However, the 2020-21 unaudited actuals Form ICR shows that some programs were charged more than the approved rate. The district needs to calculate and charge the full indirect cost rate, but no more, to all allowable restricted programs and other funds, including those that require a contribution from the unrestricted general fund, to show the true cost of each program and to maximize unrestricted resources. In addition, Education Code Section 17620(a)(5) allows the district to use up to 3% of the developer fees collected in a fiscal year for reimbursement of the administrative costs incurred by the district in collecting those fees. A review of the district’s 2020-21 unaudited actuals report shows that the district could have charged up to $90,000 for administrative costs related to developer fee collection. Special Education FCMAT was unable to determine, and district staff were unable to confirm, whether the district charges all its authorized charter schools for special education services provided and any applicable excess costs. If the district-operated and independent charter schools use district special education services, the district needs to ensure that the charter schools are billed for them. As part of the AB 602 special education funding formula, the extraordinary cost pool program reimburses special education local plan areas (SELPAs) for extraordinary costs of single placements in nonpublic, nonsectarian schools (NPSs) and for special education and related services for pupils residing in licensed children’s institutions (LCIs) (Education Code Section 56836.21). The district needs to track and monitor these costs throughout the year and apply for reimbursement of these costs when applicable. Redevelopment Agencies The district receives funds from local RDAs; a portion of the funds collected is applied toward local prop- erty taxes subject to the LCFF deduction, and a portion is available for educational facility expenditures. The district deposits RDA revenues that are not subject to the LCFF deduction (Object 8625) in a locally restricted resource in the general fund. Per Health and Safety Code Section 33607.5(a)(4)(A) and Education Fiscal Crisis and Management Assistance Team Stockton Unified School District 29 Findings and Recommendations Revenue Increases and Expenditure Reductions Code Sections 42238(h)(6), 42238.02(j)(6) and 42238.03(c)(6), these RDA revenues are restricted to expen- ditures for educational facilities, and many districts use the revenue to meet their required 3% contribution to the ongoing and major maintenance account (Resource 8150). Staffing The district’s 2020-21 unaudited actuals and 2021-22 adopted budget reports show that unrestricted general fund salaries and benefits were 91.54% and 89.09% of the expense budget, respectively. The state- wide average for all school districts as of 2019-20 (the latest data available) was 88%. The district needs to determine if its percentages are anomalies, possibly due to pandemic-related issues, or if it consistently exceeds the statewide average. Health and Welfare Benefit Audit A best practice is to conduct a verification and determination of eligibility for benefits for all active and retired employees and dependents every five years. Although this process requires staff time to complete, districts often find that they are paying for benefits for numerous individuals who no longer qualify for them. Cafeteria Fund Education Code Section 38101 allows the district’s general fund to charge the cafeteria fund direct costs, including the cost of items such as communication services, water, electricity, gas and waste. The charges must be applied using the procedures defined in the California School Accounting Manual (CSAM), Pro- cedures 905 and 910. Charging direct costs helps a district accurately show the total cafeteria program costs and recapture allowable dollars in the unrestricted general fund. A review of the district’s 2020-21 unaudited actuals report indicated that the cafeteria fund may not have been charged its full share of all allowable direct costs. Parcel Tax Many districts have sought approval from local voters for a parcel tax to increase funding. Parcel taxes are normally levied at a flat rate per parcel and must be applied uniformly to all real property owners. The only permitted exemptions are for senior citizens and federal supplemental security income disability benefit recipients. Parcel taxes can be extremely difficult to pass because they require approval from two-thirds of voters. The advice of experienced financial advisors and legal counsel should be obtained before determin- ing whether to place a local parcel tax measure on the ballot. Recommendations The district should: 1. Communicate its educational strengths and course offerings and continue to explore options to increase student enrollment and attendance. 2. Review its interdistrict transfer requests and policies in an effort to minimize the number of outgoing transfers. Fiscal Crisis and Management Assistance Team Stockton Unified School District 30 Findings and Recommendations Revenue Increases and Expenditure Reductions 3. Review the facility use fee schedule annually and update it as needed to ensure fees are sufficient to cover all costs and are charged to all users as authorized in Education Code Section 38134. 4. Review inventories of supplies, equipment and vehicles to determine if obsolete or surplus items exist. Consider selling items no longer needed. 5. Ensure that all programs and other funds are charged the maximum allowable indirect cost rate. 6. Ensure the capital facilities fund is charged for all allowable administrative costs of fee collection. 7. Ensure that it charges district-operated and independent charter schools for special education services provided by the district and for any applicable excess costs. 8. Track and monitor the costs for students placed in NPSs and pupils residing in LCIs, and apply for reimbursement of costs from the special education extraordinary cost pool. 9. Consider using Object 8625 RDA funds to meet the 3% required contribution to Resource 8150. 10. Analyze its salary and benefit costs to determine if its 2020-21 and 2021-22 percentages are anomalies or if further measures are needed to better align with the statewide average. 11. Conduct a verification and determination of eligibility for benefits for all active and retired employees and dependents every five years. 12. Consider charging the cafeteria fund its full share of all allowable direct costs. 13. Evaluate the feasibility of putting a parcel tax measure before the voters. Fiscal Crisis and Management Assistance Team Stockton Unified School District 31 Findings and Recommendations 2018 Measure C 2018 Measure C The district has implemented a complex multiyear, multifund facilities program since 2005, when voters approved its first Proposition 39 general obligation bond. Several general obligation bonds have passed since that time, which have provided millions of dollars of funding for facilities projects. In addition, the district has received facilities funding from a variety of state programs, developer fees and local redevelop- ment. Program planning, plan implementation, budget and expenditure tracking, cash flow analyses, and com- pliance with a myriad of laws, regulations and policies are all complex and important tasks. These tasks should have been implemented starting before the first Proposition 39 bond (also known as old Measure C) was passed in 2005 and should continue until all bond funds have been expended and all applicable projects have been closed out, including those from Measure C passed in 2018 (also known as new Mea- sure C). Tracking of budgets and expenditures is required to adequately evaluate and improve practices, processes and procedures to deliver projects that are cost effective and cost efficient. Tracking projected and actual costs also allows the district’s staff and governing board to see if projects are over or under budget and thus whether there is adequate funding to pay for all proposed projects. Construction project budgets and expenditures should be followed up with regular, clear and easy-to-un- derstand communications to the board, administration and public, and with continuity throughout the bond programs. This is the best way to provide transparency to taxpayers and voters and maintain credibility with the community. Based on FCMAT’s interviews, some communication has been provided throughout the years; however, the district could not provide written evidence of these communications. The documents provided to FCMAT do not include comprehensive reports that indicate the plan for the entire $156.38 million 2018 Measure C bond, the total amount spent to date, what the funds have been spent on, current projects and projected completion dates. Long-Range Facilities Master Plan The district does not have a long-range facilities master plan. Instead, FCMAT was provided with the district’s March 2008 Implementation Plan, which was developed by a construction management company; this Implementation Plan is not a facilities master plan. An implementation plan is typically one of many components of a comprehensive long-range facilities master plan. Projects listed on the district’s Imple- mentation Plan are now outdated and not relevant in current project selection. The Implementation Plan provides information on the Measure Q bond program, a $464.5 million bond passed in February 2008. It also details the projects that were completed and in progress under Old Measure C, which was passed in 2005 for $120 million. The March 2008 Implementation Plan provides an extensive list of recommendations for the implementation of the Old Measure C and Measure Q programs, including the challenges of coordinating overlapping bond measure projects and scopes of work. Many of these recommendations could be considered best practices for running a successful bond program and are as useful today as they were in 2008. FCMAT did not receive any documents that showed an effort to follow these recommendations. A long-range facilities master plan will help the district develop and meet the goals of its facilities program, help provide justification for how projects are selected and funded, and help avoid last-minute changes after projects have been selected. The master plan should be a comprehensive document, and the follow- ing main pieces of data should be used to develop it: Fiscal Crisis and Management Assistance Team Stockton Unified School District 32 Findings and Recommendations 2018 Measure C • Enrollment projections and a demographic study to determine future enrollment trends, capacity of existing schools, and the need for new school construction and additions to existing schools. The district will need to obtain data about new residential development from its developer fee justification studies and from the city of Stockton planning depart- ment. • Site assessments of existing schools to determine needs for modernization and renova- tion, portable building replacements, Americans with Disabilities Act (ADA) compliance, structural and seismic needs, infrastructure upgrades and technology needs. The district would need to hire an architectural and/or engineering firm experienced in this process to develop the site assessments. • Stakeholder input on school facility needs and priorities from their respective viewpoints: board of education through special board workshops, district administration, school site facility committees, parents, Maintenance and Operations Department, Division of the State Architect (DSA) requirements (per the site assessments), community members through community meetings, and the Facilities and Planning Department. The plan should include both qualitative and quantitative data from the items listed above. The needs gathered from stakeholder input should then be prioritized using a standard facilities priorities template (a sample is included in the appendix of this report). Facility needs are necessarily a mixture of all stakeholder input but should have as top priorities the DSA requirements; infrastructure upgrades including roofs, foundations, and wall systems; and utility infrastructure upgrades including electrical power, low voltage and technology systems, plumbing, and heating, ventilation and air conditioning systems. It is essential to include both the infrastructure upgrades, such as underground utilities and roofing, which are often invisible to the lay users of schools, as well as beautification activities such as exterior painting, landscaping and other curb appeal projects. A long-range facilities master plan can help achieve a balance between these two types of projects. The prioritization process can be difficult and politically charged, but is important to provide the district staff, board and public with information and evidence that planning is being done and that projects are being selected based on facility needs. After priorities are set, a long- range and short-term implementation plan will need to be developed, along with cost estimates of all work and a financing plan that includes inflation, industry-standard contingencies and program costs. 2018 Measure C Projects Resolution 17-35 was adopted by the district’s governing board on February 13, 2018, and authorized the Measure C election, which was held on June 5, 2018. Proposition 39 requires that the ballot language include a list of projects the bond funds will pay for. The Measure C ballot language included a list of every school in the district, followed by general language about modernization, repair and renovation at those sites. This is typical language used in bond measures, which allows districts the flexibility to determine projects within that general framework after the bond election date. However, a successful bond program requires a more detailed plan than the broad listing in the ballot measure. The detailed planning documents need to include information such as the project lists, scope of work, cost estimates, timeline, and cash flow projections over the years of the bond. FCMAT was not provided with evidence of these documents. Although a prioritization or planning process may have been used, staff members who might have been involved in the process are no longer with the district, and current staff were not able to locate board meeting documents regarding the process. Fiscal Crisis and Management Assistance Team Stockton Unified School District 33 Findings and Recommendations 2018 Measure C A complete list of current and future Measure C projects with all budget and expenditure information was not provided to FCMAT. In its review of district documents, FCMAT found that some reports and spread- sheets had been developed by previous staff members, but that current staff do not use them. The spread- sheets include pieces of information but are not comprehensive, and some appear to be one-time snapshot documents. The district provided FCMAT with a summary of bond measure expenditures for 2020-21; however, the information was not presented by project in a readily accessible format. It is a best practice to use sepa- rate account codes, such as a resource code, in Fund 21 (building fund) for each bond measure project to enable easier tracking of project budgets, revenues, expenditures and remaining balances. The district did not provide a master program budget that shows the beginning and ending balance of Measure C since the beginning of the bond measure. A master program budget should contain the follow- ing categories: • All funding/revenue sources — past, current and projected, starting with passage of the bond measure and continuing through program completion. • Each project — with original budget, revised budget, expenditures and percentage of budget completion. • Program costs — programwide costs that should not be charged to specific projects, including legal services for items such as lease-leaseback agreement templates or bid doc- ument development for the program, community outreach, some citizens’ bond oversight committee (CBOC) costs, development and maintenance (either in-house or contracted out) of the budget and expenditure reports and DSA noncertified legacy project closeout activities. • Major unforeseen reserve/contingency — percentage of total program budget (e.g., 5%) for unforeseen costs such as major termite and dry rot damage not already found, claims and lawsuits, and hazardous materials mitigation not anticipated. • Construction cost escalation (inflation) — developed by adding anticipated inflation to every project expected to have a construction contract awarded that year. Inflation compounds on future projects for every year prior to the start of construction. • Program remaining balance — which should be a positive number. A negative number means that the program is over budget. The district did not provide budget and expenditure reports: one for each project and one for programwide expenditures. Overall program costs are often left out of districts’ bond program planning. However, there are costs for overall bond program activities not associated with any one specific project, which are also appropriately charged to the bond and need to be included in the master program budget, such as those program costs listed above. The budget and expenditure reports should include all budgets, costs and contingencies. Contingencies include the following: • Construction contingency (i.e., change orders) — for example, 10% of each project con- struction budget. • Project contingency — typically 15% of the above construction contingency (i.e., 15% of the 10%). This represents the soft costs associated with changes in construction. • Owner’s contingency — for example, 1% of the hard construction budget. Fiscal Crisis and Management Assistance Team Stockton Unified School District 34 Findings and Recommendations 2018 Measure C The master program budget and all project and programwide budget and expenditure reports should be updated monthly for maximum ability to respond to unexpected costs, budget overages, and issues such changes in budget assumptions. These reports are relatively simple to maintain and update using Excel spreadsheets. A best practice is for an accounting position in the Facilities and Planning Department to complete the reports, with at least two people cross trained to ensure that the reports are updated in a timely manner when employees are absent or leave the district. Project and programwide budget and expenditure reports can be used for planning and communication. A best practice is to include the reports in all CBOC meeting agendas and post them on the district’s website under a CBOC link. The master program budget is also an effective communication item for board meetings (a sample master program budget and programwide and project budget and expenditure report templates are included in the appendix of this report). During FCMAT’s fieldwork, the director of facilities and planning/transportation had been in the position only for approximately two months and did not yet appear to have specific knowledge about the overall Measure C Program, including information about project budgets and expenditures, the list of current proj- ects, or the plan for future projects. Other staff members provided FCMAT with various outdated spread- sheets and reports that appear to be snapshots in time and include information about various projects, but ongoing and comprehensive reports that show all projects, budgets, encumbrances or commitments, expenditures, and the remaining balance for each project were not provided. Partial and incomplete lists create confusion and lack of clarity about projects funded by Measure C and make review and evaluation of the projects difficult to complete. Project Update Reports were provided to FCMAT; the most recent of which was dated September 10, 2021. These reports include partial information about various projects and are sorted by the engineering or planning technician assigned to the projects. It is unclear whether these are one-time snapshot documents, whether and how frequently they are updated, and who sees and uses them to monitor the facilities pro- gram. The Project Update Reports included a variety of construction projects as well as nonconstruction projects, such as upgrading the 1A site diagrams in electronic format and leading the effort to update and obtain board approval for the School Facilities Needs Analysis. Most of the projects listed did not state their funding source(s) and varied in the cost and budget information provided. Spaces were provided for project budget, construction budget, cost estimate and contract amount, but not all information was included for each project. The costs and budgets were shown in lump sums, and no backup documents were provided to indicate how they were derived. Because of the lack of documentation provided for each Measure C project, FCMAT was unable to determine if the district tracks project budgets and expenditures adequately. A September 28, 2021 board presentation included the following list of projects funded by Measure C: • Madison Portable Replacement (in progress) • Adams Portable Replacement (in progress) • Chavez Athletics (Fields Only) (in progress) • Tyler Modernization (in progress) • Fillmore Portable Replacement (not started) • Edison High School Minor Demolition and Field Work (not started) A comparison of the board report to the Project Update Reports found the following: Fiscal Crisis and Management Assistance Team Stockton Unified School District 35 Findings and Recommendations 2018 Measure C • Of the four in-progress projects in the board presentation, FCMAT was not provided with a Project Update Report for the Chavez Athletic Fields Project, so it is unknown how or if this project is tracked. • The Project Update Reports list the Tyler Modernization Project as two phases: Tyler Alternation and Tyler Kitchen; however, the two separate phases are not listed in the board presentation. The board presentation included the following Bond Program Financial Summary: The above table lacks some context and detail regarding Measure C funds and projects. For example, the “Total Amount Needed to Complete” is unclear regarding which projects are included in the $94.9 million. The term “Current Drawdown” is used rather than the more standard term “issuance,” which may be confus- ing to some readers. The table does not include the first issuance of $30 million, so readers are not made aware of how much bonding capacity remains in Measure C. As of September 2021, there had been one issuance of $30 million (Series A) for Measure C. Bond issu- ances are the actual amounts of cash available to spend on all project costs, including both hard costs (e.g., construction) and soft costs (e.g., architect, inspectors, testing and project management). At the time of FCMAT’s fieldwork, the district was planning a second issuance, Series B, for $98 million. It appears that this funding would be used to pay for Measure C contracts that have been awarded and are in progress. However, best practice is to not award contracts until there is sufficient cash to pay for them. Following the second issuance of $98 million, the board presentation indicates that the district will be at its maximum debt capacity; therefore, it is unknown when the remaining $28.38 million in bonding capacity may be issued. Thus, it is important to plan and budget projects for the reduced amount of available fund- ing. This may entail delaying, deleting or reducing the scope and cost of projects. FCMAT was not provided with the details on all contracts for Measure C projects, so the total cost of each project is unknown. Contracts and/or contract amounts awarded as part of the planning and design phases of the projects — such as architect, engineers, environmental services consultant, state funding consultant (if applicable) and legal services — were not included in documents provided by the district. However, the Project Update Reports show that construction contracts alone exceed the cash available from the Series A Fiscal Crisis and Management Assistance Team Stockton Unified School District 36 Findings and Recommendations 2018 Measure C bond issuance. For example, the following two projects have active construction contracts that have been approved by the board for which construction costs alone total more than the $30 million from Series A issuance. Projects Reported to the Board (9/28/21) to be Funded from Measure C (as of end of September 2021) Active Construction Contracts Madison Portable Replacement Project Construction Contract* $20,581,945 Adams Portable Replacement Project Construction Contract* $19,187,542 Total Construction Contracts Approved $39,769,487 *Amendment #1 to Lease-Leaseback Agreements The lease-leaseback agreement amendments for the construction portion of work were approved by the board for the full amounts. The requisition requests (dated August 11, 2021) for purchase orders for Madison and Adams were for partial amounts and state, "Partially funded - remaining balance of $8,581,945.43 to be added to PO at a later date" and "PARTIALLY FUNDED, REMAINING BALANCE OF "$7,128,652.00" TO BE ADDED TO PURCHASE ORDER AT A LATER DATE," respectively. The Madison requisition request was for $12,019,800, and Adams was for $12.0 million. Because the board has approved the entire $39,769,487 in contracts for these two projects, the district is liable for payment of the entire amount, not just the partial amounts listed in the requisition requests for purchase orders. Because this exceeded the cash available from Measure C issuances at the time of the board presentation, the district may have needed to find alternate funding sources to pay for these contracts. No evidence was provided showing that the district has applied for state facilities funding or has other alternative funding sources for the current Measure C projects. The district’s 2021-22 Fund 21 Cash Flow Projections spreadsheet appears to include actual monthly expenditures but does not include the monthly projections that are necessary for planning. A monthly cash flow projection that is maintained regularly would show projected cash shortfalls and would allow the district to plan projects proactively and ensure cash is available to pay for them. FCMAT compiled the project budget and contract information provided in the Project Update Reports for all Measure C projects on one page. However, the table below provides summary total amounts only, because the district did not provide budget details for each project. The table includes only those projects that are either in the board presentation or in the Project Update Reports as current Measure C projects. It does not include other funding sources because the Project Update Reports do not show that information, and it does not include future projects because no list of future projects was provided to FCMAT. 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This is not typical and makes it appear that the amount listed as the budget may be actual cost. For example, the construction budget for the Adams Portable Replacement Project is $22,970,320.93 rather than a rounded budget figure. Therefore, it is unclear if all staff are using the same definitions for the different types of cost estimates and budgets. Both the Tyler Alteration (Modernization – Phase I) and the Madison Portable Replacement Project show that they are significantly over budget in the construction cost alone, not including soft costs. However, it is unclear whether the district has a process to reconcile this by doing one or both of the following: a) Deleting or reducing the scope of projects b) Deleting or reducing the size of future projects The Adams Portable Replacement Project construction cost estimate is from 2008. The difference between the 2008 cost estimate and the construction budget shown on the Project Update Report is 106%, and the Project Update Report does not include a recent cost estimate. Neither the board presentation nor the Project Update Reports provide sufficient detail to adequately monitor the budgets and expenditures for Measure C projects. Other future projects are included in the Project Update Reports, but no funding sources are indicated. Therefore, it is impossible to determine whether they should be included in the list of Measure C projects and in the program budget and expenditure tracking. These include the following: Stagg High School Gym Heating, Ventilation and Air Conditioning (HVAC) Replacement Project — Listed as waiting for funds. Stagg High School Portable Replacement Project — No timeline or source of funds listed. Worknet Building (new district office) Project — Is an active project. Source of funding is not listed on the Project Update Report. Franklin Welding Lab Project — Career technical education program facility. Source of funding is not listed on the Project Update Report. Stagg High School Livestock Program — No budgets or cost estimates listed, but the Project Update Report states that the architect is in preliminary design. George Bush Elementary School Slab Upheaval – The project description in the Project Update Report indicates soil conditions are causing heaving and damage to building founda- tions, floors, interior and exterior finishes. The Project Update Report states: This project has undergone investigation with reports and recommendations received. Total time involved to mitigate and repair is three (3) years. The first phase consists of placing a concrete footing around the structures to halt water penetra- tion to the foundation. After this is complete, the structures need two (2) years for the foundation to settle, then repairs can be made. The funding source is not included, but $1.8 million is listed as the contract amount “(not including soft costs).” There is no description of the cost estimate for future phases, including for repair and possible replacement to building foundations, floors and finishes, which are possible major scopes of work. Fiscal Crisis and Management Assistance Team Stockton Unified School District 39 Findings and Recommendations 2018 Measure C A facilities project becomes a project long before construction starts. Once staff get approval beyond conceptual planning, a project budget and expenditure report can be created and populated with budget amounts. In addition, all projects need to be tracked and monitored. Individuals FCMAT interviewed indicated that the district recently hired consultants to provide bond pro- gram accounting software and to review processes and procedures in the Facilities and Planning Depart- ment. However, these services were not yet complete at the time of FCMAT’s fieldwork. Millions of dollars have been committed for facilities projects, and it is imperative that the district update all project budgets and expenditures immediately and routinely monitor them to ensure the information is current. It is best practice to correct inadequate program implementation and monitoring as soon as possible rather than wait for a consultant’s report. Citizens’ Bond Oversight Committee Proposition 39, a state referendum passed in 2000, requires school districts to perform certain account- ability procedures to pass a bond with 55% voter approval instead of the super-majority two-thirds approval (66.67%). Districts can choose whether they wish to conduct a Proposition 39 or two-thirds approval bond election. Proposition 39 requires districts to demonstrate that projects are done in a cost-effective and cost-efficient manner and conduct annual performance and financial audits. This allows the board, admin- istration, employees, parents, students and the public to have confidence that taxpayer money is spent wisely, without waste and without malfeasance or fraudulent activity. Districts that have passed Proposition 39 bond measures are required by law (Education Code Sections 15278-15282) to have an active citizens’ bond oversight committee. A CBOC is required to meet at least once a year and to provide an annual report to the public. The committee may also review the annual performance and financial audits and engage in other activities as listed in the Education Code. Measure C is a Proposition 39 bond; however, the district does not have a CBOC, and interviews indicated that the district has not had one since 2017 or 2018. No CBOC meeting agendas, minutes or reports were provided to FCMAT or posted on the district’s website. Therefore, it is unclear when or if there was a legally consti- tuted CBOC for 2018 Measure C or previous Proposition 39 bond measures. In addition, performance and financial audits for 2018 Measure C were not provided to FCMAT or posted on the district’s website. Interviews indicated that there is no CBOC because the district has had difficulty getting committee members. Although it has become challenging in some districts to find community members interested in devoting their time and effort to a CBOC, FCMAT saw no evidence of active recruitment for committee members beyond a call for volunteers on the Facilities and Planning Department link of the district’s web- site. An active recruitment effort includes developing an application form and submittal process, holding interviews, and strategically recruiting members in all required CBOC categories. Recruitment efforts should go beyond advertising on the district’s website, social media and other advertising platforms: they should include personal outreach efforts by board members, school principals, and the superintendent to senior citizens’ organizations, county taxpayer organization(s), local business leaders, district parents, and parent-teacher organizations. It is best practice to hold CBOC meetings even if the minimum required seven members cannot be found. Agenda items, including budget and expenditure reports, project progress reports and awarded contracts, can still be discussed and posted on the district’s website to provide accountability and transparency. The absence of an active CBOC has helped cause the lack of communication and reporting to the board and public about Measure C. Fiscal Crisis and Management Assistance Team Stockton Unified School District 40 Findings and Recommendations 2018 Measure C Facilities and Planning Department Staffing The director of facilities and planning/transportation oversees the Facilities and Planning, Maintenance and Operations, and Transportation departments. Because of numerous management position vacancies throughout the district, the director was also helping to oversee the Purchasing/Warehouse Department at the time of FCMAT’s fieldwork. Such a broad span of control does not allow adequate time for the director to supervise the Facilities and Planning Department. Staff meetings were reported to be informal, with no written agendas, and it is unclear whether the Project Update Reports are used in the meetings. The department includes two engineering technicians and two planning technicians; however, interviews did not provide a clear indication of the difference between the two positions’ project assignments, roles, or responsibilities. At the time of FCMAT’s fieldwork, two key planning management positions (planning manager and construction manager) had been eliminated. The lack of comprehensive knowledge of a plan for the Measure C Program, lack of maintenance of databases and spreadsheets, and lack of tracking and monitoring of budgets and expenditures are all indicators that the Facilities and Planning Department may be inadequately staffed or that employees have not been assigned responsibilities for, and/or may not have experience in, planning functions. The Facilities and Planning Department has experienced significant staff turnover. The department is in a transition period with a new director, the loss of key positions, and lack of management staff to adequately oversee the responsibilities of planning and construction. This appears to have resulted in a lack of commu- nication and cohesiveness within the department. As discussed previously, the district has hired a consul- tant to perform an evaluation of the Facilities and Planning Department, which is to include a review of the department’s organizational structure and staffing. Procurement Interviews indicated a misconception about the need for board approval or ratification of contracts, specif- ically a misunderstanding that contracts do not have to be approved or ratified by the board. Board Reso- lution No. 21-06, Resolution to Update the Delegation of Power for Signing Contracts, adopted on July 27, 2021, delegates the authority to sign contracts to specific individuals and includes the following provisions: WHEREAS, the Governing Board of the Stockton Unified School District may delegate the function to sign contracts to an authorized agent or agents, pursuant to Education Code, section 17604; and WHEREAS, it is understood that Education Code Section 17604 provides, in part, that no contract made pursuant to the delegation and authorization shall be valid or constitute an enforceable obligation against the district unless and until the same shall have been approved or ratified by the governing board, the approval or ratification to be evidenced by a motion of the board duly passed and adopted . . . Education Code Section 17604 states the following: Wherever in this code the power to contract is invested in the governing board of the school district or any member thereof, the power may by a majority vote of the board be delegated to its district superintendent, or to any persons that he or she may designate, or if there be no district superintendent then to any other officer or employee of the district that the board may designate. The delegation of power may be limited as to time, money or subject matter or may be a blanket authorization in advance of its exercise, all as the governing board may direct. However, no contract made pursuant to the delegation and authorization shall be valid or Fiscal Crisis and Management Assistance Team Stockton Unified School District 41 Findings and Recommendations 2018 Measure C constitute an enforceable obligation against the district unless and until the same shall have been approved or ratified by the governing board, the approval or ratification to be evidenced by a motion of the board duly passed and adopted. In the event of malfeasance in office, the school district official invested by the governing board with the power of contract shall be personally liable to the school district employing him or her for any and all moneys of the district paid out as a result of the malfeasance. [Emphasis added.] Therefore, if contracts are not taken to the board for either proactive approval or retroactive ratification, the contracts are invalid and do not constitute an enforceable obligation against the district. For architects, engineers and construction management firms, a qualifications-based process is required by Government Code Sections 4525 and 4529.12. Based on information provided by the district, a qualifica- tions-based process was used for its current pool of architects. It is also a best practice to procure the professional services of certain other consultants through a qualifi- cations-based selection process. This process can include the use of a Request for Qualifications (RFQ) or Request for Proposal (RFP), or, minimally, can include informal discussions with more than one vendor, to provide the ability to compare and contrast various firms and services. However, the district is not con- sistent in its use of a qualifications-based selection process. The district’s Administrative Regulation and Exhibit 3600, Consultants, require use of the district’s Consultant Utilization Form for all non-instructional consultants. The form is to be included in the board agenda item recommending use of the consultant. The district recently hired a firm to provide a financial management and bond accounting and reporting system, including installation, set up, training and monthly consulting services. However, FCMAT found no evidence of a qualifications-based selection process for these services, and the district did not follow its policies by requiring the completion of its Consultant Utilization Form, which provides information on qualifications, reasons for needing the service, and funding source. The district also recently hired a firm to provide an evaluation of the Facilities and Planning Department. FCMAT found no evidence of a qualifica- tions-based selection process for these services; however, the completed Consultant Utilization Form was included in the board agenda item regarding using the consultant. Recommendations The district should: 1. Review the recommendations provided in the March 2008 Implementation Plan and include them as part of a long-range facilities master plan and in short-term year-to-year activities. 2. Develop a comprehensive long-range facilities master plan that covers 10 years. 3. Develop a long-range and short-term implementation plan. 4. Use a separate resource code in Fund 21 for each bond project. 5. Immediately develop a master program budget, a programwide budget and expenditure report, and individual project budget and expenditure reports for Measure C and all other active projects. Assign an employee in the Facilities and Planning Department to update these documents monthly, and ensure other employees are cross trained to maintain and update the reports. Once these documents are developed, discontinue the use of the Project Update Reports. Fiscal Crisis and Management Assistance Team Stockton Unified School District 42 Findings and Recommendations 2018 Measure C 6. Consider completing a master program budget for each previous bond measure to create a continuous flow of information that provides an understanding of how the facilities program has been implemented. 7. Use the master program budget and programwide and project budget and expenditure reports at all CBOC meetings. 8. Provide frequent and more detailed board presentations of the Measure C Program. To avoid unnecessary effort, the master program budget format can be used for board presentations. 9. Ensure that cash is available to pay for all active projects. Complete monthly cash flow projections that include all funding sources used for facilities projects. Ensure that the projections are updated monthly and include prior months’ actuals and estimated monthly projections for the term of the program. 10. Actively recruit members and form a CBOC for Measure C as soon as possible. 11. Update its website to include a link for Measure C, and post all CBOC meeting agendas, minutes and reports on that webpage. Consider including photographs of construction projects (before and after photos are very effective) and narrative reports with appealing graphics to help communicate about the Measure C Program. 12. Conduct annual, independent performance and financial audits for Measure C as required, and post them to its website. 13. Reduce the number of departments the director of facilities and planning/transportation oversees and/or is helping to oversee. 14. Ensure the Facilities and Planning Department is adequately staffed with qualified, experienced individuals. 15. Comply with Board Resolution No. 21-06 and Education Code Section 17604 by obtaining board approval or ratification of every contract. Work with its legal counsel to determine if any prior contracts need to be presented to the board for ratification. 16. Consistently follow Administrative Regulation 3600, and use a qualifications-based selection process for all consultants. Fiscal Crisis and Management Assistance Team Stockton Unified School District 43 Appendices Appendices Appendix A: Sample Facilities Priorities Template Appendix B: Sample Master Program Budget Template Appendix C: Sample Programwide Budget and Expenditure Report Template Appendix D: Sample Project Budget and Expenditure Report Template Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 44 Appendices Appendix A: Sample Facilities Priorities Template Appendix A: Sample Facilities Priorities Template Sample – Facilities Priorities Template Sample Guidelines for School Renovation Funds Priority 1--Health and safety issues Examples:  Restroom repairs  Fire and intrusion alarms, emergency lighting, exit signage  Improperly operating heating and ventilation systems  Badly cracked walkways  Exposed fluorescent lamps  Asbestos abatement  Lead paint abatement Priority 2--Building shell integrity Examples:  Roof replacement  Deteriorated and leaking windows  Exterior paint and wall finishes  Exterior doors and locks  Dry rot and termite repair Priority 3—ADA compliance Examples:  Path of travel on campus  Door thresholds and hardware  Restroom modifications Priority 4--Classroom interior renovations Examples:  New marker boards and tackable wall surface  Interior paint  Ceiling tiles  Cabinet repair/replacement  Plumbing repairs/replacement  New floor covering  New window coverings  New light fixtures Fiscal Crisis and Management Assistance Team Stockton Unified School District 45 Appendices Appendix A: Sample Facilities Priorities Template Priority 5—Technology upgrades and low-voltage systems Examples:  Additional electrical outlets & electrical system upgrades for computers  Conduits and cabling for computer networks and distributed video  Upgraded telephone/intercom/clock systems  Upgraded fire and intrusion alarm systems Priority 6—Mechanical, electrical, and plumbing infrastructure upgrades Examples:  New heating and air conditioning systems  New electrical service and distribution  New plumbing fixtures and piping as necessary Priority 7—Restroom renovation Examples:  New toilet partitions  New ceramic tile floors and wainscot  New plumbing fixtures  New accessories and mirrors Priority 8--Renovation & new construction in support of educational program Examples:  Adaptive re-use of existing spaces for new program  New & renovated science labs  New and renovated theaters  Libraries  Magnet programs, ROTC, etc. Priority 9—New and Renovated Support spaces Examples:  Administration offices  Teachers’ lounge/workroom  Storage  Janitorial Priority 10—Site infrastructure Examples:  Sewer, water and gas lines  Fire hydrants and access roads and gates  Provision for future relocatable classrooms or other expansion Fiscal Crisis a nd Management Assistance Team 2 Stockton Unified School District 46 Appendices Appendix A: Sample Facilities Priorities Template Priority 11---Renovation & new construction in support of social service programs Examples:  Healthy start clinics  Counseling/career centers  Family learning centers Priority 12--Athletic/Co-curricular program support facilities Examples:  Gyms/locker rooms  Swimming pools  Tracks  Stadium lighting & seating Priority 13—Site landscape and hardscape Examples:  Parking lot repair and repaving  Hardcourt repair and resurfacing  Concrete walkway repair  Irrigation system repair and replacement  Landscape repair and replacement  Outdoor eating areas  Planting areas Fiscal Crisis and Management Assistance Team Stockton Unified School District 47 3 Appendices Appendix B: Sample Master Program Budget Template Appendix B: Sample Master Program Budget Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 48 Appendices Appendix B: Sample Master Program Budget Template XXXX SCHOOL DISTRICT MEASURE XXX FACILITIES --- MASTER PROGRAM BUDGET (INCLUDES STATE FUNDING, INTEREST, OTHER FUNDING SOURCES AS APPROPRIATE) AS OF XXXX DATE FUNDING State School Premium / Facilities Measure XX Discount / Interest Other Funding Date Received Program Bond Issuance Issuance Costs Earnings Sources Developer Fee Existing Funding at Start Fiscal Year 2016-2017 Fiscal Year 2017-2018 Fiscal Year 2018-2019 Fiscal Year 2019-2020 Fiscal Year 2020-2021 (PROJECTED) Fiscal Year 2021-2022 (PROJECTED) Fiscal Year 2022-2023 (PROJECTED) Fiscal Year 2023-2024 (PROJECTED) Fiscal Year 2024-2025 (PROJECTED) Fiscal Year 2025-2026 (PROJECTED) Fiscal Year 2026-2027 (PROJECTED) Fiscal Year 2027-28 (PROJECTED) Totals by Source: $ - $ - $ - $ - $ - $ - Total Program Revenue: $ - Measure XX Bond Projects Preliminary Current Committed Expensed Percent Project Budgets Budgets Contract(s) to Date Complete Project A Project B Warranty Call Back Program Costs Major Unforeseen Reserve - HOLD THROUGH PROGRAM Construction Cost Escalation - USE ON FUTURE PROJECTS Owner Contingency - HOLD THROUGH PROGRAM TOTAL - - Program Remaining Balance - - Totals: $ - $ - $ - $ - #DIV/0! COLOR KEY Green 100% Complete White Active Orange Future Blue Program Costs Dark Blue Contingencies/Inflation Fiscal Crisis and Management Assistance Team Stockton Unified School District 49 Appendices Appendix C: Sample Programwide Budget and Expenditure Report Template Appendix C: Sample Programwide Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 50 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD E/B EDIWMARGORP TCIRTSID XXXX SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB stsoC etiS 0.001 - $ - $ - $ - $ - $ - $ - $ - $ - $ stsoC noitisiuqcA - - - - - - - - - esahcruP - - - - - - - - - noitacoleR - $ - - $ - - - - - - seeF lageL/eltiT/worcsE - $ - - $ - - - - - - stsoC gnicnaniF/dnoB - $ - - $ - - - - - - ecnarusnI laicepS - $ - - $ - - - - - - lasiarppA ytreporP - $ - $ - $ - $ - $ - $ - $ - $ - $ seidutS laicepS - - - - - - - - - ydutS cixoT - - - - - AQEC - - - - lacinhcetoeG - - - - - - - - - drazaH lacigoloeG - - - - yevruS lacihpargopoT - - - - - - - - tnatlusnoC noitacoleR - - - - - - reenignE liviC etiS - - - - - - - - - gnitacoL dnuorgrednU - - - - - - - - - yevruS lacituanoreA - - - $ - - - - - - serutaeF gnitsixE - noitilomeD - - - $ - - - - - - lasopsiD / pu-naelC .nrvnE - - - $ - - - - - stsoC etiS suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stsoC ycnegA dna tcirtsiD 0.002 - - $ - seeF kcehC nalP ASD - - $ - seeF kcehC nalP EDC - - $ - lortnoC ecnatsbuS cixoT fo viD - - $ - lageL - $ - $ - $ - $ - $ - $ - $ - $ - $ seeF ytilitU/ytiC/ytnuoC - - - - - lacirtcelE - - - - - - - - - reweS - - - - - - - - - eganiarD mrotS - - - - - - - - - retaW - - - - - - - - - saG - - - - - - - - - enohpeleT - - - - - - - - - noisiveleT elbaC - - - - - - - - - snoitagitiM/stnemeltitnE rehtO - - - - - eeF gniliF AQEC - - - $ - - seicnegA rehtO - - - $ - - - stsoC ycnegA suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stnatlusnoC llA 0.003 - - - $ - - - - - - gninnalP dna gnimmargorP - - $ - - - reenignE/tcetihcrA - - - $ - - - - tnatlusnoC ytlaicepS - - $ - tmgM tcejorP - - $ - lageL - - $ - ngiseD egatloV woL - - $ - hcaertuO ytinummoC - $ - $ - $ - $ - $ - $ - $ - $ - $ stnatlusnoC taMzaH - - - ngiseD - - - gnirotinoM - - - $ - - - stsoC tnatlusnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD Appendices Appendix C: Sample Programwide Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 51 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD E/B EDIWMARGORP TCIRTSID XXXX SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB stsoC diB 0.004 - - $ - noitubirtsiD dna gnitnirP - - $ - - secitoN & stnemesitrevdA - - $ - stsoC diB suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stsoC noitcurtsnoC 0.005 - - $ - rotcartnoC etiS - $ - $ - $ - $ - $ - $ - $ - $ - $ rotcartnoC lareneG 0026 - - - rotcartnoC lareneG - - - 1# redrO egnahC - - - 2# redrO egnahC - - - rotcartnoC ygrenE - - $ - rotcartnoC taM zaH - - $ - rotcartnoC ytlaicepS - - $ - rotcartnoC ytlaicepS - $ - $ - $ - $ - $ - $ - $ - $ - $ egatloV woL - - - EGATLOV WOL REDLOHECALP - - - mralA eriF - - - - - - - - - gninetsiL detsissA - - - ataD - - - enohpeleT - - - mocretnI - - - slleB dna skcolC - - - noisurtnI - - - VT elbaC - - - SME - - - ytiruceS oediV latigiD - - - - - - - - - aideM oediV - - - - - - - - - SDIF - - $ - selbatacoleR - - $ - slairetaM dehsinruF renwO - - $ - noitcurtsnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD troppuS noitcurtsnoC 0.006 - - $ - noitcepsnI - - $ - gnitseT - - $ - slortnoC yevruS - - $ - ytiruceS - - $ - tnemeganaM noitcurtsnoC - - $ - troppuS rtsnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD tnempiuqE & erutinruF 0.007 - - - $ - - - - - - ngiseD tnempiuqE & erutinruF - $ - $ - $ - $ - $ - $ - $ - $ - $ dezilatipaC-noN-E&F - - - seilppuS lacinhceT-noN - - - seilppuS lacinhceT - - - hceT-noN - dezilatipaC noN-E&F TNEDUTS/xxxx$@ - - - hceT - dezilatipaC-noN-E&F - $ - $ - $ - $ - $ - $ - $ - $ - $ dezilatipaC-E&F - - - hceT-noN - dezilatipaC-E&F - - - hceT - dezilatipaC-E&F - - $ - slairetaM yrarbiL - - $ - ytlaicepS - - - $ - - - - - - stsoC E&F suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD Appendices Appendix C: Sample Programwide Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 52 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD E/B EDIWMARGORP TCIRTSID XXXX SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB stsoC tcejorP suoenallecsiM 0.008 - $ - $ - $ - $ - $ - $ - $ - $ - $ gnisuoH miretnI - - - pU-teS gnisuoH miretnI - - - esaeL gnisuoH miretnI - $ - $ - $ - $ - $ - $ - $ - $ - $ egarotS dna gnivoM - - - gnivoM - - - egarotS - - - gnikcaP - - - robaL tnuoccA ecroF - - - $ - - - - - - gniniarT / pU-tratS smetsyS - - - $ - - - - - - stsoC O&M - - - $ - - - - - - stsoC sdnuorG dna gnidliuB - - $ - - - lasopsiD etsaW - - - $ - - - - - - stsoC tcejorP suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD seicnegnitnoC 0.009 - - - draH %01@ ycnegnitnoC noitcurtsnoC - - 1# .O.C ycnegnitnoC noitcurtsnoC fo egasU - - 2# .O.C ycnegnitnoC noitcurtsnoC fo egasU - - srotcartnoC ytlaicepS ycnegnitnoC noitcurtsnoC fo egasU - - - evoba CC %51 @ ycnegnitnoC tcejorP - - - draH %1 @ ycnegnitnoC renwO - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD - $ - $ - $ - $ - $ - $ - $ - $ - $ LATOT ETAD - $ TEGDUB JORP )suoiverP -- ETAD( MORF EGNAHC :LIATED EPOCS/REDRO EGNAHC )etad( 1# REDRO EGNAHC )etad( 2# REDRO EGNAHC :2# .O.C OT DETALER 0$ :SREDRO EGNAHC GNIMOCHTROF DNA DEVORPPA LATOT Appendices Appendix C: Sample Programwide Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 53 Appendices Appendix D: Sample Project Budget and Expenditure Report Template Appendix D: Sample Project Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 54 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD TCEJORP xxx SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB stsoC etiS 0.001 - $ - $ - $ - $ - $ - $ - $ - $ - $ stsoC noitisiuqcA - - - - - - - - - esahcruP - - - - - - - - - noitacoleR - $ - - $ - - - - - - seeF lageL/eltiT/worcsE - $ - - $ - - - - - - stsoC gnicnaniF/dnoB - $ - - $ - - - - - - ecnarusnI laicepS - $ - - $ - - - - - - lasiarppA ytreporP - $ - $ - $ - $ - $ - $ - $ - $ - $ seidutS laicepS - - - - - - - - - ydutS cixoT - - - - - AQEC - - - - lacinhcetoeG - - - - - - - - - drazaH lacigoloeG - - - - yevruS lacihpargopoT - - - - - - - - tnatlusnoC noitacoleR - - - - - - reenignE liviC etiS - - - - - - - - - gnitacoL dnuorgrednU - - - - - - - - - yevruS lacituanoreA - - - $ - - - - - - serutaeF gnitsixE - noitilomeD - - - $ - - - - - - lasopsiD / pu-naelC .nrvnE - - - $ - - - - - stsoC etiS suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stsoC ycnegA dna tcirtsiD 0.002 - - $ - seeF kcehC nalP ASD - - $ - seeF kcehC nalP EDC - - $ - lortnoC ecnatsbuS cixoT fo viD - - $ - lageL - $ - $ - $ - $ - $ - $ - $ - $ - $ seeF ytilitU/ytiC/ytnuoC - - - - - lacirtcelE - - - - - - - - - reweS - - - - - - - - - eganiarD mrotS - - - - - - - - - retaW - - - - - - - - - saG - - - - - - - - - enohpeleT - - - - - - - - - noisiveleT elbaC - - - - - - - - - snoitagitiM/stnemeltitnE rehtO - - - - - eeF gniliF AQEC - - - $ - - seicnegA rehtO - - - $ - - - stsoC ycnegA suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stnatlusnoC llA 0.003 - - - $ - - - - - - gninnalP dna gnimmargorP - - $ - - - reenignE/tcetihcrA - - - $ - - - - tnatlusnoC ytlaicepS - - $ - tmgM tcejorP - - $ - lageL - - $ - ngiseD egatloV woL - - $ - hcaertuO ytinummoC - $ - $ - $ - $ - $ - $ - $ - $ - $ stnatlusnoC taMzaH - - - ngiseD - - - gnirotinoM - - - $ - - - stsoC tnatlusnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD Appendices Appendix D: Sample Project Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 55 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD TCEJORP xxx SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB stsoC diB 0.004 - - $ - noitubirtsiD dna gnitnirP - - $ - - secitoN & stnemesitrevdA - - $ - stsoC diB suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stsoC noitcurtsnoC 0.005 - - $ - rotcartnoC etiS - $ - $ - $ - $ - $ - $ - $ - $ - $ rotcartnoC lareneG 0026 - - - rotcartnoC lareneG - - - 1# redrO egnahC - - - 2# redrO egnahC - - - rotcartnoC ygrenE - - $ - rotcartnoC taM zaH - - $ - rotcartnoC ytlaicepS - - $ - rotcartnoC ytlaicepS - $ - $ - $ - $ - $ - $ - $ - $ - $ egatloV woL - - - EGATLOV WOL REDLOHECALP - - - mralA eriF - - - - - - - - - gninetsiL detsissA - - - ataD - - - enohpeleT - - - mocretnI - - - slleB dna skcolC - - - noisurtnI - - - VT elbaC - - - SME - - - ytiruceS oediV latigiD - - - - - - - - - aideM oediV - - - - - - - - - SDIF - - $ - selbatacoleR - - $ - slairetaM dehsinruF renwO - - $ - noitcurtsnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD troppuS noitcurtsnoC 0.006 - - $ - noitcepsnI - - $ - gnitseT - - $ - slortnoC yevruS - - $ - ytiruceS - - $ - tnemeganaM noitcurtsnoC - - $ - troppuS rtsnoC suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD tnempiuqE & erutinruF 0.007 - - - $ - - - - - - ngiseD tnempiuqE & erutinruF - $ - $ - $ - $ - $ - $ - $ - $ - $ dezilatipaC-noN-E&F - - - seilppuS lacinhceT-noN - - - seilppuS lacinhceT - - - hceT-noN - dezilatipaC noN-E&F TNEDUTS/xxxx$@ - - - hceT - dezilatipaC-noN-E&F - $ - $ - $ - $ - $ - $ - $ - $ - $ dezilatipaC-E&F - - - hceT-noN - dezilatipaC-E&F - - - hceT - dezilatipaC-E&F Appendices Appendix D: Sample Project Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 56 :ON NOITACILPPA CSPO :EDOC NOITACOL XXXXX URHT DNEPXE XXXXXXXX :ETAD TCEJORP xxx SERUTIDNEPXE STNEMTIMMOC TEGDUB gniniameR ecnalaB desnepxE tnerruC gnidneP devorppA lanigirO tnerruC tegduB yranimilerP tegduB tegduB fo etaD oT tnemtimmoC segnahC segnahC tcartnoC tegduB snoitacifidoM tegduB noitpircseD EDOC TCEJBO EDOC EDART/DIB - - $ - slairetaM yrarbiL - - $ - ytlaicepS - - - $ - - - - - - stsoC E&F suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD stsoC tcejorP suoenallecsiM 0.008 - $ - $ - $ - $ - $ - $ - $ - $ - $ gnisuoH miretnI - - - pU-teS gnisuoH miretnI - - - esaeL gnisuoH miretnI - $ - $ - $ - $ - $ - $ - $ - $ - $ egarotS dna gnivoM - - - gnivoM - - - egarotS - - - gnikcaP - - - robaL tnuoccA ecroF - - - $ - - - - - - gniniarT / pU-tratS smetsyS - - - $ - - - - - - stsoC O&M - - - $ - - - - - - stsoC sdnuorG dna gnidliuB - - $ - - - lasopsiD etsaW - - - $ - - - - - - stsoC tcejorP suoenallecsiM - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD seicnegnitnoC 0.009 - - - draH %01@ ycnegnitnoC noitcurtsnoC - - 1# .O.C ycnegnitnoC noitcurtsnoC fo egasU - - 2# .O.C ycnegnitnoC noitcurtsnoC fo egasU - - srotcartnoC ytlaicepS ycnegnitnoC noitcurtsnoC fo egasU - - - evoba CC %51 @ ycnegnitnoC tcejorP - - - draH %1 @ ycnegnitnoC renwO - $ - $ - $ - $ - $ - $ - $ - $ - $ latotbuS noisiviD - $ - $ - $ - $ - $ - $ - $ - $ - $ LATOT ETAD - $ TEGDUB JORP )suoiverP -- ETAD( MORF EGNAHC :LIATED EPOCS/REDRO EGNAHC )etad( 1# REDRO EGNAHC )etad( 2# REDRO EGNAHC :2# .O.C OT DETALER 0$ :SREDRO EGNAHC GNIMOCHTROF DNA DEVORPPA LATOT Appendices Appendix D: Sample Project Budget and Expenditure Report Template Fiscal Crisis and Management Assistance Team Stockton Unified School District 57 Appendices Appendix E: Study Agreement Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 58 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 59 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 60 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 61 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 62 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 63 Appendices Appendix E: Study Agreement Fiscal Crisis and Management Assistance Team Stockton Unified School District 64