Vallejo City Unified School District Report

Fiscal Health Risk Analysis May 13, 2025 Vallejo City Unified School District Michael H. Fine Chief Executive Officer May 13, 2025 Rubén Aurelio, Superintendent Vallejo City Unified School District 665 Walnut Ave. Vallejo, CA 94592 Dear Superintendent Aurelio: In March 2025, the Vallejo City Unified School District and the Fiscal Crisis and Management Assistance Team (FCMAT) entered into an agreement for FCMAT to conduct a FCMAT Fiscal Health Risk Analysis of the district. The agreement stated that FCMAT would perform the following: Prepare an analysis using the 20 factors in FCMAT’s Fiscal Health Risk Analysis (FHRA) and identify the Client’s specific risk rating for fiscal insolvency. This report contains the fiscal health risk analysis report with the study team’s findings and recommen- dations. FCMAT appreciates the opportunity to assist the Vallejo City 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 Contents Contents About FCMAT ..................................................................................................3 Purpose and Services .............................................................................................3 History .........................................................................................................................4 Introduction ......................................................................................................5 Background ...............................................................................................................5 Fiscal Health Risk Analysis Guidelines ...............................................................5 Study Team ................................................................................................................6 Fiscal Health Risk Analysis .......................................................................... 7 Summary .................................................................................................................... 7 About the Analysis ...................................................................................................9 Areas of High Risk....................................................................................................9 Budget and Fiscal Status ....................................................................................................9 Material Weakness Questions ...........................................................................................9 Score Breakdown by Section ................................................................................11 Fiscal Health Risk Analysis Questions ...............................................................12 Annual Independent Audit Report ..................................................................................12 Budget Development and Adoption ..............................................................................13 Budget Monitoring and Updates .....................................................................................14 Cash Management ..............................................................................................................16 Charter Schools ...................................................................................................................16 Collective Bargaining Agreements .................................................................................16 Contributions and Transfers .............................................................................................18 Deficit Spending (Unrestricted General Fund) ............................................................19 Contents Employee Benefits ..............................................................................................................19 Enrollment and Attendance .............................................................................................20 Facilities .................................................................................................................................21 Fund Balance and Reserve for Economic Uncertainties .........................................22 General Fund – Current Year ..........................................................................................23 Information Systems and Data Management .............................................................23 Internal Controls and Fraud Prevention ........................................................................24 Leadership and Stability ...................................................................................................25 Multiyear Projections .........................................................................................................26 Non-Voter-Approved Debt and Risk Management ...................................................26 Position Control ...................................................................................................................27 Special Education ................................................................................................................27 Risk Score, 20 numbered sections only ...........................................................28 District Fiscal Solvency Risk Level, all FHRA factors ....................................28 Appendix ........................................................................................................29 Appendix A – Study Agreement ........................................................................30 About FCMAT Purpose and Services About FCMAT Purpose and Services FCMAT was created by the California Legislature to help California’s transitional kindergarten through grade 14 (TK-14) local educational agencies (LEAs) avoid fiscal insolvency. Today, FCMAT helps LEAs iden- tify, prevent and resolve financial, management, program, data, and oversight challenges; provides pro- fessional learning; produces and provides software, checklists, manuals and other tools; and offers other related school business and data services. FCMAT may be asked to provide fiscal crisis or management assistance by a school district, charter school, community college, county superintendent of schools, the state superintendent of public instruction, or the Legislature. When FCMAT is asked for help with management assistance or a fiscal crisis, FCMAT management and staff work closely with the requesting LEA to meet their needs. Often this means conducting a formal study using a FCMAT study team that coordinates with the LEA for on-site fieldwork to evaluate specified operational areas and subsequently produces a written report with findings and recommendations for improvement. For more immediate needs in a specific area, FCMAT offers short-term technical assistance from a FCMAT staff member with the required expertise. To help meet the need for qualified chief business officials (CBOs) in LEAs, FCMAT offers four different CBO training and mentoring programs that consist of 11 or 12 diverse two-day training sessions over the course of a full year. For agencies with professional learning needs, FCMAT offers workshops on specific topics. Popular topics include associated student body operations, use of FCMAT’s Projection-Pro online financial forecasting software, use of FCMAT’s Local Control Funding Formula (LCFF) Calculator, and data reporting for the California Longitudinal Pupil Achievement Data System (CALPADS). FCMAT staff and management also frequently make presentations at various professional conferences. The California School Information Services (CSIS) service of FCMAT helps the California Department of Education (CDE) operate CALPADS; helps LEAs learn about CALPADS, resolve data issues and meet reporting requirements; and provides LEAs with training and leadership in data management. CSIS also developed and continues to host and improve the Standardized Account Code Structure (SACS) web-based financial reporting system for all California LEAs, and provides ed-data.org, which gives educators, policy- makers, the Legislature, parents and the public quick access to timely and comprehensive data about TK-12 education in California. Since it was formed, FCMAT has provided LEAs with the types of help described above on more than 2,000 occasions. FCMAT’s administrative agent is the Kern County Superintendent of Schools. FCMAT is led by Michael H. Fine, Chief Executive Officer, and is funded by appropriations in the state budget and modest fees to requesting agencies. Workshop schedules, manuals, presentation slide decks, Projection-Pro software, LCFF calculators, past reports, an online help desk, and many other resources are available for download or use at no charge on FCMAT’s website. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 3 About FCMAT History History FCMAT was created by Assembly Bill 1200 (Chapter 1213, Statutes of 1991) and Education Code 42127.8. Assembly Bill 107 (Chapter 282, Statutes of 1997) added Education Code 49080, which charged FCMAT with responsibility for CSIS and its statewide data management work, and Assembly Bill 1115 (Chapter 78, Statutes of 1999) codified CSIS’ mission. Assembly Bill 1200 created a statewide plan for county offices of education and school districts to work together locally to improve fiscal procedures and accountability standards. Assembly Bill 2756 (Chapter 52, Statutes of 2004) gave FCMAT specific responsibilities for districts that have received emergency state loans. In January 2006, Senate Bill 430 (Chapter 357, Statutes of 2005) amended Education Code 42127.8, and Assembly Bill 1366 (Chapter 360, Statutes of 2005) amended Education Codes 42127.8 and 84041. These new laws expanded FCMAT’s services to include charter schools and community colleges, respectively. Assembly Bill 1840 (Chapter 426, Statutes of 2018) changed how fiscally insolvent districts are administered once an emergency appropriation has been made, shifting oversight responsibilities from the state to the local county superintendent to be more consistent with the principles of local control, and giving FCMAT new responsibilities associated with the process. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 4 Fiscal Health Risk Analysis Introduction Background Located in the North Bay region of the California Bay Area, within the city of Vallejo in Solano County, Vallejo City Unified School District is governed by a five-member board of education. In 2023-24, the district served 9,441 noncharter school students in transitional kindergarten through grade 12 (DataQuest). During the same period, it reported an unduplicated pupil percentage of 83.63%, which includes students who are English learners, foster youth, or eligible for free or reduced-price meals (CDE). The district also operates Vallejo Charter School, serving 415 students in transitional kindergarten through grade eight (DataQuest), and provides oversight for five additional charter schools: Caliber: ChangeMakers Academy; Griffin Academy High; Mare Island Technology Academy; MIT Griffin Academy Middle; and MIT Academy. Vallejo itself has a proud history as the former home of the Mare Island Naval Shipyard, which served as a submarine facility during World War II. The shipyard officially closed in March 1996, resulting in a significant loss of jobs, residents and local revenue. More than 30 years later, the district continues to experience the lasting impact of this economic shift. In June 2004, the governor signed Senate Bill (SB) 1190 (Chapter 53, Statutes of 2004), placing Vallejo City Unified School District under state receivership and approving an emergency appropriation of $60 million. The district’s fiscal insolvency was driven by leadership turnover, escalating staffing costs, overstaffing, and significant weaknesses in fiscal practices and operations — including inadequate internal controls and a failure to respond to declining enrollment. In August 2024, the district fully repaid the emergency appropriation. It now operates under the oversight of a county-appointed trustee who reports to the county superintendent. The trustee retains stay and rescind authority over governing board decisions that may affect the district’s financial condition and will continue to serve until June 30, 2025. In 2023-24, the district began deficit spending, reducing its unrestricted general fund ending balance by $2,673,735 — or 5.369% — according to the 2023-24 unaudited actuals report. Following the district’s 2024-25 first interim report, the 2023-24 annual independent audit report proposed a net decrease of $1,366,773 to the general fund. This adjustment would further reduce the unrestricted general fund ending balance. The district’s 2024-25 first interim report marked its third consecutive qualified certification. In response, FCMAT conducted a Fiscal Health Risk Analysis to determine the district’s level of risk of insol- vency, using financial data from the first interim report as the basis for the analysis. Fiscal Health Risk Analysis Guidelines FCMAT entered into a study agreement with the Vallejo City Unified School District on March 13, 2025, and a study team visited the district on March 24-26, 2025, to conduct interviews, collect data and review documents. After the fieldwork, the study team conducted virtual interviews on April 8, 2025 and continued to analyze the gathered documents and data. This report summarizes the team’s findings and conclusions from those activities. FCMAT’s reports focus on systems and processes that may need improvement. Those that may be func- tioning well are generally not commented on in FCMAT’s reports. In writing its reports, FCMAT uses the Associated Press Stylebook and its own short internal style guide, which emphasize plain language, capital- ize relatively few terms, and strive for conciseness, clarity and simplicity. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 5 Fiscal Health Risk Analysis Study Team The team was composed of the following members: Andrea Ward, CFE John Von Flue FCMAT Intervention Specialist FCMAT Chief Analyst Cassady Clifton FCMAT Technical Writer Each team member reviewed the draft report to confirm its accuracy and to achieve consensus on the analysis. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 6 Fiscal Health Risk Analysis Fiscal Health Risk Analysis For TK-12 School Districts Dates of fieldwork: March 24-26, 2025 and April 8, 2025 School District: Vallejo City Unified School District Summary Fiscal Health Risk Analysis The Vallejo City Unified School District has experienced a major leadership transition this fiscal year. A new For TK-12 School Districts superintendent began in July 2024, and as of the fieldwork conducted in March, the chief business official Dates of fieldwork: March 24-26, 2025 and April 8, 2025 position that had been vacant since January was in the process of being filled in early April. During this Scthraoonls Ditisiotrinct,: tVhaelle djoi sCtitryi cUtn hifiaeds Srechcoeoilv Deisdtr iactd ditional support and guidance from the county superintendent and a county-appointed trustee to support fiscal recovery and maintain solvency following the district’s accep- Summary tance of an emergency state apportionment in 2004. The Vallejo City Unified School District has experienced a major leadership transition in 2024-25. A new superintendent position began in July 2024, anAds a ss hofo thwen fi einld wFoigrku croen d1u bcteeldo iwn M, tahrceh ,d thiset crhicietf hbuassin eesxsp oeffricieianl pcoesditi odne thcalitn hiandg b eeennr ovallcmanet nsitn cfeo rJ amnuoarrey wthasa inn tahe d peroccaedsse o af bnedin g filled in early April. During this transition, the district has received additional support and guidance from the county superintendent and a county-appointed projects continued enrollment decline. Between the 2014-15 and 2023-24 school years, noncharter school trustee to support fiscal recovery and maintain solvency following the district’s acceptance of an emergency state apportionment in 2004. enrollment decreased by 31%. As shown in Figure 1 below, the district has experienced declining enrollment for more than a decade and projects continued decline. Between the 2014-15 and 2023-24 school years, noncharter school enrollment decreased by 31%. Vallejo City Unified School District Historical and Projected Enrollment, 2014-15 — 2028-29 Vallejo City Unified School District Historical and Projected Enrollment, 2014-15 — 2028-29 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2014-15 2015-16 2016-17 2017-18 2018-19 2019-202020-212021-222022-232023-242024-252025-262026-272027-282028-29 Figure 1. A line graph showing the district’s historical and projected enrollment from 2014-15 — 2028-29. Source: Adapted from ‘Enrollment Multi-Year Summary by Grade” (DataQuest). Note: Projections for fiscal years 2024-25 through 2028-29 are based on data from the district’s 2024-25 first interim report. In 2023-24, the district incurred a $2.7 million unrestricted general fund deficit. According to the 2024-25 first interim report, district leadership projects this trend will continue, with projected unrestricted general fund operating deficits of $20.3 million in 2024-25, $13.1 million in 2025-26, and $6.1 million in 2026-27. Further, the financial impact of the 2024-25 collective bargaining agreements have not yet been incorpo- rated into these projections. Based on the 2024-25 first interim report, Figure 2 on the following page shows the projected impact on the unrestricted general fund ending balance. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 7 tnemllornE Number of Students Fiscal Year Figure 1. A line graph showing the district’s historical and projected enrollment from 2014-15 — 2028-29. SSoouurrccee:: Adapted from ‘Enrollment Multi-Year Summary by Grade” (DataQuest). NNoottee:: Projections for fiscal years 2024-25 through 2028-29 are based on data from the district’s 2024-25 first interim report. In 2023-24, the district incurred a $2.7 million unrestricted general fund deficit. According to the 2024-25 first interim financial report, district leadership projects this trend will continue, with projected unrestricted general fund operating deficits of $20.3 million in 2024-25, $13.1 million in 2025-26, and $6.1 million in 2026-27. Further, the financial impact of the 2024-25 collective bargaining agreements have not yet been incorporated into these projections. Fiscal Health Risk Analysis Based on the 2024-25 first interim report, adjusted to incorporate findings from the 2023-24 independent audit report, Figure 2 shows the projected imVpaalclet ojon thCei tuynr eUstnriicfiteedd g eSnecrhalo fuonld Denidsitnrgi cbatl aHncise.t orical and Projected Unrestricted General Fund Ending VBalaleljaon Ccitey, U 2n0if2ie2d- S2c3h o—ol 2Di0s2tr6ic-t2 A7udited and Projected Unrestricted General Fund Ending Balance, 2022-23 — 2026-27 $60 $50 $40 $30 $20 $10 $0 2022-23 2023-24 2024-25 2025-26 2026-27 Figure 2. A line graph showing the district’s historical and projected general fund unrestricted ending fund balance from 2022-23 — 2026-27. Figure 2. A line graph showing the district’s audited and projected general fund unrestricted ending fund balance from 2022-23 — 2026-27. Sources: Adapted from the district’s 2023-24 unaudited actuals and 2024-25 first interim report. SSoouurrccee:: Adapted from the district’s 2024-25 first interim report. Even after transferring $10 million from Special Reserve for Other than Capital Outlay Fund 17, district leadership acknowledges the need to reduce an additional $3.2 million in unidentified costs in the 2026-27 fiscal year. Leadership also noted the need to identify and implement further budget reductions beginning in the 2025-26 school year. Although outside the scope of this engagement, district leadership shared during interviews that the dis- trict began taking difficult but necessary actions after the first interim reporting period to begin addressing the ongoing deficit spending. FCMAT’s analysis for this FHRA determined that the district’s score from the 20 numbered sections is 36.3%. District Fiscal Solvency Risk Level: High Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 8 snoilliM UnrestrictedGeneral Fund Ending Balance Fiscal Year Fiscal Health Risk Analysis About the Analysis The Fiscal Crisis and Management Assistance Team (FCMAT) developed the Fiscal Health Risk Analysis (FHRA) to help evaluate a school district’s fiscal health and risk of insolvency in the current and two subse- quent fiscal years. The FHRA consists of 20 sections, each including specific questions related to essential functions and processes. These sections and questions are based on FCMAT’s extensive work since the inception of Assembly Bill 1200 in 1991 and represent common indicators of fiscal risk or potential insolvency observed in school districts that have neared insolvency and required external assistance. Each analysis section affects fiscal stability, and neglecting any of these areas will ultimately lead to the district’s fiscal failure. The analysis aims to determine the district’s level of risk at the time of evaluation. A higher number of “No” responses in the analysis indicates an increased risk of insolvency or other fiscal issues for the district. Not all sections or questions carry equal weight; some areas pose a higher risk and thus have a greater impact on the district’s fiscal stability. To help the district, narratives are provided for each “No” response, explaining the reasoning behind the response and outlining the actions needed to achieve a “Yes” in the future. Identifying issues early is the key to maintaining fiscal health. Diligent planning allows school districts to better understand their financial objectives and implement strategies that sustain fiscal efficiency and long- term solvency. School districts should consider completing the FHRA annually to assess their fiscal health and track their progress. Areas of High Risk The following sections on this page and the next two pages repeat certain questions and answers found in the “Fiscal Health Risk Analysis Questions” section later in this report. These sections identify conditions that create a significant risk of fiscal insolvency. A “No” response to any of these questions will supersede all other scoring and elevate the district’s overall risk level. Budget and Fiscal Status: Is district currently without the following? Yes No Disapproved budget ✓ ☐ Negative interim report certification ✓ ☐ Three consecutive qualified interim report certifications ☐ ✓ Downgrade of an interim certification by the county superintendent ✓ ☐ “Lack of going concern” designation ✓ ☐ Material Weakness Questions Yes No N/A 2 5 Has the district’s budget been approved unconditionally by September 15th by the county superintendent of schools in the current and two prior fiscal years ☐ ✓ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 9 Fiscal Health Risk Analysis 3 4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs in accordance with EC 42142? ☐ ✓ ☐ 3 6 Has the district addressed any deficiencies the county superintendent of schools has identified in its oversight letters to the district in the most recent and two prior fiscal years? ✓ ☐ ☐ 4 3 Does the district forecast its general fund cash flow for the current and subsequent year and update it as needed to ensure cash flow needs are known? ✓ ☐ ☐ 4 4 If the district’s cash flow forecast shows insufficient cash in its general fund to support its current and projected obligations, does the district have a reasonable plan to meet its cash flow needs for the current and subsequent year? ☐ ☐ ✓ 5 2 Has the district fulfilled, and does it have evidence showing fulfillment of, its oversight responsibilities in accordance with EC 47604 32? ✓ ☐ ☐ 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? ✓ ☐ ☐ 6 3 Does the district accurately quantify the effects of collective bargaining agreements and include complete disclosure documents that show the impact on its budget and multiyear projections? ☐ ✓ ☐ 6 4 Based on the presettlement analysis, did the district identify related costs or savings, and did it identify ongoing revenue sources or expenditure reductions to support the agreement in the current and subsequent years? ☐ ✓ ☐ 7 2 If the district has deficit spending in funds other than the general fund, has it included in its multiyear projection sufficient transfers from the unrestricted general fund to cover any projected negative fund balance? ✓ ☐ ☐ 8 3 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending to ensure fiscal solvency? ☐ ✓ ☐ 10 5 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable factors? ✓ ☐ ☐ 11 2 Does the district have sufficient and available resources to cover all contracted obligations for capital facilities projects? ✓ ☐ ☐ 12 1 Is the district able to maintain the minimum reserve for economic uncertainties in the current year (including Fund 01 and Fund 17) as defined by the State Standards and Criteria for Fiscal Solvency? ✓ ☐ ☐ 12 2 Is the district able to maintain the minimum reserve for economic uncertainties in the two subsequent years? ✓ ☐ ☐ 12 3 If the district is not able to maintain the minimum reserve for economic uncertainties, does the district’s multiyear projection include a board-approved plan to restore the reserve? ☐ ☐ ✓ 19 1 Does the district account for all positions and costs (including substitutes, overtime, stipends, and employer-paid benefits) in position control? ☐ ✓ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 10 Fiscal Health Risk Analysis Score Breakdown by Section Because the score is not calculated by category, category values provided are subject to minor rounding and are provided for information only. 1. Annual Independent Audit Report 0.6% 2. Budget Development and Adoption 3.2% 3. Budget Monitoring and Updates 6.0% 4. Cash Management 0.0% 5. Charter Schools 0.0% 6. Collective Bargaining Agreements 6.2% 7. Contributions and Transfers 2.0% 8. Deficit Spending (Unrestricted General Fund) 3.6% 9. Employee Benefits 1.2% 10. Enrollment and Attendance 3.2% 11. Facilities 0.2% 12. Fund Balance and Reserve for Economic Uncertainty 1.0% 13. General Fund - Current Year 1.6% 14. Information Systems and Data Management 0.0% 15. Internal Controls and Fraud Prevention 2.4% 16. Leadership and Stability 1.0% 17. Multiyear Projections 1.0% 18. Non-Voter-Approved Debt and Risk Management 0.0% 19. Position Control 2.0% 20. Special Education 1.1% Score 36 3% Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 11 Fiscal Health Risk Analysis Fiscal Health Risk Analysis Questions 1. Annual Independent Audit Report Yes No N/A 1 1 Has the district recorded findings from the most recent and prior two years’ audits without negatively affecting its fiscal health? ☐ ✓ ☐ The district’s 2023-24 independent audit report identified the following audit adjustments: • General fund: net reduction of $1,366,733. • Building fund: net reduction of $1,102,340. The 2023-24 independent audit report also identified an estimated general fund reduction of $138,590 due to extrapolated questioned costs in the state transportation program. Additionally, the 2021-22 independent audit report identified several questioned costs, including: • $50,380 related to the grade span adjustment. • $244,030 due to an overstatement of charter school revenue. • $19,466 resulting from ineligible students included in the unduplicated student count. 1 2 Has the audit report for the most recent fiscal year been completed and presented to the board within the statutory timeline per Education Code (EC) 41020? ☐ ✓ ☐ Education Code (EC) 41020 requires that the annual audit for the prior year be filed with the county office of education, the CDE, and the state controller by December 15, and that the governing board review the audit no later than January 31. For 2023-24, the district’s audit was completed on December 12, 2024, but was not presented to the board until February 19, 2025 — after the January 31 board review deadline. The district missed both statutory deadlines for the 2022-23 audit. The audit was dated March 8, 2024, and was not presented to the board until March 20, 2024. Similarly, for 2021-22, the audit was dated February 15, 2023, and was not presented to the board until March 22, 2023, missing both the required filing and review deadlines under EC 41020. 1 3 Were the district’s most recent and prior two audit reports free of findings of material weakness? ☐ ✓ ☐ The 2023-24 independent audit report identified a material weakness in internal control over financial reporting, referencing the adjustments noted in Item 1.1 of this analysis. Similarly, the 2022-23 independent audit report included Finding 2023-001, also classified as a material weakness in internal control over financial reporting. The 2021-22 independent audit report cited Finding 2022-002 as a material weakness in financial reporting as well. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 12 Fiscal Health Risk Analysis 1 4 Has the district corrected all audit findings from the most recent and prior two audits? ☐ ✓ ☐ The district’s 2023-24 independent audit report included repeat findings from the prior year: Finding 2024-001 (internal control over financial reporting) and Finding 2024-002 (attendance reporting) were both cited in the 2022-23 audit. Similarly, in the 2022-23 audit report, Finding 2023-001 was a repeat of 2022-002, and Finding 2023-002 was a repeat of 2022-001. In the 2021-22 audit report, Finding 2022-001 was also a repeat of prior year Finding 2021-002. 2. Budget Development and Adoption Yes No N/A 2 1 Does the district develop and use written budget assumptions and multiyear projections that are reasonable, are aligned with the county superintendent of schools’ instructions, and have been clearly articulated? ☐ ✓ ☐ Based on document review, interviews and inquiries with the county office, FCMAT found that the district’s budget assumptions consistently lack detail and are presented at a high level, making it difficult to evaluate the nature of the changes and assess their reasonableness. 2 2 Does the district use a budget development method other than a prior-year rollover budget and if so, does that method include tasks such as reviewing prior year estimated actuals by major object code and removing one-time revenues and expenses? ✓ ☐ ☐ 2 3 Does the district use position control data for budget development? ✓ ☐ ☐ 2 4 Does the district calculate its Local Control Funding Formula (LCFF) revenue correctly? ✓ ☐ ☐ 2 5 Has the district’s budget been approved unconditionally by September 15th by the county superintendent of schools in the current and two prior fiscal years? ☐ ✓ ☐ The district’s 2023-24 budget was approved on September 28, 2023, following the implementation of required adjustments outlined in a conditional approval letter issued by the county office on August 16, 2023. 2 6 Does the budget development process include input from staff, administrators, the governing board, the community, and the budget advisory committee (if there is one)? ✓ ☐ ☐ 2 7 Does the district budget and expend restricted funds before unrestricted funds? ☐ ✓ ☐ The district is behind in spending several restricted federal funds within the year they were allocated, as shown below in Table 1. Table 1. Allocations and Remaining Balances for Selected Federal Programs, 2023–24 — 2024–25 2024-25 2023-24 2023-24 Allocation Federal Program Allocation Remaining Balance & Remaining Balance Title II, Part A $606,860 $290,689 $611,851 Title III, English Learner $376,088 $169,862 $354,020 Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 13 Fiscal Health Risk Analysis 2024-25 2023-24 2023-24 Allocation Federal Program Allocation Remaining Balance & Remaining Balance Title IV, Part A $335,376 $309,178 $371,158 Total $1,318,324 $769,729 $1,337,029 Sources: Adapted from “Title II, Part A, Supporting Effective Instruction, Fiscal Year 2023-24” (CDE), “Title II, Part A, Supporting Effective Instruction, Fiscal Year 2024-25” (CDE), “Title III, Part A, English Language Acquisition, Language Enhancement, and Academic Achievement for English Learner Students, Fiscal Year 2023-24” (CDE), “Title III, Part A, English Language Acquisition, Language Enhancement, and Academic Achievement for English Learner Students, Fiscal Year 2024-25” (CDE), “Title IV, Part A, Student Support and Academic Enrichment, Fiscal Year 2023-24” (CDE), and “Title IV, Part A, Student Support and Academic Enrichment, Fiscal Year 2024-25” (CDE). Additionally, in 2024-25, the district forfeited a total of $144,913 in 2022-23 Title III (CDE) and Title IV (CDE) federal funding. 2 8 Have the district’s Local Control and Accountability Plan (LCAP) and budget been adopted within the statutory timelines established by EC 42103 and filed with the county superintendent of schools no later than five days after adoption or by July 1, whichever occurs first, for the current and prior fiscal year? ✓ ☐ ☐ 2 9 Has the district refrained from including carryover funds in its adopted budget? ☐ ✓ ☐ The district’s 2024-25 adopted budget includes one-time carryover funds, primarily from Elementary and Secondary School Emergency Relief (ESSER) allocations. 2 10 Other than objects in the 5700s and 7300s, does the district avoid using negative expense or contra expenditure accounts in its budget? ✓ ☐ ☐ 2 11 Does the district have and follow a documented standard procedure for evaluating both the proposed acceptance of grants and other restricted funds and the potential multiyear impact on the district’s unrestricted general fund? ✓ ☐ ☐ 2 12 Does the district adhere to a budget calendar that includes statutory due dates, major budget development tasks and deadlines, and the staff members and departments responsible for completing them? ✓ ☐ ☐ 3. Budget Monitoring and Updates Yes No N/A 3 1 Are actual revenues and expenses consistent with the most current budget? ☐ ✓ ☐ The district’s 2024-25 first interim budget did not account for several significant costs, including special education contracts and services, employee compensation settlements, charter school funding, and other known obligations. 3 2 Are budget revisions posted in the financial system at each interim reporting period, at a minimum? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 14 Fiscal Health Risk Analysis 3 3 Are clearly written and articulated budget assumptions that support budget revisions communicated to the board at each interim reporting period, at a minimum? ☐ ✓ ☐ A review of the district’s 2024-25 first interim presentation found that budget assumptions and changes are identified by major object code, include only general information, and lack clear, detailed explanations for the underlying changes. 3 4 Following board approval of collective bargaining agreements, does the district make necessary budget revisions in the financial system to reflect settlement costs in accordance with EC 42142? ☐ ✓ ☐ Education Code 42142 requires school districts to make necessary budget revisions in their financial systems within 45 days of adopting a collective bargaining agreement and to reflect those changes in any applicable interim reports or multiyear fiscal projections. The district’s board minutes show that two collective bargaining agreements were approved — one with the Vallejo Education Association on May 8, 2024, and one with the California Schools Employee Association (CSEA) on August 21, 2024. Both agreements included a one-time $5,000 stipend to be paid in September 2024. Although the payments were made as scheduled, the required budget revisions were not entered into the financial system or reflected in the 2024-25 first interim report. According to the county office, the total cost of the stipends exceeds $5.3 million in salaries. 3 5 Do the district’s responses fully explain the variances identified in the SACS Criteria and Standards Review form? ☐ ✓ ☐ In its review of the district’s 2024-25 first interim report, FCMAT identified instances in the criteria and standards where required explanations for variances were insufficient or missing: • Standard S5B, 1b – Status of the District’s Projected Contributions, Transfers, and Capital Projects: The narrative does not adequately explain a $6.3 million change in 2024-25 and a $2.8 million change in 2026-27. • Standard S5B, 1c – Status of the District’s Projected Contributions, Transfers, and Capital Projects: The narrative does not adequately explain the $6.3 million change in 2024-25. 3 6 Has the district addressed any deficiencies the county superintendent of schools has identified in its oversight letters to the district in the most recent and two prior fiscal years? ✓ ☐ ☐ 3 7 Does the district prohibit processing of requisitions or purchase orders when the budget is insufficient to support the expenditure? ✓ ☐ ☐ 3 8 Does the district encumber funds for salaries and benefits and adjust those encumbrances as needed? ☐ ✓ ☐ The district budgets for employee compensation but does not encumber those funds in its financial system. 3 9 For the most recent and two prior fiscal years, have the district’s interim financial reports and unaudited actuals been adopted and filed with the county superintendent of schools within the timelines established in Education Code? ☐ ✓ ☐ According to county office records, the following reports were not filed by their respective deadlines: • 2022-23 Unaudited Actuals: due September 15, 2023; adopted September 20, 2023. • 2023-24 Unaudited Actuals: due September 15, 2024; adopted September 18, 2024. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 15 Fiscal Health Risk Analysis 4. Cash Management Yes No N/A 4 1 Are accounts held by the county treasurer reconciled with the district’s and county office of education’s (COE) reports monthly? ✓ ☐ ☐ 4 2 Does the district reconcile all bank (cash and cash equivalent) accounts with each statement in a timely manner? ✓ ☐ ☐ 4 3 Does the district forecast its general fund cash flow for the current and subsequent year and update it as needed to ensure cash flow needs are known? ✓ ☐ ☐ 4 4 If the district’s cash flow forecast shows insufficient cash in its general fund to support its current and projected obligations, does the district have a reasonable plan to meet its cash flow needs for the current and subsequent year? ☐ ☐ ✓ 4 5 Does the district have sufficient cash resources in its other funds to support its current and projected obligations in those funds? ✓ ☐ ☐ 4 6 If the district uses interfund borrowing, is it complying with EC 42603? ☐ ☐ ✓ 4 7 If the district is managing cash in any fund(s) through external borrowing, does the district’s cash flow projection include repayment based on the terms of the loan agreement? ✓ ☐ ☐ 5. Charter Schools Yes No N/A 5 1 Does the district have a board policy, memorandum of understanding (MOU), or other written document(s) regarding charter oversight? ✓ ☐ ☐ 5 2 Has the district fulfilled, and does it have evidence showing fulfillment of, its oversight responsibilities in accordance with EC 47604 32? ✓ ☐ ☐ 5 3 Are all charters authorized by the district going concerns and not in fiscal distress? ✓ ☐ ☐ 5 4 Has the district identified specific employees in its various departments (e g , human resources, business, instructional, and others) to be responsible for oversight of all approved charter schools? ✓ ☐ ☐ 5 5 Does the district monitor charter school audits for timeliness, completeness, and exceptions? ✓ ☐ ☐ 6. Collective Bargaining Agreements Yes No N/A 6 1 Has the district settled with all its bargaining units for the past two fiscal years? ✓ ☐ ☐ 6 2 Has the district settled with all its bargaining units for the current year? ☐ ✓ ☐ Interviews indicated that while the primary terms of the agreements with the classified and certificated bargaining units have settled, some remaining negotiation items are still under discussion with the teachers’ group. Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 16 Fiscal Health Risk Analysis 6 3 Does the district accurately quantify the effects of collective bargaining agreements and include complete disclosure documents that show the impact on its budget and multiyear projections? ☐ ✓ ☐ Public disclosures were not available for all agreements and memorandums of understanding. Some agreements that included range increases or changes to working conditions for specific members or classifications — despite involving a cost — were not disclosed as required. Additionally, a one-time payment for 2024-25 was disclosed as being funded with restricted funds; however, upon implementation, those restricted funds were no longer available, and unrestricted funds were used instead. 6 4 Based on the presettlement analysis, did the district identify related costs or savings, and did it identify ongoing revenue sources or expenditure reductions to support the agreement in the current and subsequent years? ☐ ✓ ☐ Presettlement analysis and the public disclosure for the 2023-24 agreement with the Vallejo Education Association, presented at the May 8, 2024 board meeting, indicated that the negotiated increases would cause the district to fall below its minimum reserve requirement for economic uncertainties in 2025-26 without additional, yet-to- be approved budget reductions. The one-time payments for 2024-25 were initially disclosed as being funded with restricted funds; however, upon implementation, those restricted funds were no longer available, and unrestricted funds were used instead. 6 5 In the current and prior two fiscal years, has the total cost of the district’s bargaining agreement settlements, including step-and-column increases, been at or under the funded cost-of-living adjustment (COLA)? ☐ ✓ ☐ The district settled with its bargaining units for ongoing salary increases above the COLA in 2022-23. Combined one-time and ongoing salary costs resulted in total compensation increases that exceeded COLA in both 2022-23 and 2023-24. Additionally, the classified unit received both one-time and ongoing salary increases above the 2024-25 COLA. Table 2 summarizes the district’s negotiated compensation increases compared to the applicable COLA for each year. Table 2. Cost of Vallejo City Unified School District’s Collective Bargaining Agreement Settlements versus COLA, 2022-23 — 2024-25 Certificated Classified Certificated One-time Classified One-time Ongoing & Ongoing Ongoing & Ongoing Fiscal Year COLA Salary Costs Salary Costs Salary Costs Salary Costs 2022-23 2.70% 9.10% 16.38% 8.00% 19.76% 2023-24 8.22% 5.50% 10.33% 5.60% 13.58% 2024-25 1.07% 0.72% 0.65% 0.18% 6.10% Sources: Adapted from “LCFF COLA” (CDE) and the district’s public disclosures of proposed collective bargaining agreements. 6 6 If settlements have not been reached in the past two years, has the district identified resources to cover the costs of the district’s proposal(s)? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 17 Fiscal Health Risk Analysis 6 7 Did the district comply with public disclosure requirements under Government Codes 3540 2 and 3547 5, and EC 42142? ☐ ✓ ☐ Over the past several years, the district has entered into multiple written agreements with its bargaining groups. However, not all associated public disclosures were available on the district’s board agenda website. Of the disclosures that were available, most were not signed by the superintendent and the CBO as required before presentation to the board. 6 8 Did the superintendent and CBO certify the public disclosure of collective bargaining agreement before board approval? ☐ ✓ ☐ The public disclosures included in the online board agendas were not signed by the superintendent nor the CBO. 6 9 Is the governing board’s action consistent with the superintendent’s and CBO’s certification? ☐ ✓ ☐ The public disclosure certifications were not signed at the time they were presented to the board. 7. Contributions and Transfers Yes No N/A 7 1 Does the district have an active, board-approved plan to eliminate, reduce or control any contributions/transfers from its unrestricted general fund to other restricted programs and funds? ☐ ✓ ☐ The district lacks an active, board-approved plan to eliminate, reduce or control contributions and transfers from the unrestricted general fund to restricted programs. According to the 2024-25 first interim report, the district has budgeted $31,326,489 in unrestricted contributions as follows: • Special education: $23,808,335. • Navy Junior Reserve Officer Training Corps: $172,291. • Routine restricted maintenance: $6,891,319. • Title II, Part A: $1,609. • California Community Schools Partnership Program: $128,228. • Classified School Employee Summer Assistance Program: $12,977. • Teacher Residency Capacity Grant: $225,000. • Other local revenue programs: $86,400. 7 2 If the district has deficit spending in funds other than the general fund, has it included in its multiyear projection sufficient transfers from the unrestricted general fund to cover any projected negative fund balance? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 18 Fiscal Health Risk Analysis 7 3 If any contributions or transfers were required for restricted programs and/or other funds in either of the two prior fiscal years, and there is a need in the current year, did the district budget for them at reasonable levels? ☐ ✓ ☐ A comparison of the unrestricted contributions projected in the 2024-25 first interim report with those in the 2022-23 and 2023-24 unaudited actuals reports shows a notable decrease in the district’s contribution to special education programs. This reduction is not accompanied by a documented plan or other explanation: • 2022-23 unaudited actual special education contribution: $25,047,061. • 2023-24 unaudited actual special education contribution: $34,138,827. • 2024-25 first interim special education contribution: $23,808,335. 8. Deficit Spending (Unrestricted General Fund) Yes No N/A 8 1 Is the district avoiding deficit spending in the current fiscal year? ☐ ✓ ☐ As of the 2024-25 first interim report, the district projects deficit spending of $20,323,296 for 2024-25 — an increase of $14,936,997 from the $5,386,299 deficit estimated in the 2024-25 adopted budget report. 8 2 Is the district projected to avoid deficit spending in both of the two subsequent fiscal years? ☐ ✓ ☐ As of the 2024-25 first interim report, the district projects deficit spending of $13,149,931 in 2025-26 and $6,117,284 in 2026-27. 8 3 If the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce and/or eliminate deficit spending to ensure fiscal solvency? ☐ ✓ ☐ On December 11, 2024, the board adopted Resolution No. 5009 as a supplement to the district’s 2024-25 first interim report. The resolution requires the district to submit a detailed budget reduction plan, including a timeline for implementation in the 2025- 26 fiscal year, by the 2024-25 second interim report. 8 4 Has the district decreased deficit spending over the past two fiscal years and is there evidence of this in its unaudited actuals reports? ☐ ✓ ☐ According to its 2022-23 and 2023-24 unaudited actuals reports, the district’s deficit spending has increased over the past two fiscal years — from a balanced budget in 2022-23 to a deficit of $2,673,735.66 in 2023-24. 9. Employee Benefits Yes No N/A 9 1 Has the district completed an actuarial valuation in accordance with Governmental Accounting Standards Board requirements to determine its unfunded liability for other post-employment benefits (OPEB)? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 19 Fiscal Health Risk Analysis 9 2 Does the district have a plan to fund its OPEB liabilities for the current and two subsequent years such that the total of annual required service payments (whether legally or contractually required, or locally defined such as pay-as-you-go premiums, trust agreement obligations or a board adopted commitment) are no greater than 2% of the district’s unrestricted general fund revenues? ✓ ☐ ☐ 9 3 Within the last five years, has the district conducted a verification and determination of eligibility for benefits for all active and retired employees and dependents? ☐ ✓ ☐ Although interviews indicated that a beneficiary eligibility review was conducted several years ago, no documentation was provided to confirm that the review took place. 9 4 Does the district track, reconcile and report employees’ compensated leave balances? ✓ ☐ ☐ 9 5 Has the district followed a policy or collectively bargained agreement to limit accrued vacation balances? ☐ ✓ ☐ According to the district’s contract with the CSEA, vacation leave accrual is limited to 50 days for employees with 15 or more years of service. The maximum allowable balance in days is 75 days — 50 days carried over plus 25 days earned annually — which equates to 600 hours. However, the district’s leave balance report shows nine staff with balances exceeding 600 hours, including two with more than 1,400 hours. Interviews confirmed that the district has not consistently enforced the accrual limits. 10. Enrollment and Attendance Yes No N/A 10 1 Has the district’s enrollment been increasing or remained stable for the current and two prior years? ☐ ✓ ☐ As shown in Figure 3 below, the district’s enrollment has declined over several years and, according to district projections, is expected to continue decreasing into the foreseeable future. Vallejo City Unified School District Historical and Projected Enrollment, 2019-20 — 2028-29 12,000 10,000 8,000 6,000 4,000 2,000 0 2019-20 2020-21 2021-22 2022-23 2023-24 2024-252025-26 2026-27 2027-28 2028-29 Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 20 Figure 3. A line graph showing the district’s historical and projected enrollment from 2019-20 through 2028-29. SSoouurrccee:: Adapted from ‘Enrollment Multi-Year Summary by Grade” (Dataquest). NNoottee:: Projections for 2024-25 – 2028-29 are based on the district’s 2024-25 first interim report. 10.2 Does the district monitor and analyze enrollment and average daily attendance (ADA) data at least monthly through the second attendance reporting period (P-2)? ☐ ✓ ☐ The district could not provide evidence that it monitors and analyzes enrollment and ADA on at least a monthly basis through the P-2 reporting period. 10.3 Does the district track historical enrollment and ADA data to project future trends? ✓ ☐ ☐ 10.4 Do schools maintain an accurate record of daily enrollment and attendance that is reconciled monthly at the school and district levels? □ ✓ ☐ The district’s annual independent audits for fiscal years 2022-23 and 2023-24 included findings related to inaccurate reporting of “P-2” and “Annual” attendance reports. According to the audits, these discrepancies resulted from data entry errors and deficiencies in internal controls. 10.5 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable factors? ✓ ☐ ☐ tnemllornE Number of Students Fiscal Year Fiscal Health Risk Analysis Figure 3. A line graph showing the district’s historical and projected enrollment from 2019-20 through 2028-29. Sources: Adapted from ‘Enrollment Multi-Year Summary by Grade” (DataQuest). Note: Projections for 2024-25 – 2028-29 are based on the district’s 2024-25 first interim report. 10 2 Does the district monitor and analyze enrollment and average daily attendance (ADA) data at least monthly through the second attendance reporting period (P-2)? ☐ ✓ ☐ The district could not provide evidence that it monitors and analyzes enrollment and ADA on at least a monthly basis through the P-2 reporting period. 10 3 Does the district track historical enrollment and ADA data to project future trends? ✓ ☐ ☐ 10 4 Do schools maintain an accurate record of daily enrollment and attendance that is reconciled monthly at the school and district levels? ☐ ✓ ☐ The district’s annual independent audit reports for fiscal years 2022-23 and 2023-24 included findings related to inaccurate reporting of “P-2” and “Annual” attendance reports. According to the audits, these discrepancies resulted from data entry errors and deficiencies in internal controls. 10 5 Are the district’s enrollment projections and assumptions based on historical data, industry-standard methods, and other reasonable factors? ✓ ☐ ☐ 10 6 Has the district planned for enrollment losses to any charter schools? ✓ ☐ ☐ 10 7 Do all applicable schools and departments review and verify their respective California Longitudinal Pupil Achievement Data System (CALPADS) data and correct it as needed before the report submission deadlines? ✓ ☐ ☐ 10 8 Has the district certified its CALPADS data (most recent Fall 1, Fall 2, and end-of-year reports) by the required deadlines? ✓ ☐ ☐ 10 9 Does the district follow established board policy to limit outgoing interdistrict transfers and ensure that only students who meet the required qualifications are approved? ☐ ✓ ☐ The district is in the process of revising its Administrative Regulation 5117: Interdistrict Attendance Agreements and Permits to establish more rigorous criteria for approving outgoing interdistrict transfers. According to interviews, the district has historically not restricted these transfers. Additionally, the district did not provide data on the number of outgoing students it has approved. 10 10 Does the district adhere to the average TK-3 class enrollment limits at each school, the adult-to-student ratio for each TK class, and the credentialing requirements for teachers assigned to TK classes as defined in the Education Code? ✓ ☐ ☐ 11. Facilities Yes No N/A 11 1 If the district participates in the state’s School Facility Program, has it made the required contribution to its Routine Restricted Maintenance Account? ✓ ☐ ☐ 11 2 Does the district have sufficient and available resources to cover all contracted obligations for capital facilities projects? ✓ ☐ ☐ 11 3 Does the district properly track and account for facility-related projects? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 21 Fiscal Health Risk Analysis 11 4 Does the district use its facilities fully (districtwide) in accordance with the Office of Public School Construction’s loading standards? ☐ ✓ ☐ The district has acknowledged that it is underutilizing its facilities and is actively working to consolidate and close sites to better align capacity with current needs. A calculation completed by the district in October 2024 found that, with a total capacity of 21,120 and an enrollment of 9,679, the district has 11,441 excess seats — resulting in a facility utilization rate of just 45.82%. 11 5 Does the district include facility needs (maintenance, repair, and operating requirements) when adopting a budget? ✓ ☐ ☐ 11 6 Has the district met the facilities inspection requirements of the Williams Act and resolved any outstanding issues? ✓ ☐ ☐ 11 7 If the district passed a Proposition 39 general obligation bond, has it met the requirements for audit, reporting, and a citizens’ bond oversight committee? ☐ ☐ ✓ 11 8 Does the district have a board-approved long-range facilities master plan completed within the last five years that reflects its current and projected facility needs? ☐ ✓ ☐ The district’s facilities master plan is a comprehensive document that addresses all district sites and outlines current and future facility and educational program needs totaling over $728 million. Last revised in 2019, the plan is due for review and potential updates to ensure it accurately reflects current conditions, priorities and costs. 12. Fund Balance and Reserve for Economic Uncertainties Yes No N/A 12 1 Is the district able to maintain the minimum reserve for economic uncertainties in the current year (including Fund 01 and Fund 17) as defined by the State Standards and Criteria for Fiscal Solvency? ✓ ☐ ☐ 12 2 Is the district able to maintain the minimum reserve for economic uncertainties in the two subsequent years? ✓ ☐ ☐ 12 3 If the district is not able to maintain the minimum reserve for economic uncertainties, does the district’s multiyear projection include a board-approved plan to restore the reserve? ☐ ☐ ✓ 12 4 Is the district’s projected unrestricted fund balance stable or increasing in the two subsequent fiscal years without unsubstantiated revenue increases or expenditure reductions? ☐ ✓ ☐ According to its 2024-25 first interim report, the district projects a declining unrestricted ending fund balance of $13,651,082 in 2025-26 and $7,533,798 in 2026-27. 12 5 If the district has unfunded or contingent liabilities or one-time costs other than post-employment benefits, does the unrestricted general fund balance include sufficient assigned or committed reserves above the recommended reserve level to cover these costs? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 22 Fiscal Health Risk Analysis 13. General Fund – Current Year Yes No N/A 13 1 Does the district ensure that one-time revenues do not pay for ongoing expenditures? ☐ ✓ ☐ The district’s 2024-25 first interim report projects the use of one-time funding sources to offset a projected ongoing structural deficit, including: • $6.5 million in 2025-26 from the one-time sale of surplus property (local revenue). • A $10 million transfer in 2026-27 from one-time funds in Special Reserve for Other than Capital Outlay Fund 17. 13 2 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below the prior year statewide average? ✓ ☐ ☐ 13 3 Is the percentage of the district’s general fund unrestricted expenditure budget that is allocated to salaries and benefits at or below that of the prior two years? ✓ ☐ ☐ 13 4 If the district has received any uniform complaints or legal challenges regarding local use of supplemental and concentration grant funding in the current or prior two years, is the district addressing the complaint(s)? ☐ ☐ ✓ 13 5 For positions supported with one-time or restricted funding, does the district either ensure that these funds are sufficient to pay for these staff or have a plan to pay for the positions with unrestricted funds? ✓ ☐ ☐ 13 6 Is the district using its restricted dollars fully by expending allocations for restricted programs within the required time? ☐ ✓ ☐ The district did not fully expend and report its 2022-23 allocations for the following federal programs by September 30, 2024: • Title III , English learner: $57,977 (CDE). • Title IV : $86,936 (CDE). 13 7 Does the district account for all program costs, including the maximum allowable indirect costs, for each restricted resource and other funds? ✓ ☐ ☐ 13 8 Are all balance sheet accounts in the general ledger reconciled at least at each interim reporting period and at year-end close? ☐ ✓ ☐ A consulting accounting firm issued a fiscal systems review report dated November 1, 2023 , which found that district balance sheet accounts had not been reconciled for multiple years. The firm’s analysis identified 70 accounts requiring adjustments, with individual correction ranging from under $100 to several million dollars. A follow-up report dated January 17, 2025, noted a significant improvement. However, 12 district accounts remain unreconciled, with a combined net correction of $53,410.18. 14. Information Systems and Data Management Yes No N/A 14 1 Does the district use an integrated financial and human resources system? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 23 Fiscal Health Risk Analysis 14 2 Does the district use the system(s) to provide key financial and related data, including personnel information, to help the district make informed decisions? ✓ ☐ ☐ 14 3 Has the district accurately identified students who are eligible for free or reduced-price meals, English learners, and foster youth, in accordance with the LCFF and its LCAP? ✓ ☐ ☐ 14 4 Is the district using the same financial system as its COE? ✓ ☐ ☐ 14 5 If the district is using a separate financial system from its COE, is there an automated interface that allows data to be sent and received by both the district’s and COE’s financial systems? ☐ ☐ ✓ 14 6 If the district is using a separate financial system from its COE, has the district provided the COE with direct access so the COE can provide oversight, review and assistance? ☐ ☐ ✓ 15. Internal Controls and Fraud Prevention Yes No N/A 15 1 Does the district have controls that limit access to its financial system and include multiple levels of authorization? ✓ ☐ ☐ 15 2 Are the district’s financial system’s access and authorization controls reviewed and updated upon employment actions (e g , resignations, terminations, promotions, or demotions) and at least annually? ☐ ✓ ☐ The district does not have a defined process to review security access to its financial system on at least an annual basis. Staff reported having access to system functions beyond those required for their assigned duties. 15 3 Does the district ensure that duties in the following areas are segregated, and that they are supervised and monitored?: • Accounts payable (AP) ✓ ☐ ☐ • Accounts receivable (AR) ✓ ☐ ☐ • Purchasing and contracts ✓ ☐ ☐ • Payroll ✓ ☐ ☐ • Human resources (i e , duties related to position control and payroll processes) ✓ ☐ ☐ 15 4 Are beginning balances for the new fiscal year posted and reconciled with the ending balances for each fund from the prior fiscal year? ✓ ☐ ☐ 15 5 Does the district review and work to clear prior year accruals throughout the year? ✓ ☐ ☐ 15 6 Has the district reconciled and closed the general ledger (books) within the time prescribed by the county superintendent of schools? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 24 Fiscal Health Risk Analysis 15 7 Does the district have processes and procedures to discourage and detect fraud? ☐ ✓ ☐ Although the district has adopted Board Policy 3400, Management of District Assets/ Accounts, and Administrative Regulation 3400, as well as Board Policy 3405, Fraud Awareness, Identification, and Prevention, and Administrative Regulation 3405, the related processes and procedures are not actively implemented. For example, the reporting process references a Fraud Incident Report form available on the district’s website that can be submitted anonymously. However, FCMAT was unable to locate the form online, and staff were unfamiliar with the process for anonymously reporting suspected fraud. 15 8 Does the district have a process for collecting reports of possible fraud (such as an anonymous fraud reporting hotline) and for following up on such reports? ☐ ✓ ☐ The district does not have a clearly established process for collecting reports of possible fraud or for guiding appropriate follow-up. Although both Board Policy and Administrative Regulation 3405 outline staff responsibilities and procedures for responding to suspected fraud, staff were unaware of both the policy and their roles in the process. 15 9 Does the district have an internal audit process? ☐ ✓ ☐ The district has two positions associated with the internal audit process: a director of audit and compliance, and an accounting analyst. At the time of fieldwork, the director position was vacant, and the responsibilities typically associated with an internal audit process, such as independently evaluating operations, internal controls and risk management practices, were not being performed. Additionally, the accounting analyst was not assigned or performing any duties related to the internal audit process. 16. Leadership and Stability Yes No N/A 16 1 Does the district have a chief business official who has been in this position with the district for more than two years? ✓ ☐ ☐ 16 2 Does the district have a superintendent who has been in this position with the district for more than two years? ☐ ✓ ☐ The district’s superintendent started in July 2024. 16 3 Does the superintendent schedule and hold meetings regularly with all members of their administrative cabinet? ✓ ☐ ☐ 16 4 Is training on financial management and budget provided to school and department administrators who are responsible for budget management? ✓ ☐ ☐ 16 5 Does the governing board adopt and revise policies and administrative regulations annually? ✓ ☐ ☐ 16 6 Are newly adopted or revised policies and administrative regulations implemented, communicated, and available to staff? ✓ ☐ ☐ 16 7 Do all board members attend training on the budget and governance at least every two years? ✓ ☐ ☐ 16 8 Is the superintendent’s evaluation performed according to the terms of the contract? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 25 Fiscal Health Risk Analysis 16 9 Is the district avoiding relying on consultants to prepare financial reports (e g SACS) or other primary fiscal activities? ☐ ✓ ☐ At the time of fieldwork, the district did not have a CBO and was relying on a consultant to support business operations, including interim reporting and budget projections. The previous CBO resigned in January, and a new CBO is expected to begin in April 2025. 17. Multiyear Projections Yes No N/A 17 1 Has the district developed multiyear projections that include detailed assumptions aligned with industry standards? ☐ ✓ ☐ Portions of the multiyear projection in the district’s 2024-25 first interim report are aligned with industry standards and clearly communicated. For example, revenue and inflation assumptions are based on county office guidance and clearly explained in the board presentation. However, assumptions in other areas of the multiyear projection lack clarity or supporting detail. For example: • Other adjustments applied to classified salaries are not described in the report or related presentation materials. • Changes in restricted expenditures are broadly attributed to the removal of one- time carryover and expiring restricted programs, without further explanation. 17 2 To help calculate its multiyear projections, did the district prepare an accurate LCFF calculation that includes multiyear considerations? ✓ ☐ ☐ 17 3 Does the district use its most current multiyear projection when making financial decisions? ✓ ☐ ☐ 17 4 If the district uses a broad adjustment category in its multiyear projection (such as line B10, B1d, B2d Other Adjustments, in the SACS Form MYP/MYPI), is there a detailed list of what is included in the adjustment amount and are the adjustments reasonable? ✓ ☐ ☐ 18. Non-Voter-Approved Debt and Risk Management Yes No N/A 18 1 Are the sources of repayment for non-voter-approved debt {such as certificates of participation (COPs), bridge financing, bond anticipation notes (BANs), revenue anticipation notes (RANs) and others} stable, predictable, and other than the unrestricted general fund? ☐ ☐ ✓ 18 2 If the district has issued non-voter-approved debt, has its credit rating remained stable or improved during the current and two prior fiscal years? ☐ ☐ ✓ 18 3 If the district is self-insured, has it completed an actuarial valuation as required and does it have a plan to pay for any unfunded liabilities? ✓ ☐ ☐ 18 4 If the district has non-voter-approved debt (such as COPs, bridge financing, BANs, RANs and others), is the total of annual debt service payments no greater than 2% of the district’s unrestricted general fund revenues? ☐ ☐ ✓ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 26 Fiscal Health Risk Analysis 19. Position Control Yes No N/A 19 1 Does the district account for all positions and costs (including substitutes, overtime, stipends, and employer-paid benefits) in position control? ☐ ✓ ☐ The position control report provided by the district did not include benefits, extra-time or stipends. Further, the report listed some vacant positions that may or may not be filled. Interviews indicated that several long-vacant positions had been removed from position control, even though the district was actively recruiting for at least one of them and had extended a job offer. 19 2 Does the district analyze and adjust staffing based on staffing ratios and enrollment? ☐ ✓ ☐ The district uses a spreadsheet to project staffing needs based on enrollment. For 2024-25, the spreadsheet indicates a need for 372.8 full-time equivalent (FTE) positions, compared to the current staffing level of 377 FTE. 19 3 Does the district reconcile budget, payroll and position control regularly, at least at budget adoption and interim financial reporting periods? ✓ ☐ ☐ 19 4 Does the district identify a budget source for each new position before the position is authorized by the governing board? ✓ ☐ ☐ 19 5 Does the governing board approve all new positions and extra assignments (e g , stipends) before positions are posted? ✓ ☐ ☐ 19 6 Do managers and staff responsible for the district’s human resources, payroll and budget functions meet at least monthly to discuss issues and improve processes? ✓ ☐ ☐ 20. Special Education Yes No N/A 20 1 For special education classrooms and support services, does the district use staffing ratios that align with statutory requirements and industry standards, and are students’ support needs also considered? If so, are those needs documented and evaluated at each budget cycle? ✓ ☐ ☐ 20 2 Does the district access all available funding sources for costs related to special education (e g , state excess cost pool, legal fees, mental health)? ☐ ✓ ☐ The district is undergoing a transition in special education leadership and currently operates as a stand-alone Special Education Local Plan Area. There is no evidence that the district has accessed additional funding sources to support its special education costs. 20 3 Does the district use appropriate tools to help it make informed decisions about whether to add services (e g , special circumstance instructional assistance process and form, transportation decision tree)? ✓ ☐ ☐ Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 27 Fiscal Health Risk Analysis 20 4 Does the district budget and account correctly for all costs related to special education (e g , transportation, due process hearings, indirect costs, nonpublic schools and/or nonpublic agencies)? ☐ ✓ ☐ According to its 2024-25 first interim report, the district significantly underbudgeted for nonpublic agency services. In addition, several other charges that were previously budgeted and expended in prior years are either not included or have been significantly reduced in the 2024-25 budget, raising questions about whether all anticipated costs have been fully accounted for. 20 5 Does the district monitor contributions from the unrestricted general fund and adjust to trends in the special education program? ✓ ☐ ☐ 20 6 Is the district’s rate of identification of students as eligible for special education at or below the countywide and statewide average rates? ☐ ✓ ☐ According to DataQuest, the district’s special education identification rate in 2023-24 was 13.96%, slightly above the countywide rate of 13.95% and the statewide rate of 13.70%. 20 7 Does the district analyze whether it will meet the maintenance of effort requirement at each interim financial reporting period? ✓ ☐ ☐ Risk Score, 20 numbered sections only: 36 3% Key to Risk Score from 20 numbered sections only: High Risk: 40% or more Moderate Risk: 25-39.9% Low Risk: 24.9% and lower District Fiscal Solvency Risk Level, all FHRA factors: High (The existence of any condition from the “Budget and Fiscal Status” section, and/or a material weakness, will supersede the score above because it elevates the district’s risk level.) Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 28 Fiscal Health Risk Analysis Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 29 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 30 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 31 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 32 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 33 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 34 Appendix Appendix A – Study Agreement Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 35 Appendix Appendix A – Study Agreement Michael H. Fine Digitally signed by Michael H. Fine Date: 2025.03.13 17:00:16 -07'00' Fiscal Crisis and Management Assistance Team Vallejo City Unified School District 36