2021−2022 San Joaquin County Grand Jury Working Title 1: Working Title 2 (Case No. xx20) Stockton Unified School

Conclusions 15

• CL1
  Inattention to Non-Voter-Approved Debt and Risk Management • Sources of non-voter-approved debt repayment unstable, unpredictable and from the unrestricted general fund • Downgrade of credit rating • Out-of-date actuarial study without a plan to pay for any unfunded liabilities when self-insured • High levels of non-voter-approved debt (such as COPs, bridge financing, BANS, RANS and others), with total annual debt service payments greater than 2% of the district’s unrestricted general fund revenues
• CL2
  Related Issues of Concern • Failure to produce timely and accurate financial information • Annual Independent Audit Report contains material apportionment or internal control findings • Inadequate, undocumented monitoring and oversight of authorized charter schools • Out-of-date long-range facilities master plan • Special education costs not monitored, with contribution rate above the statewide average contribution rate • Special education staffing ratios, class sizes and caseload sizes do not align with statutory requirements and industry standards • District and the county office of education have different financial systems and lack automated interface Revised 8-14-2019 34 Appendix B: ESSER funds The Elementary and Secondary School Emergency Relief Fund (ESSER) was established as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act in March 2020. CARES provided direct funding to states and districts to address the impact COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. The ESSER Fund is the leading source of funding for public elementary and secondary education under each law. As each succeeding law was enacted, the U.S. Department of Education (ED) modified the acronym ESSER to distinguish each fund from the other. Collectively known as ESSER funds. The Office of Elementary and Secondary Education (https://oese.ed.gov/offices/education- stabilization-fund/elementary-secondary-school-emergency-relief-fund/) clarifies each ESSER phase as: ESSER I On March 27, 2020, Congress set aside approximately $13.2 billion of the $30.75 billion allotted to the Education Stabilization Fund through the Coronavirus Aid Relief, and Economic Security (CARES) Act for the Elementary and Secondary School Emergency Relief Fund (ESSER) Fund. The Department awarded these grants to State educational agencies (SEAs) for the purpose of providing local educational agencies (LEAs), including charter schools that are LEAs, with emergency relief funds to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the Nation. ESSER Fund awards to SEAs are in the same proportion as each State received funds under Part A of Title I of the Elementary and Secondary Education Act of 1965, as amended, in fiscal year 2019. ESSER II The Coronavirus Response and Relief Supplemental Appropriations (CRRSA) Act, 2021, was signed into law on December 27, 2020, and provided an additional $54.3 billion for the Elementary and Secondary School Emergency Relief (ESSER II) Fund. ESSER II Fund awards to SEAs are in the same proportion as each State received funds under Part A of Title I of the Elementary and Secondary Education Act of 1965, as amended, in fiscal year 2020. American Rescue Plan (ARP) ESSER (III) On Thursday, March 11, 2021, the American Rescue Plan (ARP) Act was signed into law. It was an unprecedented $1.9 trillion package of assistance measures, including $122 billion for the ARP Elementary and Secondary School Emergency Relief (ARP ESSER) Fund. Funds are provided to SEAs and LEAs to help safely reopen and sustain the same operation of schools and address the impact of the coronavirus pandemic on the Nation’s students. ARP ESSER Fund awards to SEAs are in the same proportion as each State received funds under Part A of Title I of the Elementary and Secondary Education Act of 1965, as amended, in fiscal year 2020. https://oese.ed.gov/offices/education-stabilization-fund/elementary-secondary-school-emergency-relief-fund/ 35 ESSER funds can be used in a variety of ways as long as the use addresses the impact of COVID-19. While all three funds can be used for things like hiring new staff, avoiding layoffs and implementing strategies that address the public health crisis. There are some additional nuances that were added to the terms for ESSER II and ESSER III. These include: • accelerating learning recovery, • facilitating remote learning, • prepping for reopening, • testing for reopening, • improving air quality in schools, • maintaining health and safety and • building new protocols to meet CDC guidance. 36 Appendix C: Consultant Forms E 3600 BOARD POLICY Adopted: 06/12/07 Page 1 of 2 Business and Noninstructional Operations Consultants CONSULTANT UTILIZATION FORM The following form is to be utilized by all non-instructional Consultants. The form is divided into two sections. Section #1 is to be utilized by the Consultant, and Section #2 by the District designees. Section #1 To provide consultant services to the Stockton Unified School District, all potential noninstructional Consultants must first provide the District’s ____________________Office with the following information. The information may be provided below or attached hereto.
• CL3
  Mismanaged Collective Bargaining Agreements • Failure to consider long-term impact of collective bargaining agreements • Lack of bargaining agreements with all units for several years with no resources identified to cover potential settlements • Presettlement analysis not conducted thoroughly or timely • Settlements above the funded cost of living adjustment (COLA) • Lack of compliance with public disclosure requirements under Government Code Sections 3540.2, 3543.2 and 3547.5 and Education Code Section 42142 • Board approval of collective bargaining agreement is inconsistent with superintendent’s and CBO’s certification
• CL4
  Increasing and/or Unplanned Contributions and Transfers • Insufficient control and monitoring of contributions and transfers • Lack of a board approved plan to eliminate, reduce, or control contributions/transfers • Transfers from the unrestricted general fund not made when needed to cover projected negative fund balances in other funds • Contributions/transfers to restricted programs and/or other funds not budgeted
• CL5
  Continuing Deficit Spending • Deficit spending in the current or two subsequent fiscal years • Not having or implementing a board-approved plan to reduce and/or eliminate deficit spending • Not decreasing deficit spending over the past two fiscal years
• CL6
  Mismanaged Employee Benefits • Actuarial valuation not completed in accordance with Governmental Accounting Standards Board (GASB) requirements to determine the unfunded liability for other post-employment benefits (OPEB) • Lack of a board adopted plan to fund health and welfare retiree benefit liabilities • Nonexistence or noncompliance of a policy or collectively bargained agreement to limit accrued vacation balances • No verification and determination of eligibility for benefits for all active and retired employees and dependents in the last five years • Compensated leave balances not tracked, reconciled and reported
• CL7
  Inattention to Enrollment and Attendance Reporting • Enrollment decreasing and/or unstable • Enrollment and average daily attendance (ADA) data not monitored and analyzed at least monthly through P2 • Consistently inaccurate data reported through CALPADS and other state reporting • Enrollment projections and assumptions not based on historical data, industry-standard methods, and other reasonable considerations 32 • CALPADS data not reviewed and verified by applicable sites and departments and corrected as needed before the report submission deadlines • Unplanned or unmonitored effects of enrollment losses to charter schools • Board policy to limit outgoing interdistrict transfers is nonexistent, or policy is not followed
• CL8
  Decreasing Fund Balance and Reserve for Economic Uncertainty • Failure to accurately estimate the ending fund balance • Failure to maintain the minimum reserve for economic uncertainty • If unable to maintain the minimum reserve for economic uncertainty, a board-approved plan to restore the minimum reserve for economic uncertainty does not exist • Projected unrestricted fund balance not stable or not increasing • Unrestricted fund balance does not include assigned or committed reserves above the recommended reserve level when unfunded or contingent liabilities or one-time costs exist
• CL9
  Ineffective Internal Controls and Fraud Prevention • Lack of controls that limit access to the financial system • Access and authorization controls to the financial system not reviewed and updated upon employment actions (e.g., resignations, terminations, promotions or demotions) and at least annually • Duties in accounts payable, accounts receivable, purchasing, contracts, payroll, human resources, associated student body, and warehouse/receiving not segregated, supervised or monitored • Beginning balances for the new fiscal year not posted and reconciled with the ending balances from the prior fiscal year • Prior year accruals not reviewed and cleared by first interim • Suspense accounts not reconciled regularly • General ledger not reconciled or closed timely • Inadequate processes and procedures in place to discourage and detect fraud
• CL10
  Breakdown in Leadership and Communication • Uninformed decisions made because the system(s) can’t provide key financial and personnel data needed • Instability in the chief business official or superintendent positions (been with the district less than two years) • Lack of regular communication between the superintendent and all members of the administrative cabinet • Timely training on financial management, budget and governance not provided to site and department administrators who are responsible for budget management and decision-making • Board policies and administrative regulations routinely ignored, not adopted, updated, implemented or communicated to staff • Micromanagement by board members • Systems fully or partially controlled by highly influential special interest groups
• CL11
  Lack of Multiyear Planning • Unreasonable and/or unclear multiyear projections that are not aligned with industry standards • Failure to explain trend analysis • LCFF calculation not prepared with multiyear considerations • Financial decisions made without most current multiyear projection in mind • Detailed information not included when “other adjustments” is used with multiyear projections (line B10) 33
• CL12
  Lack of Position Control • Financial and human resources systems not integrated • Accounting for positions and costs is incomplete • Staffing not analyzed or adjusted based on staffing ratios and enrollment • Budget, payroll and position control not reconciled regularly • Budget source not identified for each new position before the position is authorized by the governing board • New positions and extra assignments posted before governing board approval • Staffing ratios for certificated, classified and administrative positions not adopted or followed • Lack of regular meetings between human resources, payroll and budget to discuss issues and improve processes.
• CL13
  Unreliable Budget Development • Budget has been disapproved or conditionally approved by the county office within the last two years • Unreasonable and/or unclear budget assumptions • Reliance on prior-year rollover budget method • Position control data not used • Local Control Funding Formula (LCFF) revenue not calculated correctly • Reliance on carryover funds • One-time sources utilized for ongoing expenditures • Expenditures described in the LCAP not aligned with the budget
• CL14
  Insufficient Budget Monitoring or Updates • Failure to regularly update budget assumptions • Negative or three consecutive qualified interim report certifications • Downgrade of an interim certification by the county superintendent • “Lack of going concern” designation from the county superintendent • Actual revenues and expenditures inconsistent with the most current budget • Budget revisions not posted in the financial system or communicated to the board regularly • Lack of control or monitoring of total compensation as a percentage of total expenses • Failure to regularly reconcile balance sheet accounts in the general ledger • Incomplete responses to criteria and standards variances or deficiencies identified by the county office of education • Requisitions or purchase orders processed when the budget is insufficient 31
• CL15
  Inadequate Cash Management • Failure to reconcile cash accounts monthly • 18-month cash flow not forecast • Lack of short-term plan to address cash flow needs • Noncompliance with Education Code requirements when interfund borrowing is occurring • Failure to set aside repayment funds when external borrowing is occurring • Lack of communication to the board about the district’s cash position (with a clear distinction that cash and fund balance are not the same thing)