Leadership and Management of the Southern Humboldt Joint Unified School District

R1

Recommendations numbered R-7 have been implemented. (Fully implemented and ongoing. Summary is attached.)

R2

Recommendations numbered have not yet been implemented, but will be implemented in the future. (Attach a timeframe for the implementation.)

R8

The Humboldt County Civil Grand Jury recommends that the Humboldt County Office of Education perform an intervention with Southern Humboldt Unified School District in order to assist the District in achieving financial stability, a district-wide positive behavior program, and academic rigor. These efforts are to be ongoing, with implementation starting b the start of the 2020/2021 school year. (F-1,2,3,4,7,8,9,12) Regarding the recommendation on financial stability, it should be noted that the responsibility for the Southern Humboldt Unified School District’s fiscal stability and solvency rests solely with the governing board of the district [E.C. 42120 et seq.]. As noted in our response to F-8 above, it is the county superintendent of school’s responsibility to provide for fiscal oversight of a school district within their county. While the county superintendent of schools may offer a variety of services and assistance to the districts in the county, those are generally done on a cooperative basis and at the request of the district. The Humboldt County Superintendent of Schools office provides such assistance and services on a regular basis. “Performing an intervention with” the district implies a circumstance that is less than voluntary for the district and as such must be done within the parameters set forth in the Education Code. Specific to the responsibility to intervene, if warranted, is E.C. 42127.6 which provides for a two-stage intervention. Stage one is based on proof and review of evidence of fiscal distress using the standards and criteria noted above or a report by FCMAT or an external reviewer. If findings regarding fiscal distress are made, the county superintendent of schools shall investigate the financial condition of the district and determine if the district may be unable to meets its financial obligations for the current or two subsequent years, or should receive a qualified or negative interim report certification. The district’s 2019-20 second interim report was qualified. Provisions also provide for the county superintendent of schools to make similar findings at any time in the fiscal year (other than an interim report). In that event, the county superintendent of schools must recommend remedial action and shall do at least one of the following actions: • Assign a fiscal expert to advise the district on its financial problems. • Conduct a study of the financial and budgetary conditions of the district, including internal controls. • Direct the district to submit a financial projection of all fund and cash balances. • Direct the district to submit a proposal for addressing the fiscal conditions. • Withhold compensation of the members of the district’s governing board and the superintendent for failure to project the required information. • Assign FCMAT. Stage two provides that if after taking the actions in above, the county superintendent of schools determines that the district is will be unable to meet its financial obligations for the current or subsequent year, the county superintendent, in consultation with the state superintendent of public instruction, shall take at least one of the following actions: • Develop and impose a budget revision for the district. • Stay or rescind any action that is determined to be inconsistent with the ability of the district to meet its obligations for the current or subsequent fiscal year. • Assist in developing a financial plan that will enable the district to meet its future obligations; commonly referred to as a Fiscal Stabilization Plan. • Assist in developing a budget for the subsequent fiscal year. • Appoint a Fiscal Adviser to perform any or all of these actions. It should be noted that none of these actions shall abrogate any provision of a collective bargaining agreement. The Humboldt County Superintendent of Schools has determined that there is insufficient evidence to implement stage two interventions. The SHUSD collaborates directly with HCOE on many innovative and comprehensive programs and projects. HCOE will continue to provide universal continuous improvement support for the districts in the form of instructional coaching, leadership development, curriculum review, improvement science and other professional development opportunities. For instance, a 5 month online teaching institute has been made available to SHUSD teachers and administrators to support rigor and engagement with distance learning as well as best practices in pedagogy related to direct instruction. SHUSD continues to be part of the HCOE sponsored North Coast Multi-Tiered System of Support (MTSS) Coalition where support in the three domains of the MTSS Framework of behavioral, academic, and social-emotional development are emphasized. In addition, utilizing Carnegie’s continuous improvement model, HCOE is working to assist the district in building capacity of teacher leadership through the support of dedicated instructional coaching and continued partnership with local educators and colleagues in a supportive countywide network. 7 o\.DT Co ~~ ~ !C~HR~I~S H~AiRT~LiEY~,~E~o~.~D.,~S~u~p~e~ri~nt~e~nd~e~n~t::::::::::;:::;;;;;;;;:::::::;;~;,;;;:~;::::::;~~~~ :*t' ""' * \ ~~ 901 Myrtle Avenue, Eureka, California 95501-1294 Phone: 707/445-7000 FAX: 707/445-7143 www.hcoe.org C''° Ot EO\)c.t- September 13, 2019 Don Boyd, Superintendent Southern Humboldt Unified School District PO Box 650 Miranda, CA 95553 SUBJECT: 2019-2020 BUDGET & LCAP REVIEW PROCESS Dear Don: Thank you for submission of the district's 2019-2020 Adopted Budget and Local Control Accountability Plan. The County Superintendent of Schools is required to review the adopted budget and determine if the budget meets the Criteria and Standards for fiscal stability, allows the district to meet its financial obligations during the current fiscal year and satisfies its multiyear financial obligations. The County Superintendent is also required to approve the Local Control Accountability Plan (LCAP) that has been adopted by the District prior to the approval of the district's adopted budget (Education Code Section 42127(d)(2)). The District's Adopted Budget has been analyzed in the context of the 2019-2020 Adopted State Budget. The budget analysis also included a review of the expenditure sections ofthe LCAP. Based on prior approval of the district's LCAP, the 2019-2020 Adopted Budget of the School District has been reviewed and approved pursuant to the provisions of Education Code Section 42127(a) through (d). The attached review and approval form documents and communicates our observations and/or concerns with regard to your district's budget. The last page provides detailed information under the Description of Recommendations and Technical Corrections section. We recognize the challenges around developing a budget and financial plan that provides for ongoing fiscal stability and advancing the goals and activities contained within your district's LCAP. As the school year continues, the business office staff and I look forward to working with you. Please do not hesitate to call on any of us if we can be of any further service in either the budget development or the budget administration process. Sincerely, ChrisHS,~. \~ ~~ Superintendent of Schools CH:CW:jw Enclosures c: Corey Weber District Board President W: \Administration Share\Budget Review Process\2019-20\Letters\2019-20 budget response districts- So Hum.docx "Committed to Excellence in Leadership and Service" Humboldt County Office of Education REVIEW AND APPROVAL OF FISCAL YEAR 2019-2020 FINAL ADOPTED BUDGET TO THE GOVERNING BOARD: Southern Humboldt Joint Unified School District FROM: Chris N. Hartley, Ed.D., Humboldt County Superintendent of Schools In accordance with the provisions of Education Code (E.C.) Section 42127, we have completed our review of the final adopted budget for your district. A report on that review follows. AN ITEM MARKED WITH AN ASTERISK (*) REQUIRES THE DISTRICT SUPERINTENDENT AND GOVERNING BOARD TO DO THE FOLLOWING BY OCTOBER 8: • Review the comments, recommendations and/or technical corrections at a public meeting of the board, and • Provide awritten response communicating any actions taken and, if required, submit a revised budget. 1. TYPE OF APPROVAL !ZI The adopted budget has been approved. D* The adopted budget has been conditionally approved. Board action and response to HCOE is required before OCTOBER 8. (See Section 8for details). D* The adopted budget has not been approved. (See Section 8for details). 2. STANDARDS AND CRITERIA (E.C. 33127 and 33129) !ZI We accept your school district Criteria and Standards Review as complete and narrative(s) as reasonable. D* We have made recalculations based upon updated information for the prior fiscal year. (See Section 8for details). 3. OTHER INFORMATION (E.C. 42127(c)(2)) We are required to review and consider studies, reports, evaluations or audits that may contain information relative to the fiscal stability or distress of aschool district. You have provided all such information to us and based upon our review: !ZI The information does not indicate other evidence of fiscal distress. D* The information does indicate some evidence of fiscal distress. (See Section 8 for details). 4. RECOMMENDATIONS AND TECHNICAL CORRECTIONS A. Revenue and Expenditures D* The revenue appears to be overstated (see Section 8for details). D* The total expenditures appear to be understated. (See Section 8 for details). D There appears to be astructural deficit in the general fund. D Total available reserves appear adequate to offset this condition. D* Total available reserves do not appear adequate to offset this condition. (See Section 8for details). W:\Administration Share\Budget Review Process\2019-20\Review Fonns\So Hum.doc Humboldt County Office of Education REVIEW AND APPROVALOF FISCAL YEAR2019-2020 FINAL ADOPTED BUDGET School District, B. Average Daily Attendance (ADA): We recommend you budget the funding guaranteed by the state based on prior year ADA. The district ADA upon which this budget is based is 442.40, which funds 17 units of necessary small school (NSS) funding. [g] This represents the state guaranteed level of ADA funding. D With our prior concurrence, this level of ADA is above the state guaranteed level of funding by _ADA (actual ADA should be monitored closely). 0 * This exceeds the state guaranteed level of ADA funding by_ ADA (See Section 8 for details). C. Other Recommendations [g] See Section 8 for details. 0 * See Section 8 for details. D. Technical Corrections 0 * Other technical corrections have been made to your final adopted budget (See Section 8for details). 5. SPECIAL RESERVES We have completed a preliminary review of the ending unrestricted reserves for the prior year based on information available at this time as well as the unrestricted reserves for the budget year and two subsequent years. They: [g] Appear to meet the state required reserves. 0 * Are projected or recalculated to be below the state recommended minimum reserves as of June 30, _ . (See Section 8 for details). 6. CASH BALANCE [g] Appears adequate. 0 * Cash shortage appears possible in one or more months of the budget year. 7. MULTI-YEAR FINANCIAL PLAN (E.C. 42127(c)(2)) We have reviewed your board adopted multi-year budgets and found that they were based uponthe following assumptions: 1s1 Subsequent Fiscal Year 2nc1 Subsequent Fiscal Year Staffino Chanoes: Certificated No FTE Chanoe No FTE Chanoe Classified No FTE Chanoe No FTE Chanoe Enrollment 760 761 ADA 699.81 700.66 Unduolicated % 54.93% 54.95% COLA % 2.86% 2.92% W\Administration Slwe\Budget Review Proc<n\2019-20\Review Forms\So Hum doc Humboldt County Office of Education REVIEW AND APPROVAL OF FISCAL YEAR 2019-2020 FINAL ADOPTED BUDGET School District, 8. DESCRIPTION OF RECOMMENDATIONS AND TECHNICAL CORRECTIONS SECTION DESCRIPTION NUMBER *ITEM REQUIRES SPECIFIC BOARD ACTION 4C Cafeteria We also noted that the Cafeteria Fund projects a deficit of $75,000 representing 29.73% of the total annual revenue generated by the fund. Every effort should be made to mitigate the deficit as quickly as possible so that the impact on the unrestricted resources will be minimized. Facilities We also noted the budget contains expenditures for facility projects funded by bond proceeds. We recommend that the district closely monitor the expenditures to avoid any unintended fiscal impact to district reserves or cash . Cash 6 We are aware that during the budget adoption process the original 2019-20 cash flow projection with the expenditure information driven by trend data resulted in a negative cash balance in the general fund. The results of the initial projection indicate the need for the district to maintain a monthly review and projection of cash to ensure the district maintains a positive cash balance. EXAMINED BY COUNTY SUf ERINTENDENT OF SCHOOLS: ~~\~~ BY: y DATE j ( 1.3 ( I ' Chris N. Hartley, Ed.D. Superintendent CH:jw c: Board President District Superintendent and Business Office County Business Office W:\Administration Share\Budget Review Process\2019-20\Review Fonns\So Hum.doc o\.DT <'o i .JI ~ ~ CHRIS H ARTLEY, Eo.D., Superintendent *=========================================== * ~ \ 901 Myrtle Avenue, Eureka, California 95501-1294 Phone: 707/445-7000 FAX: 707/445-7143 www.hcoe.org C''° OF EO\)C.}­ January 2, 2020 Don Boyd, Superintendent Southern Humboldt Unified School District P.O. Box 650 Miranda, CA 95553-1921 Subject: Certification of2019-2020 First Interim Report Dear Don: Thank you for the timely submission of the district' s 2019-2020 First Interim Report. We acknowledge that you and the governing board have issued a positive certification of the district's financial status. In accordance with Education Code Section 42131 , we have completed our review and analysis of the district's First Interim Report. While we concur with the positive certification, we wish to share the following: Multi-Year Projections: During our review of the multi-year projections, we noted that the Local Control Funding Formula (LCFF) was based on School Services of California (SSC) projections for cost-of-living (COLA) increases of 3.00% for 2020-21 and 2.80% for 2021-22. Under these revenue assumptions, the multi­ year budgets project deficits of $50,071 in 2020-21 and $216,954 in 2021-22. Reserves: Due to the budget deficits, the district' s reserve level is projected to drop from 4.87% in 2019-20 to 4.22% in 2021-22, which is only $21,271 above minimum reserve requirement. We recommend that the district continue working on ways to reduce the deficits in the multi-years in order to mitigate the impacts to the district' s reserves. Cash We noted that the 2019-20 first interim cash flow projection, with the expenditure information driven by trend data, resulted in a negative cash balance in November 2019. We recommend that the district review cash and update projections monthly so that the district can make adjustments to expenditures as needed to mitigate the negative impact on the monthly cash balances. We wish to acknowledge and express our appreciation to the district's staff, the governing board and the community for their continued diligence and hard work. Ifyou have any questions regarding our review procesff please feel free to contact our office. . 1l . Smcerl~f~ ~~ley, Chris Ed. D. Superi~tendent, Humboldt County Schools CW:hg c: Corey Weber, Director of Fiscal Services, HCOE Thomas Mulder, District School Board President "Committed to Excellence in Leadership and Service" SOUTHERN HUMBOLDT JOINT UNIFIED SCHOOL DISTRICT 5/31/2019 ALL FUNDS General General General -------SPECIAL REVENUE FUNDS ------- ---------OTHER FUND TYPES -------­ ADOPTED BUDGET FundfTRANs FundfTRANs FundfTRANs Cafeteria Special Bond County School Capital Retiree Capital Total FISCAL YEAR 2019-20 --- U - n - r - e - s -- tr - ic -- te - d -- ----------- R - e - s -- tr - i - c - te -- d - -------------- T -- o - t - a - l ----- ------ F -- u -- n - d - ----- --- R - e - s - e -- rv - e - s -- ---- B -- u - il - d - i - n - g - - F -- u - n - d - -- --- F -- a - c -- il - it - i - e - s -- -------- O -- u -- tl - a - y -- ----------- F - u -- n - d -- ---------- F -- a - c -- il - i - ti - e - s - -- ---- A - l - l - F -- u -- n - d -- s - -- A. REVENUES Local Control Funding Formula $ 8,312,069 $ $ 8,312,069 $ $ $ $ $ $ $ $ 8,312,069 Federal Sources 440,990 440,990 170,000 610,990 Other State Sources 134,831 372,997 507,828 14,043 521 ,871 Other Local Sources 81,899 302,621 384,520 68,244 452,764 ------------------------------------ ------------- --------------- --------- ------------ ------------- ------------- ---------------- --------------- ---------------- Total Revenue 8,528, 799 1,116,608 9,645,407 252,287 9,897,694 B. EXPENDITURES Certificated Salaries 2,598,377 375,540 2,973,917 2,973,917 Classified Salaries 1,281,537 678,654 1,960,191 153,386 2,, 13,577 Employee Benefits 2,044,604 816,914 2,861,518 83,722 2,945,240 Supplies 222,823 119,406 342,229 84,424 27,922 454,575 Services & Other Operating 839,901 440,353 1,280,254 5,755 1,286,009 Capital Outlay 7,641 7,641 13,335 20,976 Other Outgo 1,450 139,510 140,960 140,960 Support Costs (9,064) 9,064 ---------------------------------------------------------- -------------- -------------- ------------ ---------------- ------------- ---------------- --------------- ----------------- Total Expenditures 6,979,628 2,587,082 9,566,710 327,287 27,922 13,335 9,935,254 --------------------------------------------------------- ------------ ---------------- ------------- --------------- -------------- ---------------- --------------- ----------------- C. EXCESS REVENUES (EXPENDITURES) 1,549,171 (1,470,474) 78,697 (75,000) (27,922) (13,335) (37,560) D. OTHER FINANCING SOURCES/USES lnterfund Transfers In 75,000 75,000 lnterfund Transfers Out (75,000) (75,000) (75,000) Other Sources Other Uses Contributions (1,457,587) 1,457,587 --------------------------------------------------------------- ----------------- ---------------- ----------------- ---------------- ---------------- ----------------- ---------------- ------------------- Total Other Sources (Uses) (1,532,587) 1,457,587 (75,000) 75,000 ----------------------------------------------------------- ----------------- ---------------- ---------------- ---------------- ---------------- ----------------- ---------------- ----------------- E. FUND BALANCE INCREASE (DECREASE) 16,584 (12,887) 3,697 (27,922) (13,335) (37,560) F. ADJUSTED BEGINNING BALANCE 356,230 122,195 478,425 39,847 442, 125 27,922 78,812 1,067,130 ----------------------------------------------------------- ----------------- ---------------- ---------------- ---------------- --------------- ---------------- --------------- ----------------- G. ENDING BALANCE $ 372,81 4 $ 109,308 $ 482, 122 $ 39,847 $ 442,125 $ (0) $ $ 65,477 $ $ $ 1,029,570 ======================================= ==:======== ========== =========== ========== ========== ========== ;;;::;;;:====== :::;;;;;;;;:;;;;;;;;; District Reserve of 5. 05% includes: Total General Fund Expenditures, Transfers out and Uses $9,641,710 General Fund Designated for Economic Uncertainty: $ 44,858 Recommended Minimum Reserve Calculation at 4%: $385,668 Special Reserve Fund Ending Balance: $ 442, 125 Budgeted Reserve Level: 5.05% TOTAL: $ 486,983 8\district\allfunds\40 19-20 AdoptlonAJlfunds MULTl-YEAR BUDGET PROJECTION SOUTHERN HUMBOLDT JOINT UNIFIED SCHOOL DISTRICT 5/31/2019 ALL FUNDS General General General --------SPECIAL REVENUE FUNDS-------­ ---------·-OTHER FUND TYPES---------­ ADOPTION MULTI-YEAR PROJECTION FundfTRANs FundfTRANs FundfTRANs Cafeteria Special Bond County School Capital Retiree Capital Total FISCAL YEAR 2020-21 Urvestrocted Restricted Total Fund Reserves Building Fund Facilities Outlay Fund Facilities All Funds ------------------------------------------------------------­ A. REVENUES Local Control Funding Formula $ 8,523,325 $ $ 8,523,325 $ $ $ $ $ $ $ $ 8,523,325 Federal Sources 448,990 448,990 170,000 618,990 Other State Sources 134,831 372,997 507,828 14,043 521,871 Other Local Sources 81 ,899 302,621 384,520 68,244 452,764 ------------------------------------­-----­-----········-­---­ Total Revenue 8,740,055 1,124,608 9,864,663 252,287 10,116,950 B. EXPENDITURES Certificated Salaries 2,664,145 375,540 3,039,685 3,039,685 Classified Salaries 1,349,590 722,718 2,072,308 153,386 2,225,694 Employee Benefits 2,128,119 844,837 2,972,956 83,722 3,056,678 Supplies 225,449 117,362 342,811 84,424 427,235 Services & Other Operating 839,901 372,176 1,212,077 5,755 1,217,832 Capital Outlay 7,641 7,641 7,641 Other Outgo 1,450 139,510 140,960 140,960 Support Costs (9,064) 9,064 -----------­--­------­--­--­-------------------------------­ Total Expenditures 7,199,590 2,588,848 9,788,438 327,287 10,115,725 C. EXCESS REVENUES (EXPENDITURES) 1,540,465 (1,464,240) 76,225 (75,000) 1,225 D. OTHER FINANCING SOURCES/USES lnterfund Transfers In 75,000 75,000 lnterfund Transfers Out (75,000) (75,000) (75,000) Other Sources Other Uses Contributions (1,457,587) 1,457,587 Total Other Sources (Uses) (1,532,587) 1,457,587 (75,000) 75,000 E. FUND BALANCE INCREASE (DECREASE; 7,878 (6,653) 1,225 1,225 F. ADJUSTED BEGINNING BALANCE 372,814 109,308 482,122 39,847 442,125 (0) 65,477 1,029,570 G. ENDING BALANCE $ 380,692 $ 102,655 $ 483,347 $ 39,847 $ 442,125 $ (0) $ $ 65,477 $ $ $ 1,030,795 District Reserve of 4.96% includes: Total General Fund Expenditures, Transfers out and Uses $9,863,438 General Fund Designated for Economic Uncertainty: $ 46,890 Recommended Minimum Reserve Calculation at 4%: $394,538 Special Reserve Fund Ending Balance: $ 442,125 Budgeted Reserve Level: 4.96% TOTAL: $ 489,015 B\district\lllfund1\.40 1~20AdoptionMYP MULTl-YEAR BUDGET PROJECTION SOUTHERN HUMBOLDT JOINT UNIFIED SCHOOL DISTRICT 5/3112019 All FUNDS General General General --------SPECIAL REVENUE FUNDS -------- -----------OTHER FUND TYPES---------­ ADOPTION MULTI-YEAR PROJECTION Fund/TRANS Fund/TRANS Fund/TRANs Cafeteria Special Bond County School Capital Retiree Capital Total FISCAL YEAR 2021-22 Unrestricted Restricted Total Fund Reserves Building Fund Facilities Outlay Fund Facilities All Funds -------------------------··----------------------------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- --------------- ----------------­ A. REVENUES l ocal Control Funding Formula $ 8,688,782 $ $ 8,688,782 $ $ $ $ $ $ $ $ 8,688,782 Federal Sources 448,990 448,990 170,000 618,990 Other State Sources 134,831 372,997 507,828 14,043 521,871 Other Local Sources 81,899 302,621 384,520 68,244 452,764 -·····--------·-····------------------------------------------ ---------------- -----·-······-····- ------------------ ----------------­ ............. ................... ----------------- ---------------- ----------------- Total Revenue 8,905,512 1,124,608 10,030,120 252,287 10,282,407 B. EXPENDITURES Certificated Salaries 2,744,377 375,540 3,119,917 3,119,917 Classified Salaries 1,409,435 722,718 2,132,153 153,386 2,285,539 Employee Benefits 2,148,343 844,837 2,993, 180 83,722 3,076,902 Supplies 225,449 112,270 337,719 84,424 422,143 Services & Other Operating 839,901 369,794 1,209,695 5,755 1,215,450 Capital Outlay 7,641 7,641 7,641 Other Outgo 1,450 139,510 140,960 140,960 Support Costs (9,064) 9,064 ------------------------------------------------------------- ---------·------·--- -----·---------- ----------------- -----------·----- ---------------- ---··------------- ---------------- ----------------­ Total Expenditures 7,359,891 2,581,374 9,941,265 327,287 10,268,552 -------------------·--·--·---------------------------------- ------------------ --------------- ----------------- ---·----------- -----·····------- ----------------- ---------------­ ----------------­ C. EXCESS REVENUES (EXPENDITURES) 1,545,621 (1.456,766) 88,855 (75,000) 13,855 D. OTHER FINANCING SOURCES/USES lnterfund Transfers In 75,000 75,000 lnterfund Transfers Out (75,000) (75,000) (75,000) Other Sources Other Uses Contributions (1,457,587) 1,457,587 ---------------·--------------------------------------------- ------------------ ----------------- ------------------ ----------------- ---------------- ----------------- ---------------- ----------------­ Total Other Sources (Uses) (1,532,587) 1,457,587 (75,000) 75,000 -------------------------------------------···---------------- ------------------ ............................... -----------------­ ----------------- ---------------- ----------------- ---------------- ----------------­ E. FUND BALANCE INCREASE (DECREASE; 13,034 821 13,855 13,855 F. ADJUSTED BEGINNING BALANCE 380,692 102,655 483,347 39,847 442,125 (0) 65,477 1,030,795 ------------------------------------------------------------- ------------------ ----------------- ------------------ ----------------- -·--·----------· ----·------·----- -·-------------­ ............................... G. ENDING BALANCE $ 393,726 $ 103,476 $ 497,202 $ 39,847 $ 442,125 $ (0) $ $ 65,477 $ $ $ 1,044,650 =================================== ========== ========== ========== ========== ========= ========= ========= ========== District Reserve of 4.95% includes: Total General Fund Expenditures, Transfers out and Uses $10,016,265 General Fund Designated for Economic Uncertainty: $ 54,078 Recommended Minimum Reserve Calculation at 4%: $400,651 Special Reserve Fund Ending Balance: $ 442,125 Budgeted Reserve Level: 4.95% TOTAL: $ 496,203 B\districtlallfunds~O 19-20 AdopdonMYP SOUTHERN HUMBOLDT JT UNIFIED SCHOOL DISTRICT CASH FLOW WORKSHEET --GENERAL FUND (INCLUDES RESERVE) 2019-20 I 0 1 2 3 4 5 6 7 8 9 10 11 12 Actuals through the month of: I Before FY start Julv Auoust Seotember October November December January February March April May June Accruals Beginning Cash 759,945 91 0, 121 1,039,762 748,635 566,372 (249,719) 1,395,428 937,876 496,624 27,923 1,331 , 784 806,283 Local Control Funding Fonmula 502,776 502,776 538,004 502,776 - 2,347,011 201 ,110 347,603 278,229 2,041,853 246, 155 803,776 - Federal Revenues - - 1,920 - 10,947 106,323 61 ,695 8,640 10,304 36,296 96,010 21 ,666 87, 189 State Revenues - - - 36,516 29, 119 - 11 ,675 - 25,227 36,516 - 270,517 98,259 Local Revenues 34,170 46,293 53,782 48,286 7,422 7,703 27,368 24,399 10,764 25, 146 33, 187 63,999 2,000 Sources - - - - - - - - - - - - Receivables 21 ,909 18,392 16, 173 16,858 - 14, 189 42, 180 - 10,888 13,24 1 0 1000 36,290 36,600 276, 149 290,947 307, 165 319,559 260,654 278,326 293,040 289, 116 305, 104 280,969 - - 2000 67,000 106,448 167,824 164,768 179,286 184,960 173,767 181,672 175,618 192,798 182,606 183,444 3000 146,720 157,817 223, 116 223, 162 233,114 239,286 227,211 229,524 235,073 230, 11 5 235,095 481,283 - - 4000 91 38,942 62,083 21,754 30,013 16,684 41 ,270 19,540 15,310 25,31 1 28,427 42,803 5000 158,578 98,014 171,235 86,069 114,000 68,274 98,678 11 1,820 85,071 111 ,666 149,622 27,228 - 6000 - - 598 - - 588 - 1,011 - 187 - 5,257 - 7000 - - - - - 728 - - - - 140,232 - TFin - - - - - - - - - - - - - TF out - - - - - - - - - - - 75,000 - Uses - - - - - - - - - - - - Payables - - - - - - - - - - - - Deferred Expense - - - - - - - - - - - - TRANs Note Payable - - - - - - - - - - - - Prepaid Expense - Cash Balance 910,121 1,039,762 748,635 566,372 (249,719) 1,395,428 937,876 496,624 27,923 1,331,784 806,283 730,024 Total Projected Receivables (including deferred appropriations if any): 187,448 Final Projected Cash Balance General/Charter Fund, TRANS, Reserve: $730,024 April 7, 2020 Don Boyd, Superintendent Southern Humboldt Unified School District P.O. Box 650 Miranda, CA 95553-1921 Subject: Certification of 2019-2020 Second Interim Report Dear Mr. Boyd: Thank you for the timely submission of the district’s 2019-2020 Second Interim Report. We acknowledge that you and the governing board have issued a qualified certification of the district’s financial status. In accordance with Education Code Section 42131, we have completed our review and analysis of the district’s Second Interim Report. Given the assumptions underlying these budget projections, we concur with your qualified certification. As we continue to work through the challenges Southern Humboldt Unified School District is facing, we would like to share the following focus areas which represent important points to consider and review: Multi-Year Projections: During our review of the multi-year projections, we noted that the Local Control Funding Formula (LCFF) was based on School Services of California (SSC) projections for cost- of-living (COLA) increases of 2.29% for 2020-21 and 2.71% for 2021-22. Under these revenue assumptions, the multi-year budgets project deficits of $181,325 in 2020-21 and $155,060 in 2021-22. Reserves: Due to the budget deficits, the district’s reserve level is projected to drop from 6.06% in 2019-20 to 4.07% in 2021-22, which is only $6,410 above minimum reserve requirement. We recommend that the district continue working on ways to reduce the deficits in the multi-years in order to mitigate the impacts to the district’s reserves. Cash Based on the 2019-20 County Cash Report, the district had a negative cash balance in November 2019. We recommend that the district review the timing of expenditures and monitor cash going into the 2020-21 fiscal year so that adjustments can be made to help maintain a positive cash balance. Negotiations In our review of your Second Interim Report, we note that the district has not concluded negotiations with the bargaining units for this year. We also noted that no increases in salary other than for step and column were included in the two subsequent years’ projections. Because the district is projecting to deficit spend, compensation increases may have an additional impact on the district reserves. Please plan on providing us with the financial effects of any collective bargaining agreements on our prescribed forms at least ten working days prior to the public meeting at which the board will take action as prescribed by Government Code 3540.2. COVID-19 Fiscal Impacts At this time, the full fiscal impact of COVID-19 is not known for the district, however we anticipate that the May Revise will be much lower than the January budget proposal. The Department of Finance has already issued a letter to all state agencies to expect a workload only budget and there should be no expectation of full funding. As we face the inevitable fiscal challenges ahead, it will be critical for the District’s fiscal solvency to carefully evaluate all program spending and establish priorities for the district. Districts will need to act as swiftly as possible to align spending with available resources. Implications of a qualified certification The district’s fiscal status results in the following additional requirements under current law: 1. “Third Interim report” – Provide the county superintendent, the SPI and the controller with a financial statement, no later than June 1 of that fiscal year, that projects the district’s fund and cash balances through June 30 for the period ending April 30 [E.C. 42131(e)]. This report is sometimes referred to as the “third interim report.” A district is not required to self-certify to a “positive,” “qualified,” or “negative” certification when submitting their June 1 financial statement. 2. Non-Voter-Approved Debt – Because the district’s financial status mirrors that of a district with a qualified certification, Education Code Section 42133 prohibits the district from issuing non-voter-approved debt (e.g., certificates of participation, tax and revenue anticipation notes [TRANs], and capital leases) in 2019/20 and 2020/21, unless the county superintendent determines that repayment of the debt is probable. Please submit a non-voter-approved debt disclosure to our office at least 30 days prior to the governing board’s approval to proceed with all non-voter approved debt issuance, excluding TRANs. For TRANs, please contact our office for a list of requirements. 3. Employee Negotiations – Government Code Section 3540.2(a) requires the district to allow the county office of education at least 10 working days to review and comment on any proposed collective bargaining agreement. Therefore, please provide us any forthcoming agreements or re-openers within this timeframe, along with a certification, signed by the district superintendent and chief business official, that the district can fulfill the agreement’s costs. Summary Based on the level of structural deficit it is important that the district take a pro-active approach to mitigate deficit spending. We encourage the district to develop a fiscal stability plan that addresses these on-going deficits. We wish to acknowledge and express our appreciation to the district’s staff, the governing board and the community for their continued diligence and hard work. If you have any questions regarding our review process, please feel free to contact our office. Sincerely, Corey Weber Director of Fiscal Services CW: hg c: Chris N. Hartley, Ed. D., Superintendent, HCOE Thomas Mulder, District School Board President