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Report 2003-129 Summary - June 2004

The Fiscal Crisis and Management Assistance Team:

Its Recommendations, if Implemented, Should Help Financially Troubled School Districts

HIGHLIGHTS

Our review of the Fiscal Crisis and Management Assistance Team (FCMAT) disclosed:

  • FCMAT's reports include recommendations that are valuable and should help improve the financial health of school districts.
  • Most of the school districts we reviewed have implemented or partially implemented many of FCMAT's recommendations.
  • Fiscal recovery of a school district can take several years depending on the nature and severity of its problems.
  • Since its formation, FCMAT's responsibilities have expanded, primarily as a result of legislation.
  • FCMAT's process for selecting consultants to work on its large comprehensive reviews is fair, but FCMAT can improve by sending application packets to a larger group of consultants.
  • FCMAT's governing board has good reasons to keep the rate FCMAT bills school districts low.
  • The percentage of FCMAT's administrative and overhead costs seems reasonable

RESULTS IN BRIEF

The Fiscal Crisis and Management Assistance Team (FCMAT) provides fiscal and management assistance services to county offices of education (county offices) and school districts. The Legislature authorized the creation of FCMAT in 1991 when it passed Assembly Bill 1200 (Chapter 1213, Statutes of 1991). This law provided county offices with tools to oversee the fiscal health of the school districts under their purview. One of these tools was the ability to request FCMAT's assistance at troubled school districts.

Since FCMAT's inception, it has completed 369 school district studies and other services, including acting as a fiscal adviser to school districts and county offices and assisting the State Superintendent of Public Instruction. Although helping California's local educational agencies fulfill their financial and management responsibilities continues to be FCMAT's main purpose, its responsibilities have grown over the years, almost exclusively as the result of other legislation, to include preparing comprehensive assessments and recovery plans for four of the six school districts that received emergency loans from the State, facilitating fiscal training for county offices and school districts, and developing and maintaining two separate statewide information systems.

Our review of FCMAT's involvement at 10 school districts revealed that FCMAT provides findings and recommendations that are valuable and should help improve the financial health of school districts. All of the school districts we reviewed appeared to have implemented or partially implemented some of the recommendations we selected to review, although due to various factors, including the severity and nature of their problems, several of them continue to experience financial difficulties. Because FCMAT's recommendations are standards-based, they have resulted in improved practices, which can lead to improved overall fiscal health for the school districts that implemented them. However, FCMAT's recommendations can be effective only if school districts take action on them. School districts are not required to implement FCMAT's recommendations and, except for those districts that received emergency loans, FCMAT is not required to report the progress the districts make in implementing its recommendations.

Additionally, staff at some of the school districts believe that having FCMAT as an independent, external consultant added credibility to the problems they faced and the solutions they proposed to their communities and governing boards. This credibility helped the districts make difficult but necessary decisions, such as reducing spending for transportation and special education programs.

FCMAT has a list of nearly 70 consultants it can use on any given request for management assistance services to school districts. Although it is not subject to state contracting laws, which would require it to use a competitive bid process to select its consultants, FCMAT requests bids when contracting for consultant services for its bigger comprehensive studies, such as for the Compton Unified School District and Oakland Unified School District. Generally, FCMAT's contracting process appears fair, although it could invite more consultants to bid on these jobs, providing it with a broader group of experts from which to choose.

To offset some of the costs of performing management assistance studies, the Legislature authorized FCMAT to charge school districts that are not declared as fiscal emergencies a daily rate for these services. Currently, FCMAT's governing board has approved a $400 rate per team member for every day that FCMAT or its consultants are on site at the districts. This rate is on the low end of what FCMAT pays its consultants for these services, but it appears reasonable given FCMAT's understanding that the Legislature intended FCMAT to assist financially troubled school districts to head off financial crises, such as bankruptcy, thereby avoiding the need for emergency loans from the State. FCMAT generally does not bill school districts that have received state emergency loans or that FCMAT's board has designated as being in a fiscal emergency for its services. Rather, the State pays FCMAT's costs in such cases, either through FCMAT's annual appropriation for management assistance studies or through separate appropriations specific to particular school districts.

For the three fiscal years 2000-01 through 2002-03, FCMAT's studies cost an average of $3.1 million annually, including $2.1 million per year for management assistance studies and an average of $1 million during each of the three fiscal years for comprehensive studies of school districts as mandated by legislation. Of the $2.1 million, it billed approximately $632,000, or 31 percent of its average costs per year, to the school districts that received the services. Also during this period, FCMAT spent, on average, $419,000 per year, or 13.5 percent of the $3.1 million, on administrative costs, including costs for office space, utilities, office supplies and equipment, and other costs not directly associated with its studies.

We noted that the administrative costs do not include the portion of two managers' salaries that is related to administrative duties, such as approving staff time sheets and attending FCMAT's board meetings. However, it is not likely that including the portion of their salaries associated with performing those tasks would cause FCMAT's total administrative costs to exceed a reasonable proportion of the total costs. Further, given the small size of FCMAT, it is reasonable that its administrative costs, most of which would remain the same regardless of the number of studies it performs, represent a higher proportion of its total costs when compared to larger organizations because FCMAT cannot benefit from the economies of scale that large organizations enjoy.

Finally, according to its bylaws, the FCMAT governing board provides policy direction and broad operational guidance to the Kern County Superintendent of Schools (Kern superintendent's office), which houses and administers FCMAT. The FCMAT governing board meets quarterly to discuss topics including FCMAT's reports, to prioritize requests for FCMAT's assistance, and to oversee its projects.

As one of several divisions of the Kern superintendent's office, FCMAT is subject to the same administrative policies and procedures as other divisions within that office. Through its other divisions, the Kern superintendent's office handles certain administrative aspects of FCMAT's operations, such as providing personnel and information technology support services.

RECOMMENDATIONS

To obtain the broadest range of consultants to choose from, FCMAT should expand its list of consultants who receive request for application packets.

AGENCY COMMENTS

FCMAT agrees with our findings and recommendations and will develop, in coordination with its governing board, a corrective action plan for the two recommendations.















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