Report 2019-108 All Recommendation Responses

Report 2019-108: Sacramento City Unified School District: Because It Has Failed to Proactively Address Its Financial Challenges, It May Soon Face Insolvency (Release Date: December 2019)

Recommendation for Legislative Action

To help ensure that county office superintendents can prevent school districts under their oversight from becoming insolvent, the Legislature should consider amending state law to require school district boards to obtain approval from their county office superintendents before considering actions that would result in expenditures that exceed 200 percent of their required reserve amount. County office superintendents should disapprove any district action that they determine would cause school districts to do either of the following:
-Project insolvency within the current fiscal year or two subsequent fiscal years.
-Rely on reserves or other one-time resources, such as one-time funds from the State, to remain solvent within the current fiscal year or two subsequent fiscal years.

Description of Legislative Action

AB 961 (McCarty, 2021) would have authorized the county superintendent of schools to stay or rescind any action of a personnel commission for classified school employees that is determined to be inconsistent with the school district's ability to meet its financial obligations. If a school district's subsequent year's budget is disapproved by the county superintendent of schools, the bill would have specified that the county superintendent of schools' authority to stay or rescind actions continues without interruption until the next subsequent year's budget is approved. The bill would have authorized the county superintendent of schools to impose or implement the multiyear financial recovery plan if the governing board of a school district fails to adopt or implement a multiyear financial recovery plan. If the county superintendent of schools prepares a multiyear financial recovery plan for the school district, the bill would have required the county superintendent to consult certain documents and entities and to hold at least two public hearings to receive stakeholder input. The bill would have authorized a school district to appeal to the superintendent a county superintendent of schools' decision to prepare, adopt, or implement a multiyear financial recovery plan. This bill died in the Assembly.

California State Auditor's Assessment of Annual Follow-Up Status: Legislation Proposed But Not Enacted

Description of Legislative Action

AB 961 (McCarty, 2021) would authorize the county superintendent of schools to stay or rescind any action of a personnel commission for classified school employees that is determined to be inconsistent with the school district's ability to meet its financial obligations. If a school district's subsequent year's budget is disapproved by the county superintendent of schools, the bill would specify that the county superintendent of schools' authority to stay or rescind actions continues without interruption until the next subsequent year's budget is approved. The bill would authorize the county superintendent of schools to impose or implement the multiyear financial recovery plan if the governing board of a school district fails to adopt or implement a multiyear financial recovery plan. If the county superintendent of schools prepares a multiyear financial recovery plan for the school district, the bill would require the county superintendent to consult certain documents and entities, and to hold at least two public hearings to receive stakeholder input. The bill would authorize a school district to appeal to the Superintendent a county superintendent of schools' decision to prepare, adopt, or implement a multiyear financial recovery plan. As of December 10, 2021, this bill is pending in the Assembly Education Committee.

California State Auditor's Assessment of Annual Follow-Up Status: Legislation Introduced

Description of Legislative Action

As of December 10, 2020, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of 1-Year Status: No Action Taken

Description of Legislative Action

As of June 10, 2020, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of 6-Month Status: No Action Taken

Description of Legislative Action

As of January 2020, the Legislature has not taken action to address this specific recommendation. However, SB 887 (Wilk) was introduced on January 23, 2020, as a spot bill regarding school district boards.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation for Legislative Action

To help ensure that school district boards are accountable for the costs they approve, the Legislature should consider amending state law to require those boards to certify the district's ability to meet the costs disclosed in each collective bargaining agreement.

Description of Legislative Action

As of January 30, 2023, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

Description of Legislative Action

As of December 10, 2021, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

Description of Legislative Action

As of December 10, 2020, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of 1-Year Status: No Action Taken

Description of Legislative Action

As of June 10, 2020, the Legislature has not taken action to address this specific recommendation.

California State Auditor's Assessment of 6-Month Status: No Action Taken

Description of Legislative Action

As of January 2020, the Legislature has not taken action to address this specific recommendation. However, SB 887 (Wilk) was introduced on January 23, 2020, as a spot bill regarding school district boards.

California State Auditor's Assessment of 60-Day Status: No Action Taken

Recommendation #3 To: Sacramento County Office of Education

To ensure that Sacramento Unified takes the steps necessary to address its fiscal crisis, the county office superintendent should do the following:

Direct Sacramento Unified to submit a corrective action plan by March 2020 that consolidates the district's plans to resolve its fiscal crisis.

Annual Follow-Up Agency Response From October 2023

On September 15, 2023, we approved the district's 2023-2024 Budget. However, we noted the following concerns:

- Multi-year projections submitted by the district show that the unrestricted General Fund balance will decrease by $33.9 million in 2023-2024, by $18.3 million in 2024-2025 and by $32.2 million in 2025-2026.

- The district has not settled with its classified bargaining units for 2022-2023 and must still bargain with both certificated and classified bargaining units for the current fiscal year and beyond.

- From 2018-2019 through to the current fiscal year, the district adopted several fiscal recovery plans and implemented $58.1 million in ongoing solutions and $21.9 million in onetime solutions. With the fiscal pressures the district faces and the significant reductions the district has already made, it has limited ability to absorb additional cost increases.

We have provided a fiscal expert to support the district and will continue to closely monitor its fiscal condition.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

The Sacramento County Office of Education has fiscal oversight responsibility of Sacramento Unified and all other school districts in the county. As part of his fiscal oversight, the county office superintendent reviews districts' annual budgets and interim financial reports to assess their ability to meet their financial obligations. When a district's budget or financial reports indicate that the district may be unable to meet its financial obligations for the current fiscal year or two subsequent fiscal years, the county office superintendent can take action, such as assigning a fiscal expert to advise the district or requiring the district to submit a proposal for addressing its fiscal deficiencies. As long as it continues to exercise its duties by overseeing Sacramento City Unified and raising its concerns, it will have addressed our recommendation.

Annual Follow-Up Agency Response From October 2022

Response submitted by email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

In its response, the Sacramento County Office of Education (SCOE) notes that all of the items in the financial recovery plan that Sacramento Unified developed in 2020 required negotiations with its employee associations. SCOE indicated that, to date, the district has not been able to reach an agreement with its employee associations on items that would address the fiscal solvency issues of the district. SCOE notes in its response that despite one-time funding from the State that will mitigate the district's structural deficit over the next few years, Sacramento Unified's fiscal improvement is temporary due to declining enrollment and significant ongoing fiscal pressures for program services. Therefore, SCOE conditionally approved the district's fiscal year 2022-23 budget and maintains its fiscal advisor to support the district.

Annual Follow-Up Agency Response From October 2021

Response submitted via email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Sacramento County Office of Education (SCOE) has required Sacramento Unified to develop and submit a fiscal recovery plan by December 15, 2021. In its response, SCOE notes that all of the items in the financial recovery plan that Sacramento Unified developed in 2020 required negotiations with its employee associations. SCOE indicated that, to date, the district has not been able to reach an agreement with its employee associations on items that would address the fiscal solvency issues of the district. SCOE notes in its response that despite one-time savings over the past two years, Sacramento Unified's fiscal improvement was temporary. Therefore, SCOE has determined that the district's 2021-22 Adopted Budget does not provide adequate assurance that the district will meet its future obligations.

1-Year Agency Response

As indicated in our 6-Month Response, SCOE received a fiscal recovery plan from the district last Spring (May 21, 2020, Board agenda item 10.3). Unfortunately, all the items on this plan required negotiations with the district's employee associations. To date, the district has not been able to reach agreement with its employee associations on items that would address the fiscal solvency issues of the district.

As part of the 2020-21 Budget development and approval process, SCOE directed the district to submit a new fiscal recovery plan by December 15, 2020. District staff have developed a fiscal recovery plan and have placed it on the December 10, 2020, Board agenda (item 9.3) for approval by the district's governing board. However, many of the items included in the revised plan continue to require negotiations with the district's employee associations. SCOE will support the district to adopt and implement the fiscal recovery plan and work with its employee associations on the negotiable items in the plan. Furthermore, SCOE will continue to monitor the district's budget and financial transactions carefully to ensure it does not take any action to put it at further financial risk and will look for additional opportunities to reduce expenditures so that the district can avoid any potential insolvency and move towards fiscal recovery.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

SCOE directed the district to submit a corrective action plan and received the most recent copy of the plan (May 21, 2020 Board agenda item 10.3). This plan looks similar to the plan requested by the State Auditor. Unfortunately, all the items on the district's plan require negotiations with the district's employee associations. To date, the district has not been able to reach agreement with its employee associations on items that would address the fiscal solvency issues of the district. Furthermore, the amount of budget cuts needed will likely grow substantially if COVID-related revenue cuts are passed on to the school district from the State.

California State Auditor's Assessment of 6-Month Status: Pending

As indicated in Sacramento City Unified School District's recommendation #6, the district is currently in the process of developing a fiscal recovery plan and has not yet settled on how it will address its financial condition.

60-Day Agency Response

We will send a copy of the letter from the County Superintendent directing the district to submit a corrective action plan as directed by the State Auditor.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

At our 6 month review, we hope to see that the Sacramento County Office of Education was successful in obtaining the corrective action plan from the Sacramento City Unified School District and the county office will have begun working with the district to correct the items identified in the audit.

Recommendation #4 To: Sacramento County Office of Education

To ensure that Sacramento Unified takes the steps necessary to address its fiscal crisis, the county office superintendent should do the following:

Ensure that Sacramento Unified addresses the issues identified in this report, including its executive management turnover and lack of policies guiding its budget process.

Annual Follow-Up Agency Response From October 2023

As indicated in our response to recommendation #3, SCOE is providing a fiscal expert to assist the district in maintaining its budget, monitor the district's staffing and financial transactions, and support the district to address the issues identified in the Audit report. The district provides comprehensive reports throughout the year on the status of its efforts to address the audit items.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

The Sacramento County Office of Education has fiscal oversight responsibility of Sacramento Unified and all other school districts in the county. As part of his fiscal oversight, the county office superintendent reviews districts' annual budgets and interim financial reports to assess their ability to meet their financial obligations. When a district's budget or financial reports indicate that the district may be unable to meet its financial obligations for the current fiscal year or two subsequent fiscal years, the county office superintendent can take action, such as assigning a fiscal expert to advise the district or requiring the district to submit a proposal for addressing its fiscal deficiencies. As long as it continues to exercise its duties by overseeing Sacramento City Unified and raising its concerns, it will have addressed our recommendation.

Annual Follow-Up Agency Response From October 2022

Response submitted by email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Sacramento County Office of Education (SCOE) notes in its response that it continues to have a fiscal advisor assist the district in maintaining its budget, monitor the district's staffing and financial transactions, and support the district in addressing the issues identified in our audit report. SCOE notes that the fiscal advisor regularly meets with the district to discuss the status of our audit recommendations.

Annual Follow-Up Agency Response From October 2021

Response submitted via email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Sacramento County Office of Education (SCOE) notes in its response that it has appointed a fiscal advisor to help the district develop its budget and fiscal recovery plan, monitor the district's staffing and financial transactions, and address the issues identified in our audit report. SCOE also notes that the district has completed a comprehensive review of its budget and made improvements to some of its budgeting policies. Nevertheless, SCOE indicated that Sacramento Unified has not fully addressed its fiscal crisis. As a result, SCOE has directed the district to develop and submit a new financial recovery plan and take any immediate actions needed to implement the plan no later than December 15, 2021. In addition, SCOE will monitor the district's implementation of the plan and continue to follow up with the district to ensure that all remaining audit issues are fully addressed.

1-Year Agency Response

See emailed response from Nick Schweizer.

California State Auditor's Assessment of 1-Year Status: Pending

The Sacramento County Office of Education provided a summary of Sacramento Unified's efforts to implement our recommendations. As noted in Sacramento Unified's responses to our recommendations, the district has not implemented many of our recommendations.

6-Month Agency Response

Since response is in excess of 2000 characters, our response will be submitted via email.

California State Auditor's Assessment of 6-Month Status: Pending

Sacramento County Office of Education provided us with a summary of its understanding of the Sacramento Unified's efforts to implement our recommendations. Their summary is consistent with our review that the district is still in the process of implementing many of our recommendations.

60-Day Agency Response

We will send a copy of the letter from the County Superintendent directing the district to submit an Audit Resolution Plan to our office by February 28, 2020. Once Received, we will determine our next steps.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #5 To: Sacramento County Office of Education

To ensure that Sacramento Unified takes the steps necessary to address its fiscal crisis, the county office superintendent should do the following:

Ensure that Sacramento Unified implements all of the recommendations detailed below.

Annual Follow-Up Agency Response From October 2023

As indicated in our response to recommendation #3, SCOE is providing a fiscal expert to assist the district in maintaining its budget, monitor the district's staffing and financial transactions, and support the district to address the issues identified in the Audit report. The district provides comprehensive reports throughout the year on the status of its efforts to address the audit items.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Recommendation will be kept open until Sacramento Unified makes sufficient progress in implementing our recommendations.

Annual Follow-Up Agency Response From October 2022

Response submitted by email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Sacramento County Office of Education (SCOE) notes in its response that it continues to have a fiscal advisor assist the district in maintaining its budget, monitoring the district's staffing and financial transactions, and supporting the district in addressing the issues identified in our audit report. SCOE notes that the fiscal advisor regularly meets with the district to discuss the status of our audit recommendations.

Annual Follow-Up Agency Response From October 2021

Response submitted via email.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The Sacramento County Office of Education (SCOE) notes in its response that it has appointed a fiscal advisor to help the district develop its budget and fiscal recovery plan, monitor the district's staffing and financial transactions, and address the issues identified in our audit report. SCOE also notes that the district has completed a comprehensive review of its budget and made improvements to some of its budgeting policies. Nevertheless, SCOE indicated that Sacramento Unified has not fully addressed its fiscal crisis. As a result, SCOE has directed the district to develop and submit a new financial recovery plan and take any immediate actions needed to implement the plan no later than December 15, 2021. In addition, SCOE will monitor the district's implementation of the plan and continue to follow up with the district to ensure that all remaining audit issues are fully addressed.

1-Year Agency Response

Our responses to recommendation #4 address this recommendation as well. Please see emailed response from Nick Schweizer.

California State Auditor's Assessment of 1-Year Status: Pending

The Sacramento County Office of Education provided a summary of Sacramento Unified's efforts to implement our recommendations. As noted in Sacramento Unified's responses to our recommendations, the district has not implemented many of our recommendations.

6-Month Agency Response

See Item #4 above.

California State Auditor's Assessment of 6-Month Status: Pending

Sacramento County Office of Education provided us with a summary of its understanding of the Sacramento Unified's efforts to implement our recommendations. Their summary is consistent with our review that the district is still in the process of implementing many of our recommendations.

60-Day Agency Response

We will send a copy of the letter from the County Superintendent directing the district to submit an Audit Resolution Plan to our office by February 28, 2020. Once Received, we will determine our next steps.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #6 To: Sacramento City Unified School District

To address its current financial problems, Sacramento Unified should do the following:

By March 2020, adopt a detailed plan to resolve its fiscal crisis. The plan should estimate savings under multiple scenarios and include an analysis that quantifies the impact of reductions the district can make to ongoing expenditures. Specifically, Sacramento Unified should consider the impact of possible salary adjustments for employees in different bargaining units and include the impact those salary adjustments would have on postemployment benefits, such as pensions. It should also use the most recently available data to estimate net savings from modifying the health care benefits it provides to employees, as well as the impact those modifications would have on the total compensation of the employees. Finally, it should calculate the impact of possible changes to district and employee contributions to fund future retiree health benefits. The district should use the plan it develops as the basis for its discussions of potential solutions with its teachers union.

Annual Follow-Up Agency Response From September 2023

The District's 2023-24 Adopted Budget and subsequent AB1200 public disclosure of collective bargaining agreements were reviewed and approved by the Sacramento County Office of Education. Additionally the State's COLA, other funding sources and strong ending fund balance from the 2022-23 year have improved the District's fiscal outlook. See the most recent adopted budget and budget approval letter from SCOE: https://www.scusd.edu/sites/main/files/file-attachments/10.2_board_approved_adopted_budget_2023-24.pdf?1687990875 and SCOE letter.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Although the district notes that SCOE approved its fiscal year 2023-24 budget, SCOE's approval letter identifies multiple factors that clearly demonstrate why Sacramento City needs a long-term financial plan. SCOE notes that while the district currently has sufficient reserves, it plans to spend $33.9 million more than the unrestricted revenue it receives in fiscal year 2023-24, $18.3 million in fiscal year 2024-25, and $32.2 million in fiscal year 2025-26. SCOE also notes that the district does not have an agreement with its classified staff for fiscal year 2022-23 and does not have an agreement with any of its staff for the current school year. SCOE notes that cost increases from those labor agreements could result in the district being unable to meet its reserve requirements. Further, SCOE indicates that one-time federal funding the district received will begin to expire in fiscal year 2023-24, which will then require the district to identify ongoing funding to replace the one-time funding or terminate services and staff. All of these factors comprise a precarious financial position, and the district could benefit from developing a long-term financial plan to address the identified issues.

Annual Follow-Up Agency Response From October 2022

The District has taken action and a fiscal recovery plan to address the deficit was approved by the Board in December 2021. Additionally, the State's COLA and other funding sources significantly improved the District's fiscal outlook. FRP adopted 12/16/21:

https://www.scusd.edu/sites/main/files/file-attachments/approved_copy_-_fiscal_recovery_plan.pdf?1641511320

2022-23 Budget adopted 6/23/22:

https://www.scusd.edu/sites/main/files/file-attachments/10.2_item__2022-23_adopted_budget_scusd_06.23.22.pdf?1659550307https://www.scusd.edu/budget-updates

See September 15, 2022 letter from SCOE providing conditional approval of district budget: https://www.scusd.edu/sites/main/files/file-attachments/scoe_letter_9-15-22_re_2022-23_adopted_budget_report.pdf?1664386988

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Despite developing a fiscal recovery plan, the district has not made changes that would address its structural deficit. In its response to our recommendations, the Sacramento County Office of Education (SCOE) notes that despite one-time federal and state funding that will mitigate the district's structural deficit over the next few years, Sacramento Unified is facing reduced revenue due to declining enrollment and related revenue loss and significant ongoing fiscal pressures for program services. Therefore, SCOE conditionally approved the district's fiscal year 2022-23 budget, asked the district to refrain from taking actions that would further increase its ongoing costs, and that it is continuing to maintain the current fiscal advisor to support the district. The budget that SCOE conditionally approved projects a decrease in the district's fund balance by $5.3 million in fiscal year 2023-24 and $13.6 million in fiscal year 2024-25. Until it addresses its structural deficit, the district will not have addressed its financial risks.

Annual Follow-Up Agency Response From October 2021

The Budget Department presented a fiscal recovery plan (FRP) for budget reductions to the Board, which was adopted on February 4, 2021. See Attachment 1.

The Budget Department presented a proposed budget for all funds to the Board, which was adopted on June 24, 2021. The department's most recent budget update occurred on August 19, 2021. See Attachments 2 and 3.

On September 15, 2021, the Sacramento County of Education (SCOE) issued its 2021-22 Adopted Budget Conditional Approval letter. The 2021-22 Adopted Budget has been conditionally approved and the District must meet various directives and timelines as provided by SCOE. Indeed, the District is required to submit a Board approved FRP plan to the County Superintendent and take any immediate actions needed to implement the plan no later than December 15, 2021. See Attachment 4.

As previously reported, the District's attempts to discuss a successor contract with the Sacramento City Teachers Association (SCTA) have been delayed by numerous factors, including the COVID-19 pandemic. In addition, on June 9, 2021, the California Public Employment Relations Board (PERB) found that SCTA failed to negotiate in good faith with the District over a successor contract for over a year and failed to respond to the District's proposals which unreasonably delayed negotiations and thwarted the possibility of reaching an agreement. See https://www.scusd.edu/pod/scta-successor-contract-negotiations. SCTA sent its most recent proposal to the District on August 25, 2021. The District's proposals, including its proposal to achieve health care savings, are also located at the above link, which continues to be updated.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

1-Year Agency Response

The Budget Department presented a fiscal recovery plan (FRP) that includes both negotiable and non-negotiable options for budget reductions to the Board on November 19, 2020 and received feedback. The Board is set to vote on the FRP at the December 10, 2020 board meeting.

As you are aware, the District has previously passed a proposal to reduce its current 100% Healthcare premium contribution to an industry standard level which would save over $17 million dollars each year. In addition to negotiable items, some of the major items contained within the draft FRP include significant program and site reductions and associated layoffs of staff and administrators. The FRP presentation is available at: https://www.scusd.edu/sites/main/files/file-attachments/frp_ppt_v2_fnl.pdf?1606274802 and the details of the plan that is summarized on slide 32 of the Power Point located: https://www.scusd.edu/sites/main/files/file-attachments/frp_details_slide32.pdf . The detailed summary and impact statements for each potential reduction are provided at item 9.3 of the December 10, 2020 Board items: https://www.scusd.edu/boe121020.

The most effective and equitable solution to the District's budget deficit will be found through negotiations for a successor contract with our bargaining partners, and specifically related to achieving a balanced District contribution to its employees' health care plans. Unfortunately, as we reported in July and August, the District's attempts to discuss a successor contract with the Sacramento City Teachers Association (SCTA) have been delayed by the focus on the safe reopening of our schools and serving the needs of particularly vulnerable student groups. Board approved FRP evidence to follow.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Although Sacramento Unified's fiscal recovery plan is an important step toward resolving its financial challenges, it has several shortcomings. Specifically, its plan does not clearly address the district's looming cash challenges and relies on spending reductions that require agreements with collective bargaining groups that have yet to materialize. Sacramento Unified's fiscal recovery plan indicates that the district will need to make $51 million in ongoing

expenditure reductions based on its projected budget deficit for fiscal year 2022-23 and identifies options to reduce costs that require and do not require negotiations with its labor partners. We are concerned that the district's plan does not fully address its near-term cash shortfalls that the district expects could occur in fiscal year 2021-22. Further, much of the district's solution for its deficit relies on reductions that require negotiations with its teachers union—an effort that has to date been unsuccessful.

At the district's December 10, 2020 board meeting, the board voted to discuss the fiscal recovery plan further in February 2021.

6-Month Agency Response

The FRP is an evolving plan and currently being reevaluated in light of the changed state budget.

Due to the drastic reductions in the state budget, the District's projected solution has increased substantially from the $27M previously required to achieve fiscal solvency. The District recently presented its 3rd interim presentation at the 5/21/20 Board meeting containing discussion of the impact from state revenue reductions on the evolving Fiscal Recovery Plan (FRP): https://www.scusd.edu/sites/main/files/file-attachments/10.3_may_revise___scusd_budget_myp_5_21_20__final.pdf

As recognized by the Audit, the majority of the FRP involves changes to District represented employees' health care contributions and overall compensation, with the largest portion of that from certificated employees. In addition to what is "already on the table", the FRP analysis included cost savings items for further consideration. The District continues to further evaluate existing and potential new proposals with our labor partners. After holding the first negotiation session with SCTA on March 3, 2020, negotiations again stalled. Initially, SCTA requested that the District provide a budget presentation at the next session to which the District agreed. Then, SCTA made multiple information requests and the parties had lengthy discussions regarding distance learning during the COVID-19 school closures. SCTA finally agreed to hold the next session which was just held on June 9. The District has filed an Amended Unfair Practice Charge against SCTA detailing the continued pattern of delay which is set for hearing in late August 2020.

The District's proposed adopted budget will be presented on June 18 and the budget will be adopted on June 25.

California State Auditor's Assessment of 6-Month Status: Pending

The district states that it is developing a Fiscal Recovery Plan, which it notes is currently evolving and being evaluated. We are concerned that the district has yet to develop a detailed plan to address its declining financial condition. In addition, the economic impact of the COVID-19 pandemic certainly has added an additional financial strain for the district. It is therefore even more imperative that the district act quickly and judiciously to develop and implement a plan to resolve its fiscal crisis. Further, we expect to see action taken in its fiscal year 2020-21 budget.

Because of the impending risk of insolvency and lack of substantial progress on some of our recommendations, we believe more frequent updates from the district are necessary. Therefore, we requested that the district provide us another update in July and monthly thereafter.

60-Day Agency Response

The District presented the 2019-20 First Interim Financial Report's Fiscal Recovery Plan (FRP) at the February 6, 2020 Board meeting. https://www.scusd.edu/sites/main/files/file-attachments/9.2_17.pdf

An updated FRP will be included in the 2019-20 Second Interim Financial Report in March 2020 which will include more detailed negotiable and non-negotiable items. As recognized by the Audit, the majority of the FRP involves changes to District represented employees' health care contributions, with the largest portion of that from certificated employees. The District electronically issued its proposal related to limiting healthcare costs and increasing employee OPEB contributions to SCTA on August 2, 2019.

The District filed for an impasse determination from the Public Employment Relations Board (PERB) on December 20, 2019, and again on January 13, 2020, thereby following the statutory process for attempting to move negotiations forward when there is a stalemate as recognized by the Audit. And, while those impasse applications were declined by PERB, we are pleased that there may be some positive developments for commencing negotiations with SCTA. While we would have preferred to begin this critical work this month, we look forward to beginning negotiations on March 3, 2020. See 3 Audit update letters.

The District has, and will continue to, base its FRP and its negotiation proposals on the latest relevant data related to projected ongoing expenditures and potential reductions, including changes to health care contributions.

California State Auditor's Assessment of 60-Day Status: Pending

We look forward to reviewing the district's updated fiscal recovery plan. When considering efforts it needs to take to address its financial condition, we would remind the district to consider if the actions it takes will be sufficient so that in future years it does not fall back into a financial crisis as we show in Figure 9 on page 35 the audit report.

Recommendation #7 To: Sacramento City Unified School District

To address its current financial problems, Sacramento Unified should do the following:

Revise its multiyear projections and update them at least quarterly until it has taken action that would cause it to no longer project insolvency. It should disclose these projections to the board.

Annual Follow-Up Agency Response From October 2022

Fully Implemented. All interim reports and fiscal updates are on the website in the board documents and include up-to-date multi-year projections. https://www.scusd.edu/budgets-financial-reports

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

We have cleared this recommendation because the district has regularly prepared multi-year projections in its most recent interim financial reports and budget documents. However, it also needs to fully address our related recommendation (recommendation #8) regarding developing and publishing a methodology for these projections.

Annual Follow-Up Agency Response From October 2021

The Business Department continues to frequently revise and present to the Board its multiyear projections (MYP) at least quarterly pursuant to Education Code requirements.

On September 15, 2021, the Sacramento County of Education (SCOE) issued its 2021-22 Adopted Budget Conditional Approval letter. The 2021-22 Adopted Budget has been conditionally approved and the District must meet various directives and timelines as provided by SCOE. Indeed, the District is required to submit a Board approved FRP plan to the County Superintendent and take any immediate actions needed to implement the plan no later than December 15, 2021. See Attachment 4.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The District continues to frequently revise and present to the Board its multiyear projections at least quarterly pursuant to Education Code requirements. Recently, due to the District's 2020-21 Adopted Budget disapproval by Sacramento County Office of Education (SCOE), the District was required to present a revised budget for adoption. At the October 1, 2020, Board Meeting, District CBO Rose Ramos presented the District's Revised Budget, including an updated cash flow at item 9.2. https://www.scusd.edu/board-education-meeting/board-education-meeting-83.

SCOE disapproved the revised budget due to the District not meeting the 2% minimum required budget reserve in all years and significant cash flow challenges. Accordingly, District staff has prepared the Fiscal Recovery Plan to address its serious fiscal needs. The most current updated budget information will be provided with the District's First Interim Report on December 10, 2020. https://www.scusd.edu/sites/main/files/file-attachments/9.2_item_0.pdf

As previously outlined in the 60 day and 6 month updates, the District is required to present numerous interim and annual budget updates and reports including projections while its budget remains in disapproved or negative status pursuant to the Education Code.

California State Auditor's Assessment of 1-Year Status: Pending

Although the district has regularly prepared multi-year projections in its most recent interim financial reports and budget documents, as we have previously stated, it needs to address our related recommendation (recommendation #8) regarding developing and publishing a methodology for these projections, including disclosing its assumptions and rationale used to estimate changes in its revenue and expenses. A clear and thorough methodology for these projections is critical to the district's financial planning. Further, the district must disclose this methodology and regularly update its projections to provide better information to the public about its financial condition, particularly while the district projects insolvency.

6-Month Agency Response

The District has prepared revised multi-year projections and presented them to the Board at the following meetings: 2/6/20, 4/2/20, 5/7/20 and 5/21/20. These multi-year projections reflected the impact of developing State Budget information. The District is also preparing the 2020-21 budget which will include revised multi-year projections and will be presented at the 6/18/20 Board Meeting. The 2019-2020 budget information, including interim reports are found at: https://www.scusd.edu/2019-2020-fiscal-year

California State Auditor's Assessment of 6-Month Status: Pending

Although the district has regularly prepared multi-year projections in its most recent interim financial reports and budget documents, it needs to address our related recommendation (recommendation #8) regarding developing and publishing a methodology for these projections, including disclosing its assumptions and rationale used to estimate changes in its revenue and expenses. A clear and thorough methodology for these projections is critical to the district's financial planning. Further, the district must disclose this methodology and regularly update its projections to provide better information to the public about its financial condition, particularly while the district projects insolvency.

60-Day Agency Response

With the Education Code requirements that correspond with a Disapproved budget and Negative budget certification, the District must provide three interim budget reports in December, March, and May, as well as its adopted budget in June. In addition, due to SCOE disapproving the District's budget because of its structural deficit and projected future negative balance, the District was required to additionally submit and present a Revised adopted Budget at the board meeting on October 3, 2019. (Board item 9.1 https://www.scusd.edu/board-meetings; SCOE letter 10/10/19). As long as the District's budget results in disapproved and negative status, it will continue to be required to submit the frequent budget updates and reports.

California State Auditor's Assessment of 60-Day Status: Pending

Going forward, we expect to see evidence from the Sacramento City Unified School District that it is regularly updating its multiyear projections to provide timely information to its stakeholders.

Recommendation #8 To: Sacramento City Unified School District

To address its current financial problems, Sacramento Unified should do the following:

The district should adopt and disclose publicly a multiyear projection methodology. This methodology should disclose the assumptions and rationale used to estimate changes in salaries, benefits, contributions, and LCFF revenue—including changes in enrollment and the source and reliability of the data used to make these projections.

Annual Follow-Up Agency Response From September 2023

See the budget assumptions on the board adoption executive summary. https://www.scusd.edu/sites/main/files/file-attachments/june_22_2023_amended_agenda_reduced_1.pdf The executive summary includes a description of federal, state and local revenue and expenditure assumptions used to develop the budget and multi-year projections. The budget methodology outlined within the executive summary includes a comprehensive budget development process that utilizes enrollment projections to develop baseline staffing allocations by school site and department. The next step of the budget development process includes providing budget allocations and factors for each school site by grade span for administrators to plan their budgets. Next, the budget department, in conjunction with human resources, meets with every school site and department leader to review and finalize staffing and budget projections for the forthcoming budget year. The district then uses data from the staffing and budget projections combined with assumptions from Federal, State and Local sources to project revenues and expenditures for the budget year and two subsequent years. The District has also created a position control manager position to continuously monitor, reconcile, analyze and project positions throughout the district and ensure alignment between budget and human resources. Additionally, the budget is developed in accordance with standards and criteria for fiscal accountability as set forth by the State Board of Education and is presented and approved by June 30th for the following fiscal year. The district also relies upon the School Services of California dashboard and the Common Message published by the California County Superintendents Business and Administration Services Committee.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

As we have previously noted, although the recent interim financial reports and budget documents include elements considered when developing multi-year projections, Sacramento Unified needs to develop and publish a methodology for these projections, including the rationale used to estimate changes in its revenue and expenses and the source and reliability of the data used to make these projections. A clear and thorough methodology for these projections is critical to the district's financial planning. Further, the district must disclose this methodology to provide better information to the public about its financial condition.

Annual Follow-Up Agency Response From October 2022

See the budget assumptions on the board adoption executive summary. https://www.scusd.edu/sites/main/files/file-attachments/10.2_item__2022-23_adopted_budget_scusd_06.23.22.pdf?1659550307

The executive summary includes a description of federal, state and local revenue and expenditure assumptions used to develop the budget and multi-year projections. Additionally, a description of one time funds and their uses is included within the budget report. The budget methodology outlined within the executive summary includes a comprehensive budget development process that utilizes enrollment projections to develop baseline staffing allocations by school site and department. The budget department then works closely with human resources and school sites and departments to make additional staffing adjustments to meet programmatic needs. The district then uses data from the staffing projections combined with assumptions from Federal, State and Local sources to project revenues and expenditures for the budget year and two subsequent years. Additionally, the budget is developed in accordance with standards and criteria for fiscal accountability as set forth by the State Board of Education and is presented and approved by June 30th for the following fiscal year.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Although the recent interim financial reports and budget documents include elements considered when developing multi-year projections, Sacramento Unified needs to develop and publish a methodology for these projections, including the rationale used to estimate changes in its revenue and expenses and the source and reliability of the data used to make these projections. A clear and thorough methodology for these projections is critical to the district's financial planning. Further, the district must disclose this methodology to provide better information to the public about its financial condition.

Annual Follow-Up Agency Response From October 2021

The Business Department has obtained a template for budget assumptions and methodologies from a neighboring district and based on that model, is working to prepare a formal procedural document for the District that is consistent with its policies and practices. The District expects that this work will continue and has a goal of completing the document by February 2022 for the 2022-23 budget development cycle.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The Business Department continues to gather resources and has obtained a template of a multi-year projection methodology from a neighboring district. The team is working to prepare a draft MYP protocols/procedures document for the District consistent with best practices. We expect that this work will continue with a goal toward completing same by February of 2021 before the Second Interim Budget Update is presented to the Board in March of 2021.

California State Auditor's Assessment of 1-Year Status: Pending

At its six month response, we were concerned that Sacramento Unified planned to take until September 2020 to develop a methodology to project its revenue and expenditures while still projecting insolvency. The district now anticipates that it will complete this work by February 2021. Because the pending insolvency has such a large potential impact on the district, we believe that it is imperative that the district develop and publish a methodology as soon as possible to improve its financial planning and help its community and stakeholders better understand the problems facing the district and the need for swift action.

6-Month Agency Response

The MYP Budget Assumptions can be found in the District's fiscal interim reports. The District is developing a methodology for the assumptions and plans to have a draft completed by September 2020. https://www.scusd.edu/2019-2020-fiscal-year

California State Auditor's Assessment of 6-Month Status: Pending

We are troubled that the district plans to take nine months to develop a draft methodology while still projecting insolvency. According to its proposed fiscal year 2020-21 budget, it currently projects to face significant cash challenges as soon as February 2021. Because the pending insolvency has such a large potential impact on the district, we believe that it is imperative that the district develop and publish a methodology sooner to improve its financial planning and help its community and stakeholders better understand the problems facing the district and the need for swift action.

60-Day Agency Response

The District agrees with the recommended budget development improvements and with the recent hiring of a Budget Director, the District will work on a plan to implement for the upcoming 2020-21 budget development cycle.

The District is improving the disclosure of assumptions used for the multi-year projection to be included in the Second Interim Budget report to the Board in March 2020. The District MYP uses the assumptions provided by School Services of California as well as information from Federal, State and local agencies. Additionally, the table of assumptions may include other items that are specific to the District and that may have a significant impact on the budget and multi-year projections. A few examples of District specific assumptions may include major changes to: vendor rates, compensation changes other than step and column, one-time funds and expenditures and long term commitments. MYP Budget Assumptions Document to follow.

California State Auditor's Assessment of 60-Day Status: Pending

The district provided a draft of an updated multiyear projection assumption disclosure. In developing its multiyear projection methodology and disclosure, it will be important for the district to explain clearly why it is making certain assumptions to increase transparency and trust in its projections.

Recommendation #9 To: Sacramento City Unified School District

To address its current financial problems, Sacramento Unified should do the following:

Before it imposes an agreement on its teachers union or accepts state assistance, the district should publicly disclose the likely effects that such actions will have on the district's students, faculty, and the community, and its plans to address these effects.

Annual Follow-Up Agency Response From October 2022

The district's budget has been conditionally approved and there is no plan to seek state assistance or impose terms. The district reached agreements with labor partners in 2022 and complied with all AB 1200 disclosure requirements. https://www.scusd.edu/board-education-meeting/board-education-meeting-118

SCOE 2022-23 Budget Conditional Approval Letter:

https://www.scusd.edu/sites/main/files/file-attachments/scoe_letter_9-15-22_re_2022-23_adopted_budget_report.pdf?1664386988

California State Auditor's Assessment of Annual Follow-Up Status: Resolved

Annual Follow-Up Agency Response From October 2021

Currently, the Business Department District cannot fully implement this recommendation until negotiations and the related processes with its labor partners are exhausted. The impact of these negotiations will have to be fully evaluated thereafter in order to clearly inform the public. Accordingly, the District plans to disclose the fiscal changes to the public and its plans to address the same following its evaluation as required by through the Assembly Bill 1200, legislation passed in 1991, that defined a system of fiscal accountability for school districts and county offices of education to prevent bankruptcy. The law requires districts to do multiyear financial projections; identify sources of funding for substantial cost increases, such as employee raises; and make public the cost implications of such increases before approving employee contracts. County offices review district budgets, and the state reviews countywide school districts.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The District agrees that before it would impose terms or accept state assistance it would publicly disclose the impacts of such upon District students, faculty and community and the plans to address same. It is not possible to fully implement this recommendation unless negotiations are exhausted and the impasse procedures have taken place through PERB or state assistance is triggered. The impacts of these scenarios will have to be fully evaluated at that time given the circumstances involved in order to clearly inform the public of these consequences.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The District agrees that before it would impose terms or accept state assistance it would publicly disclose the impacts of such upon District students, faculty and community and the plans to address same.

California State Auditor's Assessment of 6-Month Status: Pending

At its May 21, 2020 board meeting, a speaker from the Sacramento County Office of Education indicated that it had begun working with a state legislator to draft legislation needed for the district to accept state assistance. As of June 2020, the district has not formally requested an emergency loan from the State. In our report, we discussed the negative repercussions of accepting state assistance, including fewer funds available for student education. Therefore, before the district decides to request state assistance, the district should publicly disclose the likely effect it will have on the district's students, faculty, and the community, and the district's plans to address these effects.

60-Day Agency Response

The District agrees that before it would impose terms or accept state assistance it would publicly disclose the impacts of such upon District students, faculty and community and the plans to address same.

It is not possible to fully implement this recommendation unless negotiations are exhausted and the impasse procedures have taken place through PERB or state assistance is triggered. The impacts of these scenarios will have to be fully evaluated at that time given the circumstances involved in order to clearly inform the public of these consequences.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #10 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Have the board adopt a budget methodology, including guidance on the use of one-time funds, the use and maintenance of district reserves, and the maintenance of a balanced budget. The methodology should use the Government Finance Officers Association's best practices as a guide and should address at least the following areas:

Including administrators from different divisions of Sacramento Unified into the budget development process to help ensure the accuracy of projections.

Establishing criteria and measures for success in the budget process, such as whether budget decisions were made with adequate input and deliberation and whether the budget was balanced without using reserves or one-time revenues for ongoing expenditures.

Developing and adhering to a multiyear funding budget plan, with the goal of realigning resources where necessary to fund ongoing expenses with ongoing revenue.

Conducting an analysis of variances in budgeted and actual revenues and expenditures at each interim reporting period. Sacramento Unified should then use this information to inform its estimates for the upcoming fiscal year's budget.

Annual Follow-Up Agency Response From September 2023

In addition to its budgeting processes on the use of one-time funds, the District also continuously monitors revenue and expenditure trend data to revise its budget and prepare budget projections moving forward. As part of the budgeting process, the budget team continuously reviews budget versus expenditure variances and revises the budget for the current year interim reports as well as informing budgeting adjustments for multi-year projections. Additionally, in order to ensure adequate input is incorporated within the budget, the budget team meets in conjunction with the human resources team with every school site and department leader to make sure needs are met and staffing projections are finalized. The budget team also works closely with the executive leadership team to realign resources as necessary to support single and multi-year district initiatives. The District has also created a position control manager position to continuously monitor, reconcile, analyze and project positions throughout the district and ensure alignment between budget and human resources. The district also relies upon the School Services of California dashboard and the Common Message published by the California County Superintendents Business and Administration Services Committee.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

SCUSD has yet to demonstrate that it has established criteria and measures for success in its budget process. To fully implement this recommendation, we would expect that SCUSD would develop acceptable levels of variation in its budgeted expenditures and investigate variances that exceed those levels to improve its budgets going forward.

Annual Follow-Up Agency Response From October 2022

See Board Policy 3100 on use of One-time funds and increased fund balance reserves to mitigate against deficits. https://www.scusd.edu/board-policies

See also use of one-time funds table included within the adopted budget executive summary. https://www.scusd.edu/2022-2023-fiscal-year

One time funds are used to fund one-time purchases and temporary positions throughout the district. As a part of the ongoing budget development and budget revision processes, the district analyzes one-time expenditures and eliminates, reduces, or transfers expenditures to an ongoing funding source upon expiration of the one-time funding source.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

In addition to implementing a policy regarding the use of one-time funds, SCUSD also provided a budget development planning calendar, demonstrating that it was involving administrators from different divisions in the budget planning process.

However, SCUSD has yet to demonstrate that it has established criteria and measures for success in its budget process, nor has it demonstrated that it uses budget variances in planning for its future budgets.

Annual Follow-Up Agency Response From October 2021

On February 18, 2021, the Budget Department brought to the Board the proposed revised Board Policy 3100 (Reserves and Use of One-Time Funds), which was approved. See https://www.scusd.edu/sites/main/files/file-attachments/7.3_item.pdf. As such, the 2021-22 adopted budget and 2020-21 unaudited actuals include the schedule of one-time funds. See https://www.scusd.edu/sites/main/files/file-attachments/10.2_item_2.pdf and https://www.scusd.edu/sites/main/files/file-attachments/10.1_item_8.pdf.

The Business Department has obtained a template for budget assumptions and methodologies from a neighboring district and based on that model, is working to prepare a formal procedural document for the District that is consistent with its policies and practices. The District expects that this work will continue and has a goal of completing the document by February 2022 for the 2022-23 budget development cycle.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Sacramento Unified addressed part of our recommendation by adopting a policy regarding the use of one-time funding and detailing the use of those funds in its budget. The policy also requires that Sacramento Unified provide a rationale and a plan for supporting ongoing expenditures in cases where one-time funds are used for such purposes. As we discuss in our report, Sacramento Unified should not rely on one-time funds to support ongoing expenditures. To the extent that it refrains from doing so, it would have addressed this aspect of the recommendation.

1-Year Agency Response

The Budget Department will bring to the Board the proposed revised Board Policy 3100 that provides guidance on the appropriate use of one-time funds and the maintenance of a District reserve above the state required minimum at the second board meeting in January 2021.

California State Auditor's Assessment of 1-Year Status: Pending

Although appropriate guidance on the use of one-time funds and maintaining reserves is a portion of our recommendation, the total recommendation goes further to address the problematic budgeting practices we observed during our audit. To fully address this recommendation, the district will need to develop more thorough policies and guidance for use in developing its budget.

6-Month Agency Response

Subsequent to the February 6, 2020, Board Meeting, at the May 21, 2020, Board Meeting, the District brought forward a revised draft of the above Board Policy for a first reading. The Board provided comments and suggestions which staff will address and present at the June 18, 2020 Board Meeting. https://www.scusd.edu/sites/main/files/file-attachments/10.2_31.pdf

Beginning in the spring of 2019, Fiscal and budget staff have been meeting regularly with the LCAP/SPSA Coordinator and Director of State and Federal Programs to review key issues in developing the LCAP and SPSA budget plans. These meetings have resulted in enhancements in LCFF supplemental and concentration reporting to ensure greater alignment between what is base versus supplemental. There is stronger collaboration on the reporting of LCAP variances to ensure that responses reflect the thinking of both the State and Federal team and fiscal services.

During the fall of 2019, a cross department team including the academic office, fiscal, human resources, instructional assistant superintendents, guidance and counseling, master scheduling, technology, and continuous improvement met to redesign the district's one stop staffing and resource allocation process to ensure greater alignment and integration of key discuss processes such as core course pre-registration and SPSA action planning/budgeting. The team has created an integrated planning calendar to ensure that all resource allocation decisions are framed through a financial and student centered return on investment. The work on the additional items of this recommendation will continue into the summer and fall of 2020.

California State Auditor's Assessment of 6-Month Status: Pending

We look forward to Sacramento Unified adopting policies that would address our recommendations regarding the use of one-time funds and maintenance of district reserves and we will review its revised budget policies when the district completes them.

60-Day Agency Response

The District agrees with the recommended budget development improvements and with the recent hiring of a Budget Director, the District will work on a plan to implement for the upcoming 2020-21 budget development cycle.

At the February 6, 2020, Board Meeting, the District brought forward a first draft of a revised Budget Policy that includes guidance on the use of One-Time Funds and the maintenance of a district reserve above the State Required Minimum. https://www.scusd.edu/sites/main/files/file-attachments/combined_2-6-20.pdf

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #11 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Develop a long-term funding plan to address its retiree health benefits liability. The plan should include appropriate action necessary to ensure the district will be able to meet its obligations to its employees and retirees.

Annual Follow-Up Agency Response From September 2023

The District is funding at the rates specified in order to maximize the return earnings and has reduced the liability from $700M to $415M as of fiscal year June 30, 2022 and is finalizing the OPEB report for fiscal year 2022-23. The district plans to continue to fund at the actuarially determined contribution level to fund the OPEB liability which includes fully funding all future costs of projected benefits.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

The district reports that it is contributing the actuarially determined contribution toward its retiree health benefit costs each year, the minimum amount it should pay toward those obligations. However, the district's actuarial report as of June 30, 2022, shows that projected annual benefit payments are expected to double within the next 15 years. We recommended that the district develop a long-term plan to address its growing retiree health benefit costs to minimize the impact such costs have on the district's budget and its ability to provide educational services to its students. By failing to develop a plan to address these costs, the district risks not being able to meet its obligations in the future.

Annual Follow-Up Agency Response From October 2022

The District is funding at the rates specified in order to maximize the return earnings and has reduced the liability from $700M to $415M as of fiscal year June 30, 2022. See the latest OPEB report. For fiscal year 2021-22, the Actuarially Determined Contribution Amount was $28,427,786 and the district contributed $28,457,590, or 100.10%. The district plans to continue to fund at the actuarially determined contribution level.

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

The district reports that it is contributing the actuarially determined contribution toward its retiree health benefit costs each year, the minimum amount it should pay toward those obligations. However, the district's actuarial report shows that projected annual benefit payments are expected to double over the next 15 years. We recommended that the district develop a long-term plan to address its growing retiree health benefit costs to minimize the impact such costs have on the district's budget and its ability to provide educational services to its students. By failing to develop a plan to address these costs, the district risks not being able to meet its obligations in the future.

Annual Follow-Up Agency Response From October 2021

The Budget Department is in the process of finalizing the OPEB report for 2020-2021.

The department and staff responsible are Superintendent Aguilar and Chief Business Officer Rose Ramos.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

As we noted in our last assessment, to fully address the recommendation, the district will need to develop and adopt a plan detailing how it will address its retiree health benefits liability. Such a plan will allow the district's board and stakeholders to hold the district accountable for its efforts to reduce its liability.

1-Year Agency Response

The District has passed a proposal to SCTA to increase the employee contribution from $20 per month to 2% of employee salary - a major increase to address the projected shortfall. In addition, due to changes in assumptions since the State Auditor Report was issued, the OPEB liability decreased substantially from the $726 million outlined in the State Audit. Due to additional changes in the assumptions of the most recent Actuarial Report dated September 3, 2020, however, the District's total Net OPEB liability increased by $41M year over year from $526M to $567M. The discount rate used to calculate the District's total liabilities decreased from 4.25% to 3.90% which accounted for the majority of the increase in the Net OPEB liability. For the fiscal year ending 2020, SCUSD contributed $26.7M towards its Net OPEB liability which is $4.1M under the Actuarially Determined Contribution (ADC) of $30.8M necessary to fund OPEB liabilities (a decrease from the $8.7M gap outlined in the State Audit). The District will review options in addition to the proposed increased employee contribution to fully fund at the ADC level which, over a five year span, will substantially decrease the Net OPEB liability.

California State Auditor's Assessment of 1-Year Status: Pending

Although the steps discussed above could have an impact on the district's retiree health benefits liability, to fully address the recommendation, the district will need to develop and adopt a plan detailing how it will address its liability. Such a plan will allow the district's board and stakeholders to hold the district accountable for its efforts to reduce its liability.

6-Month Agency Response

The District is developing its plan to establish the OPEB commission, including identifying qualified individuals to serve on a "Blue Ribbon Commission" to evaluate the District's strategies and make recommendations aimed at how to best meet the District's OPEB obligations. The expectation is that individuals will be selected in the coming weeks in order to form the OPEB Commission.

Negotiations also continue with labor partners regarding increasing employee contributions to OPEB and the impact of same on the budget.

California State Auditor's Assessment of 6-Month Status: Pending

As we note in our report, Sacramento Unified has not developed a plan to address its large retiree health benefit liability, which impacts the minimum amount the district has to contribute each year to pay for current and future retiree health benefits. Therefore, any plan developed by the OPEB commission must be integrated into the district's fiscal recovery plan.

60-Day Agency Response

The District Business Office is reviewing its OPEB liability and potential funding strategies, including an evaluation of District and employee contribution amounts, fully funding the future cost for current employees, and the amortization of the unfunded liability. This includes the District's August 2, 2019 proposal to SCTA Article 13, to increase to SCTA employee OPEB contributions to a higher percentage of their salaries.

Currently, the District contributes a fixed amount per current employee that pays for current year retiree health premiums and funds our California Employees Retiree Benefit Trust account. All employee contributions are invested in the trust. The current trust value is nearly $93.5 million, which includes over $20 million in interest earnings since 2012, over $6 million in the current fiscal year. The trust earnings will eventually fund annual costs, alleviating the District contribution from current operating funds.

The District intends to form an OPEB commission to evaluate the overall plan.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #12 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Adopt a policy that guides staff on steps they should take to ensure that special education expenditures are cost-effective. The policy should include consideration of options for offering services, including those provided by district staff or by contracted providers.

Annual Follow-Up Agency Response From October 2022

The State Auditor expressed concern with the costs for the District's use of contracted services for students with special needs, especially residential placements. Federal and state law require services be provided to students with disabilities through the IEP process and students shall be placed in the least restrictive environment which enables them to make appropriate progress based on assessed needs. The SPED Department's changes include revising and adopting critical policies concerning how it provides services, including BP/AR 6159 governing the Individualized Education Process. Most specifically on point to this recommendation is BP 6159.2, adopted by the Board on December 16, 2021, addressing when non-public, non-sectarian schools and agencies may be used by the District to meet the needs of students consistent with the law. The policy specifically provides that:

"No district student shall be placed in a nonpublic, nonsectarian school or agency unless the student's individualized education program (IEP) team, which shall include the students parent(s)/guardians(s), has determined that an appropriate public education alternative does not exist and that the nonpublic, nonsectarian school or agency placement is appropriate for the student, in light of the students' unique circumstances," and that, "Within 15 days of any decision for an out-of-state placement, the student's IEP team shall submit to the Superintendent of Public Instruction a report with information about the services provided by the out-of-state program, the related costs, and the district's efforts to locate an appropriate public school or nonpublic nonsectarian school or agency within California. (Education Code 56365)"

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2021

On February 18, 2021, the Budget Department brought to the Board the proposed revised Board Policy 3100 (Reserves and Use of One-Time Funds), which was approved. See https://www.scusd.edu/sites/main/files/file-attachments/7.3_item.pdf.

The Special Education Department is working on updating Board Policy and Administrative Regulation 3312 (Contracts) and plans to bring an updated version to the Board for its approval in the 2021-22 fiscal year.

Additionally, the Special Education Department is working with the Human Resources Department to update job descriptions to confirm alignment with current laws and regulations, best practices, and level of staffing needs within the District.

The department and staff responsible are Superintendent Aguilar and Dr. Sadie Hedegard Assistant Superintendent Special Education, Innovation, and Learning.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

The District's work with outside entities such as CCEE and retained experts to review its Special Education Department is continuing. The Special Education Department has begun the work on restructuring to meet the challenges the District faces in providing FAPE to its students with disabilities in an efficient manner.

The COVID-19 related school closures and distance learning has presented many additional challenges in this work, not the least of which is providing legally required assessments and services via distance learning exclusively while in-person services continue to be discussed with labor partners. The Department expects to continue its department-wide work to retool including updating policies related to provision of services in a cost-effective manner, including BP/AR 6159.2 which clarify that only when the district is unable to provide direct special education and/or related services to students with disabilities, the Governing Board may enter into a contract with a nonpublic, nonsectarian school or agency to meet a student's individualized education program (IEP) needs.

These policies will be evaluated together with the SPED department-wide reviews described in previous updates for a comprehensive SPED improvement plan that is expected to be presented to the Board in 2021.

California State Auditor's Assessment of 1-Year Status: Pending

6-Month Agency Response

The District has several policies and procedures which are relevant to the utilization of cost-effective practices in special education. It is important to ensure that these policies remain compliant with the District's legal obligation to design special education programs in response to individual student need and not solely based on cost. In an effort to balance these goals, a complete review of the District's policies was completed and are reflected in the proposed changes to policies and regulations that the District is providing to the Auditor, including BP/AR 6159 and 6159.2 which clarify that only when the district is unable to provide direct special education and/or related services to students with disabilities, may it enter into a contract with a nonpublic, nonsectarian school or agency to meet the student's IEP needs. In AR 6159, language is added to reference the special education procedural manual which provides guidance to staff on the utilization of various cost-effective strategies. Language is also included regarding process to ensure due diligence for determining the necessity and regular evaluation of such placements. The District will also consider the addition of a Board Policy addressing Least Restrictive Environment, with the inclusion of language aimed at the utilization of cost-effective practices.

These updated policies will be evaluated together with the SPED department-wide reviews described at the 60 day update for a comprehensive SPED improvement plan that is expected to be presented to the Board in fall 2020.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

SPED Policy is currently being reviewed and developed to provide greater guidance on the consideration of cost friendly alternatives for providing FAPE to students, including regarding mental health resources available from outside entities and relating to residential placements.

The District is also currently undergoing a broader Special Education Department review with the assistance of CCEE, and anticipates additional outside experts also being utilized by the District in the coming months that will further evaluate the effectiveness and equity of the District's SPED services.

Currently there is a focus on the development and implementation of a strong multi-tiered system of support ("MTSS") which the District believes will strengthen classroom and site based teaching/learning and interventions for students whereby over time referrals for special education services can decrease due to student need being met prior to a referral for services.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #13 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Annually apply for available state funding for its extraordinary special education costs.

60-Day Agency Response

2018-19 Claim submitted. Expected CDE notification date is February 20, 2020.

In October of each year, cumulative expenses for each student placed in a Residential Treatment Center whose expenses meet the year threshold set by CDE, will be submitted to CDE for reimbursement through the P-1 software. Accompanying paper documentation verifying the expenses and payments made will be sent to CDE as required in order to be considered for the Extraordinary Cost Pool. Currently the due date to CDE is November, 30, 2020; there is current trailer bill language pending for the upcoming budget which moves this deadline forward to October 31, 2020. Documents to follow.

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Sacramento Unified provided interdepartmental procedures assigning responsibilities to its special education and budget departments to ensure that the district applies for extraordinary special education costs each year.

Recommendation #14 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Develop and adopt a succession plan that ensures that it has staff who have the training and knowledge necessary to assume critical roles in the case of turnover.

Annual Follow-Up Agency Response From September 2023

Sac City launched initiatives to support staff to ensure they have the training and knowledge in critical areas. In the fall of 2022, SCUSD, SCOE and National University created the Sac City Unified Leadership Program (SCULP). The program--to "grow leaders from within" the District--offered certificated aspiring administrators the training in pursuit of their credential. Additionally, the SCULP 2.0, was designed to retain administrators. This experience is paid for by the District and the administrators agree to remain in the District for 6 years. The district also prepared a professional learning series that offered monthly Just in Time sessions to site leaders. These innovative programs illustrate how SCUSD is working towards a succession-based "grow from within" model that aims to educate, train, empower, and retain a new cohort of aspiring leaders each year who are poised to assume critical roles in the event of staff turnover.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

As we have noted in prior updates, Sacramento City Unified School District has taken some steps to help reduce turnover, but it has not developed a succession plan as we recommended. The purpose of an organization-wide succession plan is to ensure that the district will have staff with adequate training and knowledge in the event of turnover. The efforts the district have taken so far have focused on school site staff and not on key administrators, such as the superintendent or department-level directors.

Annual Follow-Up Agency Response From October 2022

Our professional learning opportunities provided throughout the district have been a platform for administrators to gain access to the tools and knowledge needed to perform their positions and ensure individuals are ready in the case of turnover. Specifically our series has connected our administrators with various departments to learn more about systems like; Infinite Campus (our student information system), ESCAPE (our employee management system), Frontline (our system to request substitutes) and our budget managing system also found in ESCAPE. Other professional learning opportunities are grounded in other job related tasks. We have provided this training across the district to administrators, and also support our teacher leaders through our SCULP program and mentorship. The newly formed People and Culture Talent Management Division of Human Resources' mission is to seek out and recruit the most qualified, talented, diverse people to not just "fill" the open positions, but to grow them and to grow those around them. Recruiting the right people, for the right position and placing them at the right position is paramount to building our inclusive, equitable, diverse, inviting, healthy culture that allows our employees to thrive.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Although the district has developed some items and activities to mitigate the impacts of staff turnover, it has still not developed a succession plan, as we recommend. In its 2021 update, the district pointed to checklists it had developed to help transition principals. The activities described here may be helpful to the district but are not a replacement for a succession plan that would help ensure that the district has staff with necessary training and knowledge in the event of staff turnover.

Annual Follow-Up Agency Response From October 2021

The Human Resources Department has implemented the succession planning process for all management positions, including those in the central office. The implemented process includes transition checklists and documents, electronic welcomes and introductions, regular communications, offerings of trainings, enhanced automations, one-one check-ins, and Google resources.

Additionally, the District is engaging in cross-training efforts to enhance the sustainability of processes and has developed and implemented an inter-departmental team structure aimed at ensuring enhanced knowledge building and inter-department functionality.

The department and staff responsible are Superintendent Aguilar and Chief Human Resources Officer Cancy McArn.

California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented

Sacramento Unified provided evidence that one of its divisions has completed a succession plan. It states that the other divisions' plans are in progress.

1-Year Agency Response

The Transition Planning Process has been developed. See Procedures document for each site/principal to be completed upon their resignation/retirement. The Human Resources Department meets with the departing principal or supervisor to review and facilitate transition of knowledge. Elements of the plan concerning updated department priorities and manuals require additional work and adoption.

California State Auditor's Assessment of 1-Year Status: Pending

Although Sacramento Unified has developed forms to be completed by principals leaving the district, it has not developed a succession plan as we recommended. As we describe in our report, a succession plan is a proactive step taken to ensure that an agency has a talented and competent workforce and that the agency can mitigate the loss of institutional knowledge when it experiences attrition.

6-Month Agency Response

HR consulted with other districts regarding these processes. The process for "Succession Planning" includes reaching out to each department to ascertain: 1) If they have an existing department manual; 2) Request updates as needed; 3) Standardize manuals to have consistency. HR will obtain the description of key functions for each department. Ongoing communication and an example manual to support each department manager will be issued by July 1, 2020. However, this work has already started with gathering data, including organization charts from each department. HR will implement monthly interdepartmental meetings with all stakeholders to help support managers in HR/District policies, Ed Code & contract management.

Concerning Exit Plans, HR is revising the current exit process to incorporate a project status/task document to help support the new administrator hired to fill the role.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

HR will conduct a search for effective succession plans by reaching out to neighboring school districts as well as partner agencies (ACSA, Council of Great City Schools, Central Valley Personnel Study Group, etc.).

HR will also work with appropriate stakeholders to establish a mandatory exit process for all administrators, both site and central. Training and communication would follow.

All sites/departments will be required to submit an annual list of top priorities/projects for the site/department, along with their department reporting structure. Communication would follow.

Each department will create a department manual. Training and communication would follow.

California State Auditor's Assessment of 60-Day Status: Pending

Recommendation #15 To: Sacramento City Unified School District

To prevent a similar fiscal crisis in the future, Sacramento Unified should do the following by July 2020:

Develop effective employee orientation programs, including mentorship, to allow incoming leaders to better adapt to the organization's structure and culture.

Annual Follow-Up Agency Response From September 2023

The district implemented initiatives to support leaders in adapting to the organization's structure and culture. Key programs include individualized support based on the needs of leaders. Included but not limited to, are the following: 1:1 orientation for new leaders, continued Fall meetings leaders to discuss relevant needs, additionally the newly developed HR University has served as a bank of resources. HR University is a Google classroom that is a one-stop resource bank of commonly used resources for leaders. A highlight for administrators is the ongoing offering of office hours led by several departments, each department sets aside time weekly to host open drop-in sessions for leaders to come and ask questions and get support needed. Principal/Mentor pairings were implemented as a resource.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2022

The District has established a mentoring support system, the system consists of mentor networks within our district and cohorts are organized by Instructional Assistant Superintendent areas of support. The newly formed People and Culture Talent Management Division of Human Resources' mission is to seek out and recruit the most qualified, talented, diverse people to not just "fill" the open positions, but to grow them and to grow those around them. Recruiting the right people, for the right position and placing them at the right position is paramount to building our inclusive, equitable, diverse, inviting, healthy culture that allows our employees to thrive.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The district has provided documentation showing that it has recently developed a formal mentorship program. We look forward to reviewing how it has implemented this program at our next annual follow-up.

Annual Follow-Up Agency Response From October 2021

The Human Resources Department has updated orientation processes for new employees that includes electronic welcomes and introductions and awareness of resources. An exit process for all administrators, both at sites and in the central office, has been established.

Additionally, all sites and departments are instructed to submit an annual list of top priorities and projects for their teams, along with their department reporting structure. Each department will also work to create a department manual.

Further, the District has invested in staff to build employee recognition and retention efforts.

The department and staff responsible are Superintendent Aguilar and Chief Human Resources Officer Cancy McArn.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

The activities that Sacramento Unified describes do not address the goal of the recommendation we made. For example, the documentation that Sacramento Unified provided did not include programs for mentoring new leaders. Our audit identified that Sacramento Unified had high turnover of key leadership positions and had not developed strategies to mitigate the impact of such turnover. To fully implement our recommendation, Sacramento Unified must develop an orientation program, including mentorship, for new leaders to help ensure they successfully integrate into the organization's culture.

1-Year Agency Response

The Human Resources Department has implemented a Transition Checklist for staff entering or leaving a new position. The department has also significantly updated its trainings for administration, engaged in school site and department check-in meetings, and continued efforts to enhance automated processes.

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Sacramento Unified provided a checklist for principals entering or leaving a position but not for other key management positions within the district. As we note in our report, it is important for the leaders of the organization to be introduced into the district's culture, particularly because it has experienced turnover in key management positions.

6-Month Agency Response

Successful implementation with two recently hired administrators. Due to COVID-19, HR has created an online New Employee Orientation system. HR has moved forward to create a virtual onboarding process, which was implemented 4/1/20. Administrator training will be implemented 7/1/20. New Administrator HR "meet and greets" was implemented 2/1/20.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

HR will conduct a search for effective new employee programs by reaching out to neighboring school districts as well as partner agencies (ACSA, Council of Great City Schools, Central Valley Personnel Study Group, etc.).

New Employee Orientations currently take place twice a month. This is mandatory for all administrators. Supporting documentation to follow.

Trainings for administrators are currently offered on a monthly basis.

New administrators will receive individualized meet-and-greet opportunities to assist in their transition to the District.

California State Auditor's Assessment of 60-Day Status: Pending

While Sacramento Unified offers new employee orientation and training for managers, we look forward to seeing how the district will combine new employee orientation and manager training with mentorship opportunities to ensure that new managers to the organization adapt to its culture and can be retained.

All Recommendations in 2019-108

Agency responses received are posted verbatim.