2025-108 California Community Colleges — Reserve Fund Oversight
Audit Scope and Objectives
The audit by the California State Auditor will provide independently developed and verified information related to oversight of the unrestricted general fund reserves in districts of the California Community Colleges. The audit’s scope will include, but not be limited to, the following activities:
- Review and evaluate the laws, rules, and regulations significant to the audit objectives.
- For a selection of five community college districts chosen for their diversity of geography and size, and Calbright College, do the following:
- Determine the account balances for the unrestricted general fund from fiscal years 2018-19 through 2024-25.
- Identify the anticipated year-end amount of the unrestricted general fund balance for fiscal year 2025-26.
- Determine the increase or decrease in the unrestricted general fund balance, and what percentage the reserve represented of the district’s total operating expenditures, each year for fiscal years 2018-19 through 2025-26.
- Determine whether the selected districts and Calbright College complied with the Chancellor’s Office’s guidelines for unrestricted general fund balances.
- If a district’s balance is less than the Chancellor’s Office’s guidelines, obtain the district’s justification for not complying with the guidelines.
- If a district maintains a large reserve, obtain the district’s justification for maintaining the large reserve.
- Identify and evaluate the Chancellor’s Office’s oversight of district reserves, including steps the Chancellor’s Office takes to review and validate districts’ reserves and ensure that districts responsibly manage and align spending of reserves with student and system needs.
- To the extent possible determine for the selected districts and Calbright College as it relates to their unrestricted general fund whether:
- Districts with high reserves also report budget constraints, staffing issues, or cuts.
- Districts opted to increase reserves at the expense of investments in instruction, infrastructure, or student support.
- There is any effect on student equity because of high reserves, particularly for low-income or underserved populations.
- There is any effect on a school’s credit rating because of a high reserve.
- The districts conducted any planning related to the impact of potential reductions in federal funding related to high reserve holdings.
- There is any effect on reported student outcomes related to high reserves.
- Review and assess any other issues that are significant to the audit.
