Report 2019-108 Recommendation 8 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 #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.

All Recommendations in 2019-108

Agency responses received are posted verbatim.