RE: Local Control Accountability Plans and Adopted Budget Fiscal Year

Transcription

1 Denis Fama President, Governing Board Millbrae Elementary School District 555 Richmond Drive Millbrae, CA RE: Local Control Accountability Plans and Adopted Budget Fiscal Year Dear Mr. Fama: In accordance with Education Code Section and 52070, the San Mateo County Superintendent of Schools has examined the Local Control Accountability Plans (LCAP) and the Adopted Budget of Millbrae Elementary School District (District) for fiscal year to determine compliance with the Criteria and Standards established by the California State Board of Education and to verify that the Adopted Budget includes expenditures necessary to implement the LCAP and allows the District to meet its financial obligations and multi-year commitments. On the basis of the county office review and analysis, the San Mateo County Office of Education has determined that the Budget and LCAP adopted by the Millbrae Elementary School District Governing Board on June 23, 2014 are consistent with the State-required criteria and standards and are therefore approved with the following concerns/comments: A. LOCAL CONTROL ACCOUNTABILITY PLAN School districts are required to develop, adopt, and annually update a three-year Local Control and Accountability Plan (LCAP), beginning on July 1, 2014, using a template adopted by the California State Board of Education. The LCAP requires the identification of goals, with its associated indicators of progress (metrics), for all students and for student subgroups as identified in EC The LCAP also requires that the district identify and fund specific actions to support the achievement of its LCAP goals for: a) all students, b) low income students c) English learners d) foster youth, and e) re-designated fluent English proficient students.

2 Page 2 Education Code Section 52070(d) provides that the County Superintendent of Schools shall approve a Local Control and Accountability Plan if the following criteria for approval are met: 1) Adherence to SBE Adopted Template The LCAP or annual update to the LCAP adheres to the template adopted by the SBE pursuant to EC ) Sufficient Expenditures in Budget to Implement LCAP The budget for the applicable fiscal year adopted by the governing board of the school district includes expenditures sufficient to implement the specific actions and strategies included in the LCAP adopted by the governing board of the school district, based on the projections of the costs included in the plan. 3) Adherence to SBE Expenditure Regulations The LCAP or annual update to the plan adheres to the expenditure requirements adopted pursuant to EC for funds apportioned on the basis of the number and concentration of unduplicated students pursuant to EC and LCAP REVIEW COMMENTS/FINDINGS: In alignment with the spirit of EC 52071, SMCOE reviewed the District s LCAP by template section. Below is a statement regarding the legal requirements of each template section, followed by a summary of SMCOE s observations of the District s LCAP. In addition, when appropriate, SMCOE has also provided technical assistance recommendations to the District intended to inform any updates or revisions that the District may deem necessary and appropriate. LCAP Section 1 Engagement EC 52052, 52063, and T5 CCR (SBE adopted template) require that the District provide for a meaningful process to engage parents, students, community, and other stakeholders in the development of the LCAP. The District-submitted LCAP describes extensively the process for stakeholder engagement in the development of the LCAP. In Section1 of the LCAP, the District provided an outline of the impact that the stakeholders engagement had on the LCAP. SMCOE offers no technical assistance recommendations on this section at this time. LCAP Section 2 Goals EC (c) (1) requires a description of the District s LCAP adopted goals for all students and each subgroup pursuant to EC Section 2 of the SBE adopted template requires that the District identify need(s); establish goals in alignment with the State Priorities (EC (d) (1-

3 Page 3 8)) and local initiatives; and establish the metric(s) to measure progress toward achievement of the LCAP goals for all students, as well as each subgroup pursuant to EC The District identified seven (7) LCAP goals and established metrics to measure progress over time. SMCOE recommends that, during the annual revision of the LCAP, the District revisit the metrics identified in EC and align them to its LCAP goals along with the locally identified indicators of success. LCAP Section 3A Actions, Services, and Expenditures for All Students EC (c) (2) requires that the District identify the specific actions to achieve the LCAP goals. EC requires the listing and description of expenditures to achieve the LCAP goals; including the enumeration of any actions for the LCAP year to correct deficiencies in regard to the State Priorities. Section 3A of the SBE adopted template requires that the district identify the specific actions, services, and expenditures to achieve the LCAP goals for ALL students. Section 3A of the District LCAP contains the actions, services, and expenditures associated with the implementation of the LCAP identified goals. SMCOE offers no technical assistance recommendations on this section at this time. LCAP Section 3B Actions, Services, and Expenditures for Target Students EC (c) (2) requires that the District identify the specific actions to achieve the LCAP goals. EC requires the listing and description of expenditures to achieve the LCAP goals; including the enumeration of any actions for the LCAP year to correct deficiencies in regard to the State Priorities. Section 3B of the SBE adopted template requires that the district identify the specific actions, services, and expenditures to achieve the LCAP goals for low-income students, English learners, foster youth, and re-designated English proficient students. In Section 3B, the District s LCAP provided information regarding the actions, services, and expenditures for redesignated fluent English proficient students, English learners, and low-income students. The SMCOE recommends further delineation of the services that will result in increased and improved services for all unduplicated students in its annual LCAP revision. LCAP Section 3C Spending Plan for Supplemental & Concentration Grant T5CCR (a) (5) requires that the District calculate the LCFF funds attributed to the number and concentration of low-income students, English learners, foster youth, and redesignated English learners (unduplicated students). The SBE adopted template requires that the district describe in section 3C of the LCAP how these funds, and other District funds, are going to be used in the LCAP year ( ) to support the achievement of the LCAP goals for these target student populations. The District has a total unduplicated pupil (Low Income, English Learner

4 Page 4 and Foster Youth) population of 896 that represents approximately 37% of the District s total enrollment as of October Considering that the District s unduplicated pupil percentage is below 55%, the District is not entitled to a concentration grant. In Section 3C of the LCAP, the District reported a calculated supplemental grant in the amount of $619,458 for the school year. In addition, the District described the use of the supplemental grant funds and the rationale for those uses. SMCOE offers no technical assistance recommendations on this section at this time. LCAP Section 3D Minimum Proportionality Requirement (MPP) T5 CCR requires for the District to demonstrate how the services provided in the LCAP year provide for increased/improved services to its unduplicated targeted student population(s) based on the calculated Minimum Proportionality Percentage (MPP). In Section 3D, the District reported a calculated MPP of 4.09% and indicated that the services described in Sections 3A and 3B of the LCAP include the increased support services for the District s 36% unduplicated student count. In the narrative for Section 3D, the District further details the additional services the District will provide to its unduplicated students and the teachers who serve them. SMCOE offers no technical assistance recommendations on this section at this time SMCOE LCAP Support and Next Steps: SMCOE is committed to continuing its support of each district s LCAP revisions, development, and improvement through a comprehensive array of services. The enclosed series of meetings and workshops are designed to support the District s LCAP development. SMCOE is looking forward to meeting with your staff at these meetings to further detail and support the implementation of the LCAP and its revision(s) for the school year. The SBE recently adopted permanent regulations for the LCFF and LCAP processes. Pursuant to EC , the SBE will adopt evaluation rubrics October 2015, and guidance for technical assistance will be delineated by the California Collaborative for Educational Excellence (CCEE) pursuant to EC If, based on the feedback provided in this letter the District should determine that substantial changes to the approved LCAP are necessary, those revisions must be approved using the required adoption process, including board approval. SMCOE staff will be available to provide technical assistance for revision and local Board re-approval of your district s LCAP.

5 Page 5 B. ADOPTED BUDGET Education Code Section requires the County Superintendent s Office to examine the Adopted Budget to determine if the district s budget complies with the standards and criteria established pursuant to Section 33127, allows the District to meet its financial obligations during the current fiscal year, and is consistent with a financial plan that will enable the District to satisfy its multi-year financial commitments. Beginning in , school districts are required to adopt a Local Control and Accountability Plan (LCAP) and demonstrate increased or additional support and services to identified student groups. The County Superintendent is required to determine whether the Adopted Budget includes the expenditures necessary to implement the LCAP or annual update to the LCAP pursuant to Education Code Section 52070(d). BUDGET REVIEW FINDINGS/COMMENTS: General Fund Budget Summary The Adopted Budget shows an operating deficit in the General Fund of approximately $693,000 but is projected to be reduced to a nominal amount in and fully eliminated in Federal Revenues are reduced in the budget year to eliminate prior year carryover balances. No new or additional funding for State Common Core Standards (CCS) Implementation is included in the budget year; however, remaining balance from prior year CCS funding is projected to be fully spent in the budget year and is included in the District s Local Control Accountability Plans (LCAP). Local Revenues are reduced in the budget year to remove one-time Peninsula Health Grant received in Below is a comparison of revenue and expenditure budgets in the General Fund for fiscal years and : General Fund Unrestricted/Restricted Estimated Actuals Adopted Budget A. Anticipated Revenues $19,452,372 $19,415,759 B. Proposed Expenditures 19,693,205 20,314,379 C. Excess (Deficiency) of Expenditures over Revenues (240,833) (898,620) D. Other Sources/Uses and Transfers 420, ,693 E. Total Increase (Decrease) in General Fund 179,214 (692,927) F. Ending Balance Unrestricted/Restricted $1,406, ,183 G. Ending Balance Unrestricted only $1,041,204 $713,183

6 Page 6 Total available reserve for fiscal year is approximately $681,000 or 3.34% of the total General Fund expenditures. The minimum State-recommended reserve level for the District s size is 3%. The District has sufficient budget in the General Fund to support and implement the actions and services included in the LCAP for the budget year. The funds identified as sources of funding for LCAP actions and services include LCFF State Aid, remaining balance from CCS prior year funding, donations from Millbrae Education Foundation and other federal and state grants. Cash Flow The District submitted its cash flow projections for and fiscal years with positive cash balance each month, except for the months of December 2014 and January through March The District does not plan to obtain Tax Revenue and Anticipation Notes (TRANs) or outside borrowings but has committed to continue to monitor cash balances and revise its projections as necessary. The cash flow projections for and assume zero deferral of State/LCFF funding apportionments. The State Enacted Budget does not eliminate deferrals of State principal apportionments; however, a trigger provision is included that if next year s May Revision budget reflects higher than anticipated revenues, additional apportionments may be made to fully eliminate deferrals by the end of the fiscal year. The County Superintendent urges the District to continue to implement best practices and monitor regularly its cash position to ensure payroll and other monthly obligations are met on a timely basis. Multi-Year Projections (MYP) The multi-year projection is one of the most important tools in determining the financial position of the district. In order to make multi-year projections, school districts rely on a variety of assumptions and sources of information available at the time of report preparation. The MYP incorporate the following key assumptions: Revenues: LCFF revenues are based on the LCFF gap funding rates posted on the Fiscal Crisis and Management Assistance Team (FCMAT) website at the time of budget adoption. No increase in average daily attendance (ADA) is projected. Flat funding is projected for Federal and State Revenues.

7 Page 7 Local Revenues for the subsequent two fiscal years do not include revenues projected to be funded in the budget year only such as the Peninsula Health Grant and other one-time donations. InterfundTransfers from Special Reserve Fund (Fund 17) to the General Fund are maintained at approximately the same level as the budget year. Expenditures: Salaries and benefits budget includes step and column adjustments for both certificated and classified employees. Restricted portion of the Salaries and Benefits budget that are funded from one-time sources are transferred to the Unrestricted General Fund. Other expenditure items funded by one-time revenue sources and carryover balances are eliminated in the subsequent two fiscal years projection. Within the General Fund, restricted and unrestricted programs are identified. Restricted funds are those that have spending limitations imposed by law or by resource providers. The Unrestricted portion of the General Fund is typically used in determining the true financial position of the district as these funds are not subject to external or legal constraints and can be used for any educational and operational purposes. The chart below shows the reserve levels and projected ending balance in the Unrestricted General Fund for the budget year and subsequent two fiscal years: Unrestricted General Fund Estimated Beginning Balance $1,041,204 $713,183 $694,288 Revenues & Other Financing Sources 13,888,984 15,050,857 15,458,036 Expenditures & Other Financing Uses 14,217,005 15,069,752 15,453,467 Net increase (Decrease) (328,021) (18,895) 4,569 Projected Ending Balance Fund 01 $713,183 $694,288 $698,857 Available Reserves Percentage Per MYP 3.34% 3.06% 3.30% The operating deficits in the Unrestricted General Fund are being addressed by a yearly transfer of approximately $265,000 from Fund 17-Special Reserve Fund Other Than Capital Outlay Projects to the General Fund. The projected ending balance in Fund 17 is approximately $2.3 million. This amount is not included in the determination of available reserves as the projected ending balance is restricted and assigned by the District. The County Superintendent strongly recommends the District continue to monitor the budget and identify additional measures to enhance revenues and/or implement expenditure

8 Page 8 reductions to eliminate operating deficits in the General Fund and avoid the use of one-time sources to cover on-going costs. The County Superintendent also recommends that the District review carefully the assumptions used in the Adopted Budget and MYP projections and make adjustments or revisions to the budget as necessary. The County Office noted that the LCFF gap funding rates used by the District at the time of budget adoption have been changed in the Governor s Enacted State Budget, as follows: LCFF Gap Funding Rates At District Budget Adoption 28.06% 30.39% 19.50% State Enacted Budget 29.56% 20.68% 25.48% The County Superintendent encourages the District to continue to monitor the budget closely to maintain fiscal stability and solvency. The District is reminded to maintain sufficient funds in its budget for the current and subsequent two fiscal years to support all actions and services included in the District s 3-year LCAP. Salary Negotiations The District has not settled negotiations for the fiscal year. If collective bargaining agreements result in additional ongoing costs to the District, such costs must be supported by additional recurring revenues or permanent expenditure reductions. In accordance with Government Code and Assembly Bill 2756, the District must provide the County Office of Education with an analysis of cost and impact on operating budget of the proposed salary settlement. The District is also required to submit the following documents reflecting the financial impact: 1) Disclosure of Collective Bargaining Agreement ten (10) days before the Governing Board takes action on any tentative collective bargaining agreement (requires the signatures of the Superintendent and the Chief Business Official). 2) Multi-year spreadsheet (reflecting current and two subsequent fiscal years). 3) Budget revisions (if necessary, must be posted to the financial system prior to processing a salary settlement on the payroll system). The County Superintendent encourages school districts considering a multi-year contract to be cautious and have contingency language that protects them from cost increases beyond their control. School districts are also reminded to maintain sufficient funds in their budget to support all actions and services included in their 3-year Local Control Accountability Plans. In addition, the implementation of health care reform, anticipated increase in PERS

9 Page 9 contribution and potential cost sharing of STRS unfunded liability may result in unanticipated employer costs beyond the scope of bargaining. Other Funds There are no significant changes in current year revenues and expenditures for other funds of the District compared to the Estimated Actuals, except as noted below: Projected ending balance in Fund 21-Building Fund is projected to decrease from $8.3 million at the beginning of fiscal year to $1.0 million by the close of the budget year. The District is utilizing proceeds from bond issuance and sale of site funds to complete its modernization projects. The District is projecting to transfer proceeds from sale of site amounting to approximately $3.4 million from Fund 40-Special Reserve for Capital Outlay Projects to Fund 21-Building Fund for the completion of the summer modernization projects. GENERAL COMMENTS: Public Disclosure of Voter and Nonvoter-Approved Debt Districts are reminded to review the requirements for public disclosure of voter and nonvoter-approved debt. Voter-approved debts include General Obligation Bonds and Capital Appreciation Bonds. Nonvoter-approved debts include Certificates of Participation (COPs), Tax Revenue Anticipation Notes (TRANs), Bond Anticipation Notes (BANs), revenue bonds or any other debt instruments not requiring voter approval. In accordance with AB2197, Education Code Sections 17150, and , thirty days prior to the district s Governing Board s approval, all districts, regardless of certification status, are required to submit to the County Superintendent of Schools and the County Auditor the following information (as applicable): 1) Repayment schedule for debt obligation. 2) Evidence of the district s ability to repay the obligation. 3) Disclosure of General Obligation Bonds (GOBs) and Capital Appreciation Bond (CABs) Refinancing. The County Superintendent of Schools and the County Auditor may comment publicly within 15 days of receipt of the information. The 30 day advance notice will require careful planning by the school district in order to comply with the disclosure requirements. The use of debt proceeds is detailed under

10 Page 10 Education Code , which prohibits school districts from using the proceeds from specific debt instruments for general operating purposes. Fiscal Distress Notification In compliance with Assembly Bill 2756, districts are required to submit to the County Superintendent of Schools any study, report, evaluation or audit that was commissioned by the district, the Superintendent of Public Instruction or State control agencies that shows evidence of fiscal distress under the Standards and Criteria adopted in Section 33127, or any report on the school district by the County Office, Fiscal Crisis and Management Assistance Team or any regional team created pursuant to subdivision (1) of Section The County Superintendent is required, in turn, to consider the findings of such report(s) in the analysis of the district s financial status (Reference: Education Code Section ). BUDGET RECOMMENDATIONS: The County Superintendent continues to recommend local educational agencies maintain adequate reserves to provide flexibility for districts to manage economic risks and other unforeseen circumstances. Districts are encouraged to plan ahead and review the requirements of Education Trailer bill SB 858 which is included in the Enacted State Budget. SB 858 contains changes in district reserves and creates a new transparency requirement for school districts. Beginning with budgets adopted in , SB 858 amends Education Code Section to require school districts to hold public hearing for review and discussion of reserve for economic uncertainties and substantiate the need for assigned and unassigned ending balances in Fund 01, General Fund, and Fund 17, Special Reserve Fund for Other Than Capital Outlay Projects. The Governor will also be proposing for the establishment of a Rainy Day Fund in the November 2014 election; if approved, a hard cap on the ending balances in Fund 01 and Fund 17 for school districts will be established when certain conditions are met. The County Superintendent strongly encourages school districts to continue to manage prudently district resources using best practices and to stay informed on the State s economic situation and other legislations that may impact public education. There is also a need to be mindful of additional financial burdens that local educational agencies may incur in the future such as increases in CalPERS contribution, potential employer cost sharing of CalSTRS unfunded liability, additional costs that may be incurred with the Affordable Care Act and Common Core Standards implementation. Prior to making any changes, updates and revisions to the Adopted Budget, school districts are encouraged to review carefully their LCAP to ensure that the budget is adequate and sufficient to cover the costs related to planned actions and services for students. Beginning in fiscal year , a new provision in the K-12 Audit Guide will be added to include a procedure to test

11 Page 11 expenditures which the school district has identified as consistent with its LCAP s intended actions and services. The County Superintendent recommends Districts review the audit guide to ensure compliance with the requirements. Enclosed is a summary of the District s financial profile. A historical spreadsheet that shows actual and estimated General Fund revenues, expenditures, and fund balances from fiscal year through is also enclosed for your reference. The District may find this document useful in analyzing fiscal trends; the most critical information is reflected on Lines C, E and F2 of the spreadsheet. C. CONCLUSION The County Superintendent recognizes the complex issues and series of fiscal events that school districts are facing and the challenge of communicating these conditions to their stakeholders and the general public. The County Superintendent and staff will continue to provide technical assistance in the areas of budget and LCAP monitoring and development and will provide school districts with any updates and guidelines as they become available. We appreciate the cooperation and assistance provided by Linda Luna, District Superintendent, and Wendy Richard, former District Chief Business Official, during the review process. Please feel free to contact us, if you have any questions regarding the county oversight procedures or contents of this letter. Sincerely, Denise Porterfield Gary Waddell Deputy Superintendent, Business Services Deputy Superintendent, Instructional Services dporterfield@smcoe.org gwaddell@smcoe.org Enclosures C: Linda Luna, Superintendent, Anne Campbell, Superintendent of Schools, SMCOE Priscilla Aquino-Dichoso, Administrator, District Business Services, SMCOE Brian Simmons, Director, Accountability-Innovation-Results, SMCOE

12 SMCOE-LCAP Support The Following are the support venues that will be provided to districts throughout the School year. All sessions will occur at the San Mateo County Office of Education. LCAP Accountability Support Sessions (10:30AM-12:00PM): o Sept. 26, 2014 Audience: District Accountability and Business Staff o Dec. 5, 2014 Audience: District Accountability and Business Staff o Jan. 23, 2015 Audience: District Accountability and Business Staff o March 27, 2015 Audience: District Accountability and Business Staff o June 5, 2015 Audience: District Accountability and Business Staff LCAP Summits (9:00AM-12:00PM): o Nov. 17, Audience: District LCAP Leadership Teams o Feb. 18, Audience: District LCAP Leadership Teams o April 8, Audience: District LCAP Leadership Teams One-on-One District Technical Assistance Sessions: (Two-hour windows, twice daily) o December 10-20, 2014 Audience: District LCAP Leadership Teams o March 1-15, Audience: District LCAP Leadership Teams o April 1-15, Audience: District LCAP Leadership Teams

13 Page 2 The venues below are ongoing county office engagements that will also be leveraged to support continuous improvement of District LCAP s. CBO Coffee Hours: o Sept. 16, 2014 o Oct. 16, 2014 o Nov. 4, 2014 o Jan. 6, 2015 o March 12, 2015 o April 16, 2015 o May 12, 2015 o June 9, 2015 CBO Meetings: o Sept. 25, 2014 o Oct. 23, 2014 o Dec. 11, 2014 o Jan. 22, 2015 o Feb. 12, 2015 o March 19, 2015 o April 23, 2015 o May 21, 2015 o June 25, 2015 CII Meetings: o Sept. 12, 2014 o Oct. 10, 2014 o November 14, 2014 o Jan. 9, 2015 o Feb. 20, 2015 o March 13, 2015 o April 10, 2015 o May 8, 2015 C&I Asst Supt/Chief District Instructional Leader Job-Alike Meetings: o Schedule TBD

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