Oct 30, 2025 - Special Meeting / Workshop of the Board of Trustees

001We're good. Okay. I believe we're live. So, we'll call the meeting to order on October 30th, 2025 at 3 PM. This is a workshop of the board of trustees, Apple Valley Unified School District. So, with that, we call it to order with next on the agenda is roll call. Amanda Buchanan >> here. >> Maria Okara >> here. >> Renee Longshore >> here. >> And Anita Tucker >> here. >> And Rick Rollley, I'm here as well. If we could have Anita, if you could lead us in the pledge, please. Please rise. Place the flag. >> Hand over heart. Ready? Begin. I pledge algiance to the flag of the United States of America and to the republic for which it stands. One nation under God, indivisible, with liberty and justice for all. >> Thank you. All right,

002that brings us already to item four, which is public comments. Kylie, you have some cards? >> Yes, we have four. >> Okay. And I'll remind everyone with that we have a threem minute limit and please respect that because we have a lot to cover tonight. JC Scott, that's up first and then Eva Beavers after that. >> Good afternoon, President Sabers, members of Avoda, schoolboard members, district cabinet, superintendent Nilson, members of the community, and my siblings of the California School Employees Association. My name is JC Scott, chapter president of CSCA chapter 820 in Apple Valley. And I stand before you today not only as a representative of the classified employees who keep this district running every single day, but as a voice for the community that deserves honesty, transparency, and responsibil leadership. Today, we have before

003us a devastating report from the fiscal crisis and management assistance team. A report that confirms what many of us have seen and felt for a long for far too long. Apple Valley Unified School District is at high risk for fiscal insolveny. Let that seek in. High risk for fiscal insolveny. Our district that serves over 13,000 students and employees, hundreds of hardworking, dedicated students, is teetering on the edge of financial collapse. Figmat's finding are clear and alarming. The district has been deficit spending for multiple years. The district has used onetime funds to pay ongoing salaries and benefits with no plan to sustain those positions once the money ran out. The district's own financial reports are unclear and difficult to understand, often dumped on the board and public with little to no explanation, making it nearly impossible

004for the community to know how taxpayer money is being spent. education code violations and timely submissions, disregard for direction and oversight from the county superintendent of schools, and perhaps most disturbing, Fikmat found weak internal controls and no system to detect fraud. These are not minor oversightes. These are fail failures of leadership, accountability, and stewardship. Thickmat also made it clear that the district's budget budget presentation lacked transparency with information often provided only at meetings, leaving both board members and the public with no real opportunity to review or question financial assumptions. This practice must end. Let's be clear, this report isn't just numbers and charts. It represents students who might lose programs, employees who might lose jobs, and a community that might lose faith in the public schools. Every custodian, PAR educator, bus driver, food service worker,

005and office technician in this district already does more with less, including those teachers. We show up every day for our students, but we cannot fix what poor financial management has broken. So today, I'm asking on behalf of every classified school member and every taxpayer real accountability with transparency. We asked a clear public plan for this board and administrators to end deficit spending with timeliness, actions, and accountability. Full disclosure of how onetime fundings were used to cover ongoing costs and how those positions will be sustained moving forward. Immediate implication implementation of board prevention system fraud prevention systems including um anonymous reporting hotlines, internal audits, and stronger internal controls. meaningful public access to financial records provided in advance in plain language and not buried in technical jargon. And if it comes down to implementing the district examine

006the levels before the one-time funding hiring spree. Return as close as possible to the previous levels of staffing and everyone contribute their fair share across the board, beginning with management and administrators. The day of last minute financial presentations and half answers must end. Our students, our staff, and our community deserve the truth. We all at Apple Valley Unifi want to succeed. But success cannot be built on secrecy, denial, or spin. It require requires courage and the courage to face the facts, make tough decisions, and rebuild trust. >> JC, do you have a lot more to go? >> Um, no, I'm almost done. >> Okay, thanks. >> CSA stands ready to build towards solutions, but we are not we will not stand quietly while the district drifts towards insolveny. It is an alarm bill and tonight

007we're here to say loud and clear, we hear it, we see it, and we will not let it be ignored. Thank you. >> Thank you, [applause] >> Eva. Is there a Eva? >> Oh, Maria, sorry. Did you want my attention? >> Oh, okay. Yeah, I I I saw it was a little bit over. It sound like he was wrapping it up. So, Steve Cobbs, you'll be up next. Okay. So, this is my first time being here, but my name is Eva Beavers and I am a parent um with children at Rancho Verde. So, the reason why I am here is to figure out what's going on with the budget. I am trying to question the board in regards to fraud uh charges um that are being held according to the uh report that was received.

008And I also want to question um why the teachers are being paid in other forms uh in regards to the uh funds that are available to the school district. Um just calling that into question. So that's why I'm here. >> Thank you for your comments. [applause] >> And then Karen, you're after Steve. Uh good afternoon. I'm speaking in regards to the uh collective bargaining is the area of highest risk for the district. So that's where it kind of comes to. Um district superintendent Nelson, board members, cabinet, colleagues, and friends. Um good afternoon. I rise to speak today about the conditions of the district and negotiations. I'm deeply concerned over the process of how decisions are made in regards to contracts and agreements. Over the last few months, our VUDA negotiations team has been met with

009delay after delay in being able to talk about article 19, which is our pay and benefits. We were met with a timeline for getting our health and welfare benefits finalized due to the necessity of changing insurance outlets. We agreed to 90% of the coming Kaiser rate for so that when we changed our unit members would not be leveled by new costs arising from the change. The decision to accept a lesser offer was due to the agreement that we would come back to the table after the May revise to add to our negotiated settlement. Shame on us. We trusted you. Since that time, we were told that the district was given no direction from the board of trustees and therefore we could ne not negotiate better benefit rates. This happened for more than one session. During

010that time, I was told by few people to find the money. We believe we did, but before we had another session, the district settled with CSEA and it was accepted. I stood before the board and I talked about symbolic or substantial offers to us. The offer that was made was definitely not substantial and did not include items that were in the other bargaining units offers. The board met again last month and argued for an hour about the lack of money and where to find it only to leave to go to another close session at 10:30 at night. When nobody was left in the room and came back at 11:30 p.m., I got a text after I had went home and gone to bed to announce that without negotiations, an agreement was struck with management and

011included the same offers that CSEA received. That vote was five to zero with no board members saying no to an agreement that paid management before agreeing to pay teachers a fair and equitable wage and benefits. The argument was that we all received the same offer, and this is not true. The two settlements included a surprising 16% 30-year annual longevity payout that benefits what I'm told is a few people. For example, if someone in management were making 195,000 at 16%, it would be an annual $31,000 plus. So much for not having any money to offer. Other bargaining units have in prior years put their raises toward salaries while Avda put some of theirs toward benefits to raise that level up. The new benefits package after increases included this for management. The average from 2324 which was

01215,000 now is an average raise of 9720 per person bringing their average amount to 24,720. CSEA in 2324 with 16,375 per member raised an average of $4,216 per person. Ava's average raise from 2425 up to now is $1,124 per person. Avooda dropped from 61 members taking insurance down to 595 after the buyout saving about 720,000 and that is not given to us in any of those. The call for accountability is upon us and I'll be listening with interest to this report tonight to see recommendations for cuts or accountability. Our members are awake, aware, more resolved than ever to make lasting changes to the environment that helps us retain, attract, and retain quality teachers, counselors, and SLPs to our district so we can provide the best for our students. It's time to prioritize our learning environments

013by putting our dollars and our words together. Thank you for your time. >> [applause] >> Thank you for your comments. Karen Sabers is the last speaker. >> Okay. Before you start the timer, I need to um place something on record. The fickmat report contains inaccuracies regarding certificated salary increases. In section six, specifically 6.1, it states that the 2023 24 agreement included a 1.5% ongoing salary increase and an additional $1,250 added to every cell of the certificated salary schedule. This is incorrect. We did not receive a 1.5% ongoing increase. We only received the 1,250 per cell. This section also claims that in 202425 agre the 202425 agreement a 3% ongoing salary increase and an additional 2750 per cell. This is also inaccurate. We only received the 2,750 per cell. I am formally requesting that these inaccuracies

014be corrected and that the record reflect the actual agreements. Now I'll begin my speech. Good afternoon, Superintendent Nelson, board members, cabinet, and audience. My name is Karen Sabers, president of the Apple Valley Unified Teachers Association. Reading the Figmat report was deeply disheartening. It confirms exactly what we have been raising in negotiate concerns we have been raising in negotiations and at this podium for the past 9 to 10 months. On February 7th, 2025, we sat in conference room A and asked Mr. Scholenberg whether the district had used the one-time money, something we were all told in every governor's budget briefing never to do, to hire ongoing staff. His answer, not once but twice, was simply, "Karen, we are overstaffed." We repeatedly asked this board what the district's plan was to address the problem because it was

015draining reserves to the point that the seniority list had to be updated. As a result, 45 to 48 certificated positions were eliminated and critical student and teaching support roles were lost. To date, there's been no resolution shared with us. The report also points out the past three years of deficit spending which we have also stood up here and addressed with this board. The reports highlighted weaknesses in the internal controls, transparency, and financial reporting which are too technical and often provided to the board and the public late for meaningful review. We need clear, accessessible summaries that explain what's changed, why, and what it means for our students and staff. We have asked what your plan is to stop the deficit spending for more transparency and we continue to ask for accountability. These ongoing practices combined with

016limited transparency in our financial reporting have put this district at high fiscal risk. This brings me to March 6, 2025. On that day, our then vice president, lead negotiator, Leslie McNeely, and I were called into a meeting with our superintendent, Mr. Conrad. We were told that the district would be completely revamping and restructuring its operations and that and that Abua would be included in every step of the process, including a thorough review of the budget in our input along the way. It has now been eight months. We have not been included in a single conversation about this since. While I am disappointed by the findings of this report, I'm equally disappointed that only two board members submitted questions to Figmat. Some long-erving board members continue to sit silently, avoiding hard questions that must be asked.

017Instead, the few board members who do ask questions are criticized for doing the job they were elected to do. When is this board going to stop rubber stamping and start leading? When will you demand change? And when will you hold those responsible accountable? You are here to do a job, not for the notoriety, but to serve the community that elected you and trust you to protect our students, our staff, and the future of this district. Thank you for your time in solidarity. Karen Sabers. [applause] [cheering] >> All right. Thank you for your comments. So, we're going to move on now. We'll move on to uh item B discussion information thick board technical assistance. So, we'll call you uh ladies up. We appreciate your uh your time. >> All right. Oh, please touch. Thank you so

018much. >> All right. [clears throat] That good. >> Is the green Mr. President light is on? All right. So, good afternoon. >> Mr. President, can I have a question? >> Sure. >> What will be the format of this technical assistance? Can we ask questions as you go? >> You want to answer that or you want me to answer that? So, so we had asked that the questions be submitted in advance. So, we actually have it presented. Um, the questions are part of the slides. >> Okay. >> Yeah. >> All right. So, good afternoon, Trustee, Superintendent Nelson, everybody else that has joined us this afternoon. We weren't expecting such a large crowd. So, welcome to everybody. So, let me tell you a little bit about us and um what kind of got us here today. So,

019uh the district invited us in to do what's called the fiscal health risk analysis. I'm going to talk about this more when we get to the presentation of the report. Uh but we were invited in and during that um in in preparation for that, the district had to provide lots of documents to us. They did that in a very timely manner. Um got us all the information that we needed. We were able to review those documents. Then we came in and did a series of interviews over the course of a few days. Then we left and did the analysis and and produced a draft report for the district to to look at and then got it to final. Um Karen, and I apologize, I forget your last name, but I would love for you to

020submit that through the district to us. We want to make sure that our report is as accurate as possible. We were going off an AB1200 disclosure and that was the way that we interpreted it. So, so make sure that you submit that information to the district and and we'll go about making that correct. Okay. So, we want to make sure that it's we always want our reports to be as accurate as possible. So, during the course of our interviews, we had um we could tell that there was lots of questions uh lots of questions from from the five different board members. They had some great questions, but we we knew that there needed to be some further understanding. So, we we were asked if we would possibly come in and do a board study session

021and we said, "Sure, get us the questions in advance because we don't know your district intimately, right? So, we'd like the questions in advance so we could go back into the documents." I will say this about the FHA. So, I'm going to refer to the fiscal health risk analysis as an FHA. Um, so the FHA looks at 20 different areas that over the 30 plus years we've been in existence. Those are the 20 areas and the questions under each area are the things that have led a district down the path to insolveny. Um so I'll talk more about that tool um as we get closer. But in terms of our interviews, in terms of the documents that we requested that the district have on hand, um we do not go deep. We go deep enough

022to answer those questions. So I just want to kind of set the stage for that. All right? because some of the questions that the board members asked um are something that we're going to try our best to answer your questions. We may not be able to answer every single one. Uh but we went back into the documents and if we could decipher it, we're going to we're going to provide you our interpretation. In addition to that, we're also going to talk to you about what we've seen as best practice throughout the state working with other districts. Okay? So, I just kind of wanted to set the stage on that. All right. So this first one, before we get into the questions, we thought we would just give just a little bit of background information that

023we think will kind of lay a foundation for the questions as we move into those. So this this picture I love because it walks you through the budget cycle from beginning to end. So it starts in January when the governor, you know, presents their budget anticipating what they think is going to be in there. It takes you through, you know, yes, if you were going to need to Oh, and that also includes that's when the district would do your enrollment projections so that you would have an idea of of what your finances looked for the following year. If you needed to do any kind of layoffs, that obviously has some March implications. It walks you through the entire process, but it's a nice little pictorial that that shows from beginning to end. and you will

024see it goes from January all the way through to a year and a half for an entire cycle to get to the estimated actuals. So, it just kind of walks you through that timeline. So, I thought that was a very nice representation to tell you all the different bits and pieces of the budget cycle. This one I think is really good for board members. This is one that we provide many times when people are are becoming a board member for the very first time. They'll reach out to our organization. they reach out to my boss Mike Fine an awful lot and say hey what do I need to know because I'm going to be sitting on a board what do I need to know in terms of looking at finances and so he always shares

025this I think it's really good because it talks about the what going down if you look in the dark blue is really the governance team right so the board is the one who sets the the the vision the beliefs the priorities the policies so they're pushing down the what to the district and then on the how is the administration teacher staff you're taking that and it's all centered around those strategic goals, success indicators, resource allocations. So it that's at the core of what you're doing and then it's up to the district to take that and come up with the strategies, the tactics, the technique, the how in terms of that. So it kind of outlines the the different um roles that each plays in terms of looking at at district finances. And so I'm going

026to turn it over to my colleague. I forgot to introduce ourselves. I am so sorry. Just jumped right in. My name is Shayen Hart. This is my colleague Jennifer Noga. And so we both represent FICMAT and um so I'm going to turn it over to her at this point. Thanks. Um okay, I don't have a loud voice and so I'm going to try and stand by the microphone, but I tend to wander off. Um so I will try and speak into this as as easy as possible. Um so again with the some of the questions that we received and a lot of the questions that we heard in the interviews and even speaking today the sax reports which the school districts are required to submit their financial reports in we work in them every day

027they're very easily and understandable to us for the outside world they're not easily and understandable I mean it's 190 plus pages. So my short presentation um is just kind of walking through the budget. So quick foremost, right? A budget is it it's like Shayen slide. It's your plan, your priorities as an organization. Um yes, the LCFF dollars have to align to your LCAP, but there's many dollars in your budget that have to align to strategic plans. So, it's not just the LCAP, but a lot of the funding that you receive and those plans come forward. So, um, everybody should know how some of their dollars are being spent because the plans are brought forward and they're shared, right? The budget also represents how much money you're receiving, um, how much how much you're spending, the

028expenditures that are going out, transfers that might be going out, and then how do you think you're going to finish the fiscal year. So again to that slide that um Shayen brought with all the budget reporting the budget cycle right the year and a half throughout the fiscal year there are so many changes that are happening at the state level economic as a whole and the world right we have a lot going on in our world um the school district itself we put our budgets together in May we're trying to figure out how many students are going to show up and are they actually going to come to class every day or they not going to come to class every day. So, while we'll use and I say we in looking at the district, right?

029Oops, I'm hitting the button. Sorry. All right. Um, we use trends to build our budgets. It's the best it's the best history that we can go on. And so, we use trends with those um with assumptions to build those budgets. again, we work in it. We understand it and some of that information isn't as transparent. Um, but I think there's there's this reporting hopefully will help get you guys there. Um, but looking for opportunities with your restricted and your unrestricted dollars, how to maximize the use of all of the revenues that you're receiving. And then as you talked about already with the comments, the one-time funds, right, is said at every meeting, one-time funds should be used for one-time resources. The problem with the last five years, we've had this huge influx of COVID dollars

030and it's it's masked, honestly, it's masked every district throughout the state's position because some of the one-time dollars were unrestricted, some of them were restricted. A lot of school districts moved staff into the restricted, but they're really going to be teachers that they have for ongoing. And so, it's really been kind of a night nightmare when we're working with districts that are faced with these one-time funds because, as we know, those onetime funds are gone now. And so, we are now working with in our budgets. This is our revenue. This is our expenditures. And how are we going to spend these dollars? Why do I feel like I skipped something? So, I did. Okay, there we go. Sorry. Oh my gosh. Why did you say something to me? Um, okay. So, again, the fundamentals of

031the budget is making sure that it's your operational guide for how you're going to implement programs. Um, and then it's the communication, right? It's the tool on how you're communicating to your educational partners on how you're using those dollars and um and supporting your students and within your community. Okay, more fundamentals. So again, reasonable assumptions. Those reasonable assumptions I talked about are based on trends. We get a lot of information at the governor's budget. The may revise. Um, and then the county office sends information to your district on what they expect to see in your budget. Could be the same as the governor's budget. It might be a little bit different. Some counties take a stance that might be a little more conservative, but these are all impacts, the economic, the political, and the state

032budget cycle that impact the assumptions in how you're building your budgets. So, your budget's going to change. Again, we build your budget in May. The district builds a budget in May based on who knows how many students are going to show up, how many staff members do we need, um how many facility replacements, what have you, right? Roofs that might go out. There's a lot that happens throughout the year, and therefore, your budget needs to change with each one of those um with each one of those things that can impact it. Does it change weekly, monthly? Yes, it should change as often as new information is brought forth to the staff. They want to make sure that that budget is updated. Um, one of the first signs of a troubled district is they're only changing

033maybe at adopted budget, first interim, second interim, and then lo and behold, unodudited actuals. there's a big surprise at the end because they didn't update it between each of those budget cycles. And as you're moving through the year, your adopted budget, again, it's what we thought. Um, but as you're moving through the year, the the year is progressing. You know your students, you know, if they're showing up for school. So, you make those adjustments. And so now you're going to estimate how you're going to end the year. When you have your second interim, you're threequarters of the way almost through the year. And so now that last few months, you should be estimating where do we think we're going to end the year. And again, adopted budget May and June, you have your estimated actuals.

034So that's coming to the board in May and June. You're almost done with the year. So it really should mirror this is how we think we're going to end the year. Now, there's different policies throughout the state and on districts. Some close their budget um so that you can't purchase anything past April. Some districts don't. Some districts will at second interim or even estimated actuals site budgets. They'll recoup them. It's it's whatever your policy and what the decisions of your district are driving [clears throat] those decisions, right? Because some of the site budgets, they think they're going to spend it, right? The budget, they have it. I've been in these positions. You think they're going to spend it. They've told you they're going to spend it. And then at your end, okay, there's a fallout

035of 180,000, which I know it's probably a small number. Mine were smaller, but I'm just saying there's a small number. If you have those type of variances at the year end, you should just be able to explain them. You should be able to explain what those variances are. Um, and then again, the budget should be balanced. And when we talk about a balanced budget, that's here's our revenues that we're anticipating. Here's our expenditures. You're including the other sources because you may have transfers in and transfers out. And therefore, that takes into account, but are we spending more than we're receiving or are we do we have a net surplus? Right? If you're spending more than you're receiving, that's when you have to start having the hard discussions. And so, you want to correct those. You

036do not want to have that um carrying forward year-over-year. Um again, when you're developing your budget, we focus on the general fund because it's the biggest one, right? It has a lot of the uh the activity that we the operational that's what funds the majority, but you do have other funds. And so you just need to know about them, know that the other funds are out there. Um, governmental accounting, I'm going to try and not throw out like accounting jargon, but school districts do fund accounting. So it's kind of like at home you have one checking account, but don't you wish you could split it up into different priorities. That's how school districts it's split up because you have different pots of money and they are restricted on what they can be spent on. So

037you can't actually kind of merge those pots together. They stand alone. They're separate pots. There are instances, let's say that I don't know, your mom loaned you money, so she's going to transfer some money into your checking account. There are instances between some of the funds where they can transfer money in between and their purpose and what they're being used for are allowed. And so you may see that between some accounts. Again, if you see it, staff will be able to explain it. And so it should be um explainable. Um focus on using those most restricted dollars first. The restricted dollars have deadlines. They have they have very distinct items on what they can be spent for. And so you want to make sure that you're spending those dollars first and really see if you

038can maximize some of your restricted pots of money. share them together to maximize your students needs and the programs. So again, not saying that's not being done here, but with the budget, that's the best plan for these dollars. And then again, the onetime funds, which I talked about this slide because I was on the wrong slide. Um, make sure you're using the one-time funds for one-time needs. And just to stress the one-time funds are not only just maybe revenues that you receive, but I want to stress that your um reserve is considered a one-time source. So your ending fund balance is one time in nature. So if you're deficit spending and you're dipping into your reserves, that's one time, right? Those reserves are depleted. they're going to reduce when you're using those. So, um, deficit

039spending, again, I talked about that. That's when your, um, expenditures exceed your revenues and it has a net decrease to your fund balance. And your fund balance is, so you're required by the state to have 3%. Your board has a 5% policy, I believe, on top of that. And then it's your it's reserves, right? If something goes wrong. And so, um, you want to be sure that you have if the roof needs to be replaced, if there's something catastrophic that happens, you want to make sure that the reserves are there to be able to address that. And so, not necessarily building up your reserves, but planning for emergencies is always strong. Um, a structural deficit is when you continue deficit spending year over year over year. Again, it's kind of been happening because we had

040a lot of one-time money. Some of the onetime money all came in at the front and then we spent it down through the years, but I believe you've been deficit spending in your general fund for the past three years. And so, I did not break it down between unrestricted and restricted. Um but a [clears throat] structural deficit over time can lead to fiscal insolveny and then again um just making a plan so that you have um an exit plan for any of those one-time funds or the deficit spending. So your reserves are made up again of kind of what's left over. So you have a beginning fund. If you have a net increase, it's going to begin your beginning build your beginning fund balance. So this is in that sense your reserves. So it's reserves

041and ending fund balance kind of equal. It's the same for districts that have fund 17. Your district does not have a fund 17. Um that actually is accounted for when you're looking at your budget. So if you go to another district, they have a fund 17. Fund 17 is included. And so it takes into consideration um the fund 17 to estimate what your reserves are. Again, the estimation of your ending um balances are byproduct of your budgets, right? So as we're building our budget through the year, our goal when we get to that estimated actuals or second interim is how do we think we're going to finish the year? And so we don't want any surprises, right? um surprises or big variances can avoid can create um distrust or you just have surprises and I'm

042not going to say it doesn't happen. The state oftent times will approve funds and they send them to you at the end of the the year. Um but again it's explainable. So anytime there's a variance which I think is kind of conversations that are going to be happening when there's a variance between what I would use is estimated actuals and your unaudited actuals you should be able to talk about those variances and they should be explainable. But using an adopted budget when we didn't even know what was going to happen with our district, right? We're using assumptions. We're basing it on trends. We don't know how many kids are going to show up. Comparing an adopted budget with your unodudited actuals, I would hope to see variances, right? I mean, the likelihood that any of

043those are going to align is very, very unlikely. But the estimated actuals and the unodudited actuals, those two should be kind of aligned. And you really don't want to see over a 5% variance between those. And again, things happen, but just be able to explain those. This is for the unrestricted. Now, I'm going to talk about the restricted because, as I talked about earlier, the restricted fund balance again, we have a bunch of plans that have been approved. We've been in like what is it called? Plan uh the so COVID we're in Plan Nation or whatever it is. we're having to submit plans for every single um funding out there. You're going to go out and hire this. You're going to go out and plan for this. We're going to start these new programs, but

044the people aren't out there, right? And so, you can't hire. You're having to contract out or you aren't able to spend the dollars. And so this is a little different where I say the 5% major category variances because the restricted dollars are not as easy to spend and you're going to have bigger variances than that. They're just hard to spend if you can't get the staff hired, if you can't find the contractors even to do the job. You might have bigger variances than the restricted. But again, those dollars can only be used for certain things. And so it doesn't impact things in the everyday general unrestricted general fund, right? It can't pay for a general ed teacher. And so it's just knowing all those pots of money and what they can be used for and

045understanding them right as a team team right everybody. And then the components of ending fund balance is really um it's just we're going to go to my sheet because I tried to explain this in what I think is I don't know layman terms. Um it's kind of like your savings account. So it's your ending fund balance. It's the reserves. And then again, we're required by the Sachs accounting um SAX accounting code requirement that we have to break those down. The audit, all of it requires you to break each of those dollars down. And so these are the different categories. The non-spendable fund balance, I'll apologize, there's a error in there. The bullet for stores and inventory are two and the same. Um, that third bullet should actually say prepaid items. So, really the non-spendables isn't

046necessarily cash. Yes, revolving cash is cash, but you need that set in the bank account. There's a purpose for that, right? If there's a payroll error, they need to be able to write a check to fix that. So, yes, the restricted fund balance when you look at the components of ending fund balance is just that. It's your restricted dollar amount. And I'm going to show you the slides in a few minutes. And then committed funds requires board resolution. So it requires board action that you guys are going to commit certain dollars for a specific item. It takes board action. It doesn't happen behind the scenes. It has to be at public meeting. And so you'll see a resolution. The assigned fund balance. Um I think you have lottery for yours 671,000. My guess is, you

047know, there's going to be a textbook adoption in the future and so you're using and assigning those lottery funds maybe for that purpose. Again, that's my assumption of your budget. I've not asked your staff, but that would be my assumption because, you know, you're going to have a textbook adoption and so you're going to set dollars aside for those purposes. Um, I also believe your board policy for the additional 5% is under that assigned. That's a conversation that happened. management, probably between the board, they're not going to be surprised. Um, these are conversations that are happening. And then in your unassigned fund balance, you have your required 3% reserves. And then whatever's left is kind of the flexible amount that is available to kind of use, add programs, staff, all of that. Um, again, remember

048these dollars are one time in nature. So, your reserves once you use them, now you're going to have to build them back up. So, now I'm going to attempt to go over this form. This is what everybody gets, right? Um I tried to use arrows. So, right on the very top is your total revenues. under that total revenues or above it is specific um classifications. So you have LCFF, you have federal, you have state and you have other very specific in what goes there. Um but when you're looking at these reports, you want to look at total revenues. So you have your unodudited actuals and you have your budget. This is the same on every report. This is going to be the same even on your interim reports. The columns are going to be different

049because your interim reports are just your current year. It has your adopted budget. It has some um your latest adopted budget. It has your actuals to date. And then it has where your projected where you think you're going to end. And that has a variance, but it still has your total revenue. Next, you have your total expenditures. So that's again our operational budget within the general fund. How are we going to spend our dollars? It's broken down by all classifications. You have certificated, classified, benefits, books and supplies, um services, capital outlay. Um I know we have some questions about the sevens and some later in the 8000s and I have those answered later. Um but this is your total expenditures to run your district. And then you have your um trying to see it total

050other finances. So if you are transferring money in or out it will be accounted for here. And if you are contributing if the general fund is contributing to restricted programs this is going to be accounted for here. Again we talk about that a little later because that's one of the questions and so um I'll answer that at that time. the big picture and what you want to get out of this report is this line right here. I believe it's E. I can't see it. Um I think it's E. Um this is your net um increase or decrease. So are you spending more than you're receiving? So that's your revenue minus your expenditures and your other sources. This is this tells you are you spending more than you're receiving or not? Are you deficit spending? And

051if you are, do you know why? Right. Can you explain why? Here's the fund balance. And I say fund balance, comma, reserves, because that's what the section is called in the SAX report. It's your ending fund balance. So I highlighted um F2, which is your ending fund balance, but the very top line is your beginning fund balance. that's going to match last year's unodudited actuals and it's carried forward. You could have some audit adjustments or some restatements. That's all done within your um within your county office oversight and your audit reports. So, all of those will be called out in your audit reports. And then here's your ending fund balance. So, you take that beginning fund balance, reduce it by the deficit spending, and there you have what you have available. And as I spoke

052about earlier, there's your components and how your district breaks down your I think it was 31 million211. The restricted really has one number in it. 9740. That's your restricted funds. It's that column. Everything goes in there. It's grayed out because the software doesn't allow anything else to go into those gradeout cells. The district didn't gray out the cells. The software grade out the cells. Everything in these forms are populated throughout the financial um the components of ending fund balance here in the other assignments there is a section where we type those in. I say we where staff will type that in um and then it populates this section. So those are manually entered but again it's it's on here. nothing's not printed once you enter those. And then we have this section. Um, so I

053have to tell you, I've been doing this for over 26 years. I've actually never had a question about this section, but we do have a question about this section. And this is where I'm going to try and not get technical because it's accounting. And so accounting, every entry that you do up here in your revenues and your expenditures and your other sources, there's two sides, right? A debit and a credit. And so there's two sides to it. So your section down here is the other side. It's really a complete recap of everything above section F. So when you look at for example the assets so assets and this is again where I'm going to throw in some accounting assets equals liabilities plus fund equity. So those two should equal for this report. I don't know

054that you can see them but I think I have the numbers in my head. um assets equals 65 million. If you minus the liabilities minus that outflow and minus or and minus those two, you're going to get 31,211, which is exactly what your fund oops what your fund balance is. So in essence, your assets includes because it's 65 million, it includes your reserves, it includes everything because it's at 65 million. And when you look at this report, the fund equity states that the fund equity and your F2 under the reserves should match. So this is all happening behind the scenes. As you see for the budget, it's white. They do not track this information in the adopted budget. You do not see this information at even first or second interim. Now, your district, I believe,

055shows it at estimated actuals. There are some counties that don't even show it at estimated actuals. And the reason for that is because it's in flux. It is a 100% in flux because we haven't closed the books yet. So, we're still making entries until we close the books through September. And so, it's a recap. Yeah. You want to make sure that they match, which I guarantee you they won't be able to print the report because they're going to have a TRC if it doesn't match. And so, they won't get an official DAT file if there's a problem with it. And every accounting software that I know of, I'm going to tell you, LA County didn't used to do both sides for us, but every other accounting throughout the um every other accounting system throughout the

056county does both sides for you automatically. So, however they set up that financial system, it tells it exactly which 9,000 account to go into. And so, it's all behind the scenes. And then as you upload all of your information, it scatters it throughout this section. So make sure I answer everything. While I get looking at it and again trying to learn our roles um or understand these budgets, I guess more is what I want to say. Assets is a big thing in accounting, right? You have fund balance, you have assets, and it's like, wait, we have all this stuff. Why doesn't this make sense? Why can't I use this? Good question. It's a valid question, but just understanding how it's broken down in these sax forms, these forms aren't friendly. There's nothing friendly about these

057forms. You It's 190 plus pages. They have all these embedded things in there. And so, it's hard to understand. And so I really respect the question because 26 years I've not had anybody look at this page which I don't know begs the question what are they doing? So I don't know very good question. I appreciate the question and I'm hoping um that we kind of answered it but if there's more questions but the one thing I just want everybody to remember is that the reserves are part of the assets as part of that 65. Just make sure the 65 minus the liabilities and that outflow and inflow and that fund equity matches. But what you more really want to pay attention to is everything above this section that net increase and decrease and what is

058our ending fund balance. I still think we can answer the questions where we asked about the reserves and assets because if your reserves go down, your assets are going to go down. So it's still a very valid question, right? and looking what is happening to this and so I we have that answered too. So that was a lot to go over. Sorry. Um hopefully it was a little helpful. Um and then again just to kind of recap, the budget's a working document. It's always going to change. You want it to change. You never want it to be stagnant because then that just means somebody's not keeping it accurate and up to date. Um assumptions are going to change. your enrollment, your attendance percentages, um the economic conditions with the state, with the world, everything is

059going to impact that. So there should always be revisions. Um regular revisions provide more accuracy and transparency. Um monitoring helps, right, with that year- end surprise. There shouldn't be a bunch of surprises at the year end. Why did we suddenly have a $6 million windfall or, you know, negative? Again, if there is, just be able to explain it. Um, the spending plans should align with all of those funds. And then communication across departments, right? It's not the large swings. I will tell you as a district CBO, I swept those po those sites budgets. They didn't spend their budgets by April. I swept all of them. I always had one or two principles going, "No, but wait, we have a plan. We're going to do this or we're going to do that." And so I'm like,

060"Oh, I'm going to have a swing. I'm going to have money left over. It's fine, right? You could talk about how, hey, we have a site. They're going to do this with the money and therefore we're going to see a swing. Or you budget for it, right? You show it. You reduce it by those that you took and you keep the one in there in the 5,000s or 4,000s because they have a plan to spend those monies. Um, but you make those adjustments. Um, and again, it just evolves as changes and conditions change. So, accuracy throughout regular review and adjustments. You guys all just want to be on the same page. And I think it's you now. [laughter] >> All right. >> I took longer. Sorry. >> That's okay. So, hopefully, you know, Jennifer laid

061the foundation for some of the questions that are going to be coming at us tonight. So, hopefully that gives you just a little bit more of an understanding. So, we are going to get into the questions. So, I'm just going to read the question and then we'll go into the response. Some of them are short and sweet, some of them are a little bit longer. Okay, so our first question and and we did have questions from two trustees. Um we're we're going back and forth between those questions just to allow them equal time and we weren't sure if we were going to be cut off at two hours or not. Looks like we're going to continue going forward so we can answer everybody's questions. Um but uh so I'm going to start there with budget

062development, monitoring, and adoption. So, we had the question, are there improvements or adjustments that FickMat suggests to strengthen um Apple Valley's budget processes? So, beyond what's already in the report, and we're going to talk more about that um at the five:00 session, I think our biggest thing is we just really want to talk about increased communication, right? Um let let's be totally honest. The reason why, and I'm not trying to slam the district, the board, or anybody sitting out here, but you know, because I see faces that we interviewed, right, that came in and and shared information with us. There were lots of questions, though, so we could tell. And even listening to public comment, people that came up here before us tonight, we we can all acknowledge that there's been a lack of trust

063that has developed here in terms of relationships. So, what we would push more than anything else in terms of improvements is just increased communication. Um, we we ended up, you know, Jennifer talked about it. Those sax forms are unfriendly. I come from the program side of the house. I'm gonna take my glasses on and off. I apologize. So, I've reached that age and I I to read I need them. I can't see you if they're on. Um, so I come from the program side of the house. I am not the person that sat in the seat touching the buttons. Now, as superintendent of a a little tiny district, I was also CBO. So, I had to handle all the finances, but I wasn't the one entering it into the computer. I had help with that.

064Um, so I understand finance, but but being able to interpret what is in those sachs documents, I think is one of the most important things that you can do. So, we made suggestions even during interviews that the district, you know, provide the PowerPoint upfront to board members in the community and they were like, "Yes, we'll do that." um to make sure that people have an opportunity to digest what's in there and and and also what's in those sax forms. So then those questions can be meaningful. Making sure that the presentation includes all of the assumptions that you can go through and you can explain what that budget was built on. So that increased communication I think is the thing that we would push more than anything else. We did just through the work that we

065do um around the state. Jennifer has shared a couple of items, a couple tools with the district that they could glean from, possibly use that format. So, I know that they're interested in taking a look at those and we just provided those I believe today. Um, so they'll be looking at those. So, so really having the opportunity that that opportunity to increase understanding throughout that entire budget development, the budget monitoring, um, and and that adoption, making sure that those conversations are happening that you are, uh, informing people in a in a a meaningful way and also bringing them along. It is a difficult thing. School finance is a difficult thing. um I was supposed to pop up when Jennifer was doing her little thing and just equate it to um a home finance. So that's

066truly how I try to think about it, right? So at my own personal finances, I can kind of make a a similar um analogy I'm going to call it. Uh that's probably wrong for all you English majors in here, but um but you know, I'll I'll use that. So, I know that if I sat down in June and I say, "Okay, I'm going to try to predict what my income's going to be over the year, I have a pretty good idea and I'm going to go ahead and put that on a little spreadsheet or I'm going to write that out." I also kind of know what I'm going to guess, what my food bill is going to be, what my mortgage is going to be, what I think I'm going to spend on medical, what

067I think I'm going to spend here and there. Yeah, I could go ahead and plan all that out. We start moving through. The minute I make that plan, it's out of date, right? Because maybe two weeks later, I take my son to the dentist and he needs braces. That wasn't part of my budget. But guess what? I'm going to have to make sure that now that's included. So, I'm going to have to revise my home budget to make sure that it does that. Maybe my air conditioner went out. All of a sudden, that wasn't part of my budget. I'm going to have to make sure that I do that. So, I always try to just equate, you know, school finance to what we handle every day at home. You know, the reserves, in my opinion,

068is your savings account. It's a one-time thing. It's the money that's sitting there for those emergency situations. I know that I need to live within my means. I know that I don't need to spend more than what I bring into my home, but that happens sometimes. So, that's when I go to my savings account. When that savings account is gone, as an individual, I'm going to be bankrupt. As a school district, you're going to have to take an emergency appropriation. You're going to go insolvent. So, we're going to talk a little bit more about that when we get to the later presentation, but I just wanted to to make that similarity to try and make some some connections there. So, again, in terms of budget development, monitoring, and adoption, our biggest thing here would just

069be back to that clear communication. All right, that is our number one thing that that we think is so important for every school district because we've been around the state. We've seen this before. We see that lack of trust, but you can build it back because I think every single person sitting here, whether you're sitting up here or you're sitting in the audience, I am hoping you are here for kids. I am hoping that's the reason that you are in this business. That's why I went into education, right? And every single person plays a role. I don't care if you're sitting up here, if you're part of certificated, if you're part of classified, every single person plays plays a role in that. So, we all need to have an understanding of school finance. what's happening

070so that we can best serve the students that that are here every single day. So there there's my little pitch on that. All right, we're gonna get to cash management. Are there any concerns or recommendations regarding how Apple Valley manages cash flow? No, there really isn't. Your cash flow looked really good to us. The only thing we would suggest is to do a two years, right? So most people I'm going to say we see it over and over again across the state. Most people do current year. Our standard is that you do current year plus one more. And here's the reason why. you're getting into spring and if you don't know what cash looks like on the other side of June, you could have a problem in the early part of the following year. So,

071if you haven't prepared a cash flow that also includes the following year, then then then surprises can happen and we've seen districts get in trouble for that. So, that would be our only suggestion there. So, Jennifer and I are going to be popping back and forth um as we go through the questions. Okay. So, your turn. You take that. >> I'll take that from you. I'll move it. I'll advance it. 14 slides. Um, so this question was, "What's causing um the spending of our district's reserves and assets and what decisions can we make to stop the spending?" Again, I kind of encourage you to not look at the assets piece of it and look at your reserves. And so, I don't know if you can tell, but on this slide, it's showing that your reserves

072um I'm going to look at the bigger picture. It shows that your reserves um are decreasing. So 83 million to 85 to 68 to 65. And so obviously it's the deficit spending, right? The last three years we've been deficit spending. And so what's happening to our reserves? It's impacting the assets, right? Because the reserves are going down. But I would just keep that kind of piece off of it and ask what is happening with our reserves and it's that your deficit spending. You're spending more than you're receiving. And as far as what decisions we make to stop that, it's a local decision, right? How are you spending your money? And how do you want to continue to spend the money? What's what's what's impacting and what is our major deficit? Are we overstaffed? Are we

073funding programs that aren't beneficial? I mean, there's just a number of things. And so, local decisions are going to have to kind of dissect the budget to see what's causing that deficit spending. All right. So, I'm going to actually talk about these two questions together because I think that they're just totally linked, right? Um, so one was related to funds and reserves. We'll read that one. So given that Apple Valley has not maintained a 5% reserve and that the recent AB1200 projections indicate the district may not meet the 3% reserve requirement, what specific steps can Apple Valley take to build and sustain a healthier reserve level? And then deficit spending. It was Apple Valley has been experiencing deficit spending. while our business services team's working diligently to reverse this trend. What guidance can FICMAT provide

074to assist in eliminating ongoing deficit spending. So, so first of all, I want to commend the the board for for increasing your reserve because I'm going to tell you that 3% absolutely is not enough. I'm going to tell you that 5% probably is not enough because that is only going to cover salaries for for a very short period of time. if something went truly ary um very short period of time. Um I pulled the data um I went back to school services post um annually uh what the average reserve levels are and for unified the most recent data that that we have is from 2324. So I know it's outdated but they just posted that in April 25. That's usually when they'll post that. So that's when they'll do the next year. Um for unified

075school district the average across California was 24.36%. All right. So, so I just want you to put that in the back of your mind in terms of, you know, reserve levels, but we've already talked about it. You have to live within your means, right? And so, um, that's going to require some hard work. You don't get there very easily because those numbers represent people. They represent programs. They represent things that are important to the district. they could possibly represent things that you have done for, you know, 20, 30 years. That's that's the hard conversations that are going to have to take place. So, I'll tell you what we've seen be successful. We've seen districts set up budget committee, an advisory committee, some kind of committee that is representative of people. Um, it represents the district.

076It repres has board members that are representative on there. It has certificated, classified, management, non-management, parents. Really, it is a committee of people so that you're seeing it from all sides come together. And then you talk about everything. You have to have an understanding of what money's coming in, where you are appropriating your money to. You can talk about that through funds and what kinds of things are in different funds. you you really at that point when you get to that point and you are having to make those hard decisions there can't be any sacred cows. You really have to evaluate what is effective with your students and where you're getting the most bang for your buck. You have to evaluate every single program that you have out there you know if you have walk

077to learn you know and kids are going you what does that look like and are you seeing the results with your students. So that's where that group comes together, puts their heads together, talks about everything, makes a list of priorities, and then makes recommendations to the board. And then it and that falls on the board's purview. You know, you're going to have to make those hard decisions, but hopefully you have heard from every um every representative there so that you've heard all the voices, right? So, so that's that's a tidbit that we would recommend in terms of um making those hard decisions. In terms of deficit spending, we already said live within your means, but I'll tell you, we have seen an uptick across the the California in terms of deficit spending. Jennifer was right.

078One-time funds that flooded in during COVID, right? whether it was COVID related, learning loss, all those things just greatly increased money that were coming into districts to the point that people couldn't spend it fast enough and didn't know how to spend it. I'm going to tell you because it happened so quickly. The world shut down. And so once those one-time funds expired, right, a lot of times people use those one-time funds on bodies. So they might put additional people in place. They may put additional I know across the state additional health aids, additional things to handle the things that were that districts were experiencing at the time. And yes, it was being paid for out of onetime funds. But if you don't make a very real um plan for backing out of that, then once

079those funds are gone, the onetime funds, then that staffing shifts over to your unrestricted general fund. And that's where you take the biggest hit because your unrestricted general fund was not designed to support all those positions because you had those one-time money that could support that in the past. I'm not saying make cuts in any way, shape, or form. It's a local decision. You have to decide what is important. And you guys have goals and priorities. You already have it through your LCAP. I know you've talked about it here in meetings. Um, so everyone should know what those goals and priorities are. But then you have to make sure that the expenditures flow within that and that you can afford it. So um and here's one more thing I will say about deficit spending before

080we move on to the next questions is if you don't make cuts early, whatever those look like, you're going to have to cut more later. You're going to have to cut deeper. So because it compounds over the course of the year. So you want to get as far ahead of this as you can and just make the decisions that you can to reduce deficit spending because otherwise you will have to cut much much deeper a year down the road, two years down the road, three years down the road. Um, okay. >> Um, so we got the question, um, can you explain the contribution 8980? And they kind of go hand in hand. So why are we moving unrestricted funds to restricted programs? Um, and I just took a picture of the unodudited actuals. I tried

081to blow up so you could see the number, but it's you have the same, not the exact dollar amount, but you have the same contribution in your adopted budget. the dollar amounts going to be different, but um contributions from the unrestricted general fund. Unfortunately, there are programs that aren't sufficiently um allocated funds to support the program. And it may be a program that you guys decided to run as a district, right? And you're only receiving, let's say, 200,000, but the program costs 250,000. And so the unrestricted general fund, you guys have decided for years that you're going to contribute to that program because you like, let's say it's a reading program. Um, you like that reading program, you want to keep that reading program and so you know there's going to be a contribution to

082it. And so it's programs that are running within the district that don't have enough um funding. There's also legal requirements. So, I don't know if you want to jump up and do your special edition. Um, but we are legally required, school districts are legally required to educate the special needs students. She says it very well, >> right? And and so, so through um IDA special ed students, your most neediest students, here's what I'm going to say. Special ed is one of the most grossly underfunded programs that there is. We get some money from the federal government. We get some money from the state government. We know that it is nowhere even close to to meeting the needs of our neediest students, which is our obligation as a school district. So, every single school district out

083there, I have not come across one that is not contributing to um special ed to meet the needs of those students. So, that that's all she's talking about. And every single one of those students has an IEP. You're legally required to do what's in the IEP, right? So, so there you go. >> Did you do anything else? >> No, that's it. She says it >> way better. Um, so the other piece that I will add about the contributions though is just having that number up there isn't enough information for everybody. So, you want to know like list out the programs that you're contributing to. I want to see every single program that we're contributing to for the 41. It's you just you need to know those facts because it tells the story, right? Our budget

084tells the story on how we're spending our dollars. And so when you see numbers like this, it's a huge number. And so she's correct that that um special needs students um aren't funded. I think it's in the 40 or 45% on what they're funding. And yet we're legally required um to educate the students, which absolutely no problem, right? But you need to know how much you're contributing to that program. And that's not to say that that program just gets whatever amount, right? There are things that management is doing that can control the cost of those programs. But there are other programs that you decided to contribute to. But again, showing what makes up that contribution tells a story. And so, um, knowing the facts behind that dollar amount, but it is the unrestricted dollars that

085goes over to the restricted side because in essence, they're negative. We're making up for that negative. And so, we are required to move the unrestricted general funds to the restricted side of the house to cover those programs. >> Was that me? >> I don't know. I don't know what that was. All right. [clears throat] Next, we're going to go to employee benefits and collective bargaining. So, as Apple Valley anticipates increased costs related to employee benefits, collective bargaining agreements, what advice can FCMAT offer to help us prepare for and manage these financial obligations responsibly? So, I I think everybody probably knows that, you know, staffing takes a majority of your resources and and that's what it takes to run a school district, right? I I came from the program side of the house. My heart belongs

086in the classroom. Uh I was a kindergarten teacher, first grade teacher, sixth grade teacher. Absolutely loved that. Loved being a school site principal and everything that that involved. All the persons involved in running school sites and involved in running a district make up um your your salary and benefits. So, I will say this. I will say that it's truly a local decision. I I've heard it said many many times. I hear my boss say it more than anybody else, but um that when cola comes in from the state, if it doesn't come in more than four and a half, four and a half 5% at this point is kind of where you're breaking even in terms of, you know, if everything else stayed the same and you got four and a half 5% it would

087cover your cost, but because you're going to naturally have some increased costs. Um on top of that you also have step and column. You have increased health and welfare. I think right now the average when we went out and um there was a one of the providers had uh provided like 20 districts. I think the average was like 8.5% increase. I have no idea what your increase is in health and welfare but we get hit with things like that. Inflation hits fuel costs more cost the cost of goods and services are more in terms of contracts go up. So, so beyond that, you're you're going to be probably deficit spending. It doesn't mean that you can't offer close to that, that you can't offer cola, that you can't offer even in excess of cola, but

088you're going to have to figure out how to pay for that. It it can't it has to be again living within your means. So, if beyond if you're going to offer something beyond that, then you have to figure out where you're going to cut to pay for that. So, I would say that that's the most important thing is realize that you absolutely can offer things. You want your employees to be well- paid. You want the people who are involved with with children, they are the ones that are are offering those programs every single day. We know that they are a huge resource, a great resource to us. We want them to be well paid, but we also have to live within our means. So, if we are going to do that and as you're looking

089at approaching future bargaining, whatever that looks like for your district, you have to find the ways to pay for it upfront. Know where you're going to make a decision to make some cuts because we we've already seen and we will see when we get to the FH. Yes, you've deficit spent the last two years. You're projected to do it this year for a third year. Then something has to change. Otherwise, you're cutting into those reserves. So, that would be our that would be our suggestion there. In terms of uh staffing and organizational alignment based on FICMAT's findings, is Apple Valley's current staffing including everybody, let's say, appropriately structured and aligned with the district's operational and education needs. This is an area we did not get into. So when I say that we go as far

090as we can in the FH in terms of documents and the questions that we ask in order to answer this we would have to do a staff and or honestly we don't offer that except in relationship to maybe a business department that we're going in to do a financial review. We'll go ahead and take a look at your business department because we feel like we have enough comparables because every single district is is different. No two districts are alike. Um you know in terms of understanding what funding flows into one district. Yes, there are similarities, but there are definitely districts or differences, I'm sorry. And so, we we don't have the the ability to take a look at that and even comment on that. So, I just wanted to to say that on that particular

091question. Sorry. >> All right. That one. >> Yeah. [laughter] Um, so is there any pending transaction that would ne necessitate having 45 million in the cafeteria special reserve fund and the special reserve fund for capital outlay. So the 45 million I'm going to state is inflated currently. [clears throat] Um, I think my earlier slides help with that. Um, >> no. I think I'm going to break it down here. Um, again, remember the reserve and the assets. Reserves are part of the assets. So, the 45 million is just a little overstated. Um, so we don't need to total them together either. So, remember each fund is a standalone. And so the cafeteria, I'm going to talk about the special reserve for cafeteria. So your cafeteria fund ending fund balance for the adopted or the unodudited actuals

092was the 10,108, right? So that's your fund balance. Um is it high? You haven't I think you're projected to def deficit spend this year. Um you haven't deficit spent for the past three years. I've only gone back three years. But there's rules and regulations with the cafeteria fund and how much you can have in that fund. You cannot just build your ending fund balance in cafeteria. That means the state or the feds overpaid you. Not saying overpaid you and that you weren't deservant of the dollars, right? You fill out the monthly reports and they pay you, but it hasn't been spent down. And I'm going to guess that there's cafeterias, kitchens that probably have needs. And so the district needs to make a plan, which I'm guessing they work with the um director. Um they

093make a plan to spend down these funds. And these fund this fund is also audited. And so somebody from the state comes in and audits the um cafeteria funds. So there might be a purpose for it because you might have a plan on what you're going to spend those funds on. And so they might have been building the reserves for a purpose and now there's going to be a plan for spending their funds and they're going to have to also abide by the state and not exceed the amount that they're allowed. And so there's definitely going to be a plan to spend those and you can see in the budget this year that there is a plan to spend down a little bit more of what's in your um cafeteria fund. Now, as far as

094the um the special reserve for capital outlay, so not deficit spending in as far as mine, I think in 2425 or 23 24 you did. So, I did not go into the specifics with the district, but these funds can only be built or only be used for capital outlay projects. And so the discussions happening throughout um board meetings, it's what are you going to do with those funds and what are they being used for? It could be that the um ending fund balance, so it's increased from 6.7 to 11 million this year, this past year from unudited actuals 2324 to 2425. I'm going to guess there was some type of um grant received or money received. And again, those funds are restricted for specific purposes. And so it has to go only to the capital

095outlay within your facilities. So how you spend down those funds is a local decision. Um, and then the number of Oh, so I just added the note about it kind of being inflated in that you wanted to look at just the 10 million for the cafeteria fund and just the 11 million for the special reserve. Oh, okay. So, what's causing this discrepancy between projected reported and actual spending? Which source is this? 749. Sorry. So again, in the presentation about the budget, um I talked about kind of doing the comparison and looking at the adopted budget and then comparing it to the unodudited actuals. We definitely want to see a discrepancy, right? We want even if it's more or less, we never want to compare the adopted budget with the unodudited actuals because this is a

096complete guesstimate. This is us trying to figure out what we have. the the state literally hasn't even passed the budget yet. So, we have a lot of assumptions. We have a lot of um guesstimates on our students, on our staffing, on our programs. And so, comparing the adopted budget with the unedited actuals, there should be discrepancies. Estimated actuals and unaudited actuals, you want to compare those two and you want to see what those discrepancies are. And then again, staff should be able to explain what those variances are. Um, there's going to be times, and I think we we talked about this a little bit with some people in the interviews, where you budget for an amount, let's say in the 4,000s. I'll try and use simple numbers, $1,000, and you only spent 50. So, you

097have 950 that kind of shows is kind of remaining, right, in that one budget line. Or if you're doing a comparison with your first interims, because you have line detail, right? That 950 that's left over falls to the bottom at unodudited actuals. So the 950 is now gone because you have your actuals. So the th000 is what you budgeted but you only spent 950. So that additional 50,000 just fell to the bottom. It fell to the net increase or decrease. And so it's part of what makes up that number. But what you budgeted and what you actually spent, the budget goes away at unudited actuals. There is no carrying like comparing a budget to a next year's budget. It's apples and oranges because your unodudited actuals, your ending fund balance is now taking all of

098that money that you didn't spend in all of the classifications and it's now falling to your ending fund balance. And so now you start a new year with here's our budget, here's our actuals to date, and you're going to see that on the interims. Here's our actuals to date, and are we spending more or less than what we've budgeted? And there could be times where your your actuals to date are higher. And yeah, somebody should be aligning the budget. Um, it can happen, but it shouldn't. Your budget should be looking at all of that, right? aligning your projected budget to make sure that you're looking at your actuals and that your actuals to date are being tracked. Maybe you signed on to a service contract because you weren't able to hire somebody and nobody's actually

099updated the services budget, but contracts getting paid every month. And so your actuals to date are paying that $10,000 a month, but the budgets in the one, nope, in the salaries and benefits. Almost went with those classifications, the codes. They're in the salaries and benefits. And so those are the budget revisions, right? We now know that we aren't hiring a position. We've got a contract to replace that person. So now our salaries and benefits are going to be reduced. And now that um services and operating expenditures are going to be increased and so all of that takes place throughout the year. So projected reported and actuals um estimated actuals, unodudited actuals, you can use your first interim to actuals, you can compare compare that as you're moving through the year. You can use your second

100interim and actuals and compare it through the year. But um you just want to make sure that they're aligned. And so the discrepancies I I I'm not sure of any discrepancies. Um again, I think it's because we're looking at the adopted budget versus the unodudited actuals. And so in looking at the document that we received, that's the only like way that we knew how to explain it and just showing that a budget is forever changing. So I hope we answered that sufficiently. Okay, might have to go into that one more. Oh, and then what is the inner fund transfer for 7310? Sorry. Um so um 7310 is indirect costs. So it is administration overhead. It's basically the cost of doing business. Um every program depends on payroll, HR, technology, the leadership, right? And so it

101has a cost. um at the end of every year at on audited actuals um there's actually a calculation that's based on your expenditures and it comes up with a rate. So, um, that's the allowable rate that the district can charge to the various restricted programs and they should charge to those various restricted programs because there's a lot of manpower that goes behind those restricted dollars. Um, the plans that you have to bring forward, everybody that you're paying and and actually trying to um tie one classroom to like an HR person, right? if we were a lawyer, we're going to do 0.10 in this classroom, 0.05 in this classroom, it just can't be done. And so they came up with this um indirect cost rate. It's calculated every year at your own audited actuals. You can

102actually see it on the form ICR and it sets your rate for the next years. Um and so that's a percentage that you should charge. We as Pikmat even say to charge the special ed programs and those programs that are requiring contributions because if or when it ever happens that these programs suddenly get fully funded and you are not accounting for the cost of running those programs which is your overhead then they don't really have a true picture of what the cost of that program is. And so while it looks like it's increasing the cost to special ed, it's really telling the story of here's our special ed revenue, here's our expenditure, and oh by the way, here's our overhead we're charging and that's the cost of the true program. And so um that's the

103reason for that. So typically it's a um negative to the unrestricted because that's where most of the um payroll and HR and technology are being charged from and again it's a calculation in the um on audited actuals but it's a negative so that it credits those expenditures so it reduces those expenditures and then transfers it to the restricted side. So net zero. However, you have other programs that you can charge indirect to. So, it's not only 7310 but 7350 and you have to look in the other funds. And then again, there's a TRC. You cannot print this report without these netting zero. And so, the 7310 and 50s must net zero. But tracking it between the general fund fund 13, I think you can charge 11 and 12. Your Oh, look me codes. um your

104child development and your adult ed program. Um you can charge those programs as well and you should because it's also right it's paying for your staff in the business office and the leadership. So um what's that? >> Oh, did you change the slide? I didn't know you changed the slide. >> Sorry. No, but you changed it from the last one. Sorry. I thought you were telling me I had a another dot. >> Okay. So what's causing the overspending in the special reserve for capital outlay? >> So I'm guessing Oh, I don't have 92. So I think we kind of talked about that one um with the fund 13 where you were talking about the reserves and assets and why is it 45 and do we need that? Um Is that one 40? >> Right. So

105that's >> Yeah, it's 40. Got it. >> Yeah. So um not deficit spending, not projected to deficit spend in the reports that I have that I pulled back. Um 23 24 you did. Um, if you're spending more than your revenues, it's because of the timing of when you receive the revenues. So, school districts don't have the cash flow. If they get approved for some type of capital improvement, you don't have the cash flow, right, to start building and start this big project. And so, you wait until the funds come in. So, the funds come in maybe last year, maybe two years ago or this year. and then you spend them down. And so if you are deficit spending in fund 40, it's because the grants came in and now you have you're fully funded for

106that project and now you can spend down those funds. Do you want to make sure that all of your contracts are sufficient and that they are there's enough revenue to cover that those expenditures? Yes, but that's something that your staff is managing. And so um all of those funds, but the money the timing of when that money comes in and the timing of the expenditures, it could be that they are maybe having a net decrease in that because the funding comes in first and now we can move in with move forward with the project because we just don't have the cash flow to start a big project without the money. And I don't know about you, but I want the state to pay me before I start a project. [laughter] >> All right. All right.

107So, we're just going to close out this portion, uh, the question and answer session. So, first of all, I just want to say thank you for inviting us back today. This is not our norm. We we don't normally come and do board study sessions, but we just really felt like hopefully we could help bring some clarity, help bring some understanding. I'm not sure that we have, but but but we're trying. But I I will tell you, I just want to get back to, you know, the reason we're here and the reason we felt this could be beneficial is because we saw a breakdown in trust, right? Um, we know that when there's a breakdown in trust, I said this before, the ones that truly lose are students. So, we've got to figure out a way

108to get back to building that trust, getting back to working in a collaborative relationship. That means things like increasing the communication. Absolutely. We talked to the district when we were here about, you know, doing the presentations in advance, making sure that you can explain things so that there's an understanding. Absolutely. That's that's that's their job. Board members, I will tell you we were willing to come back because we said let's give us your questions in advance. We we're not intimately knowledgeable about even what's in your financial reports. Even though you know we asked for them for the FHA, we look for certain things within that 190 page document, right? So I would say that even the people sitting there that are preparing those documents, they don't know every single number that's in there and it

109requires some some um some research, right? So I would say give them that same common courtesy. That's part of the trust too. Provide those questions in advance or come in and ask those questions in advance so that you have an understanding as you're coming into the meetings. I think that that that building trust goes both ways. There may be some people here in the room or people sitting up here that says, "Well, we're too far gone." I would certainly hope that you're not saying that because every single student that's sitting in your classrooms deserves for everybody to come together and work collaboratively towards a common goal. So, I'm going to continue to preach that because I truly believe that in my heart of hearts that we all play a role in this. So, it means

110figuring out, you know, this isn't a marriage where you can get a divorce. No, no divorce is allowed. You guys are in this for the long haul. You're in this till the end until until you leave the district. So, you got to figure out a way to get back to building that trust and back to a collaborative relationship. So, um I would just encourage you to do that. And so, I'm going to say thank you one more time. I'm going to open it up and and say, was there something that we'll try to answer your questions if at all possible, but but >> well, it was based on things you said um on slide nine. >> Which one? >> Nine. nine. We're gonna go backwards here. >> I'm just curious uh what the benefit would

111be of adding a fund 17 because you said you mentioned we don't have it, but some districts do. I was just >> curious. >> So, what's the benefits to having? >> Sorry, she didn't hear you. >> Sorry. >> They pick up what they want. [laughter] >> I don't get them. >> Can you go to the mic, ma'am? >> Yeah. Good. Good call. I should know that, right? Um, it's actually another fund to manage. So, >> and it's optional. >> And it is optional. Um, some districts will hold their 3% in there and not touch it. The problem with that is your expenditures and that 3% fluctuates. And so now you have a bunch of activity going in and out. Um, again, if you have a large reserve and you know that there's something in the

112future that you're going to build or a project and you're going to use these reserves, you could set them aside in fund 17, but know that they are considered unrestricted and can be moved back into the general fund. And so I would say for a district that has a large reserves and knows of some project that's coming up or I don't roof replacements or a building of something that they don't have specific funding for and they've saved their reserves and they build their reserves for this purpose then you would set them aside. Sorry. >> Thank you. >> I have a quick question. >> Yeah. Go ahead. >> What is a TRC? I'm sorry. [laughter] I use accounting. No, not necessarily an accounting term. So, it's a technical review checklist, right? Look, >> critical. It's a

113critical error. Basically, the SAX reports um there's a a million checklist and they go through this 194 pages to make sure that all of these checklists align. And so, yeah. So, you have to clear all of your TRC's. Sorry, I tried not to do that, but I did. Well, I have one one question and I think we'll get to the questions in the next one. Um, on slide six and seven. Um, >> six and seven. You said >> six six and seven. >> I can't get this to go back. So, I apologize. It's not it's not moving with the clicker either. >> Six was the question of budget budget fundamentals. The budget fundamentals on I'll just ask a question. I think you'll probably figure it out. Okay. Um, there was a mention about one-time funds

114that should be used for one-time resources. You mentioned it once and you mentioned it again in the next slide. Um, >> and I do know that that question has come up uh even from this day uh to find out what we could do. So as the fake mat team um what suggestions will you have in place for us or suggest for us? Um my brain is saying we need to know who is who was hired or what positions were hired under the one one-time funds so that we'll have appropriate decisions to make and until we know that it is impossible to make that decision. I I I do think it is good for you to have an understanding of what positions are paid for out of one-time funds or were and then we're moved into

115the general fund. Correct. But I think what's even more critical is what we talked about. You're going to have to have an understanding of things across the board. You're going to have to have >> that that's going to be that group coming together to have those discussions to understand because the one-time dollars are gone. there there's a little trickling. Oh, yeah. Yeah. And you guys got a block grant, so that is a onetime fund. Um, so, but if you have positions that were hired under one-time funds that came over into the general fund, that would be a really good piece of information to understand, right? But you are going to have to look at it as a whole. >> Yeah. >> Thank you. >> Yeah. So, I'm going to add on to her budget advisory

116um workg group. Um, I actually worked at a district that was negative and coming together is very hard. There's a lot of emotions, there's a lot of stress, there's a lot of unknowns. It's scary. Um, the budget advisory meeting, you you're kind of breaking down the budget and you're just learning all the pieces of it. You're defining your base program and what do we want to add to to that could that could impact the deficit spending, right? Here's our base program. However, we need this, this, and this. And so it's our base program plus. But all of those conversations, breaking down all of those all of those restricted programs and understanding how you're staffing, how you're doing it, just breaking down the budget and understanding it and kind of building it as a team, going

117through that cycle is it's it's just very very worthwhile. Um, I still have teachers from my old district that reach out um because of things that I taught them when we were doing that and he's like, "It's still working for me. I still use it." And so that district is doing well and so they work together, but it's rebuilding the program and understanding everything that's made up of this. >> Any other questions? >> I do have a question. And I just want to make sure that Trusty Oaro was done. >> I'm not done. >> Oh, okay. [laughter] I'm sorry. >> Uh, you did mention about mentioned the trust uh the um budget advisory or the budget. We have a budget committee in the district. Um the unfortunate thing is that we we failed to do

118it the way we had agreed to do it initially. uh and their agreement was that we were going to have seven seven and seven from each of the bargaining units except that when we come to the meeting it is not that uh and so the teachers who come or even the classified that show up um they are over outnumbered and so they are listening to this presentation that has um that was actually presented to us as a board. uh so they need to hear it so that they'll have opportunity to have the conversation in order to have a good understanding. You know what I'm you understand what I'm saying? [snorts] So we are struggling with that piece to be able to when we say we are having a budget committee that the committee is made

119up of the actual number of people that we said we were going to have. So we are not topheavy and the classified is not represented or the certificated are just a handful of certificated. So we need to be able to have I'm saying it in public because it has been a a problem for many staff members that presented to us that we need to really go back to what we said we would do and that is to have even number of representatives for all of the bargaining units to be present. so they'll have the understanding of what this is all about. And I'm so glad that you came. I chose not to do so much on the FICMA because I wanted to hear the information. Unfortunately, I didn't give you any answers because I had

120a family emergency and I had to leave this state. I just got back. So, this is important for me. I needed to hear what you have uncovered so that we will know where to go moving forward. Thank you so much for coming. >> Thank you. you want to answer? >> Okay. So, my question is um on a statement you made about um budgets and that they should be based on reasonable assumptions. So, that is slide number six. >> So, when one I'm sorry, >> slide number six. We're on there. >> Yeah. >> Okay. So when budgets are created with reasonable assumptions that means they're built upon trends of um revenue and expenditure. Um so when we look at our um past two years um of budgets um meaning our revenues and our expenditures and compare

121them to unodudited actuals. um the difference between revenues unless there's something uh catastrophic happening. Um I would think it wouldn't be such a great difference from the previous year. Um considering our enrollment has stayed pretty steady, I would think that our revenues would stay pretty steady too. Um am I not understanding that? So, your enrollment can stay steady, but if the kids don't show up for class, if that percentage doesn't stay steady, then you're receiving less funds. If your applications for free and reduced um English learners, foster youth, homeless, and there's the top one I'm going to forget, >> foster youth, you guys. >> Yeah. um if that percentage change, it's a huge impact. And so um there's there's there's so many pieces of it that can change. >> So even with all of that

122remaining rather consistent, should there really be a difference of for the past two years $20 million in revenue? >> There there can be. So again, remember the past few years, we've got a lot of one time. Um, just this year, right, the budget was passed. We the everybody did their budget in June, and the state adopted a budget giving every school district $313 per ADA to a school district. So for one district that we're working with, it's $ 8.5 million that they didn't have in their budget. And so I don't know what the dollar amount is for your district, but um there can be there's there's a bunch of universal TK dollars that came out. I mean it it fluctuates. You have um fed the federal a lot of school districts didn't include some of

123the federal dollars because of the >> What was happening at the federal level and the president level and cutting everything off. Again, that's the county that gives the district guidance on how to address that. And so, you're you're going to see fluctuations and it might be significant. I I can't say exactly why and what dollar amount. Um, but it's it could fluctuate >> and and here's death. >> The staff should be able to explain it. >> Yeah. >> At that point, the staff should be able to explain what those variances are. Would I go to the past and look at it? I mean, at this point, your unodudited actuals, you might want to say, why did we have some variances between estimated actuals and unodudited actuals? Um, what are those variances? I will tell you

124right now, your your salaries and benefits, they were within 1%. on your unrestricted. Your restricted side was off. But again, that's expected because you plan for hiring all these people or substitutes or hourly or what have you and it just doesn't happen. But your unrestricted your your salaries and benefits were right on fours and 5000s possibly. Oh my gosh, here I go again. >> Books and supplies and services and contracted um they might fluctuate. And again, is it more than 5% and is there a reason for it? It could have been something broke. Um, you bought a large piece of equipment and the six in the capital outlay. I did it again. I caught myself. Um, there's just so many things that impact the budget and it changes. I'm telling you, the minute we print

125the budget and give it to you for the board meeting, it's well, something changed. And so it's it's just that in influx unfortunately >> and I would just add to this um it all comes down to communication. So when you are developing that budget in June you should have a very clear understanding of what assumptions that budget was built on. All right. Then the governor is going to adopt the budget. Sometimes things change and then sometimes the district has to come back and do a 45day revision because it's been material enough that it changed things materially enough. I don't think that's necessarily been the guidance in your county. I don't think to come back and do a 45day revision. And that that varies throughout the state um in terms of what one county says is

126a material difference or not. Um but then when first interim comes around, you have more information. The budget's been adopted. you've been in school for a few months, you have an idea of how many kids showed up. You can kind of take a look at your attendance rate for those first few months, then look at a historical averages and say, is this tracking with where we were the first couple months, the last couple years, or is that looking different so that we can make some changes? And then first interim, again, you're going to have a list of assumptions that that is built on. And so you you should have an understanding when there is some differences is what I'm saying. And that comes down to communication. >> So quick question. So in terms of this

127year's budget, if our enrollment went up, if our unduplicated student count went up, then our revenue would go up. Correct? >> Only if your ADA your average daily attendance also tracked along with your enrollment. >> Yeah. If you if you used your historical trend, let's say it's 96 and for whatever reason these first few months of or couple months of school Yeah. are or you're only coming in at 94, >> right? Um that can impact the revenue. So, um, it's it's it's just a little complicated and I would say that that you know the district should be able to tell you in terms of what what is 1% in ADA look like. So, if you used to be 96 and now it's 95, what's the difference in those dollars? As a principal, I'd want to

128know that. As a principal, I wanted So, in my district, we had a little, you know, competition going on and I'm one in my school on top. So that means you're, you know, implementing things to get kids in seats every single day because we know that for every single day kids miss, there's a gap in their education. You can't make that up. The teacher's not going to teach that same lesson again, right? So getting kids in seats is one of the most important things you can do. But increasing your ADA, even 1% can bring additional dollars into the district. >> Yeah. >> Thank you so much. >> Yeah. >> Final question to ask. >> Okay. Um I as I look at one of the uh points that you made, it's not in the slide. Uh

129it shows that we we had a deficit spending in 2023 of 1.7 million and then we went on to 2024 and we deficit spent 6 point. This is in the next it's in our package packet that we read. Um and so in 2025 we are projecting 5.6 6 million. So we projected um 6.4 outside of the 1 something we had the year before. So this year we're projecting um $6.44 million. And so next year we are projecting 5 something million. So it just seems like we are projecting higher and higher on >> Are you talking about deficit spending? deficit deficit. >> Yeah. >> Is in our is in our packet. It's in our board packet. >> Yeah. We will be we'll be discussing that in the next presentation when we're going over the FH. Okay.

130>> Okay. >> Right ladies. So, we'll take a quick break before 5:00 here. We'll take um let's see 4:55. Um we can just take 10 minutes so everybody can um take a break and then we'll be back on the record here just about uh 5:05 >> and then we'll need some IT help one more time to load our next presentation thing. >> Okay. Thank you so much. >> Trust me, I don't even know how to close this thing. >> I got this. Okay, Jason gave us the heads up. So, we'll just call back the meeting to order and we'll move on to item two is receive FitMat fiscal health risk and analyst report. Ladies, you guys are up again. >> All right. Well, thanks for having us back. one more time. [laughter] All right, we're

131just going to go ahead and jump on in. So, so this part of our presentation totally relates to the fiscal health risk uh analysis. Um, so our agenda for for this part of the meeting is that we're going to tell you a little bit about us. We didn't go into depth about who we are, but I'm going to give you a little more background information. We're going to talk just in general about fiscal oversight and then um get into our indicators of risk or potential insolveny, which is something that is posted on our website. So, we're going to talk about what those 20 are, get into the FH, um, and then get into the district's results and then next steps for your district. So, all right. So, in terms of FickMat, who are we? We're

132an independent external state agency. We were we were created back in 1991 when a school district actually went insolvent and all of a sudden people went, "Oh my gosh, how did that happen?" uh because prior to AB1200 going into place, which is the legislation that created us, it also created the ability for school districts to receive an emergency appropriation if they go insolvent, the process involved with that, but it also um brought forward increased transparency on district financials because before that school district went um insolvent, they did their budget at the beginning of the year and then you didn't hear about it again pretty much till the end of the year. So AB1200 put the increased transparency in place of now the district having to come forward and and prepare a first interim, a second

133interim, a third interim if it's warranted um things. So it put a very progressive and and more transparent process in place once um I I want to make clear that um the fiscal health risk analysis is something uh that we do when we're invited in like Apple Valley did. So, Apple Valley reached out to us said, "Hey, we want to do an a fiscal health risk analysis. That's why we're here." Um, sometimes we get triggered in to to do a fiscal health risk analysis. That was not the reason. In terms of fiscal crisis and management assistance team, we said this throughout our interviews. We tried to say it in every single interview because most people don't know who we are. People when they hear our name want to focus on the fiscal crisis piece of

134our name. And yes, we get involved in fiscal crisis. That is actually not why we're here. But if a school district goes insolvent, Englewood, we've been in there 13 years, right? We have to go in and do an annual evaluation, work very closely with them. We're involved in that work, but it is a very small part of the work that we do. We like to focus on the management assistance portion of our our our name, which is what we're doing here today. That's the more preventative type work that we do up and down the state, right? We want to try to help and be helpers along the process so that school districts don't get into that fiscal crisis stage, right? and have to have us imposed on them because then that looks totally different and

135that's not good for anybody, especially kids. Um, so I just wanted to make that clear. There's that Assembly Bill 1200. Uh, I kind of already talked about that. It really also promoted collaboration between the county office and school districts. County office through AB1200 have a very specific role in terms of their oversight. So, it strengthened that oversight, their ability to see in. So when your school district uh prepares a budget, prepares first and second interim and audited actuals, those go off to the county office. There is a a technical review there. Somebody is looking at those numbers, right, and providing a letter back to the district and they're responding on those. Um so it increased that oversight and that responsibility on their part, what the district's required to do, what the county is required to

136do. The district is absolutely the first level of fiscal oversight, right? that rests with the district's elected board. That is part of your duty as being an elected board is to to ensure the financial stability of the district. That that in turn happens to to be pushed down on district administration. That's their job also to bring information to the board. So working together to ensure that fiscal stability is one of the most important things that can happen. So that's that first level of fiscal oversight. The second layer is the county office. And so again, they're they're hopefully being seen as a helper and they're giving you good information. Um, we think that that's happening. We didn't hear anything contrary to that. Uh, but the the county office a lot of times will provide uh that

137common message to all the districts in their county. So, they're providing you direction in terms of what should be included in your budget and and and those kinds of things. Um, and they also act as an intermediary between the district and the state. So you got district level, you got county level, you got state level. A lot of times if something's happening in a district that the state's going to, you know, ask questions, they'll go to a a county office first instead of going directly to um a a school district. So in terms of indicators of risk or potential insolveny, so these are 20 areas again that that we've identified as the ones that most commonly lead down the road to insolveny. So on our 30 plus years of experience. So in attention to the

138annual independent audit. If audits are being done late, not timely, if you're not implementing, you know, uh, suggestions in there, that can be a problem. I'm going to just kind of breeze through these. Okay, so budget development and adoption, not having an adequate process for that, insufficient budget monitoring, um, inadequate cash management. I don't think I'm going to read every single one. I think you guys can probably read, but those are the 20 areas. And in fact, those are the first 10. Here's the next 10. I'm going to tell you that that indicators of risk or potential insolveny that is on our website free for districts to to see and there's some things that go along with that. Our fiscal health risk analysis tool is something that we've had on our website for a number

139of years. It's free for districts to use on their own. Districts can download the tool. They can go in, they can answer yes, no, or not applicable. Um, and they can complete that themselves. Many districts invite us in just like Apple Valley did um because they want that independent external look. Once you hire us, you don't get to say what goes into our report, right? So, they like that having that um outside perspective. Um it just kind of sometimes gives you a different look. All right. So, give you just a little bit of an overview on our tool. It consists of 138 yes or no questions. Um, I will tell you that that there's a yes, no, or not applicable. The only time that your risk score starts to tick up is when we answer

140no to one of the questions. Okay? They are weighted differently. So, if you are in um there are some questions that are high-risk, there's some questions that are low risk. There's some categories that are high risk, some that are low risk. If we answer no to a question that's a high-risisk question in a high-risisk category, that is going to be scored more than if we answer no to a low-risk question in a low-risisk category. So, I just want people to know that that every single no question is not weighted equally. In fact, there is one thing that that um kind of pushed your district from moderate to high, and we'll talk about that in just a minute. um right there. Um let's see that total risk score categories. If if you actually have the report,

141it's at the very end of our report. It tells you what the what the scores are. So if you're 40% or more, you're considered high risk. You can see moderate and low risk there. Now, what's interesting is your district, their score in and of itself fell within the moderate category. So when we to tallied everything up, it went to 31.2%. So it put you in the moderate risk for insolveny. What pushed you over is that uh and I'm going to have to refer to the report and I apologize, but at the beginning of the report we have so within those 20 areas there are questions under each of those. We consider some of those questions the ones that we consider high-risisk we have pulled those forward onto pages. Let me look. Eight and nine that

142we consider material weaknesses. So those are a greater risk for your district. There is one 8.3 that actually took you if we had answered yes, then you would still be in the moderate risk. That one had a a a large enough waiting that it bumped you into the high category. It disregarded your 31.2% and it put you up there. And that question, I'll just go ahead and read it and we'll talk about it a little bit more when we get there, is if the district has deficit spending in the current or two subsequent fiscal years, has the board approved and implemented a plan to reduce or eliminate deficit spending to ensure fiscal sovereignty? We think that that is one of the greatest risks to any school district out there that if you are deficit spending,

143and it happens, that you have to come up with a plan and you have to implement a plan because otherwise you're spending down your reserves and you are spending your savings account. So that particular one um bump bumped you into that category. We used the adopted budget um as the financial reporting period. Um you guys have had an audited actuals but but that had not taken place when we were here for field work. So we have to have a cut off. So we used your adopted budget. So that that's what our answers are based on. We came on site. I think we told you you know your district had to upload all kinds of documents ahead of time for us. I don't know. I'm going to say hundreds of documents. It's a lot. Um and

144we came on site for those three days and did our interviews, left and did our analysis and then then provided the report. Our report really focuses on on systems and processes, right? So it's looking at those 20 areas and how can you improve in those systems and processes. All right, here are the areas that when we went to, you know, because you can look through here and see all the no answers and those are the ones honestly I would I'd concentrate on. Um, but when you go to page 10, see I need my glasses again on that one. It gives you a score breakdown by section. So basically these are just kind of like your your your top five in terms of um you know having a greater risk. So budget monitoring and updates, collective

145bargaining agreements, deficit spending, general fund, current year, internal controls and fraud prevention. I do want to make one thing clear on the fraud prevention. So this is an area that we have um batted around as a staff for quite some time. Uh because the thing that made you high-risisk in that area, I want to be very clear there's no fraud or anything like that that nothing like that came up. But but when you uh one of the questions asked, do you have um how is it even working Jen? So yeah, a reporting system, an anonymous reporting system. Do you have a process for for actually working through those things that have been reported? So what it does is it encourages people to come forward. We think that that is very important and we and we

146express that to the district. Okay. So that that's why that particular area is is high um is because people weren't aware. Now, it's come to our attention after the fact that I think you have some we tip posters that are, you know, throughout the district and I think maybe one or two people may have mentioned the Wii tip, but making sure that that's part of your message, right? So, every year when you guys come back to school and you have your annual, you know, whatever, however you do that, make sure people are aware of that. Make sure that your principles are making their staffs aware of it so that everybody departments are making people aware of it so that so that that is something that is encouraged so that if somebody sees something they're they're

147going to say something right. Uh it ensures that the district's um it it it just helps people to come forward and it ensures that the district um resources don't get compromised, right? So it also protects your employees too. You never ever want to put your employees in that situation where they're being accused of something. So I just wanted to make that clear on that. Okay. So we're gonna next we're going to get into the summary of current addition or current conditions. So I think we hit this home in our first presentation. Deficit spending absolutely is probably one of your largest risk indicators. Um this this particular slide only shows you know the last three years. So it shows how you ended in 2324. Yep. you were 1.7 million uh deficit spending and at the end

148of 2425 you were 6.4 million deficit spending and this year at adopted budget you were projected to deficit spend 5.7 million. So we can see what that looks like. Now we did go back and take a peek at 2122 and 2223. You guys were not deficit spending then right? So something changed something changed that that increased your deficit spending. that this is an area um definitely that you need to look at and you have to get that board approved plan in place. Not only that does the board need to adopt a plan but then you need to implement that plan. You actually have to take that and put it into action to get rid of that deficit spending otherwise that will take you down the wrong road. That is definitely one of the things um

149that we see over and over again. So, as of the the adopted budget this year, even though there was not or there was deficit spending in the current year, when we look at your outy years on your multi-year projection, you were actually projected to increase 2.6 million in 2627 and almost little under 4.6 in 2728. That is mainly due to one little box that's on your multi-year projection and it's called B1D and it's one of those funny things on the SAX form. I will tell you what the district has done is they've put a number in there. They were very transparent with their number, but they put 3.5 million in 2627 and a million in 2728. We see this up and down the state and I'm going to tell you my boss Mike Fine has

150done a little campaign to get rid of box B1D so that districts can't use it. Um but we see districts doing this over and over again. So sometimes districts are going to put something in there that they um let's say that they had some one-time funds. They had some temporary employees associated with those onetime funds. they decided they've already taken action that those employees at the end of that one-time funding is going to go away. You could put an adjustment in there that's going to account for that in your outy years. Okay. The district has put those numbers in there and then in their explanation in box F, we put it as a a little point there. In box F, they identified reductions that need to happen in order to realize those savings. So, they're

151giving the they're giving a heads up in the sax form in the budget. Okay. In, you know, and that's where I have my notes and I apologize. You think so? I apologize. I had my notes down. What side are we on? Let's see if I can tell you what was said in there. Okay. Next paper. So, so like for 2627 there was an estimated attrition reduction of $1 million. That's listed in the assumptions. An estimated certificated staffing reduction of 2.5 million and and so on. An estimated So, what they're saying is that that dollar amount that's going to put you positive in that future year, we would need to make these kinds of reductions. So, they're shining a light on it. But, but here's what we would say. Our suggestion would be that you don't

152use that unless the board has taken action because you don't know that you're actually going to realize those savings. So we we gave the district that feedback during interviews, right? We identified that and said this is something that needs to change. Don't put a number in there and solve it because you haven't solved it quite yet. Make sure that it falls out and it shows an accurate picture. So because if you remove that 3.5 million then that year is going to look very different, right? and that's also affects future years. So, we've made that that suggestion to the district. Um, and and we think that that needs to happen. >> Yep. I'm going to add something to that. I'm going to come over here. So, a lot of districts um do this. Yes. >> Again,

153because they've been in the they've been in the position for a really long time, right? and they know that these are the reductions that need to take place that like she said the temporary contracts and what have you. So, we're fixing the problem. We know that there's discussions that going to that are going to happen, but it's also because now we're going to certify positive, right? So, first and second interim budgets, you have a positive qualified or negative certification. And so, it's in there. It's very blatant, very transparent that this reduction is going to happen. Um and so now we have a positive certification. So in our conversations with the district is that again recommending not putting in the dollar amounts there and let it fall to the pro to the bottom so that you

154see what your deficit spending and selfqualify. So there is nothing wrong with the district submitting a qualified budget. Uh a lot of districts do not want that. But you are recognizing as a district that we have a structural deficit and it needs to be addressed. And so again, we as business people, we want to fix the problem. We know that these temporary funds are going to go away and so we know that we're going to fix it and so we put the put the numbers in there, but we're not driving the conversations necessarily that way. And so again, it's a different thought process because a lot of districts always want to certify positive because it's a negative connotation to be qualified, but that's not the case. Self-qualifying real shows that you guys realize that there

155is a structural deficit and that conversations are going to start happening. So I would encourage that. And I'll just add on to that, the one thing you don't want to do is to to not recognize that problem and then have the county office downgrade you. That that definitely, you know, that I will say is is one of the greatest risks too if a district is not recognizing where you are. And and so you don't ever want to get into the position where your county office then is required to downgrade you because they see things differently than you do. So we would just encourage you to do that. All right. Did we already do this one? And I lost track of where we were. Okay, next up is collective bargaining. Collective bargaining, yes, was one of

156the highest areas of risk. Um, you know, we we didn't see disclosure documents being prepared for agreements outside of the normal represented group. So, when you guys um would settle with one of your bargaining units, we saw the AB1200 disclosures, but but we saw manyus and things that had a fiscal impact. So, you know, one that comes to mind is, and I think we may have referenced it somewhere in the report, is, you know, there was oneouou that took some classified staff and totally redid ranges. That definitely had a fiscal impact on the district. So, you know, we just encourage the district anytime that you have a aou or a tenative agreement, anything to go ahead and and um create the AB1200 disclosure so that you can make sure that you can afford it, right?

157it it discloses that information. I apologize for hitting that. [clears throat] And and the ones and and one more thing that really kind of increased your risk in this particular area is that the disclosure documents that we did review often cited um your unreserved unreserved general fund in excess of the reserves. So So basically it meant that you were using your reserves. So you were using one-time funds. That wasn't everything in there. So, it also cited some other things that you were going to use, but we saw that in many of the AB1200 disclosures as a way to pay for that salary increase. It it it said that you were going to be using that. So, again, the one-time resources should not be used for ongoing expenditures. And so, that's one thing that really bumped

158up your um score in that particular area. And and we all can acknowledge that those onetime funds really kind of muddied the waters, right? it presented districts in a much more favorable light than they actually were as you were going through many of those things. So, um, one thing that we recognize, the board's taken action to offer an early retirement incentive. This is your second one, um, within just a few years. So, hopefully is going to bring you some additional savings. We don't think that looking at the state outlook that that is really going to offer much relief. So, we really think that the solutions are going to need to be at the local level and it's going to be about the things that we've already talked about, right? In terms of coming together, prioritizing,

159looking at what are your goals and your priorities for the district and being able to maintain those things, but again, reduce that deficit. All right. So, in terms of next steps, we've already talked about some of these, you know, continue your efforts to address your structural deficit. We talked about the plan. Implementing the plan is one of the most important pieces, too, so that you can reduce that deficit. Don't use the onetime money for ongoing expenditures. I mean, this has kind of been a recurring theme tonight. Um, but use that FHR to prioritize the areas. And I would start in that very front section. I think page eight and nine is what we talked about, the material weaknesses. Okay? You may not be able to conquer every single note. All right? But those are the

160ones I would tackle first, right? Because those are the ones that we've identified as an organization that definitely increases you you your risk the most. And then you can make a plan for the others. But I would definitely focus on those. Um so so that's one way that's something that you can do. Uh what was I going to say? I apologize. I lost my train of thought. I I I just want to reiterate it one more time though. Um the FH is a great tool. You can do it yourself. You guys can, you know, you get a few months down the line, you can go ahead and plug in your answers and see if those have changed. You definitely want to try to get every single You want to try to get enough nos into

161to yeses that it brings you down into the low risk range. All right. We don't see the district as going off the cliff right now. That's That's not We do some of these and we're on the phone going, "Oh my gosh, we have a district up north that just went insolvent, Bloomish Unified, and that happened quickly." And it was a phone call and within probably three months they were asking for an emergency appropriation. And so we see districts like that that are ready to go off the cliff. We really don't feel like Apple Valley is that district. No. Do you guys have some things you need to work on? Absolutely. Is it going to take the people in this room working together? Absolutely. But you got to figure out a way to get there. Okay.

162Otherwise, your kids are going to lose out. I do want to go back to uh questions. Do you have your questions? Okay. Hand me yours. >> No, that's okay. All right. So, we had in the previous presentation, before I get to any additional questions here, in the previous uh presentation, I just want to make sure we answered all the questions. We left some of them out because we thought that this answered it, but I'm just going to ask them one more time and make sure that you're comfortable with what we presented. So, under risk level set assessment, how does FCMAT rate current risk level? I think we talked about that. So, I think you're probably good there. Yes. Uh if the ratings moderate or high, what steps? Steps would be taking a look at the

163nos, right? Especially the material weaknesses and see if you can get those two yeses. Definitely. Um, did I answer everything? I think I did. I'm going back through them. Recommend. I think we did. Did you have any others outstanding that I did not answer between our last presentation and this one? I apologize. >> The only one that you didn't answer and you explained why was the staffing. >> Okay, there you go. Okay. I just wanted to make sure we'd hit all of them. there is one of yours that we couldn't get to a a a number, but we're going to get with you and we're going to answer that question for you. Okay? We'll do that individually. All right. Any questions that anybody has? >> I'll start with a question here. Um appreciate the first

164off appreciate the time and effort you guys put into this. >> So on page 11, summary of current conditions, deficit spending is increasing. >> Yes. I I heard uh is there any other districts uh do they set is there some way do they set policy stating that uh they will not ever deficit spend a board a board sets a policy you know such as we have a 5% rule for reserves three but >> would that be something that you've seen in the past I mean >> I personally have not have you seen any >> yeah set a policy that they're not deficit spending I haven't seen that. >> Okay. >> I've never seen a district do that. I think you have so many variables that I think sometimes there can be unplanned deficit spending. But

165>> that's why the question would be Yeah, there's always something that's going to happen. >> There there can be you want to do your best to avoid that. Yeah. Right. Absolutely. Just like with a personal finance at home, you do your best to avoid it, but there can be something that comes up and you could have all your ducks in a row and something can come up. that yes, you want to plan for no deficit spending. That should be the plan. >> Okay. So, and also you wrote there is no board approved plan to reduce and or eliminate deficit spending. So, if your recommendations, if this board wants to move forward with >> putting a plan together to reduce that, would you start with like a budget workshop where it's just strictly we're going to

166just hammer down on this this issue and is that that would be the way to begin it? >> I I think you know what we talked about before in terms of like a budget advisory committee, it has to be coming together. There has to be a >> there has to >> be some stakeholders involved. >> Stakeholders. Yeah. Educational partners um across the board. There has to be a level of understanding first though. So, you're going to have to lay a foundation that people in the room have a basic understanding, which means you're going to have to educate them and walk them through and and so that everybody has an understanding of what that means, what those numbers mean, >> and then start the process of trying to prioritize things within the district, things that you

167definitely want to keep, things that they may recommend that you're going to make cuts to programs or to staffing or things like that, and they would come forward with recommendations to do. I think you covered that earlier that that would be the way to go forward. >> Yeah, I think that that's >> like there's no sacred towels allowed. >> I know. I'm sorry about that line. [laughter] >> Okay, great. Thank you. Any uh are there board members questions? >> Yeah, I do. I have a question. >> Oh, Maria. Yeah, go ahead. >> Okay. >> Um, of course, my question always comes from the packet that you sent to us. So, I'm not going to deal with the packet because I think we are going to have to um visit the packet differently and all of

168us will have the opportunity to look at all of the lines that you brought up in your packet. The packet that >> are you talking about the sax document packet? >> The document you sent us. Uh but what I'm looking at is do we as a board do we as a board need to um Oh, yeah. Made a copy. I don't have paper. Um, do we as a board need to um have an approved calendar to be able to have know exactly when each of these items must occur? >> It is that's one of the things that we did have in there. Um, we didn't necessarily highlight it, but yes, we would we would expect every district to have a budget calendar as well as a governance calendar, right? So you as a board should

169have a governance calendar of what you're covering when. For the budget cycle, there should be a calendar so that all all the the people involved. You are going to need um attendance. You are going to need uh to talk to food service, to talk to transportation to see if there's any specific needs that they can identify that needs to be built into the budget. So, so you can have so it talks about it'll put things on the calendar in terms of conversations in terms of when things are due so that everyone that is involved in has to offer pieces to the district of information that they would use to build that budget on everybody's aware of that. So, yeah, that's one of the things. >> Shayen, one of the things you shared with us in

170the exit interview was um uh position control. Yes, >> we do position control on a regular basis, but we don't have it calendared to as an event in the district. And so we're working through that as a topic of it doesn't matter who's sitting in that role. This is our calendar. This is when we do it and everybody understands that that's >> and that's exactly why you have a calendar because it can be in somebody's brain. And we do that as organizations way too often that one person has all the information. They're doing it. They're doing those things. They know when those things are due. But if that person happens to get, you know, hit by a bus or they don't come back tomorrow, I'm not going to say that. I apologize. [laughter] I didn't

171mean that. Um, but if they don't if they don't show up for work tomorrow, what I mean, what position would you be in? You'd be scrambling. And we never want districts to have to scramble. We want people to know. We have that in our organization. I'm going to say we're addressing that as an organization that things land in certain people's seats that they own and then we don't cross train and we don't do those things. It needs to happen. Yeah. >> Thank you. I do have questions, but I'm just waiting for anybody else who has a question. >> Okay. No. Okay. Um, coming back to the budget, um, I noticed that in our budget development and adoption, you didn't have um, a lot of concerns. So, I'm wondering if there are no concerns notice noted.

172Um, and I know you mentioned that if there are things that can happen that are out of the ordinary. Um but it seems like it's consistently significantly off. Um what are the questions that we need to ask to find out why? >> So So can I just ask when you say it's consistently off what are you talking about in between what what's consistently off? Can you clarify that for me? So, our projected budget, and I look at budgets of other school districts, too, and they don't have the huge discrepancy, and I'm speaking as a member of a of the board, as we're looking at a budget and projecting our spending for the year and understanding what we have coming in and what we can anticipate going out, we're making decisions from that place of knowing.

173And so, being off by $20 million is significant. you know, we could be um not spending when maybe we did have the money. Um and so that's my that's my question. What are the what are if if nothing is a concern as far as how we're building our budget being off by this much, how can we correct that? because I think it's important for us to be informed >> and I would agree with you and and I think that as board members one of the things that that you need to to do as well is to um to listen to the same information that that the district is listening to. So if the district is going to let's say school services January governor's budget and they go back and they do the May revise and

174and I think they're moving to um possibly a a virtual format in the future. Um, I know they did it during COVID and then they went back to in person. I would say, do you have to attend that conference? Maybe, maybe not. If you can't go get your hands on the materials because they're going through the information that is important for school districts to know, board members to know. So, you're looking at that. So, then when the district brings forward the adopted budget, you're looking at the assumptions. You're saying, "Okay, is this matching what's on their dart board?" Right? What are the things that are happening? Um, so it again it comes back to what are the assumptions that that budget is built on? Are they reasonable and um, so I'd be asking for that

175information. Do you have anything to add to that? I I think I've kind of already talked about it um, in that the budget's always changing and the minute we print it. Okay. So we give you I say we the district brings you first interim December 15th and then the governor's budget comes out January 20th, right? And so everything we just put in the assumptions could be different. And so there's big changes, big variances, what have you. The colas could change. So it's impacting your multi-year. Um I think in this situation, honestly, it's just going to be building that trust and building that communication and the transparency in the reports. Um I don't know how the other district made theirs so perfect. If you're if you're comparing their estimated with their unodudited, then then they really

176do um a really good job of I'm going to say cleaning up the dollars probably from the sites. Um and managing some of their books and supplies and services and what have you. Um again, I'm focusing on more of the unrestricted. So the restricted dollars, the variances over there, I'm not saying they're not important, but there's a lot of reasons for it. There's a lot to understand, which I think the budget advisory will be helpful in understanding how federal dollars work and how those expenditures and that dollars accounted for. So again, federal dollars, we think we're getting them all and we think we're spending them all. So, we have a million dollars in federal dollars and we're going to spend them all. But you only book at the end of the year what you spent.

177So, if we didn't spend the million dollars and we only spent a half, your revenues are going to be off a half million dollars. And it's because you cannot claim dollars that you have not spent with the feds. Um, again, there's various programs that are like that. It's a whole indepth thing. Um, I won't go into all of that, but it can cause variances in your revenues. For example, in where the feds federal revenue is tracked. Um, you make a plan to spend it all and sometimes it just doesn't happen. So, I would focus more on the variances and the unrestricted and maybe just kind of ask what's going on in the restricted and again staff's going to be able to tell you. So, I just think because the questions, right, they kind of are

178focused around that same thing. What's the discrepancies? Why are there big suings? What's why if we're budgeting this, why did we only do this? I I really think that's just again kind of building the relationships and the collaboration and transparency of those reports and working together. And one more thing I would suggest to um we didn't mention this to the district before in our exit interview, but um I'm assuming you're probably a client of school services on the fiscal report. Maybe I would forward those to your board members because a lot of times they will do a fiscal report on things that are coming out or changes that need to be known for districts. That's why they're sending out that fiscal report. I would I would forward those on to your board members so that

179they get that same information because it's just some really good information about things that change throughout the year too. A lot of times they will highlight those changes. >> Yeah. Um thank you. I do attend all the budget workshops. I'm very active with being informed on the state of our our finances from the federal and the and our state. Um, so I will look to continue to ask questions and make sure that we're making reasonable um, predictions. Thank you for that. Um, I do have a question on your budget monitoring and updates. Um, so when these uh, changes happen throughout the year and I know you talked about um, that's a sign of a healthy budget. Um, it's it's it's going to reflect changes. It's going to be revisited. Um but when these changes are

180made um and now I'm talking significant changes um it's being done without um board knowledge or approval and my concern is that um if it's not being brought to our attention and I know I brought it up at the last staff meeting um we're not aware of the most current state of what's happening with our budget and and therefore it's not we're not making informed decisions. Correct. Um so is that normal like that boards would be making decisions without be being updated on uh the budget adjustments that are being made consistently over time. So again, in talking with um the district and I think with some of the communication that's happening at these meetings and with the FH, right, um I think there are some changes that can be implemented that can make um the

181budget process and the revisions more transparent. We've talked with the staff of things they can do. Um, every county is different and so some counties require every budget revision to go to the board. Um, other counties do not. They take them as with their budget cycles. So, adopt the budget first interim and second interm. They consider them their budget revisions and that the boards approved that and therefore everything that's been moved around is okay, right? um it's fine, but I would say because we're in this situation, obviously you're wanting more information. And so again, I've already talked with staff. I'm going to give them some examples of what they can do to help bring that transparency to the board level. And so again, kudos to the staff for asking what can we do? And so

182we're just going to supply them with some samples on what maybe um what can come to the board maybe on a monthly basis of here's the adjustments to the budget so that there's more transparency in it. And so I think the budget monitoring is really hard. Um it's you it's almost like two people are only building it, right? But it's not two people. At my [clears throat] district, it was one one person cannot be responsible for the whole budget. It it that's a lot to carry on your shoulders. And so we're not perfect. We can make mistakes. And so I always encouraged everybody to look at the budget and ask me as many questions as possible because I can make a mistake. And so it's got to be in a collaborative manner of working on

183the budget. And so again, just working as a team and being open and being transparent and trying to build in like I said, Matt reached out to ask what can we do? And so I think those monthly budget revisions will help. You'll see those revisions moving. You'll understand them, right? And so now you'll be able to speak to it if somebody asks, "Hey, why did our salaries move, you know, increase $1 million? Oh, well, we had this, this, and this. It was talked about at this board meeting, this board meeting, and this board meeting." And so, again, it's telling the story and being able to communicate it to all of our educational um partners. So again, I think it's coming to you at a future board meeting, [laughter] coming soon to a theater near you.

184>> Wonderful. Thank you. Um, my next question is from number five, charter schools. Um, it seems you have no financial concern for AAE. Um, are are you aware that according to the second interim report that their budget is no longer assuming that the foundation will cover shortfalls of revenues this year? Um, they have historically done so. Um, so that uh note from the county brought some concern to my forefront of my mind. Should there be any concerns about any potential shortfall for our district or any financial responsibility in the event of a potential shortfall. >> So, so here's what I will say to that. The most important thing when you have a charter that you've authorized is that you're providing oversight. Because if you do not provide that oversight, then if that charter happened to

185fail and had to close their doors, you would be on the hook for their financial outstanding financial debt, right? Um so the most important thing is that you're providing your oversight. I will say that the documentation that the district provided to us, you got a pretty robust oversight process. Um it it's much deeper than many districts that we've been into. So, so from our perspective, the district is doing what they need to do to cover themselves in terms of that oversight. Yeah. Okay. >> Um, my next question is from number six and it talks about our collective bargaining agreements. Um, so we have not identified resources that will cover our proposals in the collective bargaining agreements. Um, I think it's essential that we as a board are making informed decisions. Um, this starts with having

186a clear understanding of our current financial state. So, if we're trying to find out where we have money or if we have money, I know you addressed assets um, and them being related to reserves. Um, specifically, if we're looking at where the money is, then we're looking specifically at reserves. Whatever we have in reserves, that's the money we have that can go towards our collective bargaining agreement. Yes. Yes. Okay. Um my question on number eight, deficit spending. Um that those figures um thank you for um delineating them for us. Um how did how did we come to those figures? It was it a end of the year comparison between overall um revenues and expenditures? >> Yes. So, it's included in your sax form. So, do you want to try to pull up the sax form

187here? >> Well, we don't have all the >> We don't, but we can just show it on one of the sax forms. >> Control. >> What do we do? >> Control tab. >> Oh, look. I'm going to try and run this. >> Command tab. You brought it back. >> Okay. Because we're in display. We we may need some we may need some assistance because we're one of those we're trying to switch because we do have your unodudited actuals loaded on here >> and so we want to pull that form up so that we can speak specifically to that one and I'll show you where we pulled those numbers from. Oh, you just did it. >> Okay. >> I'm sorry. >> No way. >> Sorry, we're not checking. >> I'll try and assist here. I'm going

188to go ahead and shrink this one. You have the UAS. So the one of the UAS >> this one right here. >> Sure. >> That's 24 25. >> Okay. >> All right. >> 25 UAS. >> Yeah. Can I make it bigger? >> Let's make it bigger. Let's complete that. Close the dots on the side and we can zoom. >> Oh, there we go. A little bit. >> Awesome. Okay. >> All right. So, is this just un is it just No, this is unrestricted. Unrestricted. All right. >> This is only unrestricted. All right. Let me get there. >> Thank you. Now you're going to in that top. >> Okay. Right there. >> Yeah. Make that big. >> Okay. I'm sorry. Make it bigger >> because you just want the unodudited actual. You don't need the budget.

189>> Where' it go? >> So, I just wanted to show you which form we're on just so that you know where you are. So, this is your 2425 on audit deductables. And if you come down here, remember we talked about I apologize, not my computer. Um, [laughter] so right here, this line E is going to tell you your net increase decrease in fund balance. >> Yeah. So right here, there's your number that we use because remember we're only looking at the unrestricted in terms of of your deficit spending for this particular question. So So there's the number that is used. Yeah. No, it's not 64 3 801. Yeah, we rounded up. I'm sorry. So, yes. So, that's where we pulled the numbers from. So, we we're going to look at that line on each one

190of your unodudited actuals. Well, we did unodudited actuals for 23 24 25. And then we looked at that same line for your 2526 adopted budget >> which is right here. Yes. So, your adopted budget is over here on this side. There's your uh I'm restricted. >> Okay, great. Thank you so much. Um, and the next question is um we have been spending down our reserves um significantly as you've noted um because our expenditures are greater than our um revenues. Um as I've been seeing them dropped even prior to joining the board just observing it. Um that was a concern for me. Um, my question is is the spending down of reserves, and correct me if I'm wrong, has to come with a board directive. Is that correct? >> Not not spending down the reserves as

191a board directive, but anything that's brought to the board that's approved as an expenditure um and the and the budget gets revised, right, and the new budget comes forward, then your situation changes, right? your your net position changes and so you know if you're approving expenditures and your net position is now deficit spending then >> okay so when we go to give directive to spend on something a good question to ask is where are we spending from and then to look at that fund to see the money there >> correct >> thank you >> yeah is it included already in our budget have we [clears throat] accounted for this, right? Because there are some contracts that you know that you're going to have every year and so you budget for them. And so as the

192contract comes forward, it I think it usually has a funding source on the board agenda item and so it'll tell you where it's being funded from. Is this in addition to our current budget or is it already included in our budget would be a question. So then you know how it's going to affect. >> Okay, great. Thank you so much. And um I do have a question. I mean it as you know not note in our um and your time here and I appreciate both of you and all the work you've poured into this um but there is some very real concerns that are being um expressed that are um being brought forward um as part of the discussion as a board. Um I think we definitely want to um address what you guys have

193talked about and that is something you've noted the distrust the um uncertainty about our financial state. I know also you discussed um as we were going through this um that things we were asking for were maybe more of a detailed um require more of a detailed audit. um if if we choose as a board and administration to move forward in that direction to try to uh provide more data and reinstill as part of the process of trying to reinstill trust. Um is there something you would recommend maybe something Fickmat offers or something else um that you are aware of? So go into the details as far as >> um looking at more of um the history of our uh spending or being able to look at um the projection of spending like getting a more

194detailed >> I'm going to tell you that your history is going to be skewed though. So remember those one-time dollars significantly skewed your history. All right. So, so what used to be in COVID years and the years immediately following look different than it does today. So, I would caution you on looking back because that is going to be skewed. So, you know, >> so I think what I'm hearing is you're wanting more details than just the 194 pages. Correct. >> No. Well, like I think because the fiscal health risk analysis was more of a from what I understand more of an overview >> 30,000 >> correct and so and so in order to provide some sort of assurance or um clarification um like being able to >> we come in and do kind of like

195a forensic audit type. >> Is that what that would be? >> Yeah, we because I don't think you guys do forensics. >> We don't do forensic audits. No, we don't. Um, >> so I I'm not quite understanding it. So say it for me one more time. Just >> so what would be is there anything that VicMat offers that would be a little more detailed? Give a little more detailed um >> um the in terms of probably the the closest thing that we could offer would be an independent MYP independent multi-year projection. But here's what we do in those situations. We come in, we again ask the district to upload documents. We already have a lot in our document repository, so would possibly use some of those and then add some additional ones. Uh but we

196would come in and talk to the district about what assumptions did you use to build your budget. There's always a timing issue because we want to get the most accurate information as we can. So at this point in the year, we would possibly do first interim, right? because we're not going to do it off adopted budget. Lots has happened since then. So, uh, but possibly first interim, which takes place that that should be reported out by December 15th. So, we could come in, but we would talk to the district about what assumptions did you use to build your budget? What's in there? We use the assumptions that make sense to us. We don't use the ones that make sense. And we may change something based on the knowledge that we have and the information that

197we have. And then we basically do an analysis and say, "Here's your budget. Here's what we would have done if we were sitting in the seat and we explain the differences. So, is that what you're asking for?" That's probably the closest thing in terms of the kind of work that we do. >> Okay. Thank you. Yes, that does give me some information. Thank you. I appreciate it. And then um I was curious because I know back when we started working with you um there was an um a possibility that you guys might be able to return in six months to see how we're moving along in following your recommendations. Is that something you are able to do? >> Yeah, there's there's a portion in our study agreement that we already have in place with you

198that does allow us if the district reaches out within a certain period of time and I believe um Matt I'm just going to say Matt [laughter] don't know that I can say your last name correctly. Um but anyways, but uh Matt's already come to us and asked if that is something that we do and what's the process for doing that. So it the request has to happen within a certain period of time because we want to give you an opportunity to put the recommendations into place, right? So every place that that we put a no, we've gave a brief little narrative as to why it's a no, right? We need a correction. Um so anyways, but we want to give you time to work on those. That's not going to happen overnight. So, I think

199I if I'm remembering correctly, I want to say that you request within six to eight months and then we come back within a 12 to 18 months to do a follow-up review actually free of charge. Now, that one is different than this one in the sense that um I'm going we come back and we look at your progress. So, we would be looking for each area that's a no. We're not look going to look at the ones that are a yes. We're going to assume that those stayed the same. So, we look at the ones that are no and we ask the district to provide evidence to us that would make that a yes. If the district can provide evidence and we it's really it it's it's kind of reviewing things um at home and

200then we usually have to just come and and do like one day of interviews to to clear up anything that can't be seen in the documents if that makes sense. >> Yes. Thank you so much. >> May I ask just one question with regard to that? Um it'll be fast. um when you would do that follow up, could that change our um score? So instead of being like high risk, we could be like really good. So So what we Yeah. And and I don't I think I forgot to say that even the the highest performing, most efficient functioning district there is is not going to score a zero on FH because everybody has an area that they can improve in. Um, so I'm gonna tell you this. It's a great question. We actually haven't done

201a follow-up on an FH. We we just haven't we've never been invited back to do that. So, we would have to determine as an organization how we approach that. But in my mind, what makes sense is that we would we would comment on each one of those nos. I don't think we would redo the tool because we didn't verify that the yeses are still a yes. But what we could do, the district could take it and they could take those because we will report out what has changed and maybe we'll do a little paragraph that says if we put these responses in and assumed all the other yeses stayed yes, here would be your new risk score. I I could see us doing that. >> Does that is that fair? >> That's fair. Thank you

202so much. >> All right. Well, um thank you so much. We'll we'll just we'll move on if there's any comments that uh we'll I'm going to start by thanking you. Does anybody else have anything other board members any comments they like to make? Anita? >> Um, Mr. Rally, is this our comments or board comments or >> Oh, yeah, we can. I was just um I didn't know if we wanted to dismiss them. >> Okay. Yeah, >> you guys want to stay? Okay, go ahead. Go. You're up, Mia. >> Okay. These are just my board comments. >> Yeah. >> I I really want to thank the Fitmat team. Uh both of you are amazing and thank you for coming all the way here to share your presentation and recommendations and answer our questions. It really is

203helpful and I can't thank you enough. Um, I also want to say thank you to our staff, cabinet, board members for taking the time to meet with the team and I know that we all appreciate having the information that we need to help guide our district and ensure that Apple Valley remains fiscally stable. As a board member, I represent oneif of our board. My individ my individual strength lies in working collaboratively with my fellow board members to make the best decisions for our district. And while it has taken some time to reach this point and review the results from the FitMAT team, I am optimistic that we as a board now have information that we need to make the informed decisions and provide leadership and direction that our district deserves. I have visited every site

204in the district and have witnessed exemplary teaching support and care for our students. We are fortunate to have individuals who consistently go above and beyond for our students and families. Our district serves our students and community well. And now we must make thoughtful and difficult decisions guided by the facts presented in this report to continue to provide exemplary leadership that benefits our student, staff, and community. As a history teacher, I'll admit that math and numbers may not be my strongest area. But as history teaches us, we must learn from the past in order to move forward. We must study this report carefully and use its guidance to strengthen and secure our district for the benefit of all our stakeholders. Finally, sitting where I do during our meetings, I often notice the detailed notes and documents

205that Miss Longshore brings with her. I can't help but appreciate the meticulous calculations, questions, and annotations that she prepares for each and every meeting. Clearly, the result of hours of dedication. She consistently asks the tough questions that help us serve our student, staff, and district and community better. And I'd like to take a moment to thank her for her hard work and commitment. Thank you, Miss Longshore. We appreciate you. Thank you, [applause] >> Renee. >> Yes. Thank you, Trusty [clears throat] Tucker. is very kind. Um, I am just going to take a few minutes because I think it's important as we consider moving forward as a district that I share with you um some things that have been on in my head and on my heart in regards to our district's finances. It is the

206board member's job to provide strategic oversight, ensuring legal and ethical compliance and managing financial health. CSBA directs us to establish effective and efficient structure, support and ensure accountability. This begins with becoming fully versed in our budget. Thank you to the fiscal crisis and management assistance team, Shayen Hart, Jennifer Noga, and John Loz for all the hours you spent reviewing data and meeting with staff and administration and the board. Your feedback on our fiscal health is invaluable. In preparation for today, I thought back to when we first discussed this as a board and when Trusty Tucker requested it be added to the agenda as an action item. I am grateful Trusty Tucker did not need a consensus of the board to accomplish that. Requests I've made have not been given the same consideration. In fact, according

207to our governance handbook, quote, "Any member of the governance team, employee or citizen, has the right to place items on the agenda. Our board processes must be clear. If you've watched our board meetings, you'll know I ask questions. You'll have to forgive my tenacity. Any answer given needs to make sense or I request data to back it. If we are told that we don't have money, but all known facts to me suggest we should, I look into it. We as a board need to be accurately informed to make decisions in the best interest of our students, our district, and our community. It is unfortunate that I have not been given permission by the board to get information and have had to resort to public records requests in pursuit of clear understanding. Even then, the administrative

208responses have been vague and lacking, often not addressing the very question I asked. It is a gross estimate to claim that what I've asked for has to take five hours to compile, stopping people from their regular duties when in fact they really are just basic simple facts that should be already known and answered easily. For example, I requested the total of ESSER funds the district received from the state. Instead of a number, the board received a multi-page document. When I asked again directly for a sum, I was ignored. Our district's administration authorized the hiring of staff with temporary ESSER funds. Despite the state's direction and instruction not to do so, when the funds ran out, they rolled the cost over into general fund. This was at a cost of $15.3 million a year, as noted

209by the 2425 first interimm financial report. This was an administrative decision. I'm often told that my actions or comments are violating the Brown Act. This is an arbitrary phrase applied incorrectly and inconsistently when the admin or board is trying to avoid transparency. It is easy to find the Brown Act. I've read it thoroughly and I have an extra copy if anyone is interested. It's very clear on what is covered. It's not meant to keep things secret. Meetings are supposed to be open and transparent. That's what the Brown Act protects. I ask my colleagues to acknowledge that roadblocks to gain information are being thrown in our way as we strive to take a more active role in decisionmaking instead of quickly approving things without more background knowledge. The ability we have as representatives of the community

210to facilitate conversations and access information is imperative and our response to it all essential. Acknowledging a problem and considering data are only the first steps of moving forward in health as a district. It has been the board's understanding this past year that we needed to buckle down. The decisions we have made recently have been in light of this. We've stopped all progress on the Grant Hills High School stadium, have offered early retirement for the second time in five years. Rifted reading specialist positions when almost half of our students are performing 63 points below standard in ELA, allowed a 3 million reduction in books and supplies. administration took out a cop's loan and we granted approval to move forward with a trans loan if needed. Our decisions in response to what we were told had a

211very real effect on our students. Our teachers paid on average 4 to $16,000 less per year than their counterparts in neighboring districts have expressed concern. That's a district savings of at least $3 million a year. How are we not in a better financial position? And how can we attract and retain the best? Lack of fair compensation has caused staff to look elsewhere. We've incentivized retirement for roughly 48 certificated employees and our district hired 59 new teachers this year, many working under emergency circumstances towards their credential. This rate of turnover and filling of positions creates instability at our school sites. We need to talk about this because our decisions affect kids. We need to be properly informed. We need to provide clear direction. We need to do better. I shared with you all my intentions of

212serving in truth and transparency. But our district currently fosters a climate of favor and fear. I've experienced both. When I joined this board in December 2024, I was offered fully covered insurance for myself, my spouse, and any eligible children. When [snorts] I started asking questions, that offer was rescended, citing government code 53208.5. quote, "Health and welfare benefits for board members shall be no greater than that received by the district's non-safety employees." Despite this knowledge, four board members received fully covered health insurance until Trustee Tucker and I joined the board, and two continued to receive 100% benefits until it was brought to their attention this past May. Why did our administration do this? Why are their favorites? Why aren't our employees receiving the least compensation, at least getting the same health and welfare benefits? [snorts] Now,

213we as a board have decisions to make in response to this information presented. [snorts] My hope is that we can reflect on all that's been shared and see it as a foundation upon which we can build and strengthen AVUSD one decision at a time so that we can think outside of ourselves or anybody else we feel an allegiance to in order to best support the students, district, and community of Apple Valley. Maria. >> Well, I I don't have a prepared speech. Uh but anybody that knows me knows I don't do prepared speeches. Um I have to start by saying thank you to you uh you ladies for taking the time to come back up here and to share with us about the health of our district. Um when we sit on the board, we assume

214that the people who are our leaders or people who are managing our district who are highly qualified know the what they're doing. It is I've never chosen to go in and rebuild the budget. That is not my position as a as a trustee, but it is my position to know how the budget works. So I thank you so much for opening this wound and we are going to definitely have some growing pains. I can guarantee each one of you that much that there will be hard questions asked and they better be good answers given and if there's no good answer, there will be no good vote coming from me. Uh that is very important. Um when I joined the Upper Apple Valley School District in 19 uh785 in 1985 40 years ago uh up I

215was making $23,000 as a teacher I was satisfied making $23,000 as a teacher and raising five children out of that $23,000. My experience is different because the budget and the money went a long way then. I raised my children during the time of coupon shopping and I became a queen at going coupon shopping so I can feed my five children. when I joined Apple Valley School District, we were just getting ready to leave um Victor School District. And so we picketed at that time and I recall coming in to speak to the board to let them know that I'm we shop at the same store, but some people are making more money so they can shop better at the same store. So, I would go to the clearance rack so I can cover my children

216or go to the Goodwill store to buy clothes and then spend the whole night washing it so that they'll have clean clothes to go to school. That's my history. But I went on to be a teacher in Apple Valley, enjoying every minute of it. I enjoyed it not because of just the children, but because of the family I inherited, every one of you in this room. So you became my family. But when I became an administrator, I earned the right and I chose to use the word earning the right. I earned the right to have full medical coverage upon retirement because I had invested the years of being having that position. So I I I wasn't aware that there's a new rule that came about because my right was still intact. It was my part

217of my retirement. It was all written in my retirement packet. And I wasn't about to give it up because I had I had earned that right. And I'm I don't know about earning a right for most people, but for me, because I had been a teacher, I had done all of the things that the district wanted of me, and I had served without a blemish in the district. And when I res I retired, I was good for them to cover me until I reached the age of 70. I just recently reached that age of 70, by the way. And so when the district decided to give me a retirement or the medical coverage, um, I didn't ask any questions because I knew that was part of my packet. I didn't ask too many questions. But

218later on I found out that I didn't have to I couldn't pay for it. So for for the benefit of having transparency when we joined Cal PERS when we became Cal PERS as a district I was informed that Cal Purr said they couldn't cover me the way they had covered me all along. and I made a decision that I was still going to continue to be covered. So from July 1 to November 1 of this year, guess what? My paycheck was 93 cents. And do you hear me complain? No. But I get really irritated when I hear information that certain board members got favors. I did not get a favor. I earned every bit of what I got. So I have to make sure that that is on record that no, I did not get

219a a favor. I earned it. And now let's go on to uh Figma. I am so happy that we have this information and happy in the sense that I recall several board meetings ago I said I was going to reserve my comment until we got the Figma return report because there's no point chasing after something you don't know. Now we know. And now that we know, I can guarantee you that every line item that you marked in no will be addressed by this board or at least by me until we get answers. I do not believe that the district is hiding something, but I do believe that the district was not even aware that these questions was going to come up and there's been a lot of juggling of information. The only portion of this

220information that I am really satisfied about is the fact that the bargaining unit [clears throat] president brought additional information to give you some clarity. And I hope you have that clarity added into your document. But as far as I'm concerned, it is definitely not my position to recreate the district's budget. Not my position. It is my position to ask questions. And I guarantee you there will be questions. My question will begin by asking the county, how did you approve us each year to be deficit? Why did you continue to say we are good every year and we are not? So that would be my very first question and after that I want to be sure that we take care of the people who are in front of the children. I was in front of the

221children for um almost 27 25 years in this district. So I want to be sure that those people who are directly in front of the children are taken care of and that will involve a lot of growing pains. There will be positions that we'll have to eliminate so that we can afford to pay the teachers. That's all I ask and that's where I sit starting today. Thank you so much for your time. All right. Thank you, Maria. Um, since you're going on record, I will add I elected not to take my benefits because I get them from my employer, so I was not one either. Here, um, I just wanted to say thank you for coming. um but especially thank you for offering the additional support with the um technical work um because it's been

222clear that we do have um members that needed that extra support and they had questions. So I just wanted to say thank you for taking that extra time to clear that up um for them but then also share it with us. So thank you >> again ladies. Thanks. It was very informative uh especially for for me. Um and uh hopefully we'll see you guys back maybe was it March? Is that six months? April. March. April. >> Request. >> Okay. Well, that's what I said. Maybe. >> Maybe. Okay. Thanks, Rene. >> Yeah. I I too appreciate Miss Noga and Miss Hart and providing today's fiscal um health risk analysis. I also appreciate the teams in HR and the business office who gathered all those documents because I know that it was a heavy lift um as

223school was starting. Um each of the departments deserve such expert feedback. I wish there were such things for each department within a school district because um as we've talked about it, you don't know um what you don't know. you inherit what you inherit and you move forward and try to improve on what you learn from what you you get from previous people. So, um I guess I just want to go on record that I appreciate that the board um approved the recommendation to bring PIP Matt in. Um we had been talking ongoing for months about who to bring in and um we had brought school services in in the past. Um but having that support was wonderful and I do look for forward to a year from now and it is a year because I

224read the contract again. Um it is a year from now um anywhere between um this the year and 18 months to provide us um a review and we're excited to um show some changes in improvement. So thank you. >> Okay. Well that brings us to close closing items. So, what time is it here? >> We still have like five hours. >> Oh, well, no, we don't. So, that's next Thursday. Um, next regular board meeting is Thursday, November 6, 2025 at approximately 5:00 pm. Educational support center. Um, anybody have any future items for any agenda items coming up? I mean, the meeting is next next week. We do have a full packet. Okay. Hearing none, we are going to adjourn. So, we'll need a motion to adjurnn. So moved. >> A second. >> Second. >> All

225right. Did you get that? Cutie. >> Second. >> An I think it was Anita. All right. We'll do a roll call. Anita >> I. >> Renee. >> I. >> Maria. >> I. >> Amanda. >> I vote I too. All right, guys. See you next Thursday. Thank you so much.