LYNWOOD — The official audit of the Lynwood Unified School District’s multi-year financial projection indicates that the district will not meet its recommended reserve requirements over the next three years.

The final report by the Fiscal Crisis and Management Assistance Team, a state agency, was released this week and it reads exactly the way many parents and teachers had anticipated.

Those who have been warning the school board that too much money was being misused or misappropriated were not surprised by the report, former school board member Martina Rodriguez said.

“I wasn’t so much surprised by the findings,” Rodriguez said. “But I still couldn’t believe it. … The findings validated all of our concerns from all of these years. At times school board members scoffed at us … and they would look at us like we were crazy. … This report proves that we were right.”

Rodriguez, who was once mocked by a current school board member that she should work for FCMAT since “she knows so much about it,” said the report proves that deficit spending has been happening in Lynwood for too long.

“To protect the district’s financial solvency and eliminate the projected shortfalls of $8.1 million in fiscal year 2008-09, $26.4 million in 2009-10 and $50 million in 2010-11, the district should begin preparing immediately for a period of fiscal instability,” the report’s executive summary said. “The district should revise its adopted budget and multi-year projections to eliminate deficit spending and meet reserve requirements, develop appropriate staffing formulas for all positions and ensure that position control data is accurate; maximize categorical funding and ensure that all restricted programs are self-sustaining, with the possible exceptions of special education and transportation.”

While FCMAT unveiled a draft of the report nearly four months ago, district officials have remained tight-lipped on the findings. In fact, board members contacted this week, including newly re-elected Rachel Chavez and Alfonso Morales, both said they would rather not comment on the report until they have studied the 133-page document.

“I’m still in the middle of reading it,” Chavez said. “I really wouldn’t want to comment on a document of this size that I’m just starting to read.”

Aside from that, Chavez said board members will be having several executive sessions and public meetings with FCMAT to discuss the report and its findings and pretty much talk about “what needs to be done.”

The school board’s next regularly scheduled meeting takes place Dec. 8. Two other dates — Dec. 10 and Dec. 15 — are being discussed for special board meetings, but could not be confirmed by presstime with the superintendent’s office.

School Board Vice President Morales also said he preferred not to comment. “I would rather study it further,” he said. “The report is long and I wouldn’t want to say something that is wrong.”

The report is in fact quite long, Rodriguez said, but it is long overdue.

“This report is what we’ve been asking for,” she said. “It’s scary to go through because it’s all right there in black and white. All of our concerns … it’s going to be very hard to get through this, I know it is. Look at what happened recently, teachers were cut and programs were cut and people are taking furlough days and pay cuts, and still it isn’t going to be enough and this report is telling us that there aren’t any more ways around it.”

Already with the County of Los Angeles’ District Assistance and Intervention Team in their backyard, the school board first contacted FCMAT in October 2008 for management assistance, and by a 5-0 vote early this year brought the team in and opened the books. FCMAT was created by legislation in accordance with AB1200 in 1992 as a service to assist local educational agencies in complying with fiscal accountability standards.

The study agreement with the district specified that FCMAT would conduct a management assistance review of the district’s general fund budget, multi-year projections and spending patterns; review district’s processes and procedures for annual budget development, monitoring revisions, and reporting and communications of budget information to the governing board during the fiscal year; prepare a fiscal health and risk analysis to assist the district in identifying factors that affect fiscal and operational stability; and conduct a review of the programs operated by the district’s curriculum and instructional department to verify whether program and fiscal efficiency is maximized to the fullest extent.

FCMAT visited the district between January and March to conduct interviews, collect data and review documentation. Even after several requests, the report states that several documents FCMAT requested, including employment contracts, could not be located and/or provided by the district.

According to a high-ranking official at the district, the final FCMAT report is “not unexpected.”

“The district saw the draft and contested parts of it,” said the official. “Some of the assumptions in the report were not entirely accurate since the district and the school board had already begun addressing the 2008-09 deficit numbers, through the assistance of some of the unions, with furlough days, teachers taking a 3 percent pay cut, reducing teachers, enacting a hiring freeze. … The projections are just that, projections if we sit here and do nothing. But fact is, the district is already doing something. … The projections simply tell us that the job apparently is not done.”

According to acting Superintendent Patrick Leier, the report also casts a bright light on the district’s response to its challenges and suggests that mismanagement and poor judgment were involved in our response, to some degree. Still, he said, the district can get out of this mess.

“Yes, there is much potential in LUSD to recover both fiscally and programmatically,” Leier said. “The challenge is to provide the best recommendations practical for the board to consider and eventually take action on regarding necessary cuts to expenditures.”

First, Leier said, with the flexibility options the state has provided in regards to categorical budgets, comes significant potential to “suspend” much of the programming associated with categorical budgets and temporarily use a significant percentage of this financial resource to cover general fund district employee contractual obligations. “Second, and of the highest importance, is that approximately 88 percent of the district’s financial obligations are tied up in employee collective bargaining contracts focused on providing educational programming for students. We will have to work with our various bargaining groups to achieve budget savings in this regard. Hard and unpopular decisions will have to be made,” he said. And third, “we will see a significant reduction to our total work force.”

“Unfortunately, under the dire fiscal conditions we are dealing with, we will not be able to afford the same level of staffing that we have today,” he added. “Of course every effort will be made to keep core programs in place, central to the mission of LUSD, support good teaching and learning.”

A teacher at Lynwood High School who asked to remain anonymous, said that the report is going to be a “rude awakening” for a lot of people in the district.

“We knew the report was not going to be fun to look at when it got here,” he said. “It makes me very sad to think that the district, as low as it finds itself, may have to let go of more teachers, cut more programs … I don’t know, I don’t even know where else the district can cut.”

Even though the district has taken steps to address the budget shortfall … “they are not sufficient to overcome the projected budget shortfall,” FCMAT’s executive summary reads.

The cuts the district has made, which includes employee furlough days and other reductions, total $303,680. In addition, the board authorized $9.2 million in ongoing budget adjustments for the 2009-10 fiscal year. Not sufficient, the summary reads.

“The report is downright scary,” said the Lynwood High School teacher. “I mean, the report is subjective on several levels, but numbers are numbers. It shows us where the money was spent and what the priorities in the district have been.”

What the report does not do is judge, the Lynwood High School teacher added. “I don’t know if that’s such a good thing,” he said. “We needed this audit, but at the same time, we needed someone to hold people accountable. After this report, who is being held accountable? Nobody. The FCMAT team is basically telling the same people who got us here, the school board and district officials, to help clean the mess that they helped to get us in.”

What is it going to take to clean up the mess?

“The bottom line is that it will take a well thought out fiscal recovery plan, including reductions in work force as well as re-organizing and restructuring services to be more cost effective as well as successful negotiations with all of our bargaining units. All positions from top to bottom will be considred,” Leier said.

To balance the budget, the district will need to make difficult choices about which expenditures and programs will continue to be funded and which will be scaled back, reconfigured or eliminated, the executive summary reads.

If the district is not able to meet its financial obligations for the current and two subsequent fiscal years, or has a qualified or negative budget certification, the county superintendent of schools is required to notify the school board and the superintendent. Other assistance might be brought in, such as a fiscal expert, but bottom line is, if “these steps are not successful,” the district could face the loss the of local governance and decision-making authority, i.e. a state takeover.

In its fiscal health risk analysis, the key areas of concern are deficit spending, fund balance, reserve for economic uncertainty, enrollment, encroachment, management information systems, position control, budget monitoring, leadership stability and charter schools.

While much of what the FCMAT report mirrors that of what the county Office of Education said in its reports, the final decisions lie in the hands of district officials and school board members.

“This report is proof that we’re not just economically unstable, but we are also academically and internally unstable with employees being handed salaries based on verbal instructions,” Rodriguez said. “We have questioned this school board about finances over the years, including $24 million the district had in its reserves just four years ago. … All I can say is that I hope this school board opens its eyes now to see the truth.”

Over the last couple of years, the biggest problems Rodriguez — along with other concerned parents — has been vocal about during the public comment session of school board meetings revolved around a supplemental curriculum program called Kaplan the district invested millions of dollars into without properly training its teachers first; investing nearly $4 million on computers without school board approval (the board approved the large purchase after the computers were already being installed); the accumulation of endless legal fees; the district’s hiring and firing process; and the district’s mismanagement of its Special Education Department.

The report addresses all of the issues. But the report also outlines 15 conditions that represent in the district the most common indicators of fiscal distress.

The report also lists several lists of recommendations the district should follow regarding every aspect of the school district, including hiring practices, the way board members should communicate with district officials, collective bargaining procedures and how it spends its funds.

The report, abundant with spreadsheets, graphs and charts, also shows how the district has been in a deficit spending pattern for four of five years.

“People who make the time to read all 133 pages will have [oh my God] moments,” Rodriguez said. “Because it will show just how much people were being misled over the years, lied to and manipulated and that while all of this deficit spending was going on, no plans were in the works for the future of our children.”

If anything comes of the report, Rodriguez said she would like to see the district form a committee inclusive of parents, teachers, students and community leaders that will work toward improvement in every aspect outlined by the report.

Even though Leier admits that the report suggest poor judgement and some degree of mismanagement over the years at the district level, when asked if this report more widely opens the door for a state takeover, Leier said, “no” it does not.

“Actually, the report shines the light on what the district must do, in a timely manner to avoid state takeover,” he said. “LUSD, like all districts in California, will do what is required to meet its obligations to the students, parents and employees of the district. The district must significantly reduce expenses as evidenced by board action. The county, our fiscal agent, will only be able to accept our budget for next year, if the board has taken all necessary action to reduce expenses and submit a balanced budget.”

All in all, what the district will have to do from here on out, said Leier, is to “do more with less.”

The entire FCMAT report can be downloaded at www.fcmat.org.