Summary of Audit

Dear Parents for Public Schools of San Francisco

The San Francisco Unified School District's (SFUSD) June 30, 2024, audit report reveals significant financial and operational challenges, necessitating urgent attention and corrective actions. The audit report reveals substantial weaknesses in SFUSD's financial and operational controls. The negative financial certification and repeated findings of material weaknesses and non-compliance across various areas demand immediate and decisive action to implement robust corrective measures. The corrective actions in the audit focus’s on strengthening internal controls, improving financial procedures, enhancing staff training, and ensuring full compliance with all applicable laws, regulations, and funding requirements. The findings underscore the need for substantial structural improvements in management, oversight, and accountability across the district.

Key findings include Financial and Operational Issues:

Financial Issues:

Negative Financial Certification: The audit concludes with a negative certification from the State of California, indicating an inability to meet financial obligations. This follows a previous negative certification (in the December 2024 interim report), highlighting a persistent and worsening financial crisis. This underscores the urgent need for immediate and substantial corrective actions. The contrast with the County Office of Education's positive certification emphasizes the severity of SFUSD's situation.

Material Weakness in Year-End Closing Procedures: A material weakness was identified in the year-end closing process, specifically concerning payroll accruals. Inadequate internal controls and documentation resulted in inaccuracies, highlighting a critical need for improved financial oversight and procedural enhancements.

Payroll-Related Control Deficiencies: Significant deficiencies were found in payroll-related controls, increasing the risk of errors and potential fraud. These deficiencies included insufficient oversight, lack of formalized procedures, and inadequate staff training.

Untimely Deposit of Cash Receipts: Internal control weaknesses in the timely deposit of cash receipts increased the risk of loss, misappropriation of funds, and inaccurate financial reporting.

Fraudulent Interception of Payroll Deposits: A critical control weakness allowed the fraudulent interception of employee payroll deposits, highlighting the need for enhanced security measures and improved oversight.

Operational Issues:

Internal Audit Function Deficiency: The absence of a formal internal audit function hinders the District's ability to monitor and improve its internal controls. The lack of internal oversight significantly increases the risk of financial mismanagement and fraud.

Non-Compliance with Immunization Requirements: The District failed to comply with state regulations regarding pupil immunizations, leading to questioned costs and potential legal and health risks for students.

Non-Compliance with Proposition 28 Funding: The District's use of Proposition 28 (arts and music education) funding did not fully comply with the requirement to supplement, not supplant, existing funds.

Non-Compliance with Reporting Requirements (CA Clean Energy Jobs Act): The District failed to meet deadlines for submitting expenditure reports for Clean Energy Jobs Act projects.

Lack of Comprehensive School Safety Plan: The District failed to timely approve and implement a comprehensive school safety plan as required by state law.

The corrective actions in the audit focus’s on strengthening internal controls, improving financial procedures, enhancing staff training, and ensuring full compliance with all applicable laws, regulations, and funding requirements. 

In summary, the audit report reveals substantial weaknesses in SFUSD's financial and operational controls. The findings underscore the need for substantial structural improvements in management, oversight, and accountability across the district. The negative financial certification and repeated findings of material weaknesses and non-compliance across various areas demand immediate and decisive action to implement robust corrective measures.