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Audit approved to examine large reserve balances held by California community colleges
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Summary
The committee approved an audit request to analyze why many community college districts hold unrestricted reserves well above recommended levels and whether that practice affects investment in instruction and student supports; the auditor will examine selected districts and Calbright College.
Senator Bob Archuleta asked the Joint Legislative Audit Committee to approve a statewide audit examining substantial unrestricted reserve balances at California Community Colleges. The committee approved that audit request.
The request directs the state auditor to select five representative community college districts (by size and geography) and Calbright College for a review of reserve trends, the rationale districts use to accumulate higher-than-recommended unrestricted fund balances, and the effect, if any, of those balances on student services and instruction.
Why it matters: Supporters, including faculty union representatives, said that while prudent reserves are necessary for fiscal stability, reserves across the system have grown dramatically in recent years (the statewide average was cited at about 37% of general fund operating expenditures at the end of fiscal 2024). They argued that unusually large reserves may divert funding from services that support student success, such as counseling, tutoring and full-time faculty positions.
Testimony and scope
Senator Archuleta said some districts now hold reserves well above the Chancellor—s Office guidance of roughly two months (about 17%) and asked for an audit to promote transparency and accountability. Sarah Thompson, vice president of the Faculty Association of California Community Colleges, and Kay Purnell-Trushner of the California Community College Independence (a faculty coalition) urged the committee to include Calbright College in the scope, noting Calbright—s unusual funding model and that it had been audited recently by the state auditor in 2023.
State auditor—s scope and timing
State Auditor Grama Parks described objectives to (1) determine growth in unrestricted general fund balances from fiscal 2018-19 through fiscal 2025-26 for selected districts, (2) identify reasons for unusually high reserves, (3) examine Chancellor—s Office oversight, and (4) evaluate whether high reserves have affected student services or staff investments. Parks estimated the audit would require about 2,600 hours.
What community college officials said
David O—Brien and Chris Ferguson of the Chancellor—s Office did not oppose an audit but urged the committee and auditor to consider why districts maintain reserves — for example to address natural disaster risk, vulnerability to revenue volatility, or to avoid restoring severe cuts made in past recessions — and to separate noncash receivables from true cash reserves when assessing financial position.
Committee action
A motion to approve the audit carried on roll call. Supporters said the objective is not to punish prudent fiscal management but to ensure funds intended for students are not being stockpiled without justification.
Ending note
The auditor will select five districts plus Calbright for a geographically representative review and will report findings and recommendations to the legislature after completing the planned audit work.
