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Board accepts 2024–25 audits and adopts a positive first‑interim budget; staff flags structural deficit of about $2.2M
Summary
Auditors gave the district an unmodified opinion on the financial statements and federal awards; Measure SOS bond performance testing aligned with voter intent. Staff presented a First Interim report projecting a $22.9M combined general fund balance and flagged a $2.2M structural unrestricted deficit largely driven by enrollment trends and retroactive salary settlements; board certified the first interim as positive (5-0).
The Palos Verdes Peninsula Unified Board accepted multiple audit packets and approved the district’s First Interim budget certification at its Dec. 10 meeting.
Auditor Bobby Patel (I. Bailey) summarized three portions of the audit packet: the financial statement audit, federal awards audit and the state compliance component. He told the board the district earned an unmodified opinion on the financial statements and federal awards; the state awards opinion on one component was modified but the auditor reported no material weaknesses or significant deficiencies in the financial statement audit. Patel also reviewed the schedule of financial trends and noted a recent general fund deficit history as districts drew down one‑time COVID-related monies and ADA (average daily attendance) declined.
On the bond and parcel tax audits: Patel reported that a performance audit of Measure M tested about 24% of expenditures and found alignment with ballot language. For the Measure SOS bond audit staff and auditors tested a large share of expenditures (about 99% this year given the program startup) and found expenditures sampled aligned with voter-approved uses and Article XIII A requirements.
Business services staff (Cathy Winton and Buena Terrones) presented the First Interim report required by Education Code. Key figures presented to the board included:
- Projected combined general fund ending balance for 2025–26: $22,900,000 (of which the district reported $9.6M unrestricted, $7.8M restricted and a required minimum reserve of $5.4M equal to the district’s 3%). - Adjustments since budget adoption included an increase to LCFF revenues of about $1.2M tied to higher TK enrollment and the state TK add‑on; recognition of $3.1M in Student Success and Professional Development block grant revenue (no expenditures budgeted yet; spend window through 6/30/2029); and increased salary and benefit costs of about $1.9M retroactive to 7/1/24 tied to negotiated settlements. - The presentation differentiated restricted carryover spending (not a structural deficit) from a structural unrestricted shortfall of approximately $2.2M driven by enrollment/funded ADA changes and retroactive salary costs.
Board members asked clarifying questions about long‑term liabilities, audit sampling percentages and the Kids Corner program (an early childhood fee‑based program that showed revenue and expense changes due to staffing normalization). The auditor and staff explained liability increases were tied to recently issued GO bonds and new GASB reporting requirements (compensated absences). Staff indicated they would continue to monitor enrollment, county/state budget change in January/May, and bargaining outcomes that could affect multi‑year projections.
The board voted 5-0 to accept the audits (main district audit, Measure M and Measure SOS) and approved the positive certification on the First Interim report. Staff will return with updates after the governor’s January budget, the district’s scheduled budget study session, and the second interim report in March.
