2005 California Education Code Sections 41320-41322 Article 2. Emergency Apportionments

41320.  As a condition to any emergency apportionment to be made
pursuant to Section 41320.2 the following requirements shall be met:
   (a) The district requesting the apportionment shall submit to the
county superintendent of schools having jurisdiction over the
district a report issued by an independent auditor approved by the
county superintendent of schools on the financial conditions and
budgetary controls of the district, a written management review
conducted by a qualified management consultant approved by the county
superintendent of schools, and a fiscal plan adopted by the
governing board to resolve the financial problems of the district.
   (b) The county superintendent of schools shall review, and provide
written comment on, the independent auditor's report, the management
review, and the district plan.  That written comment shall include
the county superintendent's approval or disapproval of the district
plan.  In the event the county superintendent disapproves the plan,
the governing board shall revise the district plan to respond to the
concerns expressed by the county superintendent.
   (c) Upon his or her approval of the district plan, the county
superintendent of schools shall submit copies of the report, review,
plan, and written comments specified in subdivision (b) to the
Superintendent of Public Instruction, the Joint Legislative Audit
Committee, the Joint Legislative Budget Committee, the Director of
Finance, and the Controller.
   (d) The Superintendent of Public Instruction shall review the
reports and comments submitted to him or her by the county
superintendent of schools and shall certify to the Director of
Finance that the action taken to correct the financial problems of
the district is realistic and will result in placing the district on
a sound financial basis.
   (e) The district shall develop a schedule to repay the emergency
loan, including any lease financing pursuant to Article 2.7
(commencing with Section 41329.50), and submit it to the county
superintendent of schools.  The county superintendent of schools
shall review and comment on the repayment schedule and submit it to
the Superintendent of Public Instruction for approval or disapproval.
  Upon the approval of the repayment schedule, and of the other
reports, reviews, plans, and the appointment of the trustee required
by this article, the Superintendent of Public Instruction shall
request the Controller to disburse the proceeds of the emergency loan
to the district.
   (f) The district requesting the apportionment shall reimburse the
county superintendent of schools for the costs incurred by the
superintendent pursuant to this section.
41320.1.  Acceptance by the district of the apportionments made
pursuant to Section 41320 constitutes the agreement by the district
to all of the following conditions:
   (a) The Superintendent of Public Instruction shall appoint a
trustee who has recognized expertise in management and finance and
may employ, on a short-term basis, any staff necessary to assist the
trustee, including, but not limited to, certified public accountants,
as follows:
   (1) The expenses incurred by the trustee and any necessary staff
shall be borne by the district.
   (2) The Superintendent shall establish the terms and conditions of
the employment, including the remuneration of the trustee.  The
trustee shall serve at the pleasure of, and report directly to, the
Superintendent.
   (3) The trustee, and any necessary staff, shall serve until the
loan authorized by this section is repaid, the district has adequate
fiscal systems and controls in place, and the Superintendent has
determined that the district's future compliance with the fiscal plan
approved for the district under Section 41320 is probable.  The
Superintendent shall notify the county superintendent of schools, the
Legislature, the Department of Finance, and the Controller no less
than 60 days prior to the time that the Superintendent expects these
conditions to be met.
   (4) Before the district repays the loan, including interest, the
recipient of the loan shall select an auditor from a list established
by the Superintendent and the Controller to conduct an audit of its
fiscal systems.  If the fiscal systems are deemed to be inadequate,
the Superintendent may retain the trustee until the deficiencies are
corrected.  The cost of this audit and any additional cost of the
trustee shall be borne by the district.
   (5) Notwithstanding any other law, all reports submitted to the
trustee are public records.
   (6) To facilitate the appointment of the trustee and the
employment of any necessary staff, for the purposes of this section,
the Superintendent is exempt from the requirements of Article 6
(commencing with Section 999) of Chapter 6 of Division 4 of the
Military and Veterans Code and Part 2 (commencing with Section 10100)
of the Public Contracts Code.
   (7) Notwithstanding any other law, the Superintendent may appoint
an employee of the department to act as trustee for up to the
duration of the trusteeship.  The salary and benefits of that
employee shall be established by the Superintendent and paid by the
school district.  During the time of appointment, the employee is an
employee of the school district, but shall remain in the same
retirement system under the same plan as if the employee had remained
in the department.  Upon the expiration or termination of the
appointment, the employee shall have the right to return to his or
her former position, or to a position at substantially the same level
as that position, with the department.  The time served in the
appointment shall be counted for all purposes as if the employee had
served that time in his or her former position with the department.
   (b) The trustee appointed by the Superintendent shall monitor and
review the operation of the district.  During the period of his or
her service, the trustee may stay or rescind any action of the local
district governing board that, in the judgment of the trustee, may
affect the financial condition of the district.  The Superintendent
may establish timelines and prescribe formats for reports and other
materials to be used by the trustee to monitor and review the
operations of the district.  The trustee shall approve or reject all
reports and other materials required from the district as a condition
of receiving the apportionment.  The Superintendent, upon the
recommendation of the trustee, may reduce any apportionment to the
district in an amount up to two hundred dollars ($200) per day for
each late or unacceptable report or other material required under
Part 24 (commencing with Section 41000), and shall report to the
Legislature any failure of the district to comply with the
requirements of this section.  If the Superintendent determines, at
any time, that the fiscal plan approved for the district under
Section 41320 is unsatisfactory, he or she may modify the plan as
necessary, and the district shall comply with the plan as modified.
   (c) At the request of the Superintendent, the Controller shall
transfer to the department, from any apportionment to which the
district would otherwise have been entitled pursuant to Section
42238, the amount necessary to pay the expenses incurred by the
trustee and any associated costs incurred by the county
superintendent of schools.
   (d) For the fiscal year in which the apportionments are disbursed
and each year thereafter, the Controller, or his or her designee,
shall cause an audit to be conducted of the books and accounts of the
district, in lieu of the audit required by Section 41020.  At the
Controller's discretion, the audit may be conducted by the
Controller, his or her designee, or an auditor selected by the
district and approved by the Controller.  The costs of these audits
shall be borne by the district.  These audits shall be required until
the Controller determines, in consultation with the Superintendent,
that the district is financially solvent, but in no event earlier
than one year following the implementation of the plan or later than
the time the apportionment made is repaid, including interest.  In
addition, the Controller shall conduct quality control reviews
pursuant to subdivision (c) of Section 14504.2.
   (e) For all purposes of errors and omissions liability insurance
policies, the trustee appointed pursuant to this section is an
employee of the local education agency to which he or she is
assigned.  For the purpose of workers' compensation benefits, the
trustee is an employee of the local education agency to which he or
she is assigned, except that a trustee appointed pursuant to
paragraph (7) of subdivision (a) is an employee of the department for
that purpose.
   (f) Except for an individual appointed by the Superintendent as
trustee pursuant to paragraph (7) of subdivision (a), the
state-appointed trustee is a member of the State Teachers' Retirement
System, if qualified, for the period of service as trustee, unless
the trustee elects in writing not to become a member.  A person who
is a member or retirant of the State Teachers' Retirement System at
the time of appointment shall continue to be a member or retirant of
the system for the duration of the appointment.  If the trustee
chooses to become a member or is already a member, the trustee shall
be placed on the payroll of the school district for the purposes of
providing appropriate contributions to the system.  The
Superintendent may also require that any individual appointed as
trustee pursuant to paragraph (7) of subdivision (a) be placed on the
payroll of the school district for purposes of remuneration, other
benefits, and payroll deductions.  For the purpose of workers'
compensation benefits, the state-appointed trustee is deemed an
employee of the local education agency to which he or she is
assigned, except that a trustee who is appointed pursuant to
paragraph (7) of subdivision (a) is an employee of the department for
that purpose.
41320.2.  (a) The governing board of a school district that
determines during a fiscal year that its revenues are less than the
amount necessary to meet its current year expenditure obligations may
request an emergency apportionment through the Superintendent of
Public Instruction subject to the requirements and repayment
provisions of this article and Article 2.7 (commencing with Section
41329.50).
   (b) It is not the intent of the Legislature that this section
authorize emergency loans to school districts for the purpose of
meeting cashflow requirements pending the receipt of local taxes and
other funds.
   (c) It is the intent of the Legislature that emergency
apportionments, as described in this section, not occur, unless funds
have been specifically appropriated therefor by the Legislature.
41320.3.  On or before February 15 of each year, the State
Department of Education shall report to the Legislature on the status
of school districts that have received emergency apportionments
pursuant to this article or some other specific statutory
apportionment.
41321.  (a) On or before October 31 of the year following receipt of
an emergency apportionment, and each year thereafter, until the
emergency apportionment, including interest, is repaid, the governing
board of the district shall prepare a report on the financial
condition of the district.  The report shall include, but not
necessarily be limited to, all of the following information:
   (1) Specific actions taken to reduce expenditures or increase
income, and the cost savings and increased income resulting from
those actions.
   (2) A copy of the adopted budget for the current fiscal year.
   (3) Reserves for economic uncertainties.
   (4) Status of employee contracts.
   (5) Obstacles to the implementation of the adopted recovery plan.
   (b) The district shall submit the report to the trustee for
review.  Upon the trustee's approval of the report, the district
shall transmit copies to the county superintendent of schools, the
Superintendent of Public Instruction, and the Controller.
41322.  (a) If a trustee has been appointed over a school district
pursuant to Section 41320.1, the trustee may stay or rescind the
actions of the personnel commission of the school district if a
personnel commission exists.
   (b) If an administrator has been appointed over a school district
pursuant to Section 41326, the administrator shall suspend the
actions of the personnel commission of the school district if a
personnel commission exists.