Ed. Code, § 42131

(a) (1) Pursuant to the reports required by Section 42130, the governing board of each school district shall certify, in writing, within 45 days after the close of the period being reported, whether the school district is able to meet its financial obligations for the remainder of the fiscal year and, based on current forecasts, for the subsequent two fiscal years. These certifications shall be based upon the governing board of the school district’s assessment, on the basis of standards and criteria for fiscal stability adopted by the state board pursuant to Section 33127, of the school district budget, as revised to reflect current information regarding the adopted State Budget, school district property tax revenues pursuant to Sections 95 to 100, inclusive, of the Revenue and Taxation Code, and ending balances for the preceding fiscal year as reported pursuant to Section 42100. The certifications shall be classified as positive, qualified, or negative, as prescribed by the Superintendent for purposes of determining subsequent actions by the Superintendent, the Controller, or the county superintendent of schools, pursuant to subdivisions (b) and (c). These certifications shall be based upon the financial and budgetary reports required by Section 42130 but may include additional financial information known by the governing board of the school district to exist at the time of each certification. For purposes of this subdivision, a negative certification shall be assigned to any school district that, based upon current projections, will be unable to meet its financial obligations for the remainder of the fiscal year or the subsequent fiscal year. A qualified certification shall be assigned to any school district that, based upon current projections, may not meet its financial obligations for the current fiscal year or two subsequent fiscal years. A positive certification shall be assigned to any school district that, based upon current projections, will meet its financial obligations for the current fiscal year and subsequent two fiscal years.

(2) (A) A copy of each certification and a copy of the report submitted to the governing board of the school district pursuant to Section 42130 shall be filed with the county superintendent of schools. If a county office of education receives a positive certification when it determines a negative or qualified certification should have been filed, or receives a qualified certification when it determines a negative certification should have been filed, the county superintendent of schools shall change the certification to negative or qualified, as appropriate, and, no later than 75 days after the close of the period being reported, shall provide notice of that action to the governing board of the school district and to the Superintendent. No later than five days after a school district receives notice from the county superintendent of schools of a change in the school district’s certification to negative or qualified, the governing board of the school district may submit an appeal to the Superintendent regarding the validity of that change, in accordance with the criteria applied to those designations pursuant to this subdivision. No later than 10 days after receiving that appeal, the Superintendent shall determine the certification to be assigned to the school district and shall notify the governing board of the school district and the county superintendent of schools of that determination.

(B) Copies of any certification in which the governing board of the school district is unable to certify unqualifiedly that these financial obligations will be met and a copy of the report submitted to the governing board of the school district pursuant to Section 42130 shall be sent by the county office of education to the Controller and the Superintendent at the time of the certification, together with a completed transmittal form provided by the Superintendent. Within 75 days after the close of the reporting period on all school district certifications that are classified as qualified or negative pursuant to this section, the appropriate county superintendent of schools shall submit to the Superintendent and the Controller the county superintendent of schools’ comments on those certifications and report any action proposed or taken pursuant to subdivision (b).

(3) All reports and certifications required under this subdivision shall be in a format or on forms prescribed by the Superintendent and shall be based on standards and criteria for fiscal stability adopted by the state board pursuant to Section 33127.

(4) This subdivision does not preclude the submission of additional budgetary or financial reports by the county superintendent of schools to the governing board of the school district, or to the Superintendent.

(b) As to any school district having a negative or qualified certification, the county superintendent of schools shall exercise the county superintendent of schools’ authority, as necessary, pursuant to Section 42127.6.

(c) Within 75 days after the close of each reporting period, each county superintendent of schools shall report to the Controller and the Superintendent as to whether the governing board of each of the school districts under the county superintendent of schools’ jurisdiction has submitted the certification required by subdivision (a). That report shall account for all school districts under the jurisdiction of the county office of education and indicate the type of certification filed by each school district.

(d) The Controller’s office may conduct an audit or review of the fiscal condition of any school district having a negative or qualified certification.

(e) Any school district having a negative or qualified certification, or classified as qualified or negative by the county superintendent of schools, shall continue to be classified as qualified or negative until the next report required under Section 42130 is filed.

(f) The governing board of each school district filing a qualified or negative certification for the second report required under Section 42130, or classified as qualified or negative by the county superintendent of schools, shall provide to the county superintendent of schools, the Controller, and the Superintendent no later than June 1, financial statement projections of the school district’s fund and cash balances through June 30 for the period ending April 30. The governing boards of all other school districts are encouraged to develop a similar financial statement for use in developing the beginning fund balances of the school district for the ensuing fiscal year.

(g) A school district for which the county board of education serves as the governing board of the school district is not subject to subdivisions (a) to (f), inclusive, but is governed instead by the interim report, monitoring, and review procedures set forth in subdivision (l) of Section 1240 and in Article 2 (commencing with Section 1620) of Chapter 5 of Part 2.