Still, the auditors found that Oakland Unified had made steady improvements, and they recommended that the state superintendent consider returning local control of facilities and personnel management -- two of the four operational areas that remain under state governance -- to the school board.
But, as they have in the past, auditors criticized the turnover in the central office, especially in several key positions.
"The lack of consistency in district leadership and management has affected the district's direction and the progress of the district's recovery," the report said.
The progress report by the Fiscal Crisis and Management Assistance Team, released Wednesday, marked the fifth review of the Oakland school district since 2003, when the district received an emergency loan and went into state receivership.
Oakland's budget director, Barak Ben-Gal, resigned in March. In July, Chief Financial Officer Javetta Robinson was fired -- apparently over professional differences with the former state administrator, Kimberly Statham. In September, just after the start of school, Statham resigned suddenly on the eve of her first anniversary. Vincent Matthews is the district's third state administrator.
"Stability in district leadership is critical," the audit team says in its report.
The report also cautioned that the district's steep enrollment slide -- from more than 54,000 students in 2000 to fewer than 39,000 this year -- will require the district to cut costs each year.
Oakland school board members sounded upbeat about the report.
"This is the most powerful good news we've heard in quite some time," said board member Gary Yee. "I think it's really an opportunity to celebrate."
The report's recommendations are advisory; Jack O'Connell, the state superintendent of public instruction, decides when to return governing authority in each area to the school board. An Assembly bill by Sandre Swanson, which would have tied the return of local control to the district's ratings on its progress reports, was vetoed in October.
A spokeswoman for the state Department of Education, Tina Woo Jung, said Wednesday afternoon that she couldn't comment on the report until O'Connell had read it thoroughly. This summer, O'Connell restored the first of five areas, Community Relations and Governance, nearly two years after auditors recommended that he consider doing so.
Reach Katy Murphy at firstname.lastname@example.org.