SACS Minutes, February 2013, Attachment A

Common coding and reporting issues observed in 2011-2012 unaudited actuals data submissions

1. Issue: Incorrect use of unrestricted or restricted resource codes in funds other than the general fund.
   
   Correct Procedure: A restricted resource code should be used for all restricted funding, regardless of the fund in which it is reported. Examples include proceeds of bonds and other debt instruments to be used for specific capital outlay projects and property taxes collected that may only be used to pay debt service.
   
   In addition, funding that does not meet the definition of restricted should be reported in an unrestricted resource code. An example is unrestricted funds set aside in Fund 17 or Fund 20.
   
   Reference: California Department of Education (CDE) letter dated January 7, 2011, “New Requirements for Reporting Fund Balance in Governmental Funds,” pages 11 and 12.
   

2. Issue: Function 7700, Centralized Data Processing Costs, is not being used.
   
   Correct Procedure: Centralized data processing costs should be recorded to Function 7700 and not to Other General Administration Function 7200.
   
   Reference: California School Accounting Manual (CSAM) Procedure 325, Function (Activity) Classification, pages 29 and 30.
   

3. Issue: Object 5100, Subagreements for Services, is not being used.
   
   Correct Procedure: Object 5100 should be used to record payments to a third party service provider that conducts all or part of an instructional or support activity for which the LEA is responsible. The first $25,000 may be recorded using Object 5800.
   
   Federal cost principles require that subagreements be excluded from the indirect cost rate calculation and from eligible program costs on which indirect costs are charged.
   
   References: CDE letter dated December 15, 2006, “Indirect Cost and Accounting Changes Effective Beginning 2007-08.”

   CSAM Procedure 330, Object Classification.

   CSAM Procedure 915, Indirect Cost Rate.
   
   
4. Issue: Incorrect use of abatements.
   
   Correct Procedure: Receipts should be recorded as abatements of expenditures only if the receipt cancels a part or the whole of an identifiable expenditure in the current fiscal year. Otherwise, the receipt should be recorded as revenue. A good example is e-rate subsidies.
   
   Also, amounts received from organizations such as the Parent Teacher Association or parent booster club should not be abated against the expenditure to which that receipt applies, but rather reported as local revenue.
   
   Reference: CSAM Procedure 560, Abatement of Expenditures.
   
   
5. Issue: Other postemployment benefits (OPEB) expenditures are not distributed per the guidance in the CSAM (also see Item 10, below).
   
   Correct Procedure: OPEB expenditures charged to Object 3701, OPEB, Allocated, certificated positions, and Object 3702, OPEB, Allocated, classified positions, are allocated among all activities in proportion to total salaries or full-time-equivalent teachers (FTEs) in all activities.
   
   Reference: CSAM Procedure 785, Postemployment Benefits Other Than Pensions.
   
   
6. Issue: Audit adjustments and restatements using Object 9793, Audit Adjustments, and Object 9795, Other Restatements, are being recorded in resource codes that are subject to deferred revenue, for which no beginning balances exist.
   
   Correct Procedure: Audit adjustments and restatements should be made to the appropriate asset, liability, revenue and/or expenditure accounts in resource codes subject to deferred revenue.
   
   Example: The LEA under-accrues a liability for Title I (Resource 3010), resulting in an audit adjustment, as follows:
   

   Debit Expenditure
   Credit Accounts Payable
   
   This entry necessitates an offsetting increase to revenue, with either a decrease to deferred revenue or increase to accounts receivable:
   
   Debit Deferred Revenue/Accounts Receivable
   Credit Revenue

   Reference: CSAM Procedure 215, Audit Adjustments, Page 5.
   

7. Issue: Form PCRAF - unrealistic or incorrect allocation factors for undistributed support costs. For example, FTE entered for only one instructional program, resulting in allocation of all undistributed costs to that program; or an implausibly low number of FTE per program, e.g. one FTE for regular education; or dollar amounts entered instead of factors.
   
   Correct Procedure: To assure that costs are allocated on a consistent and standard basis, allocation factors should reflect real counts of the teacher FTEs, classroom units (square footage utilized), or pupils transported in all instructional programs operated by the LEA.
   
   Reference: CSAM Procedure 910, Program Cost Accounting.
   

8. Issue: Form PCRAF - allocation factors entered for programs for which there are no direct costs.
   
   Correct Procedure: Undistributed support costs should normally only be allocated to programs in which direct charged costs are incurred.
   
   The PCR/PCRAF should not be used to allocate costs incurred on behalf of other entities, such as charter schools, in lieu of recording them correctly to Goal 7110, Nonagency – Educational, in the general ledger.
   
   Reference: CSAM Procedure 910, Program Cost Accounting.
   
   
9. Issue: Technical review check (TRC) explanations that are meaningless or otherwise unhelpful, or repetitive use of the same explanation for exceptions (e.g., “will be corrected at 1st Interim”) to which the explanation clearly does not apply.
   
   Correct Procedure: If the data is wrong, the LEA should correct the data before submitting it. If the LEA believes the data is right, the LEA should provide a meaningful explanation of why.
   
   Note that revenue and expenditure accounts cannot be corrected in the coming year because revenue and expenditure accounts are closed out to fund balance at the end of each year. If the data is wrong, correct the data before submitting it.
   
   Reference: SACS User Guide and TRC instructions.
   
   
10. Issue: Indirect cost calculation (Form ICR) - indirect cost pool expenditures are being recorded incorrectly, resulting in an inappropriate indirect cost rate.
    
    
    • Administrative costs charged entirely to a general administration function when other functions benefit from those expenditures.
    • Audit costs not charged to the appropriate function.
    • Abnormal or mass separation costs not excluded from the indirect cost pool.
    • OPEB costs charged entirely or disproportionately to a general administration function.
    • Insurance, legal and communications costs charged entirely to a general administrative function.
    • Communications costs charged almost entirely to Function 8100, Plant Maintenance and Operations.
    • Incorrect use of Function 7700, Centralized Data Processing, for technology costs other than those of a general administrative nature.

    Correct Procedure:

    • Especially for small school districts and charter schools, administrative costs should be allocated between general administration, board and superintendent (functions 71XX), school administration (Function 2700), and/or other instructional support functions (functions 2XXX), as necessary. For salaries, standard distributions may be used in lieu of time documentation.
    • Audit costs should be charged to Function 7190, External Financial Audit – Single Audit, or Function 7191, External Financial Audit – Other, depending on whether the LEA is subject to federal Single Audit provisions.
    • Abnormal or mass separation costs charged to a general administration function should be excluded by entering the appropriate amount in Part II of Form ICR.
    • OPEB expenditures are allocated among all activities in proportion to total salaries or FTEs in all activities.
    • Bus and food service vehicle insurance should be charged to Function 3600, Pupil Transportation, and Function 3700, Food Services, respectively. Pupil insurance should be charged to Function 1000, Instruction.
    • Legal costs should be recorded primarily to Function 7100, Board and Superintendent, unless the costs are associated specifically with the business office, purchasing or personnel matters. Settlements should be charged to Function 7100.
    • Communications costs such as telephone, cell phone, 2-way radio, and internet service should be charged to the functions in which those services are used and not lump-sum charged to general administration or plant maintenance and operations.
    • Technology costs incurred on behalf of instructional programs should be reported in Function 1000 or Function 2420, Instructional Library, Media and Technology. Costs should be allocated between agency-wide and instructional functions as necessary. If all technology costs are initially accumulated in Function 7700, instructional costs should be reclassified to the appropriate function(s) using Object 5710, Transfers of Direct Costs.

    References: CDE letter dated December 15, 2006, “Indirect Cost and Accounting Changes Effective Beginning 2007-08.”
    
    CSAM Procedure 325, Function Classification.
    
    CSAM Procedure 785, Postemployment Benefits Other Than Pensions.
    
    CSAM Procedure 905, Documenting Salaries and Wages.
    
    CSAM Procedure 910, Program Cost Accounting.
    
    CSAM Procedure 915, Indirect Cost Rate.

11. Issue: Incorrect charter school SACS coding and reporting:
    
    
    • Salaries reported without corresponding benefits.
    • Salaries and corresponding benefits not recorded to the same resource, goal, and/or function.
    • Management company fees lump-sum charged to one function, such as general administration.
    • Depreciation expense lump-sum charged to general administration in Fund 62.
    • Indirect cost pool expenditures coded incorrectly; misconception that indirect cost rate does not apply.

    Correct Procedure:

    • Employee benefits should be recorded separately from the associated salary and in one or more appropriate benefit object codes.
    • Salary and benefits for the same employee should normally be recorded to the same resource, goal, and function.
    • Fees paid to a management company or authorizing LEA for activities other than school or general administration should be charged to the appropriate function(s), such as instructional administration (Function 2100) or pupil services (functions 3000 – 3999).
    • Fees paid for fiscal and business services are partially attributable to school administration and should be allocated appropriately. In lieu of a documented distribution, these costs may be charged 70% to school administration and 30% to general administration.
    • Depreciation expense should be charged to the functions that benefit from the asset for which depreciation is charged. For example, depreciation on a school building that consists of regular education classrooms should be charged to Goal 1110, Regular Education, K – 12, Function 1000.
    • Indirect cost rates are calculated for charter schools that report separately using SACS, even if an indirect cost rate is not used. Refer to Item 10 above for common indirect cost pool coding issues.

    References:

    CSAM Procedure 325, Function Classification
    
    CSAM Procedure 330, Object Classification
    
    CSAM Procedure 910, Program Cost Accounting
    
    CSAM Procedure 915, Indirect Cost Rate