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SACS Forum Meeting Minutes, February 2017

Standardized Account Code Structure (SACS) meeting minutes for February 7, 2017.

Meeting held at the California Department of Education (CDE), Sacramento

Meeting Agenda

Announcements and Information
  • Changes to the Standardized Account Code Structure (SACS) Software Web Pages

  • California Association of School Business Officials (CASBO) SACS Basic and Advanced Concept Workshops

Accounting Issues
  • Update – Senate Bill 884: Mental Health Services

  • Update – Indirect Cost Rate (ICR) Plan

  • 2015-16 Unaudited Actuals Data Review – Observations

  • Ongoing Major Maintenance Account – Resource 8150

  • Career Technical Education Incentive Grant (CTEIG) Pass-Through Accounting

  • Update ­– California State Teachers’ Retirement System (CalSTRS) On-Behalf Contribution Rate

  • Every Student Succeeds Act (ESSA) Per Pupil Expenditure Reporting Requirement – Discussion and Feedback

SACS Software Issues
  • SACS2017 Software– Proposed Changes
Other Issues
  • Next meeting

Meeting Minutes

Announcements and Information
  • Changes to the Standardized Account Code Structure (SACS) Software Web Pages

    CDE has made it easier to access prior year versions of the SACS software. A new SACS Software Web page has been established to which the 2002-03 through 2014-15 software versions are posted. The new Web page has links to the installation files, the readme files, and the known problems/fixes files.

    Also of note, the Certificated Salaries and Benefits Web page, from which the certificated salaries and benefits, or J-90, data files and reports can be downloaded, has been reformatted to consolidate the downloadable files into one table.
  • California Association of School Business Officials (CASBO) SACS Basic and Advanced Concept Workshops

    CASBO will be offering a SACS Basic and a SACS Advanced workshop this year. Registration information External link opens in new window or tab. can be found on the CASBO Web site. Below is the schedule of the workshops.

    SACS: Basic Concepts Workshops
    • April 20: San Luis Obispo
    • April 27: Sacramento
    • May 4: Costa Mesa

    SACS: Advanced Concepts Workshops
    • April 21: San Luis Obispo
    • April 28: Sacramento
    • May 5: Costa Mesa
Accounting Issues
  • Update – Senate Bill 884: Mental Health Services
     
    The 2016-17 Audit Guide has been updated to include new audit procedures for mental health services. The new audit procedures will affect local education agencies (LEAs) or Special Education Local Plan Areas (SELPAs) that had any mental health related service expenditures in Resource 6512, Special Ed: Mental Health Services, for fiscal year 2016-17.

    As part of these audit procedures, auditors will conduct expenditure testing to verify that funds were used to provide mental health services. If auditors find any mental health service expenditures to have been made for non-qualifying purposes, the auditors will instruct the LEA or SELPA to make a correcting journal entry. If the LEA or SELPA does not agree to make a correcting journal entry, the auditors will state in a finding the amount inappropriately expended.

    For background on mental health services and guidance on use of funds, see CDE’s guidance letter dated January 5, 2012.
  • Update – Indirect Cost Rate (ICR) Plan

    CDE submitted their indirect cost plan proposal to U.S. Department of Education (ED) on October 31, 2016. Representatives from ED’s Indirect Cost Group will meet with CDE staff beginning the week of February 27th to start discussing provisions of the new plan. CDE will continue to provide updates in the coming months.

  • 2015-16 Unaudited Actuals Data Review – Observations

    The CDE provided and discussed a list of accounting and reporting observations (Attachment A) made during the 2015–16 unaudited actuals data review.

    As mentioned at the October meeting, a focus of the review was the indirect cost rate calculation. Several items observed during these reviews are noted on this list.
  • Ongoing Major Maintenance Account – Resource 8150

    With recent voter approval of Proposition 51, the $9 billion school facilities construction bond, there are impacts to restricted maintenance account (RMA) requirements.

    Current RMA requirements (for LEAs that have received School Facility Program funding from sources other than Prop 51):
    • In the 2016-17 fiscal year, LEAs must deposit the lesser of: the 2014-15 deposited amount OR 3% of total general fund expenditures in the current year (GFE). Note that for county offices of education (COEs), total GFE excludes any restricted accounts.
    • During the next three fiscal years, 2017-18 through 2019-20, LEAs must deposit the greater of #1 and #2 as follows:
#1 #2
The lesser of: 14-15 deposited amount OR 3% of GFE 2% of GFE
    • For fiscal years after 2019-20, LEAs must deposit 3% of GFE.

RMA requirements (for LEAs in the fiscal year after they receive Proposition 51 funding):

    • Proposition 51 contains a provision to apportion funds as the Education Code read on January 1, 2015. The RMA requirement on January 1, 2015, for fiscal years beyond 2014-15, was to deposit 3% of GFE.
    • Therefore, in the fiscal year after an LEA receives Proposition 51 funding, it should deposit 3% of GFE.
    • The trigger for the Proposition 51 RMA requirement is receiving Proposition 51 funding not receiving an apportionment. The apportionment may happen months or even years before an LEA receives funding so it is important to know the difference.
    • Once Proposition 51 funding is received, the new RMA requirement supersedes the current requirements in the next fiscal year after the LEA receives Proposition 51 funding. This likely will not affect LEAs until 2018-19 because no LEAs are expected to receive funding in 2016-17.
    • If an LEA does not receive Proposition 51 funding, but received School Facility Program funding from other sources, the current RMA requirements that apply are shown above in the “Current RMA requirements” section.

  • Career Technical Education Incentive Grant (CTEIG) Pass-Through Accounting

The CDE has received a few questions regarding how to account for CTEIG funds that are passed from one LEA to another. This question poses a challenge because 1) it could depend on how the applicants applied for the grant, and 2) it depends on how local MOUs and agreements between LEAs are set up. Therefore, the accounting treatment is best decided locally where those familiar with the CTEIG arrangements between LEAs can make the most informed decision. LEAs making this decision should use the guidelines outlined in Procedure 750, Pass-Through Grants and Cooperative Projects, in the California Schools Accounting Manual (CSAM) to determine what fits best for their local situations.

There are two options to account for a grant that is passed from one LEA to another: Pass-through accounting or Subagreement for Services accounting.

    • Pass-through accounting is used when the grant recipient has administrative-involvement only. Administrative-involvement only is demonstrated by things like grant monitoring, determining eligibility, and deciding how to allocate funds.

      Example:

      Recipients
      • To record revenue, use Object 8587, Pass-Through Revenues from State Sources
      • For pass-through, use Object 7211, 7212, or 7213, Transfers of Pass-Through Revenues

      Subrecipients
      • To record revenue, use Object 8590, All Other State Revenue
      • For expenditures, use normal goals, functions, objects

    • Subagreement for Services accounting is used when the recipient has direct financial involvement. If an LEA has direct financial involvement, it normally automatically has administrative involvement. Direct financial involvement is indicated by a grant recipient that has a liability for disallowed costs, or if it funds part of the costs.

      Example:

      Recipients
      • To record revenue, use Object 8590, All Other State Revenue
      • For subagreement expenditures, use Object 5100, Subagreements for Services

      Subrecipients
      • To record subagreement revenue, use Object 8677, Interagency Services Between LEAs
      • For expenditures, use Goal 7110, Nonagency—Educational, but normal functions and objects

Ultimately, the most important thing is that LEAs do not duplicate their revenues and expenditures, so if the situation is unclear, review Procedure 750 in CSAM to see what model fits best for your local situation and communicate with the other LEAs to share your accounting.

  • Update – California State Teachers’ Retirement System (CalSTRS) On-Behalf Contribution Rate

At the last SACS Forum, it was discussed that the CDE would discontinue providing the state on-behalf contribution to CalSTRS rate because CDE and CalSTRS staff agreed that CalSTRS is the authoritative agency for providing such information.

CalSTRS has now posted on-behalf rate calculation information on its GASB 67 and 68 Frequently Asked Questions External link opens in new window or tab. Web page, under the section “On-Behalf Contributions.” Note that CalSTRS is providing two possible methods LEAs may use to calculate the on-behalf contribution.

A participant asked which method should be used to calculate the on-behalf contribution rate. The CDE is not making a recommendation since this should be a local policy decision; however, the method illustrated by CalSTRS in example 2 of the question “How do I calculate my share of State’s on-behalf contributions?” is similar to the method CDE used to calculate the on-behalf rate.

Another participant asked why the CDE stopped calculating the on-behalf rate. Previously, CalSTRS did not provide the rate; therefore, the CDE provided the on-behalf rate as a courtesy upon inquiry from auditors. Since CalSTRS is the agency which administers the teachers’ pension funds, they are the authoritative agency and it is most appropriate for them to provide the on-behalf contribution information.

  • Every Student Succeeds Act (ESSA) Per Pupil Expenditure Reporting Requirement – Discussion and Feedback

    NOTE: Subsequent to the meeting, the ESSA Accountability and State Plans regulations were repealed by Congress. Therefore, much of the information below regarding state and LEA report card implementation timelines and the uniform statewide school-level per-pupil expenditure procedure to be developed by CDE is no longer applicable. CDE will provide updated information at the May SACS Forum meeting.

    Background Information

    ESSA, which reauthorizes the Elementary and Secondary Education Act of 1965 (ESEA), was signed into law on December 10, 2015. Final regulations governing state plans, accountability, and data reporting under the ESSA were published on November 28, 2016.

    Section 200.35 of the ESSA Accountability and State Plans regulations, implementing Section 1111(h)(1)(C) of ESSA, requires states and their LEAs to annually report LEA and school-level per pupil expenditures of federal, state, and local funds on state and LEA report cards, disaggregated by source of funds.

    Implementation Timeline

    Scenario 1 — No one-time, one-year extension filed by the state:

    • The first fiscal year to report data on report cards is fiscal year 2018 (i.e., 2017–18 school year).
    • Beginning with 2017–18 school year information, report cards must be posted annually on the state and LEA Web sites on or before December 31 for the preceding school year.
      • Example: The 2017–18 school year report cards must be published by December 31, 2018.
    • A state or LEA may delay including per-pupil expenditure data on state or LEA report cards until no later than June 30 of the following calendar year.
      • Example: If a state or LEA does not include the per-pupil expenditure data on the report card posted on December 31, 2018, the state or LEA must indicate briefly on the posted report card when per-pupil expenditure data will be included, and must update the report card with such data by June 30, 2019.

Scenario 2 — One-time, one-year extension filed by the state:

    • State may request, for itself or on behalf of the LEA, a one-time, one-year extension. The request must be filed with the Secretary by July 1, 2018 (34 C.F.R. Section 200.30(e) and 200.31(e)).
    • If the request is granted, the first fiscal year to report data on report cards is fiscal year 2019 (i.e., 2018–19 school year).
    • Beginning with 2018–19 school year information, report cards must be posted annually on the state and LEA Web sites on or before December 31 for the preceding school year.
      • Example: The 2018–19 school year report cards must be published by December 31, 2019.
    • A state or LEA may delay including per-pupil expenditure data on state or LEA report cards until no later than June 30 of the following calendar year.
      • Example: If a state or LEA does not include the per-pupil expenditure data on the report card posted on December 31, 2019, the state or LEA must indicate briefly on the posted report card when per-pupil expenditure data will be included, and must update the report card with such data by June 30, 2020.

The CDE has every intention to file the one-time, one year extension. Regardless, discussions regarding the per-pupil calculation methodology and potential accounting changes (discussed below) must start now, as these issues will take time to resolve and implement. Additionally, because that extension is not automatic and must be approved by the Secretary, CDE must proceed as if the per-pupil expenditure data will be reported per the original timeline.

Uniform statewide school-level per-pupil expenditure procedure

Under 34 C.F.R. Section 200.35(c), a state must develop a single, uniform statewide procedure to calculate LEA current per-pupil expenditures of federal, state, and local funds, and a separate single, uniform statewide procedure to calculate school-level per-pupil expenditures of federal, state, and local funds.

Under the uniform statewide procedure for calculating school-level per-pupil expenditures, funds actually spent in a particular school should be reported as expenditures for that school (for example, the salary of a teacher who is assigned to that school). For funds spent centrally by an LEA, or services provided to multiple schools, two approaches are proposed.

    • Assign expenditures to individual schools only if the expenditures are related to instruction and support functions (approach 1).
    • Attribute all of the LEA’s expenditures to individual schools (approach 2).

Approach 1 — Only instruction and support costs reported at the school level:

    • Assign expenditures to the school level only if those costs are related to instruction and support functions (for example, teacher salaries, professional development).
    • All costs not related to instruction and support functions are reported at the LEA level (for example, facilities operations, maintenance, transportation, or food services).

      Pros
      • It resembles site-based budgeting principles that school rarely control much of what happens outside of the classrooms in their school.
      • LEAs are not required to allocate all expenditures since the benefits of some expenditures are not easily allocated to accurately identify how individual schools benefit from those expenditures (e.g., superintendent’s salary, transportation costs, maintenance and custodial costs).
      • It is easier for implementation and can provide an accurate picture of the resources spent as expenditures at the school level.

      Cons
      • It does not provide a full accounting of all LEA expenditures down to the school level.
      • It is difficult to determine an appropriate uniform statewide methodology for attributing instruction and support costs that are incurred on behalf of multiple schools or are not tracked to the school level. Examples are travelling teachers, other instruction support personnel, and substitute teachers who serve multiple schools.

Approach 2 — All expenditures reported at the school level

    • All of an LEA’s expenditures are allocated to individual schools in the LEA, including expenditures for things that typically are considered LEA-level expenditures (e.g., superintendent’s salary, facilities operations).
    • All LEA-level expenditures are prorated to each school based on metrics deemed appropriate for each type of expenditures. For example:
      • Use the number of students served in the school to allocate the superintendent’s salary.
      • Use the percentage of time allocated by LEA personnel to each school to attribute the costs of staff who serve multiple schools.

      Pros
      • It provides a full accounting of all LEA expenditures down to the school level.
      • Aggregate school-level expenditures will equal LEA-level expenditures.
      • All expenditures would be reported at the both school and LEA level.

      Cons
      • It is difficult to uniformly define what types of expenditures are identifiable/attributable at the school level and what types of expenditures are identifiable/attributable at the LEA level.
      • It is difficult to determine an appropriate statewide, uniform methodology for attributing many of a LEA’s costs to individual schools.
      • It does not provide an accurate measure of costs actually incurred at the school.

Examples of issues to be considered with regards to school-level per-pupil expenditure reporting

    • Definition of a “school”. Do we have a comprehensive definition of “school”? There is a definition for the current SARC report.
    • Schools in non-traditional school setting, e.g., jails, juvenile halls, students served at non-public schools.
    • Charter schools
      • For charter schools using the Alternative Form for financial reporting, they might not maintain accounting records to the level of detail necessary to report school-level per-pupil expenditures at the required level of disaggregation.
      • For charter schools serving multiple sites, are they required to prepare report card for each site or just one report card for the charter school?

Potential accounting changes

    • Private funding sources – There are currently no specific resource or object codes established to identify private funding sources. In order to identify expenditures funded by private sources so they can be excluded from the calculation, it may be necessary to establish a new resource or revenue object code for private funding sources.
    • Federal impact aid – There is no unique resource code for the federal impact aid. Resource 0000 is currently used to record federal impact aid transactions. In order to identify expenditures of Impact Aid funds so they can be classified as state and local, rather than federal, expenditures, need to consider whether to establish a new resource code, or use the Impact Aid revenues as a proxy for expenditures.

Discussion of LEAs’ current process/procedures for school-level reporting

The CDE is seeking information on current school-level budgeting process/procedures that LEAs already have in place, as this may help with development of the statewide uniform procedures for per-pupil expenditures reporting. CDE is also aware that LEAs are preparing for the 2015–16 Civil Rights Data Collection (CRDC), and that there are some school-level expenditure reporting elements required for the CRDC. Therefore, CDE would also appreciate information regarding how LEAs will determine the school-level expenditures reporting required for the CRDC.

The CDE would like to convene a workgroup of LEA representatives to obtain an understanding of current school-level budgeting procedures at local level. If anyone is interested in the workgroup, please email sacsinfo@cde.ca.gov. In addition, the CDE plans to reach out to stakeholders for additional feedback.

SACS Software Issues
  • SACS2017 Software—Proposed Changes

The CDE provided a handout (Attachment B) listing the proposed updates to the SACS2017 software budget release. There was additional discussion on some of the proposed changes, as noted below.

    • Form GANN

      After a recent review of Form GANN in the SACS Software, we have received a change request affecting both the district and county office Gann Appropriations Limit calculations.

      Currently, the local proceeds of taxes calculation for most districts includes a reduction for in-lieu taxes transferred to charter schools.  Because charter schools are not subject to the Gann calculation, the tax amount that is transferred to charter schools not reporting with the district (reporting separately in SACS or on the Charter Alternative Form) is not captured. As verified with the Department of Finance, all local property taxes are subject to the appropriations limit and there is no legal basis for an exclusion. 

      The proposed fix for this problem is to remove the line for Transfers to Charter Schools In-Lieu of Taxes from the district form, as well as the County form to avoid double counting. (By eliminating the in-lieu reduction, local property taxes will increase by the amount of in-lieu transfers to charter schools not reporting with the district in SACS).

      This change may cause districts that had amounts of in-lieu taxes going to charter schools not reporting with the district to now exceed their Appropriations Limit requiring notification of the increase to the Director of the State Department of Finance. (As indicated on Form GANN). On the COE side, the amount of appropriations counting against the limit would be reduced, leaving more room within the limit for the COE.

      Questions or concerns regarding this proposed change should be submitted in writing to sacsinfo@cde.ca.gov and they will be forwarded to the office responsible for Prop. 98 and the Gann Limit calculation for review.

    • Criteria and Standards

      The CDE provided the following details and rationale for the proposed changes to Criteria and Standards for the SACS2017 software.

      • County Offices of Education (COEs) only, Criterion 1, Average Daily Attendance (ADA), Sections 1B-1 and 1B-2

        • To be consistent with the district’s Criteria and Standards only pulling in charter school ADA corresponding to financial data reported in the district’s Fund 01, the corresponding change will be made to the COE's ADA criterion.

        • The CDE will change to only include charter school ADA corresponding to financial data reported in the COE's Fund 01, and not in funds 09 and 62.

      • COEs and Districts, Criterion 5/7, Facilities Maintenance

        The CDE will be making changes to reflect the new required minimum contribution to the Ongoing and Major Maintenance/Restricted Maintenance Account per Education Code Section 17070.75 as amended by Assembly Bill 104 (Chapter 13, Statute of 2015). Effective 2017–18 to 2019–20, the calculation will be the greater of the following: 
        1. Two percent of the total general fund expenditures and other financing uses for the current year; or
        2. The lesser of: a) the amount the COE/district unrestricted (COEs only) contributed into the account for the 2014–15 fiscal year, or b) three percent of the total unrestricted (COEs only) general fund expenditures and other financing uses for the current year.

      • Districts only, Criterion 10, Reserves

        Based on several months of discussions in 2016 with the External Services Subcommittee (ESSCO), the CDE agreed that charter school ADA corresponding to financial data reported in the district’s Fund 01 should be included in this criterion. Currently it is only extracting from Form A, Line A4 (district regular ADA).

        For SACS2017, CDE will modify the criterion to extract from Form A, lines A4 and C4 (district regular ADA and total charter school ADA reported in Fund 01) to align with charter school expenditures that are included in the reserve calculation.

        Note: The changes made to this criterion will be reflected in Form MYP/MYPI, Unrestricted/Restricted, Section F Recommended Reserves, line 2.

      • COEs only, Reactivation of Criterion 2, Local Control Funding Formula (LCFF) Revenues

        The COE LCFF criterion was disabled during transition to full LCFF implementation. Now that all COEs are either at target or hold harmless funding status, the CDE will reactivate this criterion.

        The CDE formed a workgroup last October to include COEs within each of three funding status groups (at target, hold harmless, and excess property tax/minimum state aid). The workgroup developed a new COE LCFF criterion that would best fit the LCFF revenue standard.

        Key points and rationale in developing this criterion:
        • Not meant to tie to the COE's total LCFF funding entitlement since this criterion is only looking at changes in funding related to changes in ADA. 
        • Does not include LCFF components not related to changes in overall ADA (example: COE add-ons, special education property taxes, charter funded county program’s in-lieu of property taxes).
        • Continues to incorporate the weighted methodology similar to the Revenue Limit Criterion.
Other Issues
  • Next meeting

    The next SACS Forum is tentatively scheduled for Tuesday May 16, 2017. It will take place at the CDE, 1430 N Street, Sacramento, in Room 1101. CDE is again planning on offering the forum via webinar.
Questions:   Financial Accountability & Information Services | sacsinfo@cde.ca.gov | 916-322-1770
Last Reviewed: Wednesday, March 15, 2017
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