Meeting Agenda
Announcements
- January 6 SACS Forum minutes
Accounting Issues
- Basic aid district “fair share” reduction from categorical programs (Attachment A)
- State Special Schools revenue limit adjustment – discussion of accounting and the appropriate resource code
- Qualified School Construction Bonds (QSCBs) – treatment of interest reimbursement from the federal government
- 2009–10 unaudited actuals data - common errors noted (Attachment B)
- Special education local plan area (SELPA) pass-through revenue fund – update
- SACS validation table and software updates
- Status of the California Department of Education (CDE) guidance letter
- Governmental Accounting Standards Board (GASB) Statement 54
- Clarifications as a result of questions received regarding the guidance letter
- Timelines for implementation of standards versus updates to California School Accounting Manual (CSAM) and the SACS software
- Applicability to charter schools
- Clarification of the use of Fund 11 and Fund 14
- Closure of Resource 9010 in Fund 17 and Fund 20
- Other issues and participant questions
- Clarifications as a result of questions received regarding the guidance letter
SACS Software Issues
- February validation table updates
- SACS2011 software – “What’s New” summary of changes (Attachment C)
- Future software proposals
- SACS fund forms – request for participant feedback regarding the future appearance of forms and guiding principles as to which resources should be displayed individually
Other Issues
- California School Accounting Manual (CSAM) 2011
- Education Jobs Fund (Ed Jobs) – applicability of OMB Circular A–87
- SACS Query – does the field rely on the individual mandate reimbursement records, or can they be eliminated in favor of one general record?
- Next meeting
Meeting Minutes
Announcements
- January 6 SACS Forum minutes
The January 6, 2011 draft SACS Forum meeting minutes should be released to the meeting participants this week.
Accounting Issues
- Basic aid district “fair share“ reduction from categorical programs
The CDE has received several questions in the last few months and there seems to be some confusion as to how to account for the basic aid district “fair share” reduction from categorical programs. The CDE provided a handout (Attachment A) [http://www.cde.ca.gov/fg/ac/ac/sacsminutes050311a.asp] that clarifies accounting for the basic aid district “fair share” reduction from certain categorical programs. Basic aid districts will account for the “fair share” reduction similarly to the 2009–10 per-average daily attendance reduction. Categorical revenue is reduced, not revenue limit state aid, therefore resource codes for categorical revenue will not be open in combination with Object 8011, Revenue Limit State Aid – Current Year. Most of the reductions will come from flexed categorical funding reported in Resource 0000, Unrestricted, Object 8590, All Other State Revenue.
A participant asked whether, if the transportation entitlement is reduced for the fair share reduction, the local educational agency (LEA) is held harmless from future transportation entitlement reductions if they spend less. The CDE responded that future transportation entitlements would not be reduced because of spending less due to the fair share reduction.
- State Special Schools revenue limit adjustment – discussion of accounting and the appropriate resource code
The CDE recently received a few questions regarding whether Resource 6500, Special Education Apportionment, may be used to record the State Special Schools revenue limit adjustment. The CDE’s January 10, 2011 State Special Schools apportionment letter [http://www.cde.ca.gov/fg/aa/ca/stspecsch10adjltr.asp] indicates the use of Resource 0000, Unrestricted, because the adjustment is offset against revenue limit funding.
The CDE responded that based on information provided by a Special Education staff member a few years ago, this adjustment is an appropriate use of state Special Education funding, and therefore can be appropriately recorded to Resource 6500.
Following is the example from the California School Accounting Manual (CSAM) Procedure 755, Special Education, page 755–15, for the State Special Schools revenue limit adjustment, which uses Resource 0000. It is updated to note that Resource 6500 may be used instead to report this transaction. This update will be reflected in the next edition of the CSAM.
A School District, a Member of a SELPA, Makes Payments to Another Entity for a Special Education Student's Education.
(a) The district makes payments to a State Special School using unrestricted resources.*
Fund Resource Project Year Goal Function Object School 01 0000 0 5001 9200 7130 000
- Fund 01 is the General Fund.
- Resource 0000 is Unrestricted Resource.
- Project Year is not applicable in this example.
- Goal 5001 is Special Education—Unspecified
- Function 9200 is Transfers Between Agencies.
- Object 7130 is State Special Schools.
- School is not required.
*NOTE: Resource 6500, Special Education, may be used instead to record this payment.
- Qualified School Construction Bonds (QSCBs) – treatment of interest reimbursement from the federal government
The CDE has received questions regarding the appropriate accounting for the federal government’s reimbursement to state and local governments for part of the interest expense on bonds issued under certain bond programs, such as QSCBs, Build America Bonds and Recovery Zone Economic Development Bonds. The question is whether the reimbursement of interest should be reported as revenue or a reduction of bond interest expense. The CDE provided a copy of an item from the GASB 2010–11 Implementation Guide, Chapter Z, Other Implementation Guidance, that speaks to this topic. This guidance states that the federal reimbursement is a separate nonexchange transaction and should be recognized as revenue when all eligibility requirements are met. The payment of interest on the qualifying bonds is reported at gross, not netted with the federal reimbursement. A participant asked if this guidance applies to non-taxable bonds, since it specifically mentions taxable bonds. The CDE’s response is that the assumption is that it also applies to non-taxable bonds, assuming these types of bonds are ever even issued as non-taxable.
- 2009–10 unaudited actuals data – common errors noted
The CDE provided a handout (Attachment B) [http://www.cde.ca.gov/fg/ac/ac/sacsminutes050311b.asp] and discussed a few of the common reporting errors noted in the review of the 2009–10 unaudited actuals data submissions. The handout describes the errors and the correct procedure, and references the formal guidance. The CDE explained that the data submitted becomes formally published and is compared with other LEAs and even other states. In addition, it is submitted to the federal government for use in the calculation of Title I allocations, among other uses. Therefore, it is important that the data be correct, meaningful and reliable. It is also important to note that although the overall financial picture of the LEA may be fine, if transactions are recorded incorrectly, certain details in the data may be misleading to users.
One common reporting error that elicited some discussion was the accounting for audit adjustments or restatements applied to resource codes that are subject to deferred revenue rather than fund balance. Adjustments to deferred revenue resource codes should not be accounted for using Object 9793, Audit Adjustments, or Object 9795, Restatements. This is because resource codes subject to deferred revenue do not have beginning balances to adjust. Rather, the appropriate asset, liability, revenue and/or expenditure accounts should be adjusted. In some cases, this might also necessitate an adjustment to the amount contributed from unrestricted resources.
Some participants noted that because their auditors are often the ones making the adjustments to beginning balances, it is difficult to have the entries corrected before the audit report is issued. There was discussion about communicating with auditors to ensure that all parties are in agreement with the adjustments and that the adjustments are done correctly.
- Special education local plan area (SELPA) administrative unit (AU) pass-through revenue fund – update
The CDE continued discussion of the new SELPA AU pass through fund.
- SACS validation table update was released on February 14, 2011.
- The SELPA AU guidance letter was released on March 3, 2011 [http://www.cde.ca.gov/fg/ac/co/selpaaufudnltr.asp] to the SELPA AUs and SELPA directors. Subsequent to the meeting, the guidance was posted to the CDE Web site.
- The new Fund 10 form will be available in the SACS2011 software budget release.
- Fund balance will be allowed in Fund 10.
- Interfund transfers were discussed again. The CDE reiterated that interfund transfers would not be allowed because revenue must be recognized correctly in both funds in order to ensure comparability between LEAs, the issue that necessitated the new fund to begin with. The CDE explained that because it seemed so intuitive to so many that the entire allocation of special education revenues should be posted first to Fund 10 and the AU’s portion then transferred to the AU’s general fund, it seemed likely that many AUs would follow this practice and inadvertently create a new form of incomparability of LEA financial data. The CDE noted that the working group had examined every proposed transaction that might appear to involve the use of an interfund transfer and in each case concluded that there existed an acceptable alternative accounting treatment for the transaction that did not involve the use of an interfund transfer.
- In order to establish the beginning fund balance in the new fund, in accordance with Paragraph 309 of GASB Statement 34, a restatement of the fund balance will be made.
- Governmental Accounting Standards Board (GASB) Statement 54 – update
- Clarifications as a result of questions received regarding the January 7, 2011 guidance letter [http://www.cde.ca.gov/fg/ac/co/documents/gasb54.doc] (DOC; 263KB; 15PP.) posted to the CDE Web site.
- Timelines for implementation of standards versus updates to the CSAM and the standardized account code structure (SACS) software
The SACS2011 software budget release, effective for the 2011–12 budget year, and the 2011 CSAM will be updated with the GASB 54 SACS coding changes.
Although in response to requests from LEAs that they be allowed additional time for training and implementation of GASB 54, the CDE agreed not to incorporate the associated changes into the SACS financial reporting software until 2011–12, LEAs’ 2010–11 financial statements must still conform to GASB 54. This means that LEAs must crosswalk 2010–11 unaudited actuals ending fund balances reported in the previous classifications to the new GASB 54 classifications for their 2010–11 GAAP financial statements.
- Applicability to charter schools
The CDE mentioned that there was a question regarding the applicability of GASB 54 to non-profit charter schools. The CDE clarified that GASB 54 applies to governmental entities only. Non-profit charter schools using full accrual basis accounting are not subject to the requirements of GASB 54.
- Clarification of the use of Fund 11 and Fund 14
The CDE continued discussion of Fund 11, Adult Education Fund, and Fund 14, Deferred Maintenance Fund, in response to questions regarding the guidance in the January 7, 2011 letter. The CDE is in the process of developing additional guidance to aid LEAs in using these funds appropriately.
- Timelines for implementation of standards versus updates to the CSAM and the standardized account code structure (SACS) software
- Closure of Resource 9010 in Fund 17 and Fund 20
The CDE is considering closing Resource 9010, Other Restricted Local, to Fund 17 and Fund 20. The majority of LEAs report amounts in these funds in Resource 0000, but a few use Resource 9010. The CDE is in the process of determining whether these LEAs are using Resource 9010 appropriately, and solicited the participants for feedback.
Some of the discussion surrounded the common misconception that Resource 9010 can be used to report unrestricted funds earmarked by the LEA governing board for specific purposes. There is language in the CSAM on pages 105–5 and 310–1 that addresses reporting restricted versus unrestricted funding, and on pages 310–5 and 310–20 that addresses the appropriate use of Resource 9010. Unrestricted funds earmarked by the LEA governing board should be reported in Resource 0000, not Resource 9010.
The CDE will survey a few of the LEAs reporting large balances in Resource 9010 in Fund 17 and Fund 20 to determine whether that resource is being used appropriately.
- Other issues and participant questions
Participants asked the following questions regarding amounts classified as committed in Fund 11 and Fund 14:
Does the amount of the commitment need to be specified?
The CDE advised that the action to commit funds must be taken by the end of the reporting period, i.e., fiscal year, but the dollar amount can be specified later, at any time up until the financial statements are issued.
Can the action to commit funds be reversed?
Yes, the governing body can take the same formal action to uncommit the previously committed funds, taking into consideration the same time requirements, i.e., prior to the end of the reporting period.
May one board action serve as a blanket commitment or must balances be re-committed every year?
The CDE advised that a commitment remains in place either until the funds are expended for the purpose for which they were committed, or until the board formally takes the action to undo the original commitment.
- Clarifications as a result of questions received regarding the January 7, 2011 guidance letter [http://www.cde.ca.gov/fg/ac/co/documents/gasb54.doc] (DOC; 263KB; 15PP.) posted to the CDE Web site.
SACS Software Issues
- February validation table updates
The CDE released SACS validation table updates on February 14. The February 22 release reflected the revision of codes established to report components of net assets in proprietary and fiduciary fund types. Validation table updates [http://www.cde.ca.gov/fg/ac/ac/validcodes.asp] are available on the CDE Web site.
- SACS2011 software – “What’s New” summary of changes (Attachment C) [http://www.cde.ca.gov/fg/ac/ac/sacsminutes050311c.asp]
The CDE reviewed the accompanying summary of changes to the SACS software.
- Future software proposals
- SACS fund forms – request for participant feedback regarding the future appearance of the fund forms. The CDE noted that when the SACS fund forms were first developed, they were designed to emulate the former J–200 report format so that as LEAs converted to SACS their reports would have the same appearance as they did before. For example, any revenue source that was separately identified in the old report format was separately identified in the new report format. Now, the CDE would like to develop guiding principles for determining how programs and the associated resource codes might be displayed on the fund forms in the future. Discussion of this issue in the past generally indicated that LEAs want to have more detail, not less. The CDE requested that participants begin to give it some thought and provide input at the May 3 meeting.
Other Issues
- California School Accounting Manual (CSAM) 2011
The CDE provided a reminder that the 2011 edition of CSAM is expected to be approved by the State Board of Education in July and released soon thereafter.
- Education Jobs Fund (Ed Jobs) – applicability of OMB Circular A–87
The United States Department of Education (ED) initially indicated that the Ed Jobs program was not subject to the Office of Management and Budget Circular A–87, Cost Principles for State and Local Governments, via the program information provided on the federal Catalog of Federal Domestic Assistance Web site. This information, coupled with the ED’s initial guidance that retirement incentives are an allowable use of Ed Jobs funds, led many to the conclusion that LEAs may direct-charge the cost of early retirement incentives to Ed Jobs without advance approval.
The CDE recently learned that the ED now indicates that Circular A–87 does apply to Ed Jobs. Consistent with these cost principles, advance approval is required in order to charge retirement incentives to Ed Jobs funds. This is problematic for LEAs that have already used funds to pay or commit to paying retirement incentives.
The CDE has not yet established procedures to process requests for advance approval to use Ed Jobs funds for retirement incentives. The CDE is in communications with federal government representatives in order to obtain approval authority.
Time accounting has also become an issue for the Ed Jobs program. Guidance has been provided outside of the CDE to LEAs that indicates time accounting requirements do not apply for personnel funded by Ed Jobs working 100% at the school site. However, given the applicability of Circular A–87 to Ed Jobs, there is now uncertainty about whether that guidance holds true. The CDE is in communications with federal government representatives on this issue as well.
The CDE will communicate the resolution to these issues as soon as it is available.
Subsequent to the meeting, the CDE issued its March 25, 2011 guidance [http://www.cde.ca.gov/ar/ej/documents/fedcostprncpledjob.pdf] (PDF; 84KB; 3pp.), which is posted on the CDE Web site.
- SACS Query – Do LEAs rely on the individual mandate reimbursement records, or can they be eliminated in favor of one general record?
The CDE surveyed participants regarding whether they search the SACS Query for individual mandate reimbursement programs. Currently there are separate SACS Query records for each mandate reimbursement program for which funding has been appropriated over the years. However, the CDE is not certain that individual records are necessary, given the sporadic funding of mandated reimbursements over the last several years and also uncertainty about whether the program cost accounts for each mandate reimbursement are even identified on the remittance advices issued by the State Controller’s Office.
Very little feedback was provided. The CDE will communicate with the State Controller’s Office to determine what information is provided on the remittance advices in order decide what information should be made available on the SACS Query.
- Next meeting
The next SACS Forum meeting is scheduled for May 3, 2011 at the CDE in Sacramento.
