SACS Forum Meeting Minutes, May 2017
Standardized Account Code Structure (SACS) meeting minutes for May 16, 2017.Meeting held at the California Department of Education (CDE), Sacramento
Meeting Agenda
Announcements and Information
- Local Educational Agency (LEA) Approved Indirect Cost Rates Posted
- Standardized Account Code Structure (SACS) 2017 Budget Software Release
- Future SACS Forum Topics – Suggestions
Accounting Issues
- Update – Indirect Cost Rate (ICR) Plan
- Follow-up – Every Student Succeeds Act (ESSA) Per Pupil Spending
- Proposed Elimination of Special Education Goals – 5750 and 5770
- Prefunding Increased Pension Costs
- California State Teachers’ Retirement System (STRS) On-Behalf Contribution – Recap
- Resource Code Updates
- California Work Opportunity and Responsibility to Kids (CalWORKs) Funding
- New Resource 7085:Learning Communities for School Success Program
- Fund 14, Deferred Maintenance Fund: Appropriate Use of Special Revenue Fund
SACS Software Issues
- SACS2017ALL Software Release – Proposed Changes
Other Issues
- Next Meeting
Meeting Minutes
Announcements and Information
- Local Educational Agency (LEA) Approved Indirect Cost Rates Posted
The 2017–18 approved indirect cost rates have been posted to CDE's Indirect Cost Rates (ICR) Web page.
- Standardized Account Code Structure (SACS) 2017 Budget Software Release
The SACS2017 budget financial reporting software has been released and is available for download.
- Future SACS Forum Topics – Suggestions
The CDE reminded participants that they may suggest future SACS Forum topics by sending an e-mail to sacsinfo@cde.ca.gov. Please submit suggested topics at least one week prior to the meeting.
Accounting Issues
- Update – Indirect Cost Rate (ICR) Plan
The CDE is in the process of finalizing the indirect cost rate plan proposal with the U.S. Department of Education (ED).
The three main items of change to the new plan are still on track for implementation:
- Exclusion of food costs
- Proper treatment of head of components cost
- Unrestricted indirect cost rate for grant programs not subject to the supplement-not-supplant restriction
One area the ED inquired about was regarding audit adjustments. The CDE is soliciting feedback from LEA staff who may be aware of common audit adjustments that could have a material impact on the indirect cost rate calculation. One example would be the reclassification of expenditures previously coded to Object 5100 (Subagreement for Services). Since Object 5100 is excluded from the calculation entirely, any reclassification of expenditures previously coded to this object would then be included in the indirect cost rate calculation, potentially affecting the final rate.
Please submit feedback to sacsinfo@cde.ca.gov.
- Follow-up – Every Student Succeeds Act (ESSA) Per-Pupil Spending
The ESSA law that requires LEA and school-level per-pupil expenditures to be reported in LEA and state report cards is still in effect. However, the regulations governing state plans, accountability, and data reporting under ESSA, which were published on November 28, 2016 and contained requirements for reporting per-pupil expenditures, were repealed by Congress in March 2017. Therefore, much of the information discussed at the February 2017 SACS Forum meeting is no longer applicable, as follows:
- State and LEA report card implementation timelines.
- Responsibility of the State to develop a single, uniform statewide procedure to calculate LEA-level per-pupil expenditures.
- Responsibility of the State to develop a single, uniform statewide procedure to calculate school-level per-pupil expenditures.
- Proposed Elimination of Special Education Goals – 5750 and 5770
In May, the Special Education Maintenance of Effort Workgroup (Workgroup) informed our office that they are actively pursuing a change to Education Code Section 56205(b)(1) to eliminate the requirement that Special Education Local Plan Area (SELPA) annual budget plans separately identify expected expenditures for special education services to pupils with severe disabilities and low incident disabilities versus pupils with non-severe disabilities. In addition, because special education program staff do not classify special education pupils as “severely disabled” versus “non-severely disabled” the Workgroup is also reviewing the need for Education Code Section 56030.5, which provides a definition for severely disabled.
This proposed change could result in the elimination of SACS Goal 5750, Special Education, Ages 5–22 Severely Disabled; and Goal 5770, Special Education, Ages 5–22 Non-severely Disabled. Since there is no longer the need to have separate goals to allow LEAs to distinguish special education transportation services provided to severely versus non-severely disabled students for use with the restricted Home-to-School transportation programs rolled into Local Control Funding Formula (LCFF), a new single goal would then be established for reporting Special Education Ages 5-22 transactions.
It was discussed whether LEAs could continue to use goals 5750 and 5770 if a new single goal is established. The CDE discussed two possible approaches: optional codes versus locally defined codes. If goals 5750 and 5770 were defined as optional codes in SACS, LEAs would have the option to use them and would report them in their annual financial data submission to CDE. If goals 5750 and 5770 were eliminated, LEAs could establish them as locally defined goals, but would have to roll them to the new goal for reporting financial data to CDE. CDE will evaluate these approaches as this issue moves forward.
Additionally, one participant mentioned that under their SELPA’s fee-for-service model, only the services provided to severely disabled special education students will be billed back to member LEAs. CDE will bring this comment to the Workgroup for further discussion.
CDE is soliciting feedback from LEA business service staff regarding issues or concerns with the proposed changes. Please send additional feedback to sacsinfo@cde.ca.gov.
CDE will share developments on this issue as they become available.
- Prefunding Increased Pension Costs
The CDE has received inquiries regarding the accounting treatment of amounts contributed to a pension-related trust, separate from the CalSTRS and CalPERS pension trusts, for purposes of accumulating resources to pay future CalPERS and CalSTRS employer contributions.
To illustrate this scenario, an employer provides pensions through a qualifying trust (Trust A) and pension benefits are paid through Trust A. The same employer establishes a second trust (Trust B) to accumulate pension resources. Assets accumulated in Trust B are irrevocable and are protected from creditors of the employer, can be used only to make contributions to Trust A, and can be moved to Trust A only upon instruction from the employer. The employer can use the resources of Trust B to help pay its annual contribution to Trust A, thereby avoiding the need to raise the full amount of the employer contribution in any given year.
Based on guidance provided in the Governmental Accounting Standards Board (GASB) Implementation Guide No. 2017–1 (PDF), published in April 2017, the assets in Trust B should continue to be reported as assets of the individual employer (see questions 4.7 through 4.9). In other words, Trust B should not be reported in a pension trust fund, e.g., Fund 71, but rather in the governmental fund statements, e.g., Fund 01, and government-wide financial statements. The assets in Trust B should be classified as restricted, e.g., Resource 9010 (see question 4.11). Also, note that when employer makes a contribution to Trust B, it is not treated as an expenditure. An expenditure is not incurred until Trust B assets are paid to Trust A.
The guidance in the Implementation Guide also indicates that the assets in Trust B cannot be counted in the employer’s share of pension plan fiduciary net position (FNP) for calculation of net pension liability (NPL) (see questions 4.7 through 4.10). This is because the assets in Trust B are not pension plan assets, as they cannot be used to make current benefit payments to employees.
The above guidance applies to all plan types: single-employer plan, agent multiple-employer plan, and cost-sharing multiple employer plan. - California State Teachers’ Retirement System (CalSTRS) On-Behalf Contribution – Recap
As discussed during the October 2016 and February 2017 SACS Forum meetings, CDE will no longer provide the CalSTRS on-behalf contribution rate. CDE and CalSTRS staff agreed that CalSTRS is the authoritative agency for providing such information.
CalSTRS has proposed two approaches to calculate the on-behalf contribution. The two approaches can be found on the CalSTRS GASB 67—68 Frequently Asked Questions Web page
page under the On-Behalf Contributions section. LEAs have the option to choose which approach to use when calculating their contribution amounts. LEAs are encouraged to work with their auditors in order to decide how to calculate the on-behalf contribution amounts, and can contact CalSTRS with further questions.
The STRS On-Behalf Analysis Spreadsheet Application (Revised 09-Feb-2017; EXE; 124MB), which was developed to assist LEAs with calculating and creating the journal entries for recognizing their portion of the state’s on-behalf contribution to CalSTRS, has been updated with revised instructions that refer users to the CalSTRS Web page referenced above. - Resource Code Updates
- California Work Opportunity and Responsibility to Kids (CalWORKs) Funding
Historically, CalWORKs apportionments were recorded in Resource 6350, Regional Occupational Centers and Programs (ROCP) Apportionment, and Resource 6390, Adult Education Apportionment. Categorical flexibility made that funding unrestricted beginning in 2009–10. Now, under LCFF, the ROCP and Adult Education apportionments no longer exist, and CalWORKs funding is not tied to those apportionments. This has given rise to the question whether the CalWORKs funding should be identified as unrestricted or restricted.
Both the California Budget Act and grant requirements are clear that this funding must be used for its intended purposes – for adult schools and ROCPs to provide educational services to CalWORKs clients. Since there are specific requirements tied to the CalWORKs funding, the CDE determined that the funding should be restricted.
A new restricted Resource, 6371, CalWORKS for ROCP or Adult Education, will be established for this funding. Resource 6371 was included in the June validation table update and is effective 2017–18. LEAs may continue to use the unrestricted resource in the 2016–17 fiscal year.
LEAs were asked to provide feedback regarding any impact the change from unrestricted to restricted might have on them. No feedback was received, but one participant asked if the program requirements will stay the same. The CDE responded that program requirements will not be impacted by the resource code change.
- New Resource 7085:Learning Communities for School Success Program
New Resource 7085 is being established as a result of funding created from the passage of Proposition 47 in 2014. This funding can be used for programs aimed at improving student outcomes by reducing truancy and supporting students who are at risk of dropping out of school or are victims of crime.
NOTE: Subsequent to the meeting, the CDE changed the originally proposed resource code for the Learning Communities for School Success Program from 6571 to 7085 due to concern about assigning a new resource code in the 65XX range, normally associated with special education.
Resource 7085 was also included in the June validation table update and is effective 2017–18.
- California Work Opportunity and Responsibility to Kids (CalWORKs) Funding
- Fund 14, Deferred Maintenance Fund: Appropriate Use of Special Revenue Fund
During a recent review of 2015–16 unaudited actuals reported data, it was discovered that nearly a quarter of LEAs that are utilizing Fund 14 were reporting a substantial amount of the inflows to that fund as an interfund transfer. Interfund transfers do not meet the definition of a committed or restricted revenue source. As a reminder, per Government Accounting Standards Board Statement 54 (GASB 54), the use of a special revenue fund requires that a substantial portion of inflows to the fund be restricted or committed to the purpose(s) of that fund. While generally accepted accounting principles haven’t provided a definitive meaning of “substantial” in this context, evolving industry practice has been that 20 to 50 percent is a reasonable range for making this determination.
CDE previously offered guidance regarding the appropriate accounting for Fund 14 committed revenue streams at the October 2014 SACS Forum meeting, in response to the elimination of formerly restricted categorical funding streams with the implementation of LCFF. The guidance states that the best option for reporting LCFF revenues committed to the purposes of Fund 14 is Object 8091, LCFF Transfers – Current Year. The transfer is recorded with a debit to Fund 01, Resource 0000, Object 8091, and a credit to Fund 14, Resource 0000, Object 8091.
Note that this guidance supersedes the guidance in CDE’s July 19, 2011 letter, Adult Education Fund and Deferred Maintenance Fund, regarding reporting committed amounts in Fund 11, Adult Education Fund, and Fund 14.
Note that interfund transfers, representing assigned amounts, are still allowed in conjunction with Object Code 8091 revenue transfers to Fund 14, but they should not be the predominant inflow justifying the use of the fund.
Additional information regarding GASB 54 can be found in the CDE’s January 7, 2011 letter, New Requirements for Reporting Fund Balance in Governmental Funds (DOC), on the CDE's Accounting Correspondence Web page, and on the GASB's Statement 54 Web page.
A question was asked regarding the appropriateness of an interfund transfer made to Fund 14 that represents the match required by the former Deferred Maintenance Program and that is half of the total inflows to the fund. This is acceptable if an LEA is reporting the other half of the total inflows to Fund 14 using Object Code 8091, which meets the threshold for a substantial portion of inflows to the fund being committed or restricted as described above.
SACS Software Issues
- SACS2017ALL Software Release – Proposed Changes
A list of the proposed changes (Attachment B to the SACS Forum meeting minutes for February 7, 2017) to be made in the SACS2017ALL software release was provided at the February 2017 SACS Forum meeting. The CDE recapped the following changes to the Special Education Maintenance of Effort (MOE) reports SEMA, SEMB, and SEMAI that will be included in the SACS2017ALL release:
In Section 3 of the LEA MOE Calculation worksheets, the automatic extraction of prior year expenditure data will be removed, requiring LEAs to manually enter expenditure and Special Education unduplicated pupil count data for the comparison year under all four methods. The intent of this change is to facilitate the data collection for the separate Subsequent Year Tracking (SYT) worksheet and to provide clear presentation under which method(s) the maintenance of effort is/are met.
These changes to the LEA MOE Calculation worksheets were first discussed during the October 2016 SACS Forum meeting; however, we wanted to bring it to LEAs attention before the SACS2017ALL software release.
The federal Subsequent Years rule and maintenance of effort calculation are not applicable at the SELPA level. As a result, the following worksheets will be removed from the SACS2017ALL software release:
- SELPA Exps PY (SE-PY), within Report SEMA
- SELPA MOE Calc (SMC-A) worksheet, within Report SEMA
- SELPA Exps (SE-B) worksheet, within Report SEMB
- SELPA MOE Calc (SMC-B) worksheet, within Report SEMB
- SELPA Actual (SA-I) worksheet, within Report SEMAI
- SELPA MOE Calc (SMC-I) worksheet, within Report SEMAI
- SELPA Exps CY (SE-CY) worksheet, within Report SEMA
- SELPA Budget (SB-B) worksheet, within Report SEMB
- SELPA Projected (SP-I) worksheet, within Report SEMAI
CDE anticipates that the SACS2017ALL software will be released in early July.
Other Issues
- Next Meeting
The next SACS Forum is tentatively scheduled for Tuesday, November 7, 2017. It will take place at the CDE, 1430 N Street, Sacramento, in Room 1101. We are again planning on offering the forum via webinar.