SACS Forum Meeting Minutes, October 2014

Meeting Agenda

Announcements and Information

• 2013–14 unaudited actuals data submissions – California Department of Education (CDE) review

• Local Control Funding Formula (LCFF) accounting frequently asked questions (FAQs) update 

Accounting Issues

• Governmental Accounting Standards Board (GASB) update

  • GASB Statement 63 (GASB 63) and Statement 65 (GASB 65), deferred outflows and inflows of resources guidance update
  • GASB Statement 68 (GASB 68), pension accounting and financial reporting standards update
  • Exposure Draft - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB)
    
    
• Accounting for transfers from districts to county offices of education (COEs) for district-funded COE programs
  
  
• Accounting for committed amounts in Fund 11 and Fund 14
  
  
• Accounting for capital asset balances in proprietary and fiduciary funds using Object 9796
  
  
• Elimination of dual budget adoption cycle
  
  
• Resource codes ending in 2014–15
  
  
• Restricted account for new Civic Center Act fees

SACS Software Issues

• SACS2015 software release – proposed changes
  
  
• Form CEA adjustments

Other Issues

• Next meeting

Meeting Minutes

Announcements and Information

• 2013–14 unaudited actuals data submissions – CDE review

  The Financial Accountability and Information Services (FAIS) office has started receiving and reviewing 2013–14 unaudited actuals financial data, which was due to the CDE by October 15. An extensive review of the data is done, including verifying the reasonableness of technical review exceptions and indirect cost rate calculations. It is important that the data be accurate and reliable, as it is made available to the public and is used internally for several things, including maintenance of effort compliance calculations and local educational agency (LEA) indirect cost rates.
  
  

  FAIS staff may be contacting county office of education (COE) staff to assist with questions regarding school district, joint powers agency or charter school data questions. Prompt, thorough responses are appreciated as the FAIS office has a deadline to finalize the data review by mid-December, otherwise other time-sensitive tasks, such as standardized account code structure (SACS) financial reporting software development and COE first interim reviews, are pushed back.

• Local Control Funding Formula (LCFF) accounting frequently asked questions (FAQs) update

  At the May meeting the CDE recapped LCFF accounting guidance in a FAQs format and indicated that the FAQs would be posted to the CDE Website. The FAQs are being reviewed by the CDE legal office and should be posted very soon. Since the LCFF is so sweeping and new and subject to public scrutiny, information and guidance needs to be thoroughly vetted through the appropriate channels before it is released.

  Once approved, the FAQs will be posted on the LCFF FAQs Web page under Financial Accounting.

Accounting Issues

• Governmental Accounting Standards Board (GASB) update
  
  
  • GASB Statement 63 (GASB 63) and Statement 65 (GASB 65), deferred outflows and inflows of resources guidance update
    
    After drafting a guidance letter, the CDE determined that much of what it contained would be information overload given the relatively few number of LEAs affected by these standards. The new financial statement elements have already been incorporated into the SACS software fund forms and government-wide reports, and SACS object codes have been established. Furthermore, LEAs will encounter few of the items identified in GASB 65 that require reclassification, and those tend to occur infrequently.
    
    As discussed at the May 6 SACS Forum, following are the items LEAs are most likely to encounter that should be evaluated for reclassification as deferred outflows of resources, deferred inflows of resources, or outflows:
    
    
    • Unavailable revenue. Revenue that is earned and measurable but not collectible within the timeframe defined for availability. Formerly reported as a liability but now reported as a deferred inflow of resources. This applies to governmental fund types only.
      
      
    • Grants received where the only eligibility requirement that has not been met is the time requirement, i.e., amounts received prior to the period in which they are first allowed to be expended. Formerly reported as a liability but now reported as a deferred inflow of resources.
      
      
    • Current or advance debt refundings that resulting in the defeasance of debt. The difference between the carrying value of the refunded debt and the amount needed to refund the debt. Formerly reported as an asset or liability, depending on whether a debit amount or credit amount, i.e., gain or loss. Now reported as a deferred outflow or deferred inflow of resources.
      
      
    • Debt issuance costs, except for prepaid insurance. Debt issuance costs were formerly reported as an asset, i.e., prepaid expense, and amortized over the life of the debt. Debt issuance costs are now expensed in the period incurred. Note that in governmental funds these amounts have always been and continue to be reported as expenditures. These amounts will no longer be converted to an asset in the SACS software government-wide conversion entries.
      
      
  • GASB Statement 68 (GASB 68), pension accounting and financial reporting standards update
    
    The CDE continues to monitor GASB 68 developments, particularly what information CalPERS and CalSTRS are providing to LEA employers for reporting the net pension liability, pension expense, and/or deferred inflows/deferred outflows of resources and note disclosures and required supplementary information in their financial statements.
    
    The CDE is beginning to develop guidance on accounting for the net pension liability, pension expense, and deferred outflows or deferred inflows of resources. The CDE is proposing adding a new long-term liability code, Object 9663, to allow LEAs to report the net pension liability as a separate item in the financial statements. Participants did not indicate they are using this code for anything else.
    
    More information will be provided in the coming months.
    
    
  • Exposure Draft - Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (OPEB)
    
    The GASB published two exposure drafts in May addressing accounting and financial reporting for state and local government employers providing OPEB and for OPEB plans. The proposed new standards will implement accounting and reporting requirements similar to those provided in the GASB 67 and GASB 68 pension standards.
    
    The new standards will supersede the existing OPEB-related standards, including GASB 45. Under GASB 45 financial reporting requirements, as long as employers pay their annual required contribution no additional liability is reported in the financial statements. Under the proposed OPEB employer standards, LEAs will report an OPEB liability in the government-wide financial statements. The amount reported will depend on the type of plan and whether it is administered through a trust. In addition, the proposed standards will implement significant changes in the calculation of the OPEB liability and annual expense and require more extensive note disclosures and required supplementary information.
    
    The proposed effective date of the new standards is for fiscal years beginning after December 15, 2016, which for LEAs is 2017–18.
    
    The Exposure Drafts and other informative publications are available on the GASB Other Postemployment Benefits Web page.
    
    
• Accounting for transfers from districts to county offices of education (COEs) for district-funded COE programs
  
  The CDE distributed accounting guidance in June via e-mail for the transfer from districts to COEs for district funded COE programs.
  
  A recap of the guidance is provided in Attachment A to the SACS Forum meeting minutes for October 7, 2014.
  
  
• Accounting for committed amounts in Fund 11 and Fund 14
  
  Per GASB 54, the use of a special revenue fund requires that a substantial portion of the inflows to the fund be restricted or committed to the purpose of that fund. Specific revenues streams attributable to Adult Education and Deferred Maintenance were eliminated with the implementation of the LCFF. Since the source of LCFF revenues is state aid, property taxes, or a combination of both, the CDE determined the best option for reporting LCFF revenue committed to the purposes of Fund 11 or Fund 14 is Object 8091, LCFF Transfers. The transfer is done by debiting Fund 01, Resource 0000, Object 8091 and crediting Fund 11 or Fund 14, Resource 0000, Object 8091.
  
  Note that interfund transfers do not meet the requirements of a committed or restricted revenue source. Interfund transfers may be made in conjunction with the Object 8091 revenue transfers, but should not be the only or predominant inflow justifying the use of these funds.  
  
  As discussed at the May 6 SACS Forum, an unintended consequence of the accounting change is that the committed amounts reported in Object 8091 do not count towards the three percent required contribution to Resource 8150, Routine Restricted Maintenance Account (RRMA). The CDE has been asked to consider allowing an Object 8091 transfer from Resource 8150 to Fund 14 so amounts contributed to Resource 8150 that may subsequently be transferred to Fund 14 will continue to count towards the 3 percent RRMA contribution. However, the CDE rejected this proposal because Object 8980, Contributions from Unrestricted Revenues, is used to fund Resource 8150 and it does not make sense to treat the already-contributed general purpose dollars as an LCFF transfer. 
  
  
• Accounting for capital asset balances in proprietary and fiduciary funds using Object 9796
  
  As a reminder, balances of capital assets reported in proprietary and fiduciary funds should be reported, net of accumulated depreciation and related debt, as a component of ending net position using Object 9796, Net Investment in Capital Assets. These amounts should be reported using Object 9796 regardless of whether they were acquired with unrestricted or restricted funds.
  
  
• Elimination of dual budget adoption cycle
  
  The CDE issued a letter dated October 3, 2014, that announces the elimination of the dual budget adoption cycle pursuant to Assembly Bill 2585 (Chapter 309, Statutes of 2014). It is effective beginning 2015–16.
  
  The dual budget adoption cycle option has been available since 1992. Currently, only nine LEAs statewide elect to use this option.
  
  Note that in the SACS2014ALL financial reporting software there is still the option in Form CA to select Single or Dual budget adoption cycle. LEAs may still select either adoption cycle, but all LEAs will be subject to the single budget adoption for 2015–16 regardless of which option is selected in Form CA. 
  
  
• Resource codes ending in 2014–15
  
  The CDE provided a list of closed resource codes that are last available in the SACS tables of valid code combinations 2014–15 (Attachment B to the SACS Forum meeting minutes for October 7, 2014). This is provided so LEAs can plan the disposition of any balances remaining in these resource codes and close them out in 2014–15.
  
  The CDE normally allows resource code combinations to remain available in the SACS tables for three years after the associated program has ended to allow LEAs to spend carryover or make audit or other adjustments. Since LEAs are initially notified at the beginning of the three year period via the table update notifications, by the end of that period it is possible that some of these closed resources may inadvertently remain in an LEA’s system.
  
  
• Restricted account for new Civic Center Act fees
  
  LEAs are allowed to charge a fee for the use their of school facilities, for example after-hours use of the multi-purpose room. Senate Bill (SB) 1404 (Chapter 764, Statutes of 2012) expanded the definition of the types of costs that may be included in the fee, including a proportionate share of capital direct costs, e.g., repair, restoration and refurbishment costs. SB 1404 also requires the State Board of Education to adopt regulations implementing its provisions.  These regulations require that the capital direct cost portion of the fee collected be deposited in a special fund that shall only be used for capital maintenance, repair, restoration and refurbishment. The CDE is interpreting that “special fund” means “special account,” which means a restricted resource code. At this time, the CDE suggests a locally defined restricted resource code be established to track the capital direct cost portion of fees collected and the associated expenditures.  
  
  The regulations and other information can be found on the CDE School Facilities and Transportation Services Division’s Civic Center Act Web page.

SACS Software Issues

• SACS2015 software release – proposed changes
  
  

  A list of proposed changes (Attachment C to the SACS Forum meeting minutes for October 7, 2014) for the SACS2015 software release was distributed and discussed. 

  The CDE requested feedback from LEAs for the following items:

  • Form 01CS/01CSI 
    • COE Criterion 2, LCFF Revenue
      How should this work, or even not work?
    • District/JPA Criterion 6, Other Revenues and Expenditures
      What is a good measure of change in funding during the LCFF transition period? How the current methodology is working for LEAs?
      
      
  • Proposed IC-PY-COMPARE technical review checklist (TRC)
    What are general thoughts on this TRC?
    Is a 25 percent change a reasonable threshold for an exception?
    Please send feedback to sacsinfo@cde.ca.gov by November 30.
    
    
• Form CEA adjustments
  
  

  The CDE clarified when it is appropriate to use Column 4b of Form CEA to override the extractions automatically calculated in Column 4a. A school district may receive a grant directly from the federal government, or from another state or local agency, where no part of grant can be used for teacher salaries. Since the CDE typically does not establish unique resource codes for non-CDE administered programs, the associated grant expenditures will not extract into Column 4a because there is no unique resource code to identify the amounts to be extracted even though it would be appropriate to exclude those amounts.  Therefore, the school district uses Column 4b to manually enter these amounts. The amount entered in Column 4b must include both the amount originally extracted in Column 4a plus the additional reductions identified, as Column 4a is overridden once an amount is entered into Column 4b.

Other Issues

• Participants were asked for feedback regarding scheduling SACS Forum in the afternoon on the same day as the External Services Subcommittee (ESSCO) meeting. This was proposed by some ESSCO participants that also attend SACS Forum to eliminate the additional expense of staying in Sacramento an additional night or driving back to Sacramento the following day. Overall consensus from SACS Forum participants was that they prefer SACS Forum be held in the morning, primarily because of traffic concerns.                                                

  The next meeting has not yet been scheduled.