SACS Forum Meeting Minutes, October 2016

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

Meeting Agenda

Announcements and Information

• 2015–16 unaudited actuals reviews – CDE follow up with Local Education Agencies (LEAs)
  
  
• Resource Codes Update
  
  
• Chief Business Official (CBO) Information in County-District-School (CDS) Database
  
  
• California Association of School Business Officials (CASBO) SACS Basic and Advanced Concept Workshops

Accounting Issues

• Commodities Reporting
  
  
• Update – California State Teachers’ Retirement System (CalSTRS) On-Behalf Contribution Rate
  
  
• New Governmental Accounting Standards Board (GASB) Statement 75 (GASB 75) – Post Employment Benefits Other Than Pensions (OPEB)
  
  
• Accounting for Technology Purchases
  
  
• Update – Senate Bill (SB) 884: Mental Health Services
  
  
• Indirect Cost Rate (ICR) Update
  
  
• Upcoming Every Student Succeeds Act (ESSA) Per Pupil Spending

SACS Software Issues

• SACS2017 Software – Proposed Changes
  

Other Issues

• Next meeting

Meeting Minutes

Announcements and Information

• 2015–16 unaudited actuals reviews – CDE follow up with Local Education Agencies (LEAs)
  
  The Financial Accountability and Information Services (FAIS) staff are in the process of reviewing 2015–16 unaudited actuals data submissions. Again this year a focus of the review is the indirect cost rate calculation to ensure the rates are being calculated in accordance with the CDE’s delegation agreement with the United States Department of Education (ED). In addition, the CDE wants to ensure that the financial data reported is reliable, accurate, and prepared in accordance with generally accepted accounting principles as the data is available to the public and is used for several state and federal reports.
  
  FAIS staff may be contacting LEA staff with questions regarding the indirect cost rate calculation or any other financial reporting questions. The CDE appreciates LEA staff assistance with these questions. The deadline to finalize the review is mid-December, which facilitates prompt publishing of the financial data and completion of other time-sensitive tasks, e.g., SACS financial reporting software development and county office of education first interim reviews.
  
  
• Resource Codes Update
  
  CDE provided a list of resource code changes (Attachment A to the SACS Forum meeting minutes for October 18, 2016) effective 2016–17.
  
  Included on the list are closed resource codes that were last available in the SACS tables of valid code combinations in 2015–16.
  
  
• Chief Business Official (CBO) Information in County-District-School (CDS) Database
  
  CDE announced CBO contact information has been added to the CDS data collection system. LEA CDS coordinators update information in the CDS database every year between August and October. This year, the School Fiscal Services Division has requested that CBO information be added to the data collection to ensure critical fiscal correspondence, including the distribution of passwords for select applications, reaches the appropriate LEA staff. CDE is looking for better contact information. This applies to charter schools as well.
  
  UPDATE: As of November 4, 734 school districts and 877 charter schools had not provided CBO contact information. The CDE is asking for assistance from LEA business office staff to reach out to CDS coordinators to ensure that this information is provided in the school district and charter school updated CDS information. For more information regarding updates to the CDS information, refer to the CDE OPUS-CDS Application and Resources Web page.
  
  
• 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 in 2017. Registration information 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

• Commodities Reporting
  
  Object 8221, Donated Food Commodities, was established in 2015–16 to allow LEAs to record the fair market value of commodities received from the federal government for use in school meal programs. LEAs should recognize the receipt of donated food commodities at their fair market value in the period when all eligibility requirements are met (typically, at the time of donation) by crediting revenue and debiting expenditures or inventory.
  
  The CDE reminded participants the use of Object 8221, while optional for 2015–16, is mandatory for 2016–17.
  
  
• Update ­– California State Teachers’ Retirement System (CalSTRS) On-Behalf Contribution Rate
  
  Reminder to report on-behalf contributions
  
  The CDE reminded participants that the state’s on-behalf contributions to CalSTRS should be recorded in the applicable governmental funds to which certificated salaries were charged. This is the requirement in accordance with generally accepted accounting principles.
  
  In July, when the CDE was preparing the state financial data report (the National Public Education Financial Survey, also known as NPEFS) to the National Center for Education Statistics (NCES) for fiscal year 2014–15, it was noted that over 40% of the LEAs did not record the state’s on-behalf contributions in their governmental funds. In order to ensure that the reported on-behalf contributions were consistent across the years and accurate, the CDE added the missing information in the NPEFS report to reflect the accurate total on-behalf contributions.
  
  On the other hand, the NCES used our unaudited actuals data to extract data for completing another federal financial report, the School District Finance Survey (also, known as F-33 report). Consequently, the total on-behalf contributions reported in the F-33 report were different than the total reported in the NPEFS report. The CDE has already notified the NCES about the issue and the potential variance.
  
  The CDE expects that most LEAs will have reported the on-behalf contribution for 2015–16, since they had sufficient time to implement the requirement.
  
  Future on-behalf contribution rates
  
  The CDE has been providing the state’s on-behalf CalSTRS contribution rate as a courtesy to LEA staff and auditors since 1999 because the CalSTRS did not provide the rate at that time. Recently, it was brought to the CDE’s attention that the CalSTRS started publishing the on-behalf contribution rates. However, the rates published by the CalSTRS were different than the rates the CDE calculated. In August, the CDE and CalSTRS staff met to discuss the issue, and both agencies agreed that the CalSTRS should be the authoritative agency to calculate and publish the on-behalf contribution rate. The CalSTRS will provide such information on their Web site at a later date.
  
  The CDE recommended LEAs continue using the CDE’s preliminary calculated rate (that is, 8.578248%) for 2016–17 interim reports until the CalSTRS provides and publishes the final on-behalf contribution rate.
  
  A participant questioned when the CalSTRS will provide the 2016–17 final rate. The CDE responded that the CalSTRS was still working on calculating the 2016–17 final rate but that it should be available for LEAs for year-end reporting.
  
  
• New Governmental Accounting Standards Board (GASB) Statement 75 (GASB 75) – Post Employment Benefits Other Than Pensions (OPEB)
  
  GASB 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, will replace the current GASB 45, and is for employers that sponsor postemployment benefits other than pensions (OPEB) plans, and is effective fiscal year 2017–18.
  
  Most of the provisions of GASB 75 for OPEB are parallel to the provisions of GASB 68 for pensions. GASB 75 will require an OPEB liability to be recognized on the balance sheet of the participating employers. In addition, an OPEB expense will be recognized in the income statement of the participating employers. Although LEAs may currently report OPEB liabilities and/or expenses in the financial statements, GASB 75 significantly changes what is reported.
  
  Under GASB 45, Object 9664, Net OPEB Obligation, is used to record the cumulative difference between the annual required contribution and the actual contribution made by the LEA. The net OPEB obligation under GASB 45 is a totally different measure than the OPEB liability under GASB 75. Therefore, the CDE plans to redefine Object 9664 to meet the GASB 75 definition.
  
  One participant asked to which funds the OPEB liability will apply. The net OPEB liability is reported only in the accrual-basis financial statements. It is not reported in the governmental funds.
  
  In September, GASB appointed a group of 15 consultants to assist with the development of implementation guidance relating to the GASB 74 and GASB 75. One consultant is from CalPERS. It is expected to issue two draft implementation guidance for public comments – one about GASB 74 in the fourth quarter of 2016, and the other one about GASB 75 in the third quarter of 2017. Additional information regarding GASB 75 can be found on the GASB Other Postemployment Benefits (OPEB) Web page .
  
  
• Accounting for Technology Purchases
  
  The CDE continued their discussion on the coding of technology purchases. To recap, the NCES may require LEAs to report their technology purchases separately at some point.
  
  The CDE has already notified the NCES that with our current account code structure, California can distinguish some but not all technology-related expenditures (for example, centralized data processing technology costs but not instruction-related technology costs). Also, California cannot distinguish utilities and energy services as they are reported together with other supplies and purchased services.
  
  
• Update – Senate Bill (SB) 884: Mental Health Services
  
  As was discussed at the previous SACS Forum, the California State Auditor performed a review on the effect of Assembly Bill 114 (Chapter 43, Statutes of 2011), which transferred the responsibility of providing mental health services from county mental health departments to LEAs. The State Auditors reported that LEAs were unable to tell them how much was spent on mental health services and also reported that LEAs had accumulated carryover balances in Resource 6512, Special Ed: Mental Health Services.
  
  As a result of the auditors’ findings and recommendations, SB 884: Mental Health Services was introduced. At that time, the proposed language in SB 884 would have required school districts or SELPAs to report to the CDE all mental health and special education services funding allocations and expenditures, which may have required new SACS codes. However, that language was removed, and as passed SB 884 (Chapter 835, Statutes of 2016) requires that the audit guide include audit procedures to ensure that this funding is used by LEAs for its intended purpose in the 2016–17 fiscal year.  Since the 2016–17 audit guide was finalized prior to the passing of SB 884, the CDE is in the process of amending the 2016–17 audit guide to include audit procedures for mental health services. The CDE expects the supplemental audit guide regulations will be adopted by March 2017.
  
  A participant inquired whether the CDE knows what the audit procedures are. The CDE indicated that details are not known at this time; however, the CDE promised to provide another update at our next meeting if that information is available. 
  
  
• Indirect Cost Rate (ICR) Update
  
  The CDE announced they have a new indirect cost plan in development. The last indirect cost delegation agreement that the CDE negotiated expired June 30, 2015, but a two-year extension was granted through June 30, 2017. The CDE is submitting a draft proposal to ED in the next month. After the draft is submitted, then negotiations will take place. No major changes are proposed by the CDE, but the feds may have items they want addressed. For example, the feds consider food costs (Object 4700) as distorting and therefore want these costs excluded from the indirect cost calculation entirely. In addition, “heads of components” costs are not allowed in the indirect cost pool for the restricted indirect cost rate calculation. Generally, heads of components are one level below the superintendent, e.g., assistant superintendents for business services, chief business officials, etc. The CDE will have to ensure that costs for the “head of components” of indirect functions (Functions 7200 thru 7700) are removed from the indirect cost pool and classified to the base costs (denominator).
  
  The CDE is considering implementing an unrestricted ICR, which may be used on programs that aren’t subject to supplement not supplant rules. An unrestricted ICR may help with charging maintenance and operations costs to child nutrition programs. However, consistent cost treatment could be an issue.
  
  The earliest that provisions of a new plan would be effective is for rates approved for use in 2018–19, which are based upon 2016–17 unaudited actuals data.
  
  Additional information regarding potential changes to the ICR calculation as a result of the new ICR plan with be forthcoming over the next few months.
  
  
• Upcoming Every Student Succeeds Act (ESSA) Per Pupil Spending
  
  The ESSA, which was signed into law in December 2015 and reauthorizes the Elementary and Secondary Education Act, includes new per-pupil expenditure reporting requirements to be included in state and LEA report cards.
  
  In addition to LEA-level per-pupil expenditures, each state and LEA report card must identify school-level per-pupil personnel and non-personnel expenditures, in the aggregate and by funding source (federal and state/local). The ED’s proposed regulations would require states to develop a uniform procedure to be used by LEAs to determine these per-pupil expenditures; thus, the CDE would be expected to develop these guidelines. Per-pupil expenditures would be required to be reported in state and LEA reports cards beginning with 2017–18 information, due December 31, 2018. However, the CDE plans to file a one-time extension that postpones the first due date to December 31, 2019. There are many issues related to school-level expenditure reporting that the CDE will explore and share as necessary. Excerpts from the ESSA and the Federal Register were distributed at the meeting (Attachment B to the SACS Forum meeting minutes for October 18, 2016).
  
  The entire ESSA law (PDF) and ESSA proposed regulations are available on the Internet.

SACS Software Issues

• SACS2017 Software – Proposed Changes
  
  The CDE distributed an updated list of proposed changes to be incorporated into the SACS2017 software budget release (Attachment C to the SACS Forum meeting minutes for October 18, 2016).
  
  A participant brought up a concern regarding possible duplicative data reporting due to the proposed changes to Reports SEMA/SEMB/SEMA. The CDE would like to clarify there is no proposed duplicated data reporting. More information regarding the SEMOE change will be available at the next SACS Forum meeting.

Other Issues

• Next meeting
  
  The next SACS Forum is tentatively scheduled for Tuesday February 7, 2017. It will take place at the CDE, 1430 N Street, Sacramento, in Room 1101.
  
  
• SACS Software FORM CEA/CEB
  
  A participant stated that she was asked to bring up the minimum classroom compensation percentages issue, where school districts are having difficulty meeting the required percentage as a result of funding that was previously excluded from the calculation now being included under the unrestricted Local Control Funding Formula apportionment. While the CDE understands and is sympathetic to the current issues related to meeting the requirement, the CDE only provides the form in the SACS Software for use as a tool to assist LEAs to complete the required calculation. The CDE must program the calculation in accordance with law that is still in effect under Education Code sections 41372 and 41374.