February 22, 2008
Dear County and District Superintendents, County and District Chief Business Officials, and Charter School Administrators:
FISCAL SOLVENCY PLANS
FOR FINANCING OTHER POSTEMPLOYMENT BENEFITS
The California Department of Education (CDE) will be accepting applications for the 2007-08 fiscal year from local educational agencies (LEAs) for Fiscal Solvency Plan funding. Assembly Bill 1802 (Chapter 79, Statutes of 2006), as modified by Senate Bill 1131 (Chapter 371, Statutes of 2006), provides funding of up to $15,000 per LEA for school districts and charter schools that have completed plans to meet their outstanding long-term fiscal obligations for other postemployment benefits (OPEB). The legislation provided $9 million for payment to school districts and charter schools that develop Fiscal Solvency Plans and $1 million for county offices of education to review plans submitted by school districts. During fiscal year 2006-07, 139 LEAs received fiscal solvency funds. The amount remaining for fiscal years 2007-08 and 2008-09 is $7,894,700 for school districts and charter schools and $887,101 for county offices of education.
Governmental Accounting Standards Board (GASB) Statement 45, released in June 2004, defines OPEB and establishes standards for employers to measure and report their costs and obligations relating to OPEB. Additional guidance on GASB 45 and the definition of OPEB is available on the California Department of Education (CDE) Web site at http://www.cde.ca.gov/fg/ac/.
In order to receive Fiscal Solvency Plan funds, districts and charter schools must develop a plan for meeting their annual OPEB obligations. The State Superintendent of Public Instruction (SSPI) is required, pursuant to Chapter 371, Statutes of 2006, to specify the elements that are to be included in the plan. The attached form entitled “Management Plan for Financing Other Postemployment Benefits” (Management Plan) specifies those elements. It is important that LEAs provide enough detail in the plan document for a reviewer to determine how the plan will allow the LEA to meet its long-term obligations for OPEB. It is not sufficient to only state that decisions will be made and a plan will be developed in the future. It is understood that the plan is based on a point in time and may change. Plans that do not support how the LEA will address their long-term annual OPEB obligations will not be approved for funding. The Management Plan form may be downloaded from the CDE Web site at http://www.cde.ca.gov/fg/fo/r14/fsp06rfa.asp
[Note, the preceding Web address is no longer valid and has been replaced by http://www.cde.ca.gov/fg/fo/r14/fsp07rfa.asp].
The Management Plan must be approved by the governing board of the school district or charter school. School districts must submit their Management Plans to their county superintendents for review. Charter schools must submit their plans to their authorizing entities. Authorizing entities are encouraged, but not required, to review charter plans.
Application for Funding
An application for Fiscal Solvency Plan funding is attached and is also available on the CDE Web site at http://www.cde.ca.gov/fg/fo/r14/fsp06rfa.asp [Note, the preceding Web address is no longer valid and has been replaced by http://www.cde.ca.gov/fg/fo/r14/fsp07rfa.asp]. An applicant school district or charter school may submit it’s completed and signed application to its reviewing agency at the same time it submits its Management Plan. The reviewing agency is required to sign the application certifying that a Management Plan was received and is complete and responsive to all of the elements specified by the SSPI and forward the application with original signatures to the CDE. Districts that wish to receive funding for the 2007-08 fiscal year must have their applications approved by the county office and submitted to CDE by June 15, 2008.
Districts and charter schools will be reimbursed for their actual costs, up to $15,000, for activities related to developing a plan for meeting their OPEB if their plan is approved. Districts that were required to implement GASB 45 in 2007-08 but did not submit an application for Fiscal Solvency Plan funding in 2006-07 can still apply. Applications will be funded on a first-come basis. If funds remain after funding all eligible 2007-08 applications, these funds will be made available through an additional application process in 2008-09.
Reimbursable Costs
Reimbursable costs may include, but are not limited to: (1) collection of information for the actuary; (2) costs of bidding or issuing a Request for Proposal for the actuarial services; (3) costs of hiring a vendor to oversee this process for the LEA; (4) the cost of the actuarial valuation and any presentations of the results of the valuation to employee groups, board members, et.al; (5) staff time related to the evaluation of options and development of a long term plan for meeting the annual OPEB obligations; (6) preparation and Board approval of the Management Plan for Financing Other Postemployment Benefits document; and (7) direct and indirect costs.
Districts may be reimbursed for the costs already incurred for actuarial valuations provided that the associated Management Plan is current and the valuation date was not earlier than 24 months before the first year covered by the Management Plan (i.e., not earlier than July 1, 2006, if used for the period beginning July 1, 2008.) Complete records of expenditures should be maintained and may be subject to audit.
Accounting
LEAs should use Resource Code 7386 and Revenue Object Code 8590 to account for Fiscal Solvency Plan funds. If expenditures related to the Fiscal Solvency Plan were made in a prior year, LEAs can use Object 8990, Contributions from Restricted Revenues, to reimburse Resource 0000 from Resource 7386.
Consistent with the CDE’s existing indirect cost rate guidance, the Fiscal Solvency Plan funds may be charged for indirect costs, provided the amount charged does not exceed the LEA’s approved indirect cost rate. Further information on indirect costs can be found on the CDE Indirect Cost Rates Web site at http://www.cde.ca.gov/fg/ac/ic/.
County Office of Education Funding
The authorizing legislation provides funding for county offices of education to review Fiscal Solvency Plans submitted by school districts. The CDE will allocate funding to county offices of education for each plan reviewed equal to 10 percent of the district’s requested reimbursable costs or $500, whichever is greater. For example, if a district requests $15,000 for developing a Fiscal Solvency Plan, the county office of education for that district would receive $1,500. If a district requests $3,000, the county office of education would receive $500 (rather than 10 percent of $3,000 or $300). Funding will be allocated to the county office once a district application is submitted to the CDE. County offices are eligible to receive funding to review plans even if the district’s plan is not approved by the county office.
If you have any questions regarding this letter, please contact Janet Finley, Consultant, School Fiscal Services Division, at 916-323-5091 or by e-mail at jfinley@cde.ca.gov.
Sincerely,
Scott Hannan, Director
School Fiscal Services Division
1430 N Street
Sacramento, CA 95814