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Ltr-08: Fiscal Solvency Plan

Letter Head: Jack O'Connell, State Superintendent of Public Instruction, California Department of Education

September 8, 2008

Dear County Superintendents and County Chief Business Officials:

FISCAL SOLVENCY PLANS
FOR FINANCING OTHER POSTEMPLOYMENT BENEFITS

The California Department of Education (CDE) is accepting applications for the 2008-09 fiscal year from local educational agencies (LEAs) for Fiscal Solvency Plan funding. This is the final year that funds are available for this purpose and applications must be submitted by June 15, 2009, to receive funding. There is $8 million in Fiscal Solvency Plan funding remaining, and we encourage all eligible LEAs to apply.

Please forward this letter to all school districts and charter schools in your county or refer them to the CDE Web site to find the letter and related program and application materials. These can be located at http://www.cde.ca.gov/fg/fo/r14/fsp08rfa.asp.

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 developed a plan to meet their outstanding long-term fiscal obligations for Other Postemployment Benefits (OPEB). Funding is also provided for county offices of education to review the school district plans.

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 CDE Web site at http://www.cde.ca.gov/fg/ac/.

In order to receive Fiscal Solvency Plan funds, school districts and charter schools must complete the Management Plan for Financing Other Postemployment Benefits (Management Plan) document, and an application for funding. The Management Plan document can be downloaded from the CDE Web site at http://www.cde.ca.gov/fg/fo/r14/fsp08rfa.asp. Plans must support how the LEA will address its long-term annual OPEB obligations and be approved by the governing board in order to be approved for funding. School district plans must be submitted to the county superintendent for review. Charter school plans must be submitted to the authorizing entity. Authorizing entities are encouraged, but not required, to review charter plans.

Application for Funding

The application for Fiscal Solvency Plan funding also is available on the CDE Web site at http://www.cde.ca.gov/fg/fo/r14/fsp08rfa.asp. An applicant school district or charter school may submit its 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 State Superintendent of Public Instruction and forward the application with original signatures to the CDE.

Districts and charter schools will be reimbursed for their actual costs, up to $15,000, for activities related to developing the plan to meet OPEB if their plan is approved. Districts that were required to implement GASB 45 in prior fiscal years but did not submit an application for Fiscal Solvency Plan funding can still apply. Applications will be funded on a first-come basis.

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

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