SACS Forum Meeting Minutes, February 2019

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

Meeting Agenda

Announcements and Information

• Posting of the California School Accounting Manual (CSAM) 2019 Edition
  
  
• California Association of School Business Officials (CASBO) SACS Basic and Advanced Concept Workshops
  
  
• 2019 Bid Threshold

Accounting Updates

• New Federal Every Student Succeeds Act (ESSA) School Improvement Funding Resource Codes Assigned
  
  
• 2017–18 Unaudited Actuals Data Review – Observations
  
  
• Accounting for Recovery of Payment for Title III, Part A, Immigrant Student Program
  
  
• District Funded County Program, Assembly Bill (AB) 2235
  
  
• Changes to Funds 76 and 95 per Governmental Accounting Standards Board (GASB) Statement 84: Fiduciary Activities
  
  
• Update: Special Education Goals 5750 and 5770
  
  
• Update: Closing Object 8681, Mitigation/Developer Fees to Resource 0000

SACS Software

• SACS2019 Software Criteria and Standards Update

Other Updates

• Next Meeting
  

Meeting Minutes

Announcements and Information

• Posting of the California School Accounting Manual (CSAM) 2019 Edition
  
  The 2019 CSAM was approved by the State Board of Education on January 9, 2019. The CDE will post the CSAM on the CDE Accounting Definitions, Instructions, & Procedures web page once a few final details are completed. Further details will be made available once the CSAM has been posted.
  
  Update: The 2019 edition of CSAM is now posted.

• 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 this year. Registration information can be found on the CASBO State Workshops web page. Below is the schedule of the workshops.

• SACS Basic Concepts Workshops
  
  
  • April 25: Los Angeles
  • May 9: Tulare
  • May 30: Sonoma
    
    
• SACS: Advanced Concepts Workshops
  
  
  • April 26: Los Angeles
  • May 10: Tulare
  • May 31: Sonoma
    
    
• 2019 Bid Threshold
  
  The Annual Adjustment to Bid Threshold for Contracts Awarded by School Districts and the Annual Adjustment to Liability Limit of Parent or Guardian for Willful Pupil Misconduct letters have been posted to the CDE Accounting Correspondence web page. For 2019, both amounts received an increase of 3.39% from the prior year. The bid threshold amount is $92,600, and the willful pupil misconduct amount is $20,300.

Accounting Updates

• New Federal Every Student Succeeds Act (ESSA) School Improvement Funding Resource Codes Assigned
  
  The CDE announced that resource codes have been assigned for the new ESSA School Improvement Criteria and Standards (CSI) Funding: Resource 3182 for local educational agency (LEA) funding and Resource 3183 for county office of education (COE) support funding. Both of the new resource codes will be included in the March 2019 SACS validation table updates.
  
  Funding application and due date information can be found on the CDE website in the Funding Profile for Resource 3182 and Funding Profile for Resource 3183.
  
  SACS and accounting-related information for these programs can be found on the CDE website via the SACS Query Page for Resource 3182 and SACS Query Page for Resource 3183.

• 2017–18 Unaudited Actuals Data Review – Observations
  
  The CDE provided and discussed a list of accounting and reporting observations (Attachment A) (DOCX) made during the 2017–18 unaudited actuals data review. A focus of the review was the indirect cost rate calculation. Several items observed during these reviews are noted on this list.

• Accounting for Recovery of Payment for Title III, Part A, Immigrant Student Program
  
  The CDE overpaid LEAs in the 2017-18 Sixth Apportionment for Title III, Part A, Immigrant funds. Recovery of the overpayment has been made through an offset to each LEA’s January 2019 Principal Apportionment Payment for fiscal year 2018–19 funds. For more information about this recovery, please visit the CDE Funding Results, Title III, Part A, Immigrant Students web page, where, under the First Recovery section, the letter and schedule for this recovery are posted.
  
  LEAs should record the full advance apportionment before the offset as Local Control Funding Formula (LCFF) revenue. The offset amount should be recorded as an abatement (debit) to revenue in Resource 4201, ESSA: Title III, Immigrant Student program, and Object 8290, All Other Federal Revenue.

• District Funded County Program, Assembly Bill (AB) 2235
  
  Beginning 2019–20, AB 2235 requires CDE to transfer directly to a COE the full LCFF per student amount for any student attending a county community school whose attendance is credited to the school district of residence. The transfer does not include the LCFF funding for students attending county community schools who are on probation or parole and expelled from district schools. The bill also authorizes CDE to transfer an alternative amount if the school district of residence and the COE agree to an alternative amount.
  
  CDE has received questions regarding the accounting treatment of these transfers. CDE’s preliminary conclusion is that LEAs should continue to follow the accounting guidance that was developed in 2014 as a result of LCFF implementation and the change in the way funding for district students served in COE programs was distributed at that time. The accounting guidance is available on the CDE District-Funded Students in COE Programs correspondence web page.
  
  Participants generally agreed with this conclusion. Additional feedback is welcome and may be emailed to sacsinfo@cde.ca.gov.
  
  For any funding and funding calculation questions, please contact the Principal Apportionment Section by mail at 916-324-4541 or by email at pase@cde.ca.gov.

• Changes to Funds 76 and 95 per Governmental Accounting Standards Board (GASB) Statement 84: Fiduciary Activities
  
  GASB Statement 84 (GASB 84), Fiduciary Activities, is effective 2019–20. The new standard establishes criteria for determining whether activities should be reported as fiduciary. If there is a fiduciary responsibility, the fiduciary fund financial statements are required. Refer to the October 2018 SACS Forum minutes for background discussion regarding GASB 84.
  
  GASB issued an Exposure Draft of a proposed fiduciary activities implementation guide on January 3, 2019, with comments due to GASB by February 28, 2019. The final implementation guide is anticipated to be issued by Spring 2019. Although it is not yet final, CDE recommends LEAs review the proposed implementation guide questions and answers and note any areas for which a change in accounting treatment may be necessary.
  
  Following are a few common situations addressed in the proposed implementation guide:
  1. An LEA uses a clearing account to accumulate resources from withholding of its employees’ payroll deductions and accrued employer payroll taxes that will be submitted to the appropriate taxing bodies when due. The clearing account should not be reported in the fiduciary fund, because these amounts are considered a liability of the LEA (refer to proposed implementation guide question 4.16).
     
     
  2. An LEA retains ten percent of the amount billed by the contractor on a construction contract until construction is complete and all requirements in the contract have been satisfactorily met. The LEA should not report the retained amounts in a fiduciary fund, because the LEA is holding the retainage for its own benefit (refer to proposed implementation guide question 4.14).
     
     
  Note that since the proposed implementation guide has not yet been finalized, the above guidance is subject to change.
  
  CDE would also like to bring LEAs’ attention to another important provision of GASB 84. The liability to beneficiaries resulting from a fiduciary activity should be recognized only when an event has occurred that compels the LEA to disburse fiduciary resources. Prior to GASB 84, the liability to beneficiaries was recognized immediately when an LEA receives the fiduciary resources by debiting assets and crediting liabilities for a like amount at the same time.
  
  As an example, an LEA is holding scholarship donations on behalf of a student body group, and assuming the activity is fiduciary. The student body group will select recipients, monitor compliance, and direct the LEA to apply scholarship funds to recipients’ accounts. The student body group has not yet determined scholarship recipients; therefore, the LEA is not compelled to disburse the fiduciary resources. 
  • Current accounting: The LEA records the transaction by debiting assets (cash) and crediting liabilities for the same amount when the donations are received.
    
    
  • GASB 84 accounting: The LEA should not recognize a liability immediately in the custodial fund when the donations are received. The LEA should record the transaction by debiting assets (cash) and crediting new object code 8800 to record the donations received. The donations are reported as part of the net position at year-end to the extent the LEA is not compelled to disburse those donations, e.g., scholarship recipients have not been selected. 
    
    
  However, in certain cases, an LEA incurs a liability as soon as it takes control of fiduciary resources if the beneficiary does not need to take action to compel the LEA to disburse the fiduciary resources. For example, when a county office of education receives payroll tax withholding on behalf of its school districts.
  

• SACS Accounting and Software Changes
  
  Due to the implementation of GASB 84, funds formerly identified as agency funds are now custodial funds; however, the titles of Fund 76 and Fund 95 Warrant/Pass-Through Fund and Student Body Fund, respectively, remain unchanged. In addition, two new object codes will be established to facilitate the preparation of the statement of changes in fiduciary net position, and will be opened to funds 76 and 95 only. The new object codes are:
  • Object 8800, Funds Collected for Others.
    
    
    • Created to allow LEAs to record resource additions in custodial funds.
      
      
    • Object range 8801–8819, Funds Collected for Others: Locally Defined, will be reserved to allow LEAs to create locally defined object codes within this range to identify specific sources. When data are submitted to CDE, LEAs must roll up all objects within this range to Object 8800.
      
      
  • Object 7500, Funds Distributed to Others.
    
    
    • Created to allow LEAs to record resource deductions in custodial funds.
      
      
    • Object range 7501–7519, Funds Distributed to Others: Locally Defined, will be reserved to allow LEAs to create locally defined object codes within this range to identify specific distributions. When data are submitted to CDE, LEAs must roll up all objects within this range to Object 7500.
      
      
  Currently, only Resource 0000 is open to Fund 76 and 95. Resource 9010, Other Restricted Local, will be open to funds 76 and 95 to allow LEAs to report restricted net position in accordance with GASB 84.
  
  CDE provided a mockup of changes to forms 76 and 95 during the meeting.
  
  Currently, the SACS software forms 76 and 95 include actual data only, and there is no plan to expand forms 76 and 95 to include budget or interim data. CDE’s preliminary decision is to implement custodial fund changes to the SACS software for 2019–20 actuals data, but not for 2019–20 budget or interim data. This means associated changes will first appear in the SACS2020 software budget release for 2019–20 estimated actuals data. No changes will be made to the SACS2019 budget and “ALL” software releases because estimated and unaudited actuals data collected in SACS2019 software are for 2018–19. Included in the proposed SACS2020 software changes is the elimination of supplemental forms 76A and 95A. The changes to fiduciary net position reported in those forms will be incorporated in the proposed changes to forms 76 and 95.
  
  CDE will issue SACS validation table updates in early March 2019 to establish the custodial fund account code changes indicated above. Although the new custodial fund codes are not needed for reporting 2019–20 budget data, by including them in the table updates LEAs will be able to set up and start using the appropriate account strings in their financial systems for 2019–20.

• Update: Special Education Goals 5750 and 5770
  
  As discussed during the October 2018 SACS Forum, CDE has been considering eliminating or consolidating Special Education Goals 5750 and 5770 and was seeking feedback from LEAs on the proposed goal change. The CDE had communicated that it was the preference of the Special Education Maintenance of Effort Workgroup to eliminate Goals 5750 and 5770 and establish a new 5xxx goal code for Special Education, Ages 5–22.M
  
  After receiving feedback from LEA staff, the CDE is moving forward with a 5xxx goal code for Special Education, Ages 5–22. Effective 2020–21, Goals 5750, Special Education, Ages 5–22, Severely Disabled, and 5770, Special Education, Ages 5–22, Nonseverely Disabled, will be eliminated, and replaced with proposed new Goal 5760. This will take effect 2020–21, and will coincide with the roll out of the new Special Education Local Plan Area (SELPA) annual budget plan.
  
  LEAs that choose to continue to track severe and nonsevere expenditures may do so by setting up locally defined goals, including 5750 and 5770, to track these expenditures. Locally defined codes must be rolled up to the new goal 5760 when reporting data to CDE.
  
  The Special Education Maintenance of Effort Reports will be updated to reflect the goal change beginning with the SACS2020ALL software.
  
  Additional information and updates will be provided at future SACS Forum sessions.

• Update: Closing Object 8681, Mitigation/Developer Fees to Resource 0000
  
  As discussed during the October 2018 SACS Forum, CDE is planning to close the combination of Resource 0000 with Object 8681.
  
  As background, CDE shared that GASB 54 requires fund balances be reported in the applicable classification regardless of the fund in which they are reported. LEAs should use Resource 9010, Other Restricted Local, or a locally defined resource, that rolls up to 9010 to record developer fee revenues.
  
  Since there were no additional concerns raised and to conform to GASB 54, CDE will be closing Object 8681 x Resource 0000 effective 2019–20. This should allow adequate time for LEAs to make adjustments in their financial system.

SACS Software

• SACS2019 Software Criteria and Standards Updates
  
  The CDE provided a handout of the SACS2019 Software, Proposed Updates (Attachment B) (DOCX) listing the proposed changes to the SACS2019 software budget release. There was additional discussion on the proposed changes for Criteria and Standards, as noted below.
  
  
  • Criteria and Standards
    
    
    • Criterion 4–LCFF Revenue–for District only
      
      The CDE provided a handout of the proposed changes to the LCFF Revenue criterion during the meeting for district only. Due to the full implementation of LCFF in 2019–20 for districts, CDE will modify Section 4A1 as follows:
      
      
      • Remove all text references to “GAP” funding.
        
        
      • Remove the question “Has the District reached its LCFF target funding level?” since all districts will be at target (as current law stands).
        
        
      • Remove the line “LCFF Target (Reference Only)” and the associated data entry fields for the budget year and two subsequent years.
        
        
      • Remove Step 2 / Line c, “Gap Funding (if district is not at target)”.
        
        
      • Lock the 2020–21 and 2021–22 cells to not allow data entry for the Economic Recovery Target Funding, Step 2 / Line d (which will be renumbered to Line c) (New Proposed Change)
        
        
    • Criterion 2–LCFF Revenue–for County Office only (New Proposed Change)
      
      
      • Remove all text references of “GAP” funding.
        
        
      • Change title from “Transition Entitlement” to “LCFF Entitlement” for Section I, Line c1.
        
        
      • Remove Section IV, Charter Funded County Program, Step 2 / Line b3, “Gap Funding (if COE charter schools are not at target)”.
        
        
      • Lock the 2020–21 and 2021–22 cells to not allow data entry for the Economic Recovery Target Funding, Section IV, Step 2 / Line b4 (which will be renumbered to Line b3).
        
        
    • Criterion 7/5–Facilities Maintenance–for District/County Office
      
      Due to the full implementation of LCFF in 2019–20, LEAs will be required to deposit the full 3% contribution into the Routine Restricted Maintenance Account (RRMA), Resource 8150, as referenced in Education Code Section 17070.75 (b)(2)(F). This would apply to participants in the Proposition 51 program as well as any other state school facility program. Since CDE does not administer the state school facility program and the associated RRMA requirements, CDE reached out to the Office of Public School Construction (OPSC), and they also did not disagree with the 3% contribution requirement starting in 2019–20. CDE will modify Criterion 7/5 as follows:
      
      
      • Remove Section 7A/5A, LEA’s School Facility Program Funding Section.
        
        
      • Modify Section 7B/5B, calculating the LEA’s Required Minimum Contribution to calculate 3% of the total unrestricted (COEs only) general fund expenditures and other financing uses for all state school facility programs.
        
        A participant asked whether a small district as defined in Education Code (EC) Section 17070.75 (b)(2)(E) would still be exempt from the contribution requirement. Yes, small districts would still be exempt.
        
        A few participants asked whether the actual contribution amount is based on adopted budget or year-end actual general fund expenditures. This was discussed at the October 2018 SACS Forum.
        
        CDE suggests that if LEAs choose to base their 3% contributions on actuals, then as part of the year-end process they ensure a sufficient contribution to the RRMA has been made since the Criteria and Standards is not available as a monitoring tool for estimated or unaudited actuals reporting.

Other Updates

• Next Meeting
  
  The next SACS Forum is tentatively scheduled for May 14, 2019. The CDE is planning to offer this forum as a webinar only.