SACS Forum Meeting Minutes, October, 2013

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

Meeting Agenda

Announcements and Information

• 2012–13 unaudited actuals data submissions – CDE review
  
  
• Local Control Funding Formula (LCFF) – e-mail, listserv and frequently asked questions

Accounting Issues

• Deferred outflows and inflows of resources – Governmental Accounting Standards Board (GASB) Statements 63 and 65 (GASB 63 and GASB 65) – update
  
  
• Pension accounting and financial reporting standards (GASB 68) – update
  
  
• Accounting for Object 8096, Transfers to Charter Schools in Lieu of Property Taxes
  
  
• SACS Resource codes – changes as a result of the 2013–14 budget
  
  
• LCFF – Resource code and accounting changes

SACS Software Issues

• SACS2013ALL software – new interim release reflecting Local Control Funding Formula updates
  
  
  • Software changes (Attachment A)
  • Update on release date

Other Issues

• Criteria and Standards LCFF update
• California School Accounting Manual (CSAM) update
• Next meeting

Meeting Minutes

Announcements and Information

• 2012–13 unaudited actuals data submissions – CDE review
  
  The Financial Accountability and Information Services (FAIS) office staff will begin reviewing 2012–13 unaudited actuals data submissions soon. Once again a focus of the reviews will be indirect cost rate calculations for which the variance in the straight rate over the prior year was fifty percent or more, or for which a SACS software technical review exception is generated because the straight indirect cost rate falls outside the range of two percent through nine percent.
  
  FAIS staff may be contacting county office of education (COE) staff with questions regarding school district, joint powers agency or charter school indirect cost rate calculations or other unaudited actuals data, with the intent that the COE follow up with those agencies as necessary. There has been excellent cooperation from local educational agency (LEA) staff in previous years and we appreciate their continued assistance with our inquiries.
  
  
• Local Control Funding Formula (LCFF) – e-mail, listserv and frequently asked questions
  
  The CDE has established an LCFF Web page that provides a wide range of information on the LCFF, including informational letters, legislation, funding, and frequently asked questions, although no accounting guidance at this time. There is also a link provided for joining a listserv to receive e-mail notification of LCFF updates.

Accounting Issues

• Deferred outflows and inflows of resources – Governmental Accounting Standards Board (GASB) Statements 63 and 65 (GASB 63 and GASB 65) – update
  
  The CDE is still in the process of developing guidance for LEAs to implement the provisions of GASB 63 and GASB 65.
  
  There was a question regarding whether there would be significant changes to deferred revenue reporting. First, the CDE was required to change the title of Object 9650 from Deferred Revenue to Unearned Revenue because GASB 65 requires that the term “deferred” be used in account classification titles only in the context of deferred outflows and inflows of resources. In regards to recognition of unearned revenue, there is no change in recognizing a liability for unearned revenue for amounts received but unspent in conjunction with an expenditure-driven grant. However, amounts received in advance of the allowable period of expenditure will now be reported as a deferred inflow of resources, not a liability for unearned revenue. The CDE expects that this type of transaction will affect very few LEAs because LEAs only rarely receive grant funds in advance of the allowable period of expenditure.
  
  
• Pension accounting and financial reporting standards (GASB 68) – update
  
  There is nothing new to report on GASB 68 implementation since the last meeting. The California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS) are primarily responsible for implementing the provisions of GASB 68 and providing the necessary reporting information to LEAs.
  
  The CDE will provide accounting guidance and SACS coding and software changes necessary for implementing GASB 68. Note that GASB 68 is effective beginning 2014–15.
  
  Updates will be provided at future meetings as guidance is developed.
  
  
• Accounting for Object 8096, Transfers to Charter Schools in Lieu of Property Taxes
  
  During FAIS’s initial review of 2012–13 charter school Alternative Forms it was noted that several charter schools are reporting in-lieu of property taxes incorrectly. In some cases the amounts are incorrectly reported as local revenue in Object 8699, All Other Local Revenue. In addition, prior year adjustments associated with in-lieu taxes are incorrectly recorded in Object 8015, Charter School General Purpose Entitlement – Current Year. Current and prior year in-lieu taxes should be reported using Object 8096, Transfers to Charter Schools in Lieu of Property Taxes. The sponsoring LEA should also report the transfer of in-lieu taxes to the charter school using Object 8096. The transaction is recorded by the sponsoring LEA as a debit and by the charter school as a credit. Statewide, Object 8096 should net to zero.
  
  The CDE noted that this coding error is easier to see on the Alternative Form, but suspects that the same miscoding might be occurring for charter schools reported using SACS. Therefore, the CDE recommends that the charter school SACS data be reviewed by authorizing agencies and COEs for the appropriate coding as well.
  
  
• SACS Resource codes – changes as a result of the 2013–14 budget
  
  Following are the SACS resource code changes associated with the 2013–14 Budget Act. There were a few new programs implemented this year requiring the establishment of new resource codes. There was also a consolidation of some Special Education state funding that results in the closure of a few resource codes.
  
  
  • New resource codes
    
    

    Resource	Revenue Object	Title
    6230	8590	California Clean Energy Jobs Act (Prop 39)
    6381	8590	Linked Learning Pilot Program
    7405	8590	Common Core Standards Implementation
    TBD	8590	Career Technical Education Pathways Program
    TBD	8590	Adult Education Planning Grants

    
    
  • Reinstated resource code
    
    

    Resource	Revenue Object	Title
    7370	8590	Specialized Secondary Program

    
    
  • Obsolete resource codes (Non-LCFF)
    
    Special Education
    
    

    Resource	Title/Explanation
    6525	Cross-Cultural Assessments Funding rolled into Resource 6540, State Staff Development
    6535	Personnel Staff Development Funding rolled into SELPA base funding, Resource 6500
    6530	Low Incidence Entitlement Low incidence funding – materials, services, and ROCP have been combined and are paid through the apportionment; use Resource 6500, EXCEPT for ROCP, which should continue to be reported using Resource 6360.

    
    Other
    
    

    Resource	Title/Explanation
    5454	Child Nutrition: Team Nutrition Program ended

    
    There was discussion regarding accounting for Resource 6360, Handicapped Pupils Attending ROCP. Although the associated funding is now included as part of the Low Incidence funding that was consolidated in the 2013–14 Budget Act, the CDE has determined that a separate resource code should be maintained because the expenditures associated with the ROCP services provided should be recorded using Goal 6000, ROCP. If the expenditures were reported in Resource 6500 a SACS software technical review exception would occur because Special Education resource code transactions are required to be reported with a Special Education goal. However, this generated a question about how to record the revenue since there is no longer a separately calculated apportionment. The CDE suggests recording a restricted revenue contribution from Resource 6500 to Resource 6360 using Object 8990, Contributions from Restricted Revenues, rather than splitting the revenue between the two resources. This treatment is consistent with the character of the revenue now in that it is consolidated under the Special Education apportionment, but because expenditures should be recorded using the ROCP goal it needs to be tracked in a separate resource code.
    
    
• LCFF – Resource code and accounting changes
  
  The CDE discussed the accounting and SACS coding changes that have been decided to date.
  
  
  • The state aid portion of LCFF is recorded to Resource 0000, Object 8011, including Targeted Instructional Improvement Block Grant (TIIBG) and Transportation add-ons.
    
    
    • NOTE: Joint power agencies (JPAs) receiving transportation funding directly from the CDE should record the apportionment to Resource 0000, Object 8311. This is a workaround because the most appropriate revenue object is Object 8011. However, Object 8011 is not open on the JPA Form 01 in the SACS software and information regarding this special apportionment was not received in time to program the change into the SACS2013ALL interim update.  
      
      
  • For charter schools, the state-aid portion of the LCFF will also be recorded to Resource 0000, Object 8011. Object 8015 will no longer be used. The rationale is that charter schools are now subject to the same funding formula as traditional LEAs, thus the state aid they receive is the same. Object 8015 was meaningful when charter schools were funded differently.
    
    
  • Amounts of LCFF revenue that LEAs have formally committed to the purposes of Fund 11 (education for adults) or Fund 14 (deferred maintenance) will now be reported as an LCFF (formerly revenue limit) transfer using Object 8091. Object 8099 may be used for transfers associated with prior year adjustments.  
    
    
  • The PERS Reduction is not a component of the LCFF calculation. Therefore LEAs should no longer use Object 8092, PERS Reduction Transfer; or objects 3801 and 3802, PERS Reduction certificated/classified positions.
    
    
  • Resource code reinstated; formerly flexed funding not consolidated into the LCFF:
    
    

    Resource	Title
    7370	Specialized Secondary Program

    
    
  • Resource codes ending as a result of associated funding consolidated into the LCFF  (Last funded fiscal year 2012–13):
    
    

    Resource	Title
    1300	Class Size Reduction K–3 (optional)
    2200	Continuation Education
    2400	Juvenile Court/County Community Schools
    2410	Juvenile Court
    2420	County Community Schools
    2430	Community Day Schools
    7090	Economic Impact Aid (EIA) – State Compensatory Education (SCE)
    7091	Economic Impact Aid – Limited English Proficient (LEP)
    7250	School Based Coordinated Program (SBCP)

    
    
    • The last fiscal year these resource codes will be available is 2015–16, to allow LEAs time to spend 2012–13 balances. LEAs should plan to spend carried over balances before spending unrestricted funding on the same programs or services. 
       
    • EIA amounts that were transferred to SBCP Resource 7250 may remain in that resource and be expended for SBCP purposes. The understanding is that only the SCE funding was allowed to be transferred to SBCP unless carried over LEP funding was redesignated by the LEA as SCE through the Consolidated Application.
      
      
    • All other categorical funding that was consolidated into the LCFF was part of categorical flexibility and already reported in Resource 0000.
      
      
    • Note that certain state-funded career technical education programs are still restricted. The associated resource codes are as follows:
      
      

      Resource	Title
      6378	California Health Science Capacity Building Project
      6385	Governor’s CTE Initiative: California Partnership Academies
      6386	California Partnership Academies: Green and Clean Academies
      7010	Agricultural Career Technical Education Incentive
      7220	Partnership Academies Program

      
      More information regarding these programs can be found on the CDE SACS Query Web page.
    
    
  Following are issues for which a decision has not yet been made, pending implementation of regulations or further internal discussion and perhaps cleanup.
  
  
  • Supplemental and concentration grants – will resource codes be required? Decision is pending Local Control Accountability Plan regulations. There was discussion about the potential difficulty of determining what would be the correct amount to track under separate resource codes, particularly since until the LCFF is fully funded there is no way for an LEA to identify what portion of its base, supplemental, or concentration grants were funded, and also determining the appropriate expenditures to track because in reality some services may benefit all students and not just those targeted by these grants.
    
    
  • ROCP, Adult Education, and Transportation maintenance of effort (MOE) requirements – will resource codes be required? The decision is pending further clarification regarding how MOE will be monitored. However, the preliminary indication is that it is highly unlikely. Although there is an MOE requirement, funding is no longer restricted, i.e., subject to legally enforceable externally imposed constraints on the use of a specific funding source.  
    
    There was discussion about how the Annual Report of Pupil Transportation (Form TRAN) will be affected by the MOE requirements and the fact that transportation funding is now part of the LCFF. Since Form TRAN is only applicable for unaudited actuals, the CDE expects that it will have more information by the time the SACS software is developed for 2013–14 unaudited actuals reporting in order to determine the disposition of this form. Some participants expressed that Form TRAN is useful for purposes other than determining the apportionment, such as the cost per mile calculation, and suggested that it not be eliminated.
    
    
  • Special Education LCFF (revenue limit) transfer via Object 8091– is this still applicable under LCFF? The CDE is having internal discussions to evaluate whether this transfer is still appropriate, or if all unrestricted funds transfers to Special Education should be reported as a contribution using Object 8980, Contributions from Unrestricted Revenues.
    
    There was discussion about how even subsequent to implementation of the AB 602 funding model, the Object 8091 transfer has been used by some LEAs to distinguish support generated by special education pupils under the revenue limit from support for other services. Some indicated, though, that the amount of funding generated by special education pupils would be much more difficult to calculate under the LCFF.

SACS Software Issues

• SACS2013ALL software – new interim release reflecting LCFF updates
  
  Attachment A to the SACS Forum meeting minutes for October 14, 2013 provides the changes that will be reflected in the SACS2013ALL software update. Only minimal changes are being made to interim reporting periods in order to comply with LCFF changes known thus far. More comprehensive changes associated with the LCFF will be made to the SACS2014 software.
  
  The updated software is expected to be released by the week of October 21st, along with a validation table update that provides new code combinations needed with the associated SACS software fund form changes.
  
  NOTE REGARDING SOFTWARE UPDATE INSTALLATION: The CDE emphasized that the software update replaces the current version of the SACS2013ALL software. Any data previously imported or keyed into the existing software is deleted upon installation of the update. Therefore, it is important to export data sets existing in the current version before installing the new version. It is not possible to recover the deleted data once the new software is installed.
  
  The SACS2013ALL software update will not delete data that resides in the SACS2013 budget software or any other prior year SACS software.
  
  Windows 7 update
  
  The SACS software is not compatible with Windows 7. The current workaround for running the SACS software with Windows 7 is to install it on Windows XP virtual PC. However, as of April 2014 Windows XP will no longer be supported. Consequently, Windows XP virtual PC will no longer be supported.
  
  The CDE is attempting to modify SACS2014 to fix the worst of its incompatibilities with Windows 7, such as intermittent dropping of the connection to the database. However, preliminary testing indicates that there will be problems printing forms directly to a printer. Users will need to first print to Adobe Acrobat Portable Document Format (PDF) files or Microsoft XPS Document Writer files and then print from those files. The CDE continues to search for a solution to the printing problem, but the first priority is to get the SACS2014 software compatible with Windows 7 to the extent possible, then make the changes associated with LCFF, and then focus on the printing issue and other remaining compatibility issues.
  
  The CDE acknowledges the inconvenience caused by the printing issue and other issues, and appreciates LEAs’ patience while the CDE continues to work on a solution.

Other Issues

• Criteria and Standards LCFF update
  
  As required by Education Code Section 32127(c), the CDE convened the Criteria and Standards Committee on September 25 to discuss changes associated with the LCFF. The proposed revisions will go to the State Board of Education (SBE) in November. Once the changes are adopted by the SBE, the CDE will send a letter to LEAs describing the changes and their implications. The revisions will take effect for 2014–15.

• California School Accounting Manual (CSAM) update
  
  The CDE is in the process of updating the CSAM. Given other workload priorities, only the absolutely necessary updates were made. These include updates to and addition of account codes and terminology associated with GASB 63 and GASB 65, addition of guidance for the new substitute system for time accounting, updates to the SACS Resource code table, and updates to various procedures in order to provide clarification based on user feedback.
  
  The CSAM will be presented to the State Board in November for approval. Once approved, the CSAM should be available on the Web shortly afterward.
  
  
• Next meeting
  
  It was announced that the next SACS Forum meeting would be January 7, 2014. However, after further discussion it was decided to postpone it until February in order to allow time for the LCFF regulations to be finalized so that more up to date information will be available for the meeting. The new meeting date is Tuesday, February 4, 2014, and will be held at the CDE in Sacramento.