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District-Funded Students in COE Programs

Note: This guidance was reviewed for applicability to the transfer of funds process implemented pursuant to Assembly Bill (AB) 2235 (Chapter 99, statutes of 2018) and determined to be applicable to the CDE administered transfer of funds process.

[This guidance was sent via email on June 26, 2014, to Standardized Account Code Structure (SACS) Forum participants and the ESSCO, COFS and CDEfisc email distribution lists regarding the accounting for district payments to county offices of education (COEs) for district-funded students in county-operated programs.]

Dear SACS Forum participants,

Following is guidance regarding accounting for payments made by school districts to county offices of education (COEs) for students served in COE programs. In our effort to reach all intended recipients, you may receive this email more than once. If so, please accept our apology since the email lists we use to send this notice may have some duplication.

The implementation of the Local Control Funding Formula (LCFF) has necessitated several accounting changes. One such change is the accounting for funding for district students served in COE programs, which was formerly transferred to COEs automatically through the revenue limit apportionment system and is now apportioned to the school district of residence. School districts and COEs must now make local arrangements for funding COE services to these students, and districts must make any agreed-upon payments to the COEs.

The California Department of Education's (CDE’s) February 20, 2014 letter described this topic in depth. The letter indicated that the CDE would continue to explore the substance of the agreements between districts and COEs in order to provide accounting guidance for the payments. The CDE’s objectives in assessing a solution for accounting for the payments from districts to COEs for district students served in county operated programs are as follows:

  • Conformity with generally accepted accounting principles (GAAP)
  • Conformity with compliance calculations, e.g., maintenance of effort and minimum classroom compensation
  • Providing accurate program cost accounting
  • Providing an accurate calculation of per-pupil expenditures for education
  • Maximizing consistency and reliability in the financial data that the CDE collects

The CDE has concluded that districts should record payments to COEs for district students in programs operated by the COE using Goal 0000 and Object 7142, Other Tuition, Excess Costs and/or Deficit Payments to County Offices. COEs should record the payment received from districts using Object 8710, Tuition. COEs should record the expenditures associated with providing services to these students using the associated instructional goal.

This accounting treatment resembles what many districts have used historically to report excess cost payments to COEs for costs over and above the funding transferred automatically to the COE.

The CDE acknowledges that this accounting treatment does not satisfy all of the objectives described above, particularly with regard to per-pupil expenditures. However, the CDE believes that it is the least imperfect of the several options considered. Other options considered included subagreements for services, interagency transfers, and reducing district revenue by reporting the payments as an offsetting revenue transfer within the LCFF revenue object code range. The CDE determined that the latter would not be in conformity with GAAP because districts act in more than just a cash conduit capacity in the distribution of these funds, i.e., they have administrative and/or fiscal involvement, thus GAAP requires the transaction to be reported as revenue and expenditures. The other options had shortcomings as well.

The CDE also recognizes that other accounting treatments may be appropriate for other types of interagency services. The CDE urges LEAs to consult the California School Accounting Manual (CSAM) Procedure 750, Pass-Through Grants and Cooperative Projects, to determine the appropriate model for each type of service and to ensure that the model used is correct. In particular, CDE notes that the transfer of apportionment model and associated object codes used currently by some LEAs applies to transfers of restricted state Special Education funding, Resource 6500, only and should not be used for most other transactions.

Given time constraints as year-end closing deadlines draw near, the CDE provides this guidance with the understanding that further evaluation is necessary in the coming months and that additional guidance and clarification may be necessary for application in future years.

Please direct questions regarding this guidance to

Questions:   Financial Accountability and Information Services | | 916-322-1770
Last Reviewed: Friday, February 21, 2020
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