CATEGORICAL PROGRAMS

CATEGORICAL PROGRAMS Categorical programs include grants, entitlements and other financial assistance received by a school district from governmental or other entities. These programs are designed to fund specific activities such as transportation costs or special education costs. All costs charged to categorical programs must comply with the requirements of the program. Note: Please refer to the California School Accounting Manual (CSAM), Procedure 310. D/F refers to whether the resource is a grant or an entitlement. D stands for deferred revenue and represents a grant. F stands for fund balance and represents an entitlement. Characteristics of Categorical Programs Governed by additional laws and regulations Accounting requirements under GASB Additional fiscal management Additional reporting Additional audit reporting May have indefinite life or only last a year or two 9.1 May 2012

Sources of Categorical Programs Federal Government: Federal categorical programs may run on the federal fiscal year of October 1 to September 30. Funds are received primarily from the U.S. Department of Education. Federal categorical programs may also come from other federal agencies such as the U.S. Department of Labor. Examples of federal categorical programs include No Child Left Behind Act programs and Individuals with Disabilities Education Act (IDEA) programs. State of California: Examples: Economic Impact Aid (EIA), Special Education and Home to School Transportation. State categorical programs operate on a fiscal year of July 1 to June 30. Pass through federal categorical programs: For pass through grants, the State of California is the recipient organization and the school district is the subrecipient. Pass through categorical programs to California schools primarily flow through the California Department of Education. The State of California receives the grant award and then apportions the funds to school districts. The school districts then submit financial reports to the State of California. Examples of pass through grants include the No Child Left Behind Act Programs, Carl Perkins Act, and Workforce Investment Act. GASB 33 addresses specific revenue recognition policies that are to be used in accounting for categorical funds. Applying the appropriate policy is an extremely important part of the year-end closing process. An LEA should review each project separately and determine the proper entries to close the year. To account for categorical programs properly, an LEA must first determine if the categorical program is a grant or an entitlement. 9.2 May 2012

9.3 May 2012 Grant or Entitlement Grant (Deferred Revenue) - A grant is a contribution of funds to an LEA to be used for a specific purpose, activity or facility. In general, expenditure is the prime factor for determining grant eligibility, and revenue is recognized when the expenditure is made. Grants are considered earned when the expenditure is recorded (expended). Recorded as revenue when cash is received. At the end of the year, if revenue received exceeds donor-authorized expenditures, the difference is recorded as deferred revenue. Deferred revenue is revenue that has been received but not yet earned (expended). The total expenditures used in this calculation may not exceed the grant award. If donor-authorized expenditures exceed the total revenues received, the difference is recorded as accounts receivable. A program cannot have accounts receivable and deferred revenue at the same time. Unused grant award (carryover) is the difference between the total grant award and the total donor authorized expenditures for the year. Any unused grant that exceeds the deferred revenue or accounts receivable is not recorded in the books, but is added to the amount of the award for the subsequent year to determine the total grant available. The unused grant award should not be recorded as an accounts receivable because it has not been earned. Examples of grants are: No Child Left Behind Act programs, Carl Perkins programs and Agricultural Vocational Incentive Grants.

Entitlement (Fund Balance) - An entitlement is a payment based on an allocation formula. Like grants, entitlements are restricted. Entitlements are considered earned when the entitlement is awarded. The entitlement is recorded as revenue when it is received. The amount of any entitlement, which has not been received by June 30, yet is expected to be received by September 30, should be accrued. At the end of the year, any entitlement funds that have not been expended are recorded as restricted ending balances. This is done because restrictions remain on the use of the revenue from the entitlement; therefore the fund balance for this entitlement must be separated from the fund balance available for general use. Examples of entitlements are: Economic Impact Aid, Transportation, Special Education, and the restricted portion of lottery. The CDE SACS Query website provides a lot of useful information on categorical programs. It is located at http://www2.cde.ca.gov/sacsquery/querybyresource.asp The following pages illustrate the accounting transactions necessary to close categorical programs for the fiscal year. 9.4 May 2012

Categorical Program Flexibility Education Code Sec. 42605 provides school districts with the authority to use funding received for a specified list of programs for any educational purpose. This flexibility is available from 2008-09 through 2014-15. A list of programs eligible for this flexibility is included on pages 9.7 to 9.8. Accounting from 2009-10 through 2014-15 for current-year funds for these programs will all be done in the Unrestricted General Fund. Revenue for all flexible programs should be shown in Object 8590. SDCOE has created optional resource codes for districts that would like to track these programs separately within the Unrestricted General Fund (see pages 9.7 to 9.8). Please note that districts opting to use ROP funds flexibly should contact the SDCOE ROP office. Districts must ensure they are hitting their ADA cap or have an exit strategy that has been approved by the SDCOE ROP office. If you are using the optional resource codes and want to transfer funds from one of these resources to Resource 0000, you should use Object 8980: Contributions from Unrestricted Revenues. See the following accounting examples. Example 1: The school district is accounting for Instructional Materials Funds in optional resource 0927. The district receives $50,000 in suspense. 03-00 DR Cash 9999 9110 50,000 03-00 CR Suspense 9999 8999 50,000 The district then moves the revenue to Resource 0927. 03-00 DR Suspense 9999 8999 50,000 03-00 CR Instructional Materials 0927 8590 50,000 9.5 May 2012

Example 2: The district wants to transfer the entire Instructional Materials grant to Resource 0000 to use the funds for other purposes. The entry would be as follows: 03-00 DR Instructional Materials 0927 8980 50,000 03-00 CR Unrestricted Revenue 0000 8980 50,000 Please note that the district can also choose to spend the funds directly out of Resource 0927 and does not need to do a transfer to Resource 0000. Example 3: The district received $100,000 in Deferred Maintenance funding in Fund 03 but wants to transfer it to Fund 14 to be spent in that fund. The district received the funds in suspense as follows. 03-00 DR Cash 9999 9110 100,000 03-00 CR Suspense 9999 8999 100,000 The district recognizes the funds in Fund 03 using optional resource 0915. 03-00 DR Suspense 9999 8999 100,000 03-00 CR Deferred Maintenance 0915 8590 100,000 The district transfers the funds to Fund 14 to be spent. 03-00 DR Deferred Maintenance 0915 7619 100,000 14-00 CR Deferred Maintenance 0915 8919 100,000 9.6 May 2012

9.7 May 2012 Budget Act Items Subject to Categorical Program Flexibility 2008-09 to 2014-15 Budget Act Item Resource FIS Optional Resource Code Program 0800 Categorical Flexibility 6110-232-0001 1200 0964 Class Size Reduction, Grade Nine (Grade 9) 6110-190-0001 2430 0911 Community Day Schools 6110-198-0001 6091 0912 Cal-SAFE Academic and Supportive Services 6092 0913 Cal-SAFE Child Care and Development Services 6093 0914 Cal-SAFE County Classroom 6110-188-0001 6205 0915 Deferred Maintenance Apportionment 6110-260-0001 6258 0916 Physical Education Teacher Incentive Grants 6110-195-0001 6267 0917 National Board Certification Teacher Incentive Grant 6110-227-0001 6285 0918 Community-Based English Tutoring 6110-105-0001 6350 0919 Regional Occupational Centers and Programs (ROCP) 6110-156-0001 6390 0920 Adult Education 6110-228-0001 6405 0921 School Safety & Violence Prevention, Grades 8-12 6110-265-0001 6760 0922 Arts and Music Block Grant 6110-204-0001 7055 0923 California High School Exit Exam (CAHSEE) Intensive Instruction and Services 6110-108-0001 7080 0924 Supplemental School Counseling Program 6110-181-0001 7110 0925 Education Technology: CTAP, SETS, & Supplemental Grants 6110-124-0001 7140 0926 Gifted and Talented Education (GATE) 6110-189-0001 7156 0927 Instructional Materials Realignment, IMFRP (AB 1781) 6110-150-0001 7210 0928 American Indian Early Childhood Education 6110-123-0001 7258 0929 High Priority Schools Grant Program (HPSGP) 7268 0930 High Priority Schools: Corrective Action 6110-193-0001 7271 0931 California Peer Assistance & Review Program for Teachers (PAR) 7275 0932 Staff Development: Bilingual Teacher Training (BTTP) 6110-267-0001 7276 0933 Certificated Staff Mentoring Program 6110-240-0001 7286 0934 International Baccalaureate (IB) Program: Staff Development and Startup 6110-137-0001 7294 0935 Staff Development: Mathematics and Reading (SB 472) 6110-193-0001 7295 0936 Staff Development: Reading Services for Blind Teachers 6110-137-0001 7296 0965 Staff Development: English Learners 6110-144-0001 7325 0937 Staff Development: Administrator Training

9.8 May 2012 Budget Act Items Subject to Categorical Program Flexibility 2008-09 to 2014-15 Budget Act Item Resource *Funding not distributed to LEAs FIS Optional Resource Code Program Student Organizations Vocational Education (California Association of Student Councils) 6110-242-0001 7360 0938 6110-122-0001 7370 0939 Specialized Secondary Programs 6110-266-0001 7385 0940 County Oversight Williams 6110-243-0001 7390 0941 Pupil Retention Block Grant 6110-248-0001 7391 0942 School Community Violence Prevention Grant 6110-244-0001 7392 0943 Teacher Credentialing Block Grant 6110-245-0001 7393 0944 Professional Development Block Grant 6110-246-0001 7394 0945 Targeted Instructional Improvement Block Grant 6110-247-0001 7395 0946 School and Library Improvement Block Grant 6110-208-0001 7810 0947 Other State: Center for Civic Education 6110-104-0001 0000 Remedial Supplemental Instruction Programs 6110-209-0001 0000 Teacher Dismissal Apportionment 6110-211-0001 0000 Charter School Categorical Block Grant 6110-240-0001 0000 Advanced Placement Fee Waiver Program 6110-268-0001 0000 Oral Health Assessments 6110-151-0001 NA* American Indian Education Centers

9.9 May 2012 Contributions from the Unrestricted General Fund The revenue for some programs such as Special Education, Home to School Transportation, and Special Education Transportation, is often insufficient to cover all of the costs incurred by the district. In these cases, the district must do a contribution from the Unrestricted General Fund as shown below. This information is also entered on the CAT Form. Example: The school district needs to transfer $50,000 into Special Education to cover costs that are not supported by the revenue in that resource. The entry would be as follows: 03-00 DR Unrestricted Revenue 0000 8980 50,000 06-00 CR Special Education 6500 8980 50,000

9.10 May 2012 Federal Transferability Under the federal No Child Left Behind Act, school districts can transfer up to 50% of the grant award to other programs. This information is also entered on the CAT Form. Please note that Title I, Part A can only receive funds. In addition, Title V has been removed from this list because the program has been discontinued. Titles available: Title I, Part A: Basic Grants Low Income and Neglected Title II, Part A: Teacher Training and Recruiting Title II, Part D: Enhancing Education Through Technology School districts in Program Improvement can only transfer a maximum of 30% of the grant award. In these cases, transfers are only allowed for improvement activities. School districts in Corrective Action are not eligible for federal transferability. Example: The district received a $20,000 grant for Title II, Part A Teacher Training and Recruiting. The district wishes to transfer 50% ($10,000) to Title I, Part A. The entry would be as follows: 06-00 DR Title II, Part A Teacher Training and Recruiting 4035 8990 10,000 06-00 CR Title I, Part A 3010 8990 10,000

9.11 May 2012 Consolidated Federal Administration School districts have the option to consolidate federal administration costs for the following programs: Title I, Part A: Basic Grants Low Income and Neglected Title I, Part C: Migrant Education Title I, Part D: Neglected and Delinquent Children Title II, Part A: Teacher Training and Recruiting Title II, Part A: Principal Training and Recruiting Title II, Part D: Enhancing Education Through Technology Title III, Part A: Immigrant Title III, Part A: LEP Title IV, Part B: 21 st Century Community Learning Centers The advantage of consolidation is simplified accounting and personal activity timekeeping. Districts will take the following steps: Decide how much to consolidate. The maximum is 2% of the grant amount for Title III, LEP. For the other programs, there is not a specified maximum, but the district must ensure that the amount of administration plus indirect costs do not exceed 15% of the grant amount. Charge administrative costs to Resource 3155 (NCLB Consolidated Administration) throughout the year, with Function 2100 (Supervision of Instruction) Example: Fd Res Func Obj 06-00 DR NCLB Consolidated Admin 3155 2100 1300 900 06-00 DR NCLB Consolidated Admin 3155 2100 3401 250 06-00 DR NCLB Consolidated Admin 3155 2100 4300 130 06-00 CR NCLB Consolidated Admin 3155 2100 9110 1,280 At the end of the year. The undistributed costs in Resource 3155 are distributed to the participating programs using Object 5710 (Transfers of Direct Costs). The district has discretion as to how much to transfer to each program, as long as the

9.12 May 2012 amount is within the maximum allowable administrative cost for that program. Example: Fd Res Func Obj 06-00 DR Title I, Part A 3010 2100 5710 800 06-00 DR Title II, Part A 4035 2100 5710 300 06-00 DR Title III 4203 2100 5710 180 06-00 CR NCLB Consolidated Admin 3155 2100 5710 1,280 Federal Timekeeping Requirements: Consolidated administration is considered one cost objective for purposes of federal timekeeping requirements. Therefore, LEAs are not required to maintain personnel activity reports to document the time spent for administrative activities performed exclusively for these programs. Semiannual certification must still be completed. Refer to Procedure 905 in CSAM for more information. For more information on consolidated federal administration, see CSAM Procedure 780.

Completing the CAT Form Districts use the CAT Form in the SACS Software to calculate deferred revenue, accounts receivable, accounts payable and/or ending fund balance for each categorical program. There are six separate worksheets in the CAT Form based on the source of funds and the applicable accounting treatment: Deferred Revenue- Federal (see sample) Deferred Revenue- State (see sample) Deferred Revenue- Local Restricted Ending Balance- Federal Restricted Ending Balance- State (see sample) Restricted Ending Balance- Local Instructions for completing the CAT Form are included in the manual downloaded with the SACS software. An online workshop on how to complete the CAT Form is available at: http://www.sdcoe.net/business2/dfs/?loc=masteringcat To complete the CAT Form, districts fill in the requested information for the award, revenue received, and expenditures. At the bottom of the CAT Form, the district calculates the deferred revenue, accounts receivable, accounts payable, and/or restricted ending balance. Once the CAT Form has been completed, the applicable entries can be made as shown in the following examples. Note that flexible categorical programs do not need to be shown on the CAT Form because they are unrestricted funds. For the following examples, see the sample CAT Form on pages 9.15 through 9.17. Example 1: Deferred Revenue. Please note that deferred revenue programs should not have both deferred revenue and accounts receivable. 06-00 DR NCLB Title I, Part A 3010 8290 10,000 06-00 CR NCLB Title I, Part A 3010 9650 10,000 9.13 May 2012

Example 2: Accounts Receivable 06-00 DR Lottery Instruct. Materials 6300 9201 5,000 06-00 CR Lottery Instruct. Materials 6300 8560 5,000 Example 3: Accounts Payable 06-00 DR Special Ed Staff Development 6535 8590 3,000 06-00 CR Special Ed Staff Development 6535 9510 3,000 Example 4: Restricted Ending Balance 06-00 DR Economic Impact Aid 7090 9785 5,000 06-00 CR Economic Impact Aid 7090 9740 5,000 Example 5: Unused Grant Award The Unused Grant Award calculation on the CAT Form for deferred revenue programs is the difference between the available award and the total expenditures. In some cases, this amount is the same as the deferred revenue (see Example 1 on CAT Form). In other cases, the unused grant award exceeds the deferred revenue (see Example 5a on CAT Form). In these cases, no accounting entry is done for the difference between the deferred revenue and the unused grant award because the funds have not been earned. Instead, this amount will be budgeted as revenue in the subsequent year. In other cases, there is a receivable, but the district did not spend the total available award (see Example 5b on CAT Form). In these cases, the unused grant award will be an amount in excess of the receivable. This unused award cannot be claimed as a receivable because it has not been earned. 9.14 May 2012

9.15 May 2012 San Diego County 20XX-XX Unaudited Actuals FEDERAL GRANT AWARDS, REVENUES, AND EXPENDITURES - ALL FUNDS SCHEDULE FOR CATEGORICALS SUBJECT TO DEFERRED REVENUES FEDERAL PROGRAM NAME NCLB Title I NCLB Title II A NCLB Title II A TOTAL FEDERAL CATALOG NUMBER RESOURCE CODE 3010 4035 4035 REVENUE OBJECT 8290 8290 8290 LOCAL DESCRIPTION (if any) Example 1 Example 5a Example 5b AWARD 1. Prior Year Carryover 0.00 2. a. Current Year Award 100,000.00 100,000.00 100,000.00 300,000.00 b. Transferability (NCLB) 0.00 c. Other Adjustments 0.00 d. Adj Curr Yr Award (sum lines 2a, 2b, & 2c) 100,000.00 100,000.00 100,000.00 300,000.00 3. Required Matching Funds/Other 0.00 4. Total Available Award (sum lines 1, 2d, & 3) 100,000.00 100,000.00 100,000.00 300,000.00 REVENUES 5. Revenue Deferred from Prior Year 0.00 6. Cash Received in Current Year 100,000.00 80,000.00 70,000.00 250,000.00 7. Contributed Matching Funds 0.00 8. Total Available (sum lines 5, 6, & 7) 100,000.00 80,000.00 70,000.00 250,000.00 EXPENDITURES 9. Donor-Authorized Expenditures 90,000.00 70,000.00 80,000.00 240,000.00 10. Non Donor-Authorized Expenditures 0.00 11. Total Expenditures (lines 9 & 10) 90,000.00 70,000.00 80,000.00 240,000.00 12. Amounts Included in Line 6 above for Prior Year Adjustments 0.00 13. Calculation of Deferred Revenue or A/P, & A/R amounts (line 8 minus line 9 plus line 12) 10,000.00 10,000.00 (10,000.00) 10,000.00 a. Deferred Revenue 10,000.00 10,000.00 20,000.00 b. Accounts Payable 0.00 c. Accounts Receivable 10,000.00 10,000.00 14. Unused Grant Award Calculation (line 4 minus line 9) 10,000.00 30,000.00 20,000.00 60,000.00 15. If Carryover is allowed, enter line 14 amount here 10,000.00 30,000.00 20,000.00 60,000.00 16. Reconciliation of Revenue (line 5 plus line 6 minus line 13a minus line 13b plus line 13c) 90,000.00 70,000.00 80,000.00 240,000.00 California Dept of Education SACS Financial Reporting Software 37 00000 0000000 Form CAT

9.16 May 2012 San Diego County STATE PROGRAM NAME 20XX-XX Unaudited Actuals STATE GRANT AWARDS, REVENUES, AND EXPENDITURES - ALL FUNDS SCHEDULE FOR CATEGORICALS SUBJECT TO DEFERRED REVENUES Special Ed Personnel Staff Development TOTAL RESOURCE CODE 6535 REVENUE OBJECT 8590 LOCAL DESCRIPTION (if any) Example 3 AWARD 1. a. Prior Year Carryover 0.00 b. Restr Bal Transfers (Obj 8997) 0.00 c. Adjusted Prior Year Carryover (sum lines 1a & 1b) 0.00 0.00 2. a. Current Year Award 10,000.00 10,000.00 b. Block Grant Transfers (Obj 8995) 0.00 c. Cat Flex Transfers (Obj 8998) 0.00 d. Other Adjustments 0.00 e. Adj Curr Yr Award (sum lines 2a through 2d) 10,000.00 10,000.00 3. Required Matching Funds/Other 0.00 4. Total Available Award (sum lines 1c, 2e, & 3) 10,000.00 10,000.00 REVENUES 5. Revenue Deferred from Prior Year 0.00 6. Cash Received in Current Year 10,000.00 10,000.00 7. Contributed Matching Funds 0.00 8. Total Available (sum lines 5, 6, & 7) 10,000.00 10,000.00 EXPENDITURES 9. Donor-Authorized Expenditures 7,000.00 7,000.00 10. Non Donor-Authorized Expenditures 0.00 11. Total Expenditures (lines 9 & 10) 7,000.00 7,000.00 12. Amounts Included in Line 6 above for Prior Year Adjustments 0.00 13. Calculation of Deferred Revenue or A/P, & A/R amounts (line 8 minus line 9 plus line 12) 3,000.00 3,000.00 a. Deferred Revenue 0.00 b. Accounts Payable 3,000.00 3,000.00 c. Accounts Receivable 0.00 14. Unused Grant Award Calculation (line 4 minus line 9) 3,000.00 3,000.00 15. If Carryover is allowed, enter line 14 amount here 0.00 16. Reconciliation of Revenue (line 5 plus line 6 minus line 13a minus line 13b plus line 13c) 7,000.00 7,000.00 California Dept of Education SACS Financial Reporting Software 37 00000 0000000 Form CAT

9.17 May 2012 San Diego County 20XX-XX Unaudited Actuals STATE AWARDS, REVENUES, AND EXPENDITURES - ALL FUNDS SCHEDULE FOR CATEGORICALS SUBJECT TO RESTRICTED ENDING BALANCES Lottery: Instructional STATE PROGRAM NAME Materials Economic Impact Aid TOTAL RESOURCE CODE 6300 7090 REVENUE OBJECT 8560 8311 LOCAL DESCRIPTION (if any) Example 2 Example 4 AWARD 1. a. Prior Year Restricted Ending Balance 0.00 b. Restr Bal Transfers (Obj 8997) 0.00 c. Adj PY Restricted Ending Bal (sum lines 1a & 1b) 0.00 0.00 0.00 2. a. Current Year Award 15,000.00 25,000.00 40,000.00 b. Block Grant Transfers (Obj 8995) 0.00 c. Cat Flex Transfers (Obj 8998) 0.00 d. Other Adjustments 0.00 e. Adj Curr Yr Award (sum lines 2a through 2d) 15,000.00 25,000.00 40,000.00 3. Required Matching Funds/Other 0.00 4. Total Available Award (sum lines 1c, 2e, & 3) 15,000.00 25,000.00 40,000.00 REVENUES 5. Cash Received in Current Year 10,000.00 25,000.00 35,000.00 6. Amounts Included in Line 5 for Prior Year Adjustments 0.00 7. a. Accounts Receivable (line 2e minus lines 5 & 6) 5,000.00 0.00 5,000.00 b. Noncurrent Accounts Receivable 0.00 c. Current Accounts Receivable (line 7a minus line 7b) 5,000.00 0.00 5,000.00 8. Contributed Matching Funds 0.00 9. Total Available (sum lines 5, 7c, & 8) 15,000.00 25,000.00 40,000.00 EXPENDITURES 10. Donor-Authorized Expenditures 15,000.00 20,000.00 35,000.00 11. Non Donor-Authorized Expenditures 0.00 12. Total Expenditures (line 10 plus line 11) 15,000.00 20,000.00 35,000.00 RESTRICTED ENDING BALANCE 13. Current Year (line 4 minus line 10) 0.00 5,000.00 5,000.00 California Dept of Education SACS Financial Reporting Software 37 00000 0000000 Form CAT

9.18 May 2012 Entries in the Subsequent Year In the subsequent year, accounting transactions must be done to reverse or clear the closing entries. Deferred Revenue Step 1: Clear Deferred Revenue. The deferred revenue set up at closing will become a beginning balance in the subsequent year. It is necessary to reverse the deferred revenue so that it will be recognized as current-year revenue. 06-00 DR NCLB Title I, Part A 3010 9650 10,000 06-00 CR NCLB Title I, Part A 3010 8290 10,000 Step 2: Budget Deferred Revenue and an Equal Amount of Expenditures. The deferred revenue must be budgeted so it can be recognized as current-year revenue. In addition, expenditures of an equal amount must be budgeted because an ending balance is not permitted for deferred revenue programs. Accounts Receivable Step 1: Revenue Posted to Suspense by Financial Accounting Financial Accounting posts $7,500 in prior-year Lottery revenue in Suspense. However, the receivable was only $5,000. 06-00 DR Suspense 9999 9110 7,500 06-00 CR Suspense 9999 8999 7,500

9.19 May 2012 Step 2: Clear Suspense Because the amount deposited into suspense exceeds the receivable, the amount of the receivable is cleared against Object 9202 and the remainder is recognized as currentyear revenue. 06-00 DR Suspense 9999 8999 7,500 06-00 CR Lottery Instructional Materials 6300 9202 5,000 06-00 CR Lottery Instructional Materials 6300 8560 2,500 Step 3: Clear Accounts Receivable Once 9201 equals 9202 for a resource, the receivable can be cleared as shown below. 06-00 DR Lottery Instructional Materials 6300 9202 5,000 06-00 CR Lottery Instructional Materials 6300 9201 5,000 Accounts Payable The California Department of Education bills the district for grant funding that will not be used. Step 1: Pay Invoice 06-00 DR Special Ed Staff Development 6535 9511 3,000 06-00 CR Special Ed Staff Development 6535 9110 3,000 Step 2: Clear Payable Once 9510 equals 9511 for a resource, the payable can be cleared as shown below. 06-00 DR Special Ed Staff Development 6535 9510 3,000 06-00 CR Special Ed Staff Development 6535 9511 3,000

Restricted Ending Balance The restricted ending balance will become the beginning balance in the subsequent year. Because this revenue has already been recognized at closing, it should not be budgeted in the following year. However, the district can budget additional expenditures to utilize the carryover. Unused Grant Award The unused grant award from the previous year that could not be accounted for in the closing entries should be budgeted in the subsequent year on both the revenue and expenditure side of the budget. 9.20 May 2012

Interest Earned on Federal Funds School districts and charter schools are required to calculate and remit the interest earned on federal programs on at least a quarterly basis. The interest should be calculated based on the cash balances of federal program advances, therefore, the cash balances of federal reimbursement programs and school food service funds should not be included in the calculation. In addition, if any interest was earned on non-cde administered programs, the amount of interest should be calculated separately and remitted to the Federal Treasury via the appropriate state or federal agency. Districts may retain up to $100 in interest earned per year for administrative expense across all federal funds. A district cannot reduce or offset federal interest earned during times when the district does not have federal revenue and is using other revenue sources to temporarily cover federal program expenditures. Please note that SELPAs will not be remitting interest to the California Department of Education (CDE) on behalf of school districts for IDEA funds. How to Calculate Interest: The CDE indicates that districts should calculate federal interest based on the daily cash balance. Districts should calculate the interest for all federal resources together to minimize the amount of interest due. To explain, when a resource has a negative balance and it is kept separate then the interest earned is calculated to be zero. In contrast, when a resource with a negative balance is combined with a resource which has a positive balance, then the combined balance is lower. This will cause the interest earned to be lower when calculated on the combined balance. The San Diego County Office of Education has created Excel tools for on-line and off-line districts to assist with calculating interest earned. Tools: On-line: http://www.sdcoe.net/business2/dfs/fa/interest_calc_by_quarter_online.xls Off-line: http://www.sdcoe.net/business2/dfs/fa/interestcalculationbyquarter.xls Instructions: Excel 2003: http://www.sdcoe.net/business2/dfs/fa/instructions_calc_for_excel2003.pdf Excel 2007: http://www.sdcoe.net/business2/dfs/fa/interest_calc_instruc_for_excel2007.pdf 9.21 May 2012

For off-line districts, if there are many transactions it would be best to download the data from the district s financial system into Microsoft Excel and create a pivot table that summarizes the debits and credits by date. Both of these spreadsheets are based on the methodology used by the San Diego County Treasurer and are designed to take into account scenarios when the daily cash balance is negative. Example On a quarterly basis, the interest from the county treasurer is posted to the unrestricted general fund. For child development and other funds, the interest is posted in each of the funds. In this example a total of $1,000 was earned: $700 for non-federal revenues and $300 for federal revenues. DR CR 03 (01) 0000 9110 $1,000 03 (01) 0000 8660 $1,000 Of the $300 earned on federal revenues, the district will keep $100 and return $200. This entry will move the $200 into Object 9590: Due to Grantor Governments in the unrestricted general fund. DR CR 03 (01) 0000 8660 $200 03 (01) 0000 9590 $200 When issuing the warrant no expense will be recorded. DR CR 03 (01) 0000 9590 $200 03 (01) 0000 9110 $200 Districts will need to maintain supporting documentation of the interest calculations and the amounts remitted to provide to the district s auditors at the close of each fiscal year. 9.22 May 2012

9.23 May 2012 How to Remit Interest Each district is responsible for remitting interest to CDE on a quarterly basis. CDE has not developed a specific form for remitting interest on federal funds. Once you have calculated your quarterly interest, mail a check with a cover letter that specifies the time period of the interest earned and itemizes the amounts for each federal program by resource to the following address: California Department of Education PO Box 515006 Sacramento, CA 95851 Attn.: Cashier s Office