Friday, March 11, 2011

New Fund for Special Education - Correspondence (CA Dept of Education)

New Fund for Special Education - Correspondence (CA Dept of Education)

March 3, 2011

Dear Superintendents, Chief Business Officials, and Directors of Administrative Units for Special Education Local Plan Areas:

NEW FUND FOR SPECIAL EDUCATION LOCAL PLAN AREA PASS-THROUGH REVENUES

The California Department of Education (CDE) has established a special revenue fund for use by the Administrative Unit (AU) of a Special Education Local Plan Area (SELPA) to account for special education pass-through revenues outside the general fund.

Generally, the new fund is required for AUs that receive pass-through revenue for special education from federal, state, or local sources and that have administrative involvement in allocating and distributing the revenues to other member agencies. The few AUs for which the new fund is not required are identified in the section titled “Applicability of the New Fund” later in this letter.

The new fund is effective beginning in 2011–12. This letter describes the background leading to the establishment of the new fund and provides guidance to AUs on accounting for special education pass-through revenues.

BACKGROUND

On multiple occasions over the last several years, it was brought to the CDE’s attention that reporting special education pass-through revenues in the general fund of a SELPA AU impairs meaningful comparison of the AU with otherwise-similar local educational agencies (LEAs). This has been primarily problematic where the AU is a school district, rather than a county office of education (COE), particularly where a district that is a SELPA AU has attempted to pass a parcel tax, because inclusion of the pass-through revenues makes the district’s per-pupil revenues appear higher than those of other districts.

More recently, there was also brought to the CDE’s attention an occurrence in which SELPA pass-through balances in the AU’s general fund masked an unrelated fiscal solvency issue that would otherwise have been apparent.

Although these problems have not been widespread among all LEAs or even among all SELPA AUs, the problems have been significant enough for those LEAs affected by them that finding a solution was imperative. In exploring possible solutions, the CDE established as its priorities to improve comparability among LEAs; to conform to generally accepted accounting principles (GAAP); and to minimize, to the extent possible, the impact for those AUs for which the problems and current procedures were not a concern but that would nonetheless be affected by the solution.

The CDE conducted extensive research and solicited a great deal of feedback from LEAs. The CDE extends its appreciation to the many individuals who attended the meetings convened to explore this topic, embraced the need for a solution, provided helpful perspectives, and accepted the need for compromise in order to achieve that solution. CDE further extends its appreciation to the smaller group of individuals that then served as an informal working group to advise the CDE on resolution of the many inevitable details.

ACCOUNTING FOR SPECIAL EDUCATION PASS-THROUGH REVENUES
Applicability of the New Fund

The new fund is required for all SELPA AUs that receive special education pass-through revenues and that have administrative involvement in allocating and distributing those revenues to other member LEAs.[1] By definition, most AUs do have administrative involvement in the pass-through of special education revenues. A rare exception is an AU that serves purely as a cash conduit in receiving special education revenues and relaying them directly to a joint powers agency (JPA), where the JPA then performs all other AU services including allocation of the funds to member LEAs. AUs that serve purely as cash conduits, and AUs of single-district SELPAs that receive no pass-through revenues for any other LEAs, will