Private Schools for Students with Disabilities

April 1, 2002

TO: Directors, Private Schools for Students with Disabilities
FROM: Richard Rosenberg, Assistant Commissioner

Division of Finance

SUBJECT: Final New Chart of Accounts System and Cost Category Assignments for Calculations of Cost Percentages for Private School for the Disabled

(Effective 7/1/2002)

The Draft Chart of Accounts and Draft Cost Category Assignments for Calculations of Cost Percentages were forwarded to private schools for the disabled on January 31, 2002 and February 8, 2002. The department held a meeting to discuss these documents with representatives of the Private Schools for Students with Disabilities on March 14, 2002 and also received written comments from various parties. As a result of this meeting and the written comments, the department has revised various areas of Exhibit A – Crosswalk of the 2001-2002 Chart of Accounts, Exhibit B – Narrative Explanation of the 2002-2003 Chart of Accounts, Exhibit C – 2002-2003 Chart of Accounts and Exhibit D – Cost Category Assignments for Calculation of Cost Percentages and issued a new document titled Exhibit E – Determination of Non-Allowable Costs for Maximum and Minimum Cost Percentages. A list of the revisions to Cost Category Assignments for Calculation of Cost Percentages – Exhibit D is attached. The revisions to all exhibits (A, B, C, and D) are marked with underlines in the individual exhibit.

Attached are copies of the above mentioned exhibits. All exhibits, except Exhibit E, were generated from the uniform minimum Chart of Accounts consistent with Financial Accounting for Local and State School Systems 1990 commonly referred to as Handbook 2R2 and developed by the National Center for Educational Statistics.

The following is a description of each attached exhibit:

Exhibit A – Crosswalk of the 2001-2002 Chart of Accounts to the 2002-2003 Chart of Accounts - This document is a crosswalk from the current private school Chart of Accounts (2001-2002) to the new Chart of Accounts.

Exhibit B – Narrative Explanations of the 2002-2003 Chart of Accounts - This document is a detailed explanation of the new Chart of Accounts. The document describes the programs, functions and objects that allowable costs may be charged.

Exhibit C – 2002-2003 Chart of Accounts - This document is the new Chart of Accounts for private schools and includes all the possible line items that a private school would need to record costs. This format is also proposed to serve for reporting purposes as the Statement of Expenditures by Line Item which is currently a statement required in the audited financial statements filed by private schools. When using this document, please refer to Exhibit B for further detail concerning the types of costs that may be included in the object codes.

This document contains the same account numbers and line item descriptions that are used in public school districts. The private school must use these line item descriptions, but the department is not mandating the use of the 14-digit account number. A private school may elect to use another numerical line item system, which would be more easily adapted within the school’s current accounting software.

Exhibit D – Cost Category Assignments for Calculation of Cost Percentages - The attached document lists for each line item cost in the private schools’ current Chart of Accounts, the corresponding line item (or line items) under the new Chart of Accounts and the cost category that each line item will be assigned in the cost category percentage calculation. The last column lists those line items included in the total costs for certification purposes, but will remain outside the cost category percentage calculation for determining the minimum/maximum instructional and administrative percentages.

The assignment of a current private school line item to a cost category was based, to the greatest extent possible, on the Comparative Spending Guide for the public schools published by the department. Some modifications were made to correspond to line items that are specific to private schools and, therefore, determined to be appropriately outside the cost category percentage calculation.

Please note that most of the line item costs are assigned to one cost category. This includes current line items that have several account numbers under the new Chart of Accounts, such as account 120d, Other Contracted Services for Administration (line number 22). Account 120d can be assigned to various accounts under the new Chart of Accounts but all the new account numbers will fall under the cost category of administration. Conversely, there are some line items, such as Salaries of Secretarial and Clerical Assistants (line numbers 66-72), which under the new Chart of Accounts can be assigned to various account numbers, and depending on this assignment could be allocated to different cost categories (e.g administrative or support services). The school’s management must determine such allocation.

The school’s management must also make some assumptions regarding fringe benefits when using this document to calculate the cost category percentages. The costs for fringe benefits may be allocated by function, directly to object 205 for all fringe benefits except pension contributions and object 232 for pension contributions (costs are outside the per pupil cost calculation). Using this method, all fringe benefits except pensions will be charged directly to a function and object codes 205 or 232 within that function which is then assigned to a cost category (instruction, administration, etc.). If the school chooses not to allocate by function, then all fringe benefits must be charged to Unallocated Benefits, function 291 to object codes 205 through 290. If Unallocated Benefits are charged, then all fringe benefits (except pensions) will be allocated to the function and cost category based on the salary by function to the total of all salaries.

The following provides a detailed description of each column on the attached Cost Category Assignments for Calculation of Cost Percentages:

Column 1 – Account# - This column indicates the new account numbers under the Chart of Accounts which will be effective July 1, 2002 pursuant to N.J.A.C. 6A:23-4.2(a)3.

Column 2 – Total Costs – This column represents every line item included in the total costs that a private school incurs and used to determine the school’s certified actual cost per pupil in the year-end audited financial statements. This amount must then be directly charged when appropriate or allocated to one of the cost categories in columns 4 through 9 for the purpose of the cost category percentage calculation or column 10. The total of columns 4 through 10 must equal the total of column 2.

Column 3 – Cost Category Totals – This column indicates the costs that are part of the cost category percentage calculation contained in N.J.A.C. 6A:23-4.2(a)3. Costs included in the Cost Category Totals column are directly charged when appropriate or allocated to one or more of the following categories: (4) classroom instruction; (5) administration; (6) support services; (7) operation & maintenance of plant; (8) food services; and (9) extra curricular. The totals of columns 4 through 9 must equal the total of column 3. Column 10, Costs Outside Cost Category Calculation are not included in the Cost Category Percentage Calculations.

Column 4 – Classroom Instruction – This column indicates the costs that are part of the cost category percentage calculation for classroom instruction.

Column 5 – Administration - This column indicates the costs that are part of the cost category percentage calculation for administrative costs.

Column 6 – Support Services - This column indicates the costs that are part of the cost category percentage calculation for support service costs.

Column 7 – Operations and Maintenance of Plant - This column indicates the costs that are part of the cost category percentage calculation for operations and maintenance of plant costs.

Column 8 – Food Services - This column indicates the costs that are part of the cost category percentage calculation for food service costs.

Column 9 – Extra Curricular - This column indicates the costs that are part of the cost category percentage calculation for extra curricular costs.

Column 10 – Costs Outside Cost Category Calculation – This column indicates all the costs that are included in the Total Cost column (2) used in calculating the certified actual cost per pupil but are not in the Cost Category Totals column (3) and, therefore, are not in the cost category percentage calculations.

The following is an example of how the Cost Category Percentage Calculations would be determined in accordance with this calculation:

Assume that the total costs by column for School A are as follows:

Column (3) cost category totals = $1,000,000 (the sum of (4) through (9) below):

Column (4) classroom instruction = $500,000;

Column (5) administration = $300,000;

Column (6) support services = $165,000;

Column (7) operation & maintenance of plant = $25,000;

Column (8) food services = $5,000; and

Column (9) extra curricular = $5,000.

To determine the Cost Category Percentage Calculations by cost category for School A, divide the total of each column (4 through 9) into the total of column 3 and the result is the cost category percentage by cost category.

Therefore, the above amounts will result in the following instructional and administrative percentages for School A:

Instructional % = Column (4)/Column (3) = $500,000/$1,000,000 = 50%,

Administration % = Column (5)/Column (3) = $300,000/$1,000,000 = 30%.

Exhibit E – Determination of Non-Allowable Costs for Maximum and Minimum Cost Percentages

E-1 – the determination of non-allowable costs for spending in excess of the maximum administrative percentage.

E-2 – the determination of non-allowable costs for spending less than the minimum instructional percentage.

E-3 – the determination of non-allowable costs for spending in excess of the maximum administrative percentage and less than the minimum instructional percentage.

If you have any questions concerning these documents, please call Jim Verner at (609) 984-4229.

RR/JV/final coa-cost category memo.doc

Attachments

c: County Superintendents
County Business Administrators
Katie Attwood, Director
Barbara Gantwerk, Director
Cecelia Downey, Manager
Judyth Vazquez, Educational Program Development Specialist
Jim Verner, Section Supervisor
Auditors, Private Schools for Students with Disabilities

REVISIONS TO THE DRAFT COST CATEGORY
PERCENTAGE CALCULATIONS – EXHIBIT D

(also impacts Exhibits A, B, and C)

1.

Current account #120c Legal Fees – originally for all legal expenses of the private school. Those legal fees incurred for defending or initiating litigation have been put outside the calculation.

2.

Current account #215 Other Instructional Staff Salaries - originally in support services has been changed to instruction.

3.

Current account #230 School Libraries and Audio-Visual Material (and librarians) - originally in support services has been changed to instruction.

4.

Current account #250 Consultants - originally in support services has been changed to instruction.

5.

Current account #410 Health Services Salaries (nurses only) - originally in support staff has been changed to instruction.

6.

Current account #640c Telephone – telephone line(s) for Internet instruction originally in administration has been changed to instruction.

7.

Current account #730a Instructional Equipment and Furniture Under $2,000 – originally outside the calculation has been changed to instruction.

8.

Current account #730b Non-Instructional Equipment and Furniture Under $2,000 – originally outside the calculation has been changed to the cost category that benefits from the cost.

9.

Various current account numbers (730, 740, 750, 770) used for depreciation for renovations and improvements, (not equipment and furniture) that were originally outside the cost calculation as depreciation will either be charged to Operation and Maintenance (in the dominator) for maintenance/repair or Capital Outlay (outside the dominator) as a capital asset. The determination of the correct line item charged is based on the purpose not the $2,000 criteria.