March 27, 1995

TO: County and District Superintendents of Schools
County and District Chief Business Officials
County and District Data Processing Managers

FROM: J. Richard Whitmore, Deputy Superintendent
Local Fiscal Services


It has been slightly over a year since we last communicated with you about the requirement for us to develop a statewide standardized account code structure (see Management Advisory 94-01, dated January 28, 1994). As you may recall, SB 94 (Chapter 237, Statutes of 1993) provided for the development of a standardized account code structure for school districts and county offices of education, as well as a plan for conversion from the accounting and budget structure currently used.

We now have a draft account code structure, prepared with our consultant Ernst & Young. Please be aware that we consider this document to be a draft, and fully expect and encourage a continuous in-depth review and discussion of issues and concerns surrounding the details and philosophy spelled out for the new structure. As we identify and resolve issues through ongoing discussions and pilot testing, we will continue to modify the structure and the definitions as necessary to ensure the development of a comprehensive, well-planned standardized account code structure.

We are sending a copy of the document to every county office of education, as well as to each member of our Advisory and Technical Committees. Although we would like to be able to send a copy of the draft structure to every school district, budget constraints unfortunately prevent us from doing that. However, we are making the document available on the Fiscal Crisis and Management Assistance Team (FCMAT) bulletin board system (BBS) and on the Internet, and we encourage you to access it via these telecommunication vehicles.

The FCMAT BBS modem access number is (805) 636-4126. Look under "News," "Calif. Dept. of Ed.," for the file location. Files will also be available through the Internet at the California Department of Education's anonymous FTP site ( in the /pub/Fiscal directory.

Status Report

The draft account code structure that we are now disseminating is the result of many discussions among the members of our 13-member Advisory Committee and our much larger (over 70 members) Technical Committee, as well as communications with others of you who have expressed interest in and concern about ensuring that the structure and coding is reasonable and viable. The proposed structure is consistent with the federal guidelines spelled out in the 1990 edition of Financial Accounting for Local and State School Systems, otherwise known as the Federal Handbook, and conforms to Generally Accepted Accounting Principles (GAAP) and Government Accounting Standards Board (GASB) policies.

Although there are unresolved issues related to the account code structure that must yet be addressed, we believe that the current proposed structure provides a logical, well-organized, and comprehensive chart of accounts that is flexible enough to accommodate local needs. The structure is comprised of six (6) fields of accounts, with the need for an accounting system that has the capacity to assign twenty-two (22) digits. This minimum is needed to meet all federal and state reporting requirements; however, we recognize that the number of digits may not be sufficient to meet your needs as a school district or county office of education. If that is the case, you may choose to add sub-fields and sub-accounts for local discretionary purposes and to track revenues and expenditures for special projects. The draft account code structure can be expanded to allow for these additions at the local level.

One of our goals in developing and implementing a new account code structure is to eliminate certain financial reports to the state; ideally, financial reporting will become a by-product of the new structure. In addition to eliminating reports such as the J-200 (financial report), the Matrix, and other financial reports required for federal and state categorical funds, we also hope to eliminate the Program Cost Accounting Report (Form J-380). Please be aware that the issue of program cost accounting has not been addressed in this structure. It clearly is a significant component of our current financial reporting system, and has generated much discussion in our meetings; however, we have not reached a solution as to how to best address program cost accounting. Future discussions will focus more on this entire issue, which must be resolved before the structure is finalized.

In addition to requiring the development of an account code structure, SB 94 also directed us to prepare a plan for conversion to the new structure from the accounting and budgeting structure currently used by school districts and county offices of education. Toward that end, Ernst & Young has conducted a comprehensive survey of county offices and school districts designed to solicit information about your current account code structure, your system capabilities, office staffing, training programs, and possible conversion costs. The information generated from this survey is now being analyzed and will be incorporated into a statewide plan for eventual conversion to the new account code structure.

Current and Future Plans

We are continuing to meet with both our Advisory and Technical Committees to identify and resolve problems and/or inconsistencies. As we clarify issues, we will modify the structure and the definitions as necessary, refining the document in such a way as to make it as understandable and as "user-friendly" as possible.

At this point in time there are a few school districts and county offices of education that have volunteered to pilot the new structure in the 1995-96 fiscal year. We believe that this field testing will help in identifying areas that need to be corrected or refined, thereby paving the way for a smoother conversion. If your school district or county office of education is interested in piloting the new account code, please be sure to contact us so that we can include you in any future communications related to the pilot project.

As spelled out in SB 94, the California Department of Education is to submit the proposed structure and plan for conversion to the Legislature and the Department of Finance. The Legislature’s intent was for the Governor to consider funding for the plan for conversion in developing the Budget Bill for the 1995-96 fiscal year. Although this may no longer be a realistic timeline, we will nonetheless be presenting the proposed structure to the Legislature, along with a recommended plan for conversion, within the next few months.

For now, we ask that you review the draft structure and let us know of any questions or issues you would like to discuss. Please feel free also to contact any member of the Advisory Committee or the Technical Committee (see enclosed lists) to convey your thoughts, ideas, and concerns. We firmly believe that the successful development of a standardized account code structure depends upon an open exchange of information and ideas with those affected by or interested in this endeavor. Please be sure to discuss the proposed structure with other staff members within your organization, with your peers in other school districts and county offices of education, and with anyone else you think might be interested and have a particular point of view. Your thoughtful ideas and suggestions will ensure the success of this important project.

Your questions, concerns, comments, and suggestions related to the statewide standardized account code structure should be directed to Maria Fong or Janet Sterling at:

Mail or FAX: 560 J Street, Suite 170
Sacramento, CA 95814
FAX: (916) 322-1465
Internet e-mail:

Should you have questions about the information in this bulletin or about the standardized account code structure, please contact Maria or Janet at (916) 322-1770.