8700     GENERAL
(Renumbered 2/65)

Some special problems arise that are common to several agencies but do not have general application which would warrant provisions therefore in the standard entries and General Ledger accounts.  In order that procedures may be standardized among agencies having such special problems, instructions are included here.  Instructions on special problems arising in a single agency or a few agencies are not included.  Such procedures are transmitted to agencies concerned by memorandum.

8705     REAL PROPERTY ACQUISITION
(Revised 7/75)

In most cases laws authorizing the acquisition of real property provide that such acquisitions be subject to the provisions of the Property Acquisition Law.  In recent years many appropriations for the acquisition of real property also provide for construction, improvements, and equipment.

To facilitate accounting for acquisitions of real property subject to the Property Acquisition Law, the following procedure is prescribed:

1. The benefiting agency will record the entire amount of such appropriations in its allotment-expenditure accounts.

2. The benefiting agency will submit a working budget to the Department of Finance for the entire amount appropriated.

3. After approval by the Department of Finance, one copy of the working budget will be forwarded to the Accounting Section of the Department of General Services, where the amounts allotted for the acquisition of real property will be recorded.

4. All claims for the acquisition of real property will be filed by the Accounting Section and accounted by that section as decreases in memorandum allotment accounts.  In preparing these claims the Accounting Section will prepare an extra copy of the Claim Schedule, STD. 218, for the benefiting agency and will attach copies of all invoices.  These copies of STD. 218 will be forwarded to the benefiting agencies after receipt by the Accounting Section of the Controller's Notice of Claim Paid, Form CO–I 02, and inclusive warrant numbers have been noted on the copy of STD. 218.

5. Upon receipt of their copies of the Claim Schedule, STD. 218, the benefiting agencies shall record the expenditures in their accounts.  Entries to the property accounts will be made at the same time and from the same source that expenditures are reflected in the accounts.

6. The records maintained by the Department of General Services will be memorandum records only.  Expenditures from these appropriations will not be reflected in expenditure statements of the Department of General Services.

7.  The benefiting agencies will be responsible for reconciling these appropriations with State Controller's Office accounts.

8710     STATE BOARD OF CONTROL CLAIMS
(Revised 8/98)

During the year, various claims for money or damages against the State are presented to and ruled upon at regular meetings of the State Board of Control.  The dates, places, and times of the meetings may be obtained by contacting the State Board of Control.

Each year the Budget Act contains certain appropriations to pay any claims approved by the State Board of Control.  These appropriations are summarized under one item of the Budget Act.  The State Board of Control will record on its agency books all expenditures from those State Board of Control appropriations.  There are other types of State Board of Control claims for which agencies may record entries.  They are legislative claims (also known as omnibus claims) which include:

1. Claims against the State,

2. Specific cash deficiencies (SAM Section 8072), and

3. Invoices payable from reverted appropriations for which no current appropriation exists for the same purpose.  See SAM Section 8422.7.

The above claims will be filed with the State Board of Control in accordance with their procedures.

Agencies will receive a Controller's journal entry if payment of the State Board of Control claim affects the agency's accounts or appropriations.

8711.1     RECORD OF CREDIT CARDS
(Revised 1/78)

Agency accounting officers will be responsible for maintaining a record of all airline company/travel agency credit cards received, issued, and returned by credit card number and name of employee.  It is the agency's responsibility to see that such credit cards are returned when employees cease to have need or authorization for them.

8711.2     BILLING REQUIREMENTS
(Revised 7/76)

Various billing formats are currently offered by airline companies and travel agencies, which include passenger name, card number, cost of ticket, issue date, class of flight, listing by cost center or major activity, etc.  The exact format used will depend on the needs of each agency and the capability of the airline company/travel agency.

Regardless of the form of billing that is used, State agencies must ensure that they provide adequate information so that they can be compared against the passenger's copy.  See SAM Sections 8711.3 and 8422.115.

8711.3     VERIFICATION OF INVOICES
(Revised 11/72)

It is the responsibility of the agency accounting office to verify invoices from transportation companies to determine that the transportation service was furnished and the rate charged is correct.  Verification that the service was furnished can be determined by comparing the transportation invoice with the passenger coupons received by the traveler and attached to his/her travel expense claim in accordance with Instruction 5(b) on the reverse side of STD. 262, Travel Expense Claim.  Rates should agree with regular published tariffs.  Air transportation tickets are subject to an eight percent Federal excise tax.  Also, all domestic air freight waybills are subject to a five percent Federal excise tax, except for excess baggage and exportation of property outside of the United States.  The excise tax is combined with the air fare or the air freight charge and shown on the ticket or waybill as one total.  See SAM Sections 8422.106–8422.116.

8712     TORT LIABILITY PAYMENT PROCEDURE
(Revised 3/89)

This section describes procedures related to tort liability arising from other than motor vehicles.  Procedures related to motor vehicle insurance, accidents, and suits are described in SAM Sections 2440 through 2464.

Chapter 1681, Statutes of 1963, added Division 3.6, "Claims and Actions Against Public Entities and Public Employees" to the Government Code.  This law established broad guidelines by which the State shall administer and pay tort liability claims.

In general, as the law pertains to the State of California, claims are presented to the State Board of Control and, if approved, are paid by the Department of Justice.  If a claim is not approved, the claimant may bring court action against the State agency involved or its officers or employees to obtain settlement.  If such action is brought, the head of the State agency concerned, upon recommendation of the Attorney General or other attorney authorized to represent the State, may settle, adjust, or compromise the claim under provisions of Section 948 of the Government Code.  The claim will then be paid by the Department of Justice.  Similarly, tort liability judgments against the State are also paid by the Department of Justice.

Each year, the Budget Act includes support for the administration, investigation, adjustment, defense, and payment of tort liability claims, settlements, compromises, and judgments against the State, its officers and employees or for the purchase of insurance protecting the State, its officers, and employees against such tort liability claims.  Judgments and/or costs of suit are not to be paid out of feeder funds.  A specific amount is appropriated from the General Fund to be available to the Department of Justice for agencies supported from that fund.  Unspecified amounts from each Special Fund sufficient for agencies supported from those funds are also appropriated.

The appropriation is made to the Department of Finance for expenditure or allocation at its discretion.  Accordingly, it has established the following concerning tort liability payments:

General Fund

The Department of Justice is authorized to pay claims approved by the Board of Control, claims pursuant to Section 948 of the Government Code (these are claims that have been denied by the Board of Control and have been settled by the Attorney General and approved by the agency), and judgments up to $35,000 in principal amounts without approval of the Department of Finance.

Department of Finance approval is required for all claims which exceed $35,000 in principal amount which have been approved by the Board of Control, claims settled pursuant to Government Code Section 948, or judgments awarded by the courts.  The $35,000 limitation applies to the principal only.  Court awarded interest and court costs, if any, are additional.

Each approved settlement or judgment whose principal exceeds $70,000 shall be paid from special appropriation legislation.

Special Funds

Department of Justice shall pay claims and judgments under the following conditions for all special fund agencies, except the Department of Transportation.

AUTHORIZATION TO PAY TORT LIABILITY CLAIMS
AGAINST SPECIAL FUND

The (Department, Board or Commission) hereby authorizes the Attorney General to file a claim schedule with the Controller requesting payment of all claims approved by the Board of Control arising under Chapter 1681 of the Statutes of 1963 and of all settlements, adjustments, compromises of any pending actions concluded pursuant to Section 948 of the Government Code, or judgments pertaining to the activities of said agency and payable from the ___________ Fund; provided that prior to the filing of claims schedules the (Department, Board or Commission) will certify that funds are available.

        (Department Head)                   (Date) 

The Department of Justice will retain one copy of the authorization and forward the second to the State Controller.

The Department of Justice shall forward the Claim Schedule to the State Controller and retain an extra copy in a holding file.  Upon Justice's receipt of Notice of Claim Paid, the Claim Schedule in the holding file, along with a copy of Notice of Claim Paid, will be forwarded to the agency involved to notify them that a claim has been filed and paid.

Upon receipt of its copies of the Claim Schedule and Notice of Claim Paid the agency will account the claim as if the agency had filed it and account for the payment of the claim.  This accounting entry will be a consolidation of Std. Entries 4 and 6.  (Debit 9000 Appropriation Expenditure; Credit to 1140 Cash in State Treasury or 5570 Fund Balance–Clearing Account.)

An account entitled "Tort Liability Claim Expenditures" will be established in the subsidiary Allotment-Expenditure Ledger at the same time the above entry is made.  Since no specific appropriation was made to the agency, no entries will be made in the allotment, unliquidated encumbrances, or unencumbered balances.  The expenditure will be entered as an expenditure to keep the Allotment-Expenditure Ledger in balance with the General Ledger account.

Tort Liability Claim expenditures will be shown as a separate item at the end of agency budget reports.  Totals of all columns will precede this item.  It will be followed by a grand total of the expenditure column.

8715     PLANS OF FINANCIAL ADJUSTMENT
(Revised 3/87)

Plans of financial adjustment pursuant to Section 1l25l of the Government Code are divided into two types namely, (l) plans involving adjustments between appropriations of the same fund and (2) plans involving adjustments between appropriations of different funds.

Agencies will account the former type plans by making the following entries at the time of receipt of the Controller's Journal Entries and as of the dates of such documents:

Debit:
9000 Appropriation Expenditures (or other appropriate expenditure account)

Credit:
8100 Reimbursements (or other reimbursement account)

Agencies will account the latter type plans as follows:

1. At time of requesting transfer:

Transferee Fund

Debit:
1312 Accounts Receivable–Reimbursements

Credit:
8100 Reimbursements

Transferor Fund

Debit:
9000 Appropriation Expenditures

Credit:
3010 Accounts Payable

2. Upon Receipt of the Controller's Transfer:

Transferee Fund

Debit:
1140 Cash in State Treasury

Credit:
1312 Accounts Receivable–Reimbursements

Transferor Fund

Debit:
3010 Accounts Payable

Credit:
1140 Cash in State Treasury

8720     SALES TAX
(Revised 12/01)

State agencies selling tangible personal property, regardless of the amount or frequency, are required to collect sales tax if the transaction is taxable as defined by rules and regulations of the Board of Equalization (BOE). State agencies selling tangible personal property, taxable or not,  are required to (l) obtain seller's permits from the BOE (2) file sales and use  tax returns with the BOE on a quarterly, calendar year, or fiscal year basis depending on the amount of tax due, and (3) remit sales tax to the BOE based on taxable sales during the reporting period.  All sales during a reporting period will be reported, regardless of whether payment was received during that period.

8721     SELLER'S PERMIT
(Revised 12/01)

Obtain seller's permits, free of charge, by applying to the BOE.  Consolidate sales from several locations within an agency in a single return under one seller's permit.  State agencies reporting both sales and use tax will do so under the seller's permit.  Application forms for a seller's permit can be obtained from the BOE Information Center and Faxback service at 1-800-400-7115 or downloaded from the BOE website at http://www.boe.ca.gov/. 

8722     NONTAXABLE SALES
(Revised 12/01)

Nontaxable sales will be supported by exemption certificates, resale certificates, shipping documents, or other evidence. Nontaxable sales include, but are not limited to, sales (1) to the United State Government and its instrumentalities, (2) for resale by the purchaser, (3) made in interstate commerce, and (4) of food products for human consumption or feed for food animals.  Tax does not apply to sales of food animals.  Food animals are considered to be those animals, birds, or insects commonly used in producing food items that people eat, such as meat products, dairy products, eggs, and honey.  Examples of food animals include cattle, sheep, swine, chickens, hatching eggs, rabbits, ostriches, emus, fish, and bees. Tax does apply to retail sales (including sales for breeding purposes) of any form of animal life that does not meet the definition of a food animal, for example, cats, dogs, horses, mink, tropical fish, and pet birds.

State agency sales of used vehicles that are required to be registered under the Vehicle Code (typical cars and trucks for highway use) are not subject to sales tax.. The purchaser must pay  use tax to the Department of Motor Vehicles, who acts on behalf of the BOE, when the purchaser registers the vehicle.

Sales to political sub-divisions of the State are subject to sales tax.

A transfer of tangible personal property between State agencies is not considered a sale and not subject to tax since title to the property remains with the State of California.

Refer all sales tax questions to the BOE Information Center at 1-800-400-7115, through the BOE website at http://www.boe.ca.gov/, or by mail to the State Board of Equalization, P.O. Box 942879, Sacramento, CA 94279-0040.

8725     ACCOUNTING FOR SALES TAX
(Revised 12/01)

Accounting for sales tax by funds for other than Governmental Funds varies depending on the type of operation. The following instructions apply to Governmental Funds.

Sales tax billed or collected will be considered as an expenditure and/or abatement to the appropriation available for State operations at the time of sale. The amount of sales tax billed or collected will be credited to Account No. 9000, Appropriation Expenditures, and to a separate sales tax allotment account that will be established in the Allotment-Expenditure Ledger.

At the end of each reporting period, a claim payable to the BOE for the amount of sales tax liability computed on the sales and use tax return will be prepared. This claim will include any use tax liability that accrued during the reporting period. See SAM Section 8732.  The sales tax liability will be charged to Account No. 9000, Appropriation Expenditures, and to the sales tax allotment account in the Allotment-Expenditure Ledger. See SAM Section 8733 for use tax accounting instructions.  The filing of this claim may result in a small debit or credit balance in the sales tax allotment account. This is due to overages or shortages in individual amounts of tax collected in relation to the total sales tax liability for the reporting period.  State agencies will not be required to submit budget revisions for small debit balances  in the sales tax allotment account after filing this claim.

8730     USE TAX
(Revised 12/01)

State agencies will report and pay to the BOE the amount of use tax due on purchases made from retailers who do not maintain a place of business in this State or who do not hold certificates of registration to collect use tax.  State agencies that use property purchased with a resale certificate will also report and pay use tax on their purchases.  The BOE requires State agencies to file a sales and use tax return on a quarterly, calendar year, or fiscal year basis. State agencies that have a large volume of transactions subject to the use tax may file consumers use tax returns more frequently, if they desire, provided they advise the BOE and obtain a separate Consumer Use Tax Permit. No fee is charged for a Consumer's Use Tax Permit.

Consumer Use Tax application forms and information can be obtained from the BOE Information Center and Faxback service at 1-800-400-7115 or through the BOE Website at http://www.boe.ca.gov/.  Purchases made for several locations within an agency will be consolidated into a single return to the BOE under one Consumer Use Tax Permit.

The BOE will send tax returns to use tax reporting State agencies that have a Seller's Permit or a Consumer's Use Tax Permit.  The attached Schedule A, Computation Schedule  for District Tax, will be used to allocate district use taxes.  Form BOE-531, Schedule B or E, Detailed Allocation by County of 1% Uniform Local Sales and Use Tax form, will be combined and sent to State agencies reporting sales and use tax application to more than one location.
Please request additional forms from the BOE. If the proper schedules are not received or if additional forms are needed, notify  the BOE.

8731     RECORDING DATA USED TO DETERMINE CONSUMER USE TAX
(Revised 12/01)

State agencies will identify payments subject to the consumer use tax by entering on the line containing such a payment an asterisk immediately to the left of the "Amount Claimed" column on the Claim Schedule, STD. 218. If the Claim Schedule is to reimburse an agency's revolving fund, the asterisk will be entered after the applicable item on the adding machine tape for revolving fund invoices accompanying the Claim Schedule. The total net purchase price of all items in the Claim Schedule subject to use tax will be entered in the box entitled "Total Subject to Use Tax $_____."

The amount of  use tax payable will not be included in the total claimed as shown on the Claim Schedule, STD. 218.  Do not increase the vendor's invoice by the amount of the consumer use tax due.

For each claim schedule containing vendors' invoices subject to the tax, State agencies will add to a Consumer's Use Tax Form the Claim Schedule number, the Claim Schedule date, the county to which the tax is due, and the total net amount (purchase price) subject to taxation by that county.  (The Consumer's Use Tax Form is shown as 8731 Illustration. State agencies will reproduce it in sufficient quantities to meet their needs.)  The fund and appropriation from which the payment will be made and the  use tax reporting period must be shown on each Consumer Use Tax Form. A separate Consumer's Use Tax Form is required for each fund and appropriation and reporting period. The amount of the tax due will not be computed by the agency and shown on each Consumer's Use Tax Form.

The Consumer Use Tax Form will be retained by the agency until a State and Local and District Consumer Use Tax Return form, BOE-401-E, is filed.  See SAM Section 8732.

If a vendor's invoice to which the tax applies was overlooked at the time of scheduling the invoice for payment, a supplementary Consumer Use Tax Form for each fund and appropriation and reporting period will be prepared as described above.  In addition, a supporting schedule to the supplementary Consumer Use Tax Form will be prepared indicating the name of the vendor, the invoice number, and the warrant number used to pay the vendor's invoice.  The supplementary Consumer Use Tax Form and its supporting schedule will be placed on top of the other Consumer Tax Forms when the Claim Schedule is submitted to the SCO for payment of the tax to the BOE.

8732     PAYMENT OF CONSUMER USE TAX
(Revised 12/01)

Consumer Use Tax Forms will be scheduled for payment of use tax to the BOE by the State agency simultaneously with the preparation of the State, Local, and District Consumer Use Tax Return form, BOE–40-E, in duplicate. A separate Claim Schedule will be filed for each fund and appropriation from which such payment will be made. State agencies will not submit copies of the Consumer's Use Tax Form to the BOE.

The Claim Schedule, with the original copy of State, Local, and District Consumer Use Tax Return form, BOE-401-E, enclosed in a remittance advice envelope, will be submitted to the SCO. State agencies will prepare as an additional enclosure a list of vendors, including name and address, from which frequent purchases are made which are subject to use tax. The State agency's duplicate copies of Consumer Use Tax Form will be attached to the State agency's copy of the Claim Schedule. State agencies will enter the number of the Claim Schedule on their copy of the tax return.

If more than one Claim Schedule is submitted to pay the total tax due, the State, Local, and District Consumer Use Tax Return form, BOE-40l-E, will be placed in a remittance advice envelope attached to one of the Claim Schedules. A special mailing request stating "Please mail warrant in payment of our Claim Schedules numbers _____, ______, and ______, with the State, Local, and District Consumer Use Tax Return form, BOE-401-E, accompanying Claim Schedule number ______"  will be attached to the remittance advice envelope accompanying each of the related Claim Schedules. All Claim Schedules requesting payment of use tax due relating to a State, Local, and District Consumer Use Tax Return form BOE-401-E will be clipped together and a note attached by the State agency requesting that the Claim Schedules be kept together until audited by the SCO.

8733     ACCOUNTING FOR USE TAX
(Revised 12/01)

Use tax paid to the BOE for operating expenses and equipment items purchased from support appropriations will be accounted for in the Allotment-Expenditure Ledger as "General Expense" of the same appropriation as that from which the item was purchased, except that a State agency may account for use tax on equipment items as an expenditure against the equipment allotment instead of "General Expense" if use tax on equipment purchases is significant in amount.

8734     STATE ADMINISTERED UNIFORM LOCAL SALES AND USE TAXES

8734.1     APPLICATION OF STATE-ADMINISTERED UNIFORM LOCAL SALES TAXES TO STATE AGENCY SALES
(Revised 12/01)

State agencies making sales of tangible personal property are required to report and pay to the BOE the 1 percent uniform local sales tax on sales.  State agencies selling from more than one location should obtain sub-permits for each location from the BOE. The local tax on sales from multiple locations must be apportioned to the appropriate counties on Schedule B Form, BOE-531.  See SAM Section 8734.5.  Consequently, each agency should maintain a record of sales for each sales location.

The tax on sales of  tangible personal property consist of the 1 percent uniform local sales tax and the appropriate district transactions tax and the combined state and county sales tax.
 

[Paper Form]

8734.3     APPLICATION OF STATE-ADMINISTERED UNIFORM LOCAL USE TAXES
(Revised 12/01)

State agencies will report and pay the 1 percent local use tax to the BOE in the same manner as prescribed for reporting the State use tax. The local use tax must be reported to the BOE  by the county where the property is used. The tax due for each county, as shown on the Detailed Allocation by County of 1 percent Uniform Local Use Tax,  Schedule E, Form BOE-401-E will be determined by obtaining the sum of purchase prices for each county from the individual entries listed on the Consumer Use Tax Form (see SAM Section 8731.) and multiplying these sums by the 1 percent tax rate.

8734.5     ACCOUNTING AND REPORTING STATE-ADMINISTERED UNIFORM LOCAL SALES AND USE TAXES
(Revised 12/01)

The procedures prescribed for accounting, claim preparing, reporting, and paying the State sales and use taxes are also applicable to the State-administered uniform local sales and use taxes. See SAM Sections 8720–8733. State agencies reporting local tax on sales or on property used at multiple locations will allocate the local tax to the places of sales or places of use on the State, Local, and District Consumer Use Tax Return form, BOE-401-A.

State agencies that do not have multiple sales locations will allocate the local tax, for incidental sales and for purchases made in locations other than the permit location, to the county of use on Schedule B Form, BOE-531 or Schedule E Form, BOE-531.   Sales or purchases made at the permit location will be entered on line B2 or E2 at the bottom of Schedule B or Schedule E.

Local use tax which cannot be readily identified by county or which should be distributed statewide will be entered after the last county listed on Schedule B or E and will be identified as "Statewide 5999."

State agencies filing invoices for the local use tax due in the same Claim Schedule as the vendor's invoice to which the tax applies will use Consumer Use Tax Form as prescribed in SAM Section 8731.

8735     STATE-ADMINISTERED DISTRICT TRANSACTIONS (SALES) AND USE TAXES
(Revised 12/01)

Numerous counties have enacted ordinances establishing special taxing districts that impose transactions  (sales) and use taxes on the sales and/or purchases of tangible personal property in or for use within the district. Various laws authorize counties to establish districts for transportation, jails, and for other governmental services.  See SAM Section 3574.3

8735.1     APPLICATION OF STATE-ADMINISTERED DISTRICT TRANSACTIONS (SALES) TAX TO STATE AGENCY SALES
(Revised 12/01)

As of the effective date of the district taxing ordinance, State agencies selling tangible personal property within the district for use within the district will collect the appropriate transactions and use taxes from the consumers. State agencies selling tangible personal property from locations in one county that are delivered into counties that have these district taxes are required to report and pay to the BOE the transactions and use taxes applicable in the county where the delivery is made.

Delivery charges subject to the State sales tax are also subject to the district transactions tax. This district tax does not apply to fixed price sales contracts executed before the effective date of the ordinance if neither party has the unconditional right to terminate the contract.

The tax on tangible personal property sold within the district will consist of the appropriate district transactions tax, the 1 percent uniform local tax, the 1/4 percent county transportation tax, and the state sales tax.

8735.2     APPLICATION OF STATE-ADMINISTERED DISTRICT USE TAX
(Revised 12/01)

After the effective date of the district taxing ordinance, State agencies will report to the BOE and pay the district use tax applicable to purchases in the same manner as prescribed for reporting the State use tax. The district use tax is applicable to purchases of tangible property to be used within the district, but purchased from vendors located outside the district who do not hold certificates of authority to collect use tax. The district use tax does not apply to fixed price sales contracts executed before the effective date of the ordinance if neither party has the unconditional right to terminate the contract.

8735.3     APPLICATION OF STATE-ADMINISTERED DISTRICT USE TAX TO PURCHASE FOR TEMPORARY STORAGE
(Revised 12/01)

State-administered transit district use tax does not apply to storing, keeping, retaining, processing, fabricating or manufacturing of tangible personal property for subsequent use solely outside the State or for subsequent use solely outside the district imposing a use tax. The tax does apply when purchases are withdrawn from storage for use within the transit district.

8735.4     ACCOUNTING AND REPORTING STATE-ADMINISTERED DISTRICT TRANSACTIONS (SALES) AND USE TAXES
(Revised 12/01)

The procedures prescribed for accounting, claim preparation, reporting and paying the State sales and use taxes are also applicable to the State-administered district transactions (sales) and use taxes.  See SAM Sections 8720 through 8733.

State agencies reporting district use tax on sales or on property used at multiple locations will allocate the district use tax to the place of sales or places of use on the Computation Schedule for District Tax, Schedule A, of the State, Local, and District Consumer Use Tax Return form, BOE-401-A.  The Computation Schedule for District Tax, Schedule A, is used to determine the amount of tax, if any, that should be distributed to entities imposing district tax.  For information on how to apply district taxes, request a copy of Tax Tips for District Tax, Pamphlet 44, from the BOE.

8736     PERSONAL PROPERTY TAX
(New  3/77)

Effective August 19, 1975, Management Memo 75–31 set forth the state's policies and procedures regarding payment of personal property tax liability.  As pointed out, that liability is generally not the responsibility of the State.

The State is exempt from property taxation under California Constitution Article XIII, Section 3(a).  Any obligation for property tax on state leased equipment would exist, if at all, only as a result of an express provision of the lease agreement.  Payments would not be made directly to taxing authorities, if the lease obligation existed but would be limited to reimbursing the lessor for actual tax payments which the lessor could prove had been made.

A review must be made of each individual lease under which reimbursement of property taxes is claimed to ascertain whether reimbursement should be made.  Provisions in a lease adding "applicable state and local taxes" to the monthly rental relate to sales and use taxes and do not encompass personal property taxes.

Any lease clause, such as those on lessor order forms or other documents extraneous to the approved lease, which purports to require the State to reimburse the lessor for personal property taxes is not a valid basis for reimbursement unless the order form or document was included in the lease when approved or has been executed by the State and approved in the same way as the original lease.

If a copy of a personal property tax bill is received, the bill should be forwarded for payment to the lessor named in the bill.  (See 0736 Illustration.) No payment should be made by the State.  If, after payment of the taxes, the lessor submits a properly documented claim for reimbursement and the lease so provides, the lessor can be reimbursed for the taxes applicable to the lease term.

In some instances personal property tax bills will be received on equipment which was on lease but which was purchased by the State prior to the tax lien date of March 1st.  In such a case the property would be tax exempt and the bill should be returned to the taxing authority with a letter notifying it of the change in ownership.  Such notice should include the date on which the state's purchase was made.

8737     FEDERAL USE TAX ON CIVIL AIRCRAFT
(New  10/79)

The Airport and Airway Revenue Act of 1970 imposes an annual tax on the use of all taxable civil aircraft.  Aircraft owned by the State, including helicopters, are taxable civil aircraft.  Aircraft of the National Guard are not considered taxable civil aircraft.  Each State agency who operates aircraft is liable for this tax and is responsible for filing their own tax return.

The yearly taxable period begins on July 1 and ends the following June 30 for taxable civil aircraft in use during the reporting period.  The tax return is filed on a Federal Use Tax Return on Civil Aircraft, Form 4638.  The return is due on or before the end of August.  If an additional aircraft is put in use after July, an additional return is due before the end of the month following the one in which that aircraft is first used.  The return is filed with the Internal Revenue Service, and forms are available from any Internal Revenue office.  If a return was filed in the prior taxable period, a pre-addressed form should be received by mail for filing in the current taxable period.

Additional information on this tax is contained in Federal Publication 582, Federal Use Tax on Civil Aircraft, which is available from the Internal Revenue Service.

To Lessor:

This office received the attached copy of your personal property tax bill for the equipment leased by the State and installed at the location indicated.  If you have not already received the original of this bill, the enclosed will serve as notice of the amount due.

Since the State is not subject to local property taxation, you are responsible and must pay directly any amounts assessed against equipment owned by your company in order to avoid the delinquencies and penalties recited in the bill.  The state's equipment leases do not usually provide for separate reimbursement of personal property taxes.  However, if you believe your lease on the subject equipment contains provisions for reimbursement, a claim for the amount of the taxes paid by you should be submitted in accordance with the applicable billing procedure.  The claim should include a copy of the tax bill, the receipt in payment of the tax bill or other acceptable evidence of payment, and identification of the lease provisions or other basis obligating the State to make reimbursement.  Provisions in a lease adding "applicable state and local taxes" to monthly lease payments or unapproved provisions on lessor order forms relating to tax payments do not afford a basis for reimbursement of property tax payments.

Sincerely,

8740     BILLING FOR SERVICES OF EMPLOYEES PAID ON MONTHLY BASIS
(Revised 12/07)

Below is the formula for determining hourly rates when departments bill for services of employees paid on a monthly basis on or after January 1, 2008.  The number of hours to be deducted for Saturdays, Sundays, holidays, and the state contribution for staff benefits are provided.  Vacation, annual leave, personal leave program, sick leave, bereavement leave, informal time off, jury duty leave, and military leave will be compiled and averaged by the department for this computation.  Based on this formula departments will bill only for those hours actually worked 1/.  However, the formula does not include an amount for such costs as identifiable operating expenses incurred in rendering the service, charges for other than incidental use of equipment, overhead, and other costs.  Such costs will be included in billing for services in accordance with SAM Sections 8752.1 and 8758.

HOURLY BILLING RATE CALCULATIONS

CALENDAR YEAR                                 366 days x 8 hours                      2928 hrs.
LESS DEDUCTIONS

Saturdays                                  52 days x 8 hours                           416 hrs.
Sundays                                    52 days x 8 hours                           416 hrs.
Holidays:

January 1	1	1st Monday in September	1
3rd Monday in January	1	2nd Monday in October	1
February 12	1	November 11	1
3rd Monday in February	1	Thanksgiving Day	1
March 31	1	Friday following Thanksgiving	1
Last Monday in May	1	Deccember 25	1
July 4	1	Personal Holiday	1

14 days x 8 hours =                        112 hrs.

Other Absences
Vacation/Annual Leave Taken (average)                                                    *
Personal Leave Program (PLP) (average)                                                   *
Miscellaneous - Sick, Bereavement, Informal Time Off                                *
                            Jury Duty, Military (average)                                            _______
Subtotal Vacation PLP, and Miscellaneous Absences                                _______

TOTAL DEDUCTIONS (include all amounts calculated under Deductions)

TOTAL ACTUAL WORKING TIME PER YEAR   
*Statewide data are not available.  Each department, based on previous experience and expertise, must compile the information for Other Absences.  Remember to calculate a seperate average for each type of Other Absence (i.e., average vacation/annual leave, average PLP, and average miscellaneous absences.) 

TOTAL ACTUAL WORKING TIME PER YEAR1/                     (2928 hrs. less "Total Deductions")
TOTAL ACTUAL WORKING TIME PER MONTH2/                  ("Total Actual Working Time Per Year" divided by 12) 
STATE'S STAFF BENEFIT CONTRIBUTION PERCENTAGES  (effective January 1, 2008)

Employee's Retirement	16.63
OASDI	6.20
Medicare	1.45
Health, Vision, and Dental Benefits	10.82
Total Percent	35.10 3/

FORMULA FOR CALCULATING HOURLY BILLING RATE:
Monthly Salary Rate                                   x 1.3510 = Hourly Rate
Total actual working time per month

1/ Workers' Compensation, Industrial Disability, Unemployment Compensation, and Life Insurance benefits are not included as factors in the formula for computing hourly billing rates in this section since these expenses can vary substantially among departments.  However, departments will include Workers' Compensation, Industrial Disability, Unemployment Compensation, and Life Insurance benefits in billing for services in accordance with SAM Sections 8752.1 and 8758.

2/ The number of working hours per month is not appropriate for employees not expected to work 2,000 hours per year, less vacation and sick leave, such as college instructors. In such instances, an estimate of actual working time per month or year, considering average holiday, vacation, and sick leave, should be used. For example, billing rates for academic year employees would be computed on the basis of the number of workdays in a year,  less the average of sick leave usage. (Holidays and vacation are not considered in this instance since they are considered in determining the number of working days.)

Formula: Annual Salary Rate x 1.3510 3/    = Daily Rate

Working Days per Year - Average Sick Leave Days Used Per Year
                                   or

Daily Rate   3/  = Hourly Rate
        8

3/ The 35.10 percent rate is applicable only to employees who are Miscellaneous Tier 1 members of the Public Employees' Retirement System.  For those employees who are not Miscellaneous Tier 1 members, but who still belong to Social Security, their appropriate retirement contribution rate will be substituted for the 16.63 percent rate.  Those employees who are not Miscellaneous Tier 1 members and who as a group do not belong to Social Security will include their appropriate Medicare and retirement rates, and health, vision, and dental benefit rates.  For example, the appropriate total rate for members of the Safety Retirement Category who do not belong to Social Security is 31.11 percent consisting of:  (1) 18.84 percent for retirement contributions from the appropriations of the employing departments, (2) 1.45 percent for Medicare, and (3) 10.82 percent for health, vision, and dental benefits.  This 31.11 percent figure will be used in lieu of the 35.10 percent figure shown above.  State departments with employee members in different retirement categories may use a composite employer contribution rate, based on department experience.  Also, any department may use other rates for OASDI, Medicare, and health, vision, and dental benefits if more accurate rates can be determined from the actual experience of their operations.

 

8745     REFUNDS OF GASOLINE TAX TO STATE AGENCIES

8745.1     GENERAL
(Revised 2/83)

Sections 8101/8107 of the Revenue and Taxation Code provide for refunds of the State motor vehicle fuel tax to purchasers who use such fuel for certain nonhighway purposes. Refunds are at the rate of seven cents per gallon through December 1982 and nine cents per gallon of fuel purchased January 1, 1983 or later, except with respect to aircraft where the refunds are at the rate of five cents per gallon. "Motor vehicle fuel" includes gasoline or similar inflammable liquid which is used in an explosion type of engine, but does not include diesel, kerosene, or liquified petroleum gas.
Gasoline tax refunds will be claimed when substantial quantities of fuel are used in equipment (except boats) of the following two categories:

8745.2     RECORDS
(Revised 5/71)

Original fuel purchase invoices must be submitted with the refund claim. The following records will be maintained to support the gasoline tax refund claimed:

In cases where the fuel is delivered directly into equipment tanks by the vendor, the original invoice will constitute the usage record. Where the fuel is delivered by the vendor in drums or into an agency storage tank, issue tags and trip tickets or calculations are the usage records and will support the applicable original invoice.

8745.3     REFUND CLAIMS
(Revised 10/66)

Gasoline tax refund claims are administered by the State Controller's Division of Tax Collection and Refund and are subject to audit by the office. State Controller's Form SCGR–I must be used. Agencies will file claims at least annually since the law provides that a claim must be filed within thirteen months of the date fuel was purchased. Gasoline tax refund claims will be supported by original invoices. Monthly or other periodic billings covering several purchases will not be accepted in support of the refunds. When a claim for refund of motor vehicle fuel taxes is to be filed, the original invoice will be used to support this claim and a duplicate invoice used to support the claim to pay the vendor's bill. The duplicate invoice will bear the notation "Original invoice retained for use in filing claim for refund of motor vehicle fuel taxes." This procedure is acceptable to the State Controller's Office. The agency may prepare a third copy of the invoice for its files.
Since tax refunds on fuel used to operate aircraft are payable from the Aeronautics Fund, separate claims will be filed requesting such refunds.
All documents pertaining to the refund claim will be retained for audit for a period of four years after the refund claim is filed.

8745.4     ACCOUNTING FOR REFUNDS
(Renumbered 2/65)

The refunds will be abated to the appropriation current for the period of usage for which the claim is being filed.

8745.5     FEDERAL MOTOR VEHICLE FUEL TAX
(Renumbered 2/65)

The state is exempt from Federal Excise Tax on motor vehicle fuel.

8750      CONTINGENT REFUNDS UNDER AGREEMENTS FOR INSTALLATION OF UTILITY SERVICE LINES
(Revised 6/85)

It is common in agreements with utility companies for installation of service lines to provide for refunds to the state in the event that other customers later be connected to the utility line serving the state agency. The right of refund is usually for a ten-year period and is limited to the total amount of the payment under the agreement.

Accounting control over these contingent receivables will be maintained in memorandum accounts of the agency. When such agreements are negotiated, the contingent receivable will be recorded in the accounts for the total amount of the installation cost as set forth in the contract. Copies of the agreements can be filed as the subsidiary detail of the contingent receivables account.

The Office of the State Architect will furnish the agency a copy of each agreement providing for refunds negotiated by that office in connection with the construction contracts.

Contingent receivables will be recorded in memorandum accounts by the following entry:

Dr. 1380  Contingent Receivable

Cr. 5390 Other Reserves

Refunds received during the term of the agreement will be remitted to the State Treasury as abatements to the appropriation from which the installation cost was paid, or if that appropriation has reverted, as refunds to reverted appropriations. At the time the abatements are recorded, entries will be made to reduce the balances in Accounts No. 2331 and 5200 and the above memorandum accounts.

Upon expiration of the agreement the agency will check with the utility company to determine whether it is entitled to any further refund. Then any unrefunded balance will be canceled by debiting Other Reserves and crediting Contingent Receivable.

8751     CONTINGENT AND REAL LIABILITIES
(Revised 2/98)

A contingent liability is defined as an obligation relating to a past transaction or event that may be payable in the future.  The distinction between a real liability and a contingent liability depends on the certainty of the payment to be made.  A real liability exists when it is probable that the payment will be made.  A contingent liability exists when it is only possible that the payment will be made.

Real liabilities payable from an existing appropriation must be recognized at year-end even though the amount may be estimated in whole or part.  Real liabilities not properly payable from an existing appropriation will be reported as payable from a future appropriation.

A statement of all contingent liabilities and liabilities payable from a future appropriation will be prepared at year-end.  These liabilities will be reported in Statement No. 22, Statement of Contingent Receivables and Contingent Liabilities.  See SAM Section 7979.  Agencies will establish appropriate memorandum accounts as a record of these liabilities.

8752     FULL COST RECOVERY POLICY
(Revised 2/99)

The state policy is for departments to recover full costs whenever goods or services are provided for others (Requirements for General Fund departments are included in Government Code (GC) Sections 11010 and 11270). This policy, which applies to all departments regardless of funding sources, is to be followed in all cases except where statutes prohibit full cost recovery.

The full cost of goods or services includes all costs attributable directly to the activity plus a fair share of indirect costs which can be ascribed reasonably to the good or service provided. SAM Section 8752.1 contains a discussion of the cost elements to include.

8752.1     COST ELEMENTS INCLUDED
(Revised 2/99)

Include the following costs in charges for goods and services:

Department direct costs
 
Department indirect (overhead) costs
 
Central service costs

8753     CENTRAL SERVICE COSTS
(Revised 2/99)

Central service costs are those amounts expended by central service departments and the Legislature for overall administration of state government and for providing centralized services to state departments. These functions are necessary for state operations and are centralized to provide efficient and consistent statewide policy and services. Central service departments are:

Department of Finance	Department of Justice
State Controller's Office	Agency Secretaries
State Treasurer's Office	Bureau of State Audits
State Personnel Board	Legislature
Department of Personnel Administration	California State Library
Board of Control	Health Benefits For Annuitants
Office of Administrative Law	Department of Information Technology

Central service costs are funded by General Fund appropriations made to each central service department. The central services benefit all funds/departments. For equity, GC Sections 11270–11277 and 22828.5 provide for the sharing of central service costs by funds other than the General Fund. This cost sharing process is titled formally as "General Administrative Costs" but is known more commonly as "Pro Rata".  See explanation in SAM Section 8754.

In addition to administering the Pro Rata central service costs sharing, the DOF, Fiscal Systems and Consulting Unit (FSCU), prepares a Statewide Cost Allocation Plan (SWCAP) each year. SWCAP is a cost allocation plan which distributes central service costs to all departments. SWCAP contains only those central services which the federal government holds to be allowable for federal funding purposes. Therefore, differences exist in the central service costs contained in the two plans.

The central service functions included in Pro Rata and SWCAP are listed below

   Central Service Plans

Central Service Function	Pro Rata   Only	SWCAP   Only	Both
Finance:
Audits			X
Budgets			X
California Accounting and Reporting System (CALSTARS)			X
Department of Information Technology			X
Controller’s Office:
Accounting			X
Claims Audits			X
Payroll			X
General Disbursements			X
Field Audits			X
Retirement Warrants	X
Personnel/Payroll Systems and Development			X
County Cost Plan		X
Treasurer’s Office:
Investment	X
Banking			X
Cash Management and Trust Services	X
Personnel Board
Personnel Administration			X
Board of Control			X
Administrative Law			X
California State Library			X
Health Benefits for Annuitants (Retired)			X
Secretary-California Health and Human Services Agency			X
Secretary-Youth and Adult Correctional Agency			X
Secretary-State and Consumer Services Agency			X
Secretary-Business, Transportation, and Housing Agency			X
Secretary-Resources Agency			X
Bureau of State Audits			X
Department of Justice		X
Legislature	X

The costs of the above central services are apportioned on the basis of services provided. To do this, FSCU determines the most appropriate workload base for each central service. Actual workload units are accumulated for each department.  Then, central service costs are apportioned to the departments/funds on the basis of these workload units.

8754     GENERAL ADMINISTRATIVE COSTS (PRO RATA)
(Revised 2/99)

General Administrative Costs will be referred to as Pro Rata. As mentioned in SAM Section 8753, Pro Rata is the sharing of general funded central service costs by funds other than the General Fund.

The cost of each central service is apportioned to all departments. Then, each department's total central service costs are allocated to the department's funding source(s).

The FSCU classifies funds as nonbillable or billable. In general, nonbillable funds are those whose funding source is the General Fund or a federal fund.  Billable funds are funded by special revenue sources such as fees, licenses, penalties, assessments, etc.

FSCU calculates Pro Rata costs for all funds, billable and nonbillable.  The total Pro Rata cost information is supplied to departments so that full departmental/program costs can be determined.  The reports are available at website: HTTP://WWW.DOF.CA.GOV/FISA/PROSWCAP/PROSWCAP.HTM. Full cost information is particularly important when nonbillable funding sources provide and recover full costs for reimbursable services. See SAM Section 8756 for more information on the State's full cost recovery process.

Each year, the DOF certifies Pro Rata costs to be charged to billable funds.  The certification is sent to the State Controller's Office (SCO).  The SCO notifies each department of the impending Pro Rata assessments for each of its billable fund(s).  Departments have thirty days from the SCO notification date to request deferral of Pro Rata charges.  Departments will send all deferral requests to the SCO.  The SCO will transmit one copy of the department's deferral request to the DOF, FSCU, and will defer any transfer of Pro Rata charges until a decision has been made on the deferral request.

Pro Rata assessments against billable funds are paid by SCO transfers.  The SCO transfers one-fourth of each assessment at the midpoint of each calendar quarter from the billed funds to the General Fund.

Any questions concerning Pro Rata, contact DOF, FSCU, Pro Rata/SWCAP analyst.

8755     STATEWIDE COST ALLOCATION PLAN (SWCAP) 
(Revised 2/99)

The SWCAP, like Pro Rata, is a "fair share" distribution of central service costs. SWCAP includes only those central services costs which are allowable for federal reimbursement purposes.

In the fall of each year, the FSCU prepares California's SWCAP for the ensuing fiscal year. FSCU sends the SWCAP to the federal Department of Health and Human Services (DHHS) for approval.  The DHHS approval authorizes state departments to include SWCAP in their charges for work performed under federal grants and contracts.

The methods used to apportion the SWCAP costs to departments are identical to those used to apportion Pro Rata central service costs.

8755.1     DEPARTMENTAL PROCESS
(Revised 2/99)

Each department receiving federal funds has the responsibility to:

8755.2     INDIRECT COST RATE RECOVERIES
(Revised 2/99)

An ICRP establishes the basis by which the department recovers full costs associated with programs/activities. Non-CALSTARS departments may substitute Cost Allocation Plans (CAPs) for ICRPs with the approval of the federal government.  SAM Section 8756 describes these processes in more detail. Departments will send their ICRPs or CAPs (non-CALSTARS) to FSCU for review and approval prior to sending them to the cognizant federal agencies for approval. Federal agency cognizance is usually assigned to that agency which grants the most federal funds to the state department.

To further the State's full cost recovery objective, GC Sections 13332.01–13332.02, require departments to recover SWCAP costs from the federal government and to transfer the SWCAP recoveries to the General Fund within 30 days after the end of each quarter. It is important that departments prepare ICRPs annually and be familiar with all aspects of full cost recoveries and the transfers of SWCAP recoveries to the General Fund.

Departments will request the SCO to transfer SWCAP recoveries. The transfer request will contain the following:

SWCAP amount to be transferred.
Time period the recovery spans.
Account the recovery is to come from.
Total budgeted SWCAP recoveries for the current fiscal year.
Total SWCAP recoveries transferred to date for the current fiscal year.
Total SWCAP recoveries to be transferred by current fiscal year-end.
Total SWCAP recoveries transferred for prior fiscal year.
Person (e-mail address and phone number) to contact if there are any questions.

In addition, the request must contain a certification that the transfer is accurate and in accordance with the department's approved cost recovery plan.  The certification must be signed by the departmental accounting office manager.  The original and two copies of the transfer request must be sent to the DOF budget analyst for approval. After approval, the DOF budget analyst will forward the original copy of the request to the SCO.  A copy of the approved request is forwarded to FSCU.  Agencies using form CA 504 (Office of the State Controller, Transaction Request) must still include the above information.  See 8755.2 ILLUSTRATION for sample transfer request.

M E M O R A N D U M
DATE: January 29, 1999

TO: STATE CONTROLLER'S OFFICE
        DIVISION OF ACCOUNTING AND REPORTING

FROM: DEPARTMENT OF ALCOHOL AND DRUG PROGRAMS

SUBJECT: STATEWIDE INDIRECT COST RECOVERIES

In accordance with our approved Indirect Cost Rate Proposal, we have collected $30,750 from the federal government for the quarter ending December 31, 1998 for SWCAP costs for the fiscal year 1998-99.  These recoveries are based on a provisional rate and are subject to adjustment upon approval of a fiscal rate.

DEBIT:  Alcohol and Other Drug Services Program
              890000-4200-96-0001-15    $30,750

CREDIT: General Fund
                 Statewide Indirect Cost Recoveries   $30,750

The departmental summary of statewide indirect cost recoveries is as follows:

I hereby certify under penalty of perjury that this transfer request reflects true and correct amounts in accordance with our approved indirect cost rate.

If you have any questions, please call Jane Doe at (916) 445-1111 or e-mail (Jane.Doe@DADP.ca.gov).

Department of Finance Approval
BY: __________________________
Title: _________________________
Date: _________________________

cc:  Department of Finance, FSCU, Pro Rata/SWCAP Analyst

8756     INDIRECT COST RATE PROPOSAL (Revised 2/99)

Department or program costs can be categorized into three types:
(See SAM Section 8752.1 for descriptions of these costs.)

Direct
Departmental indirect
Central service

Indirect costs (both departmental and central service) are generally assigned to a program or organizational unit by an indirect cost rate or by some other cost application technique. Indirect cost rates are usually expressed as percentages. These percentages express the relationship of the sum of departmental indirect and central service costs to a direct cost base. Commonly used direct cost bases include direct salaries and wages costs, direct personal services costs, or total direct costs. The aggregation of all costs (direct, indirect, and central service), the analysis of cost relationships, and, finally, the computation of rate(s) are the basic steps involved in developing an ICRP.

8756.1     FEDERAL INDIRECT COST RATE PROPOSAL (ICRP)
(Revised 2/99)

Each department that receives federal funds must prepare an ICRP. The ICRP should be prepared in accordance with the Office of Management and Budget (OMB) Circular A-87, "Cost Principles for State, Local and Indian Tribal Governments" and the guide "Cost Principles and Procedures for Establishing Cost Allocation Plans and Indirect Cost Rates for Agreement with the Federal government" (ASMB C-10) published by the federal Department of Health and Human Services. The federal website is:
HTTP://WWW.WHITEHOUSE.GOV/WH/EOP/OMB/HTML/OMBHOME.HTML#.DOCS.

In the fall of each year, the DOF, FSCU, notifies departments with federal funding of the central service costs (SWCAP) apportioned to them for the next fiscal year. The reports are available via the Internet at website:
HTTP://WWW.DOF.CA.GOV/FISA/PROSWCAP/PROSWCAP.HTM

Departments send their ICRPs to the DOF, FSCU, for review and approval before sending the proposal to the cognizant federal agency for approval. Generally, the federal agency from which a department receives the most funding is designated as the cognizant federal agency. ICRPs are to be filed with the cognizant federal agency at least six months before the start of the fiscal year to which the ICRP applies. To facilitate processing of an ICRP, include the department's organization code on all ICRP documents.

Departments with federal funding must file ICRPs unless exempted by the DOF, FSCU. Requests for Exemption should be sent to FSCU with full explanations. Footnote and cross reference all amounts in ICRP schedules and sub-schedules.  8756.1 ILLUSTRATION 1 shows a sample ICRP calculation.

Departments required to submit ICRPs for FSCU review must include the ICRP summary form with all ICRPs.  This form summarizes basic data about the department and acts as a checklist for proper preparation of ICRPs. Most items on this form require only that a box be checked. However, an other than "normal" response requires additional comments indicated by either "describe" or "explain" on the form.  8756.1 ILLUSTRATION 2 shows a sample ICRP summary form.
 
8756.2     NON-FEDERAL INDIRECT COST RECOVERIES 
(Revised 3/90)

Departments which receive reimbursements from other than Federal funding sources will also ensure that full costs are included in charges for goods provided and services performed.  The basic principles and cost elements included are the same as for Federal ICRPs (see SAM Section 8756.1) with one exception; non-Federal cost recoveries will include the larger of the department's central service costs, SWCAP or Pro Rata.  See 8756.1 ILLUSTRATION 1 for a sample indirect cost calculation.

8757     ACCOUNTING FOR DIRECT AND INDIRECT COSTS  
(Revised and Renumbered from 8753.3 6/85)

Departments will account for reimbursements, including receipts from the federal government, according to the following cost categories:

Direct costs;
Departmental indirect costs; and
Central service costs.

Accountability by these cost categories encourages full cost recoveries including a fair share of central service costs.

Departments will establish subsidiary accounts for:

Direct cost recoveries
Departmental Indirect cost recoveries
Central service cost recoveries

These accounts will be subsidiary to Account Number 8020–Federal Grants and Contracts, or Account Number 8100–Reimbursements, depending on the fund in which these monies are accounted.

8758     CHARGES FOR INTERAGENCY SERVICES
(Revised and Renumbered from 8760 6/85)

Charges for interagency services will include the same cost components that are included in charges for services to other than state agencies, i.e., direct costs, indirect costs, and central service costs, as prescribed in Section 8752.

RECOVERY OF INDIRECT COSTS
SAMPLE CALCULATION

Department A administers a program, grant, or contract and is preparing to bill for services rendered.

Summary:

Department A would collect a total of $430,000 for its reimbursed activity, $4,000 of which is attributable to central service costs.

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8758.1     AGREEMENT PROVISION REQUIRED
(Revised 2/99)

All agreements or arrangements services will include charges for the costs identified above. Include in any agreements a provision that the charges are computed in accordance with SAM Section 8752. Any of the following sample paragraphs may be used in the agreement:

8760     BLOCK GRANT FISCAL REPORTING REQUIREMENTS
(New 7/85)

The Federal Government awards certain block grant funds to the State for various social service programs. These Federal block grants include, but are not limited to, the following:

Title XX (Social Security Act)
Low Income Home Energy Assistance
Preventive Health
Maternal and Child Health Services
Alcohol and Drug Abuse
Mental Health Services
Community Development
Community Services

The State assumes certain fiscal administrative responsibilities for these block grants.  State departments which administer block grants will require recipients (public and private non-profit organizations) to comply with certain specific fiscal requirements.

Grant Recipient Requirements

All grant recipients will:

C. 3. Enter the employer identification number assigned by the U. S. Internal Revenue Service (Applicable for private non-profit organizations).

D. 1. Enter the net outlay.  This amount should be the same as the amount reported on line D.3. of the last report.  If there has been an adjustment to the amount shown previously, please attach an explanation.  Show zero if this is the initial report.

D. 2. Use work sheet and instructions below to determine NET outlays for this report period:

D. 4. Enter the nongrant share of program outlays included in the amount on line D.3.

D. 6. Enter the unliquidated obligations for this project including unliquidated obligations to subgrantees and contractors.  Unliquidated obligations are:

 Cash basis—obligations incurred but not paid.

 Accrued expenditure basis—obligations incurred, but for which an expenditure has not been recorded.

 Do not include any amounts that have been included on lines D.1 through D.5.  On the final report, line D.6 should have a zero balance.

D. 8. Enter the grant share of unliquidated obligations.  The amount shown on this line will be the difference between lines D.6 and D.7.

D. 9. Enter the sum of the amounts shown on lines D.5 and D.8.  If the report is final, it should not contain any unliquidated obligations.

D. 11. Enter the unobligated balance of grant funds.  This amount should be the difference between lines D.10 and D.9.

The figures provided in this report must be supported by detailed accounting records.  The records will be retained and available for audit for a minimum of three years.
 
8760 ILLUSTRATION 2
 
C. 3. Enter employer identification number assigned by the U. S. Internal Revenue Service (Applicable for private non-profit organizations).
 
D. 1. Enter the grant cash on hand at the beginning of the reporting period including funds on deposit, funds on hand, and undeposited checks/warrants.
 
D. 2.  (A) Enter the funds received during the quarter as grant reimbursements.
         (B) Enter the funds received during the quarter as grant advances.
         (C) Enter the grant share of program income that was required to be used on the project by the terms of the grant.  Grant program income are those dollar amounts received form all other sources to help defray block grant program costs.
         (D) Enter the interest earned during the quarter on grant advances.
 
D. 4. Enter the total grant cash disbursements made during the reporting period.  Disbursements as used here includes advances and payments to subgrantees or contractors,  salaries and wages plus employer's share of benefits, interdepartmental charges for supplies and services, and indirect costs to which the recipient is entitled.
 
D. 5. Enter all adjustments pertaining to prior quarters which affects the ending balance that have not been included in any lines above.  Explain all adjustments in the remarks section;  use plain sheets of paper if additional space is required.
D. 6. Enter the grant cash on hand at the end of the reporting period.  This amount will include all funds on deposits, funds on hand, and undeposited funds (line D.3 less line D.4, plus or minus line D.5).
 
D. 7. Enter the estimated number of days until the cash on hand, shown on line D.6, will be be expended.
 
D. 8. Enter the advances made to secondary recipients included in line D.4.

The figures provided in this report must be supported by detailed accounting records.  The records will be retained and available for audit for a minimum of three years.

8765     RETURNABLE CONTAINERS 
(Revised 3/87)

Agencies will maintain memorandum stock cards for returnable containers, such as oil drums and gas cylinders, which are purchased, for which deposits are required, or for which they are held responsible. Returnable containers received or returned will be recorded on appropriate accounting documents, such as Stock Received Reports and Returned Stock Received Reports, so that the accountability of the organizational unit having custody can be recorded on the memorandum stock card. The transfer of containers from the custody of one unit to another will also be recorded. Periodically, the quantity of returnable containers recorded as on hand will be verified by physical count. Documents for containers returned will be maintained in a pending file until credit is received from the vendor. Agencies maintaining a Purchased Stores Ledger will not include the value of returnable containers on hand in the annual computation for valuing the Purchased Stores Ledger inventory.

8770     ACCOUNTING FOR INVESTMENT SECURITIES
(Revised 3/87)

Securities purchased as fund investments will be recorded as assets of the fund under the date of the State Treasurer's Advice unless the date of the Controller's warrant is different from the date of the advice. If the warrant date is different, the State Treasurer will show the warrant date on his advice. In this case, the transaction will be accounted under the date of the warrant. Claim schedules prepared for the purchase of securities will not be recorded in the agency accounts since no liability is incurred nor is there any change in the fund assets until the securities are purchased. Such claim schedules will serve as memorandum records pending completion of the transaction as evidence by the State Treasurer's Advice.

Many agencies that maintain savings accounts outside the centralized State Treasury System or have investments which they manage have received requests from depository banks and other payers of interest for taxpayer identification numbers normally required by the Internal Revenue Service for the identification and reporting of interest, dividends, and other payments.

The Internal Revenue Service does not require taxpayer identification numbers for accounts of funds owned or controlled by the State. Therefore, agencies that receive such requests should inform those requesting the numbers of the nature of the entity for which the savings account or investment is held. Agencies should not request taxpayer identifying numbers from Social Security Administration or Internal Revenue Service.

8775     SUBROGATION RECEIPTS 
(Revised 9/04) 

Pursuant to Labor Code Sections 3850–65, the State may recover compensation benefits and other damages from a third person liable for injury or death of a State employee. Amounts recovered by way of subrogation are the result of actions taken by the State Compensation Insurance Fund. Any amounts owing to employing State agencies will be credited to the proper appropriation as abatements. The restoration of leave credits to employee's records from third party recoveries will be at the direction of the State Compensation Insurance Fund.  See SAM Section 8537.

8776      ACCOUNTS RECEIVABLE 
(New 1/79)

For our purposes, an accounts receivable is defined as a claim against a person, firm, corporation, or other entity for money owed to the State. There are two types of accounts receivables: contingent and valid.

8776.1     CONTINGENT ACCOUNTS RECEIVABLE 
(Revised 2/94)

There are many situations in which an agency may find that it has a claim against a party. For example, there may be claims for damages to state property, claims against third parties, claims against estates and others which are contingent in nature, etc. When this occurs the agency must make a determination as to whether or not these claims should be treated as contingent or valid accounts receivables. The difference between a contingent and valid accounts receivable is the uncertainty of the legal obligation.

Claims may be either contested or uncontested. Contested claims are those claims in which either the amount is in dispute or the validity of the claim is challenged or both. A contingent receivable will be established for those contested claims which appear to have a prospect of favorable settlement or of becoming a valid receivable. Where the amount is contested, the amount to be recorded should be the potential due and payable.

Generally, uncontested claims will be recognized as valid receivables. However, uncontested claims of a type which are subject to potential legal dispute and which have a history of legal disputes, will be recorded as contingent receivables until the statute of limitations have expired for objections to the claims.

A contingent receivable need not be established if any agency feels that a disputed or doubtful claim has very little likelihood of being recovered. However, it is the responsibility of each agency to oversee outstanding claims so that a contingent or valid receivable may be established, when appropriate.

Valid accounts receivable will be recognized in the accounts by the following entry as of the date the claim against the adverse party becomes a valid receivable.

Debit:
1311 Accounts Receivable–Abatements
1600 Provision for Deferred Receivables

Credit:
1380 Contingent Receivables
9000 Appropriation Expenditures

Account No. 9000, Appropriation Expenditures, will be credited only if the original expenses were paid from the current year appropriation.

The collection of contingent receivables and accruing of valid accounts receivables at year end will be credited as an abatement to the appropriation from which the original expenses were paid. If the appropriation has reverted, the credit will be to Account No. 9891, Refunds to Reverted Appropriations. Any recoveries in excess of the actual expenses will be remitted as current year Miscellaneous Revenue to the state fund from which the agency derives its major support.
 

8776.12     ACCOUNTING FOR CONTINGENT RECEIVABLES 
(Revised 1/85)

Contingent receivables will be recognized in the accounts at the time the claim arises.  Where the claim is to repay the state for expenses incurred by the state, the receivable will be recognized as of the date the expenses are incurred.  The following entry will be made:

Debit:
1380 Contingent Receivables
Credit:
1600 Provisions for Deferred Receivables

If a contingent receivable becomes a valid accounts receivable, it will be recognized as such in the accounts and the contingent receivable will be reversed.  Contested claims should be established as a valid accounts receivable when they have been either (1) brought to judgment, or (2) the contested amount has been converted to a sum certain by negotiation.

8776.2     VALID ACCOUNTS RECEIVABLE 
(Revised 2/98)

A valid accounts receivable is a receivable which is due and payable and for which there is no apparent disagreement over the validity of the claim or the amount at the time it was established.  Due and payable refers to either a portion of or the whole claim.  For instance, a long-term receivable which is payable in installments spread over many years would be "due and payable" when the obligation is incurred.  Disputes arising after the receivable is established does not convert a valid receivable into a contingent receivable.  Generally, disputes would be over the amount of the bill because of alleged non receipt of goods, overbilling, prior payments, etc.  Agencies will investigate complaints to determine if they are valid and take any necessary corrective measures.  The adjustment of receivables to reflect their correct amounts may be made by agencies without the necessity of going through the State Controller's Office.
Valid accounts receivables are divided into current and deferred.  A current accounts receivable is a receivable which has been billed and is expected to be collected within one year, whereas, a deferred accounts receivable is expected to be outstanding for over a year.  During the fiscal year, current and deferred accounts receivables are treated alike.  If it is an abatement or reimbursement, it will generally be credited back to an appropriation.  See SAM Sections 8287, 10407, and 10408.  At June 30, an entry will be made to reduce abatement, reimbursement, and non revenue receivables to the amount that is estimated to be collectible during the ensuing fiscal year.  See SAM Section 10614, Standard Entry No. A-12.  These amounts will remain deferred until they are either collected or written off.
Accounts receivables for revenue will be fully reserved during the year.  At June 30, an adjusting entry will be made (SAM Section 10610, Standard Entry No. A–9) to accrue as revenue that portion of income earned as of June 30, but not received, that is estimated to be collectible within the ensuing fiscal year (except for CALSTARS agencies.)
Also, at June 30, an entry will be made to accrue those abatements or reimbursements that were not previously billed or accrued, but which are estimated will be collectible within the ensuing fiscal year.  See SAM Section 10602, Standard Entry No. A-3.  For accrual of revenue not previously billed, see SAM Section 10610, Standard Entry No. A-9.
BILLING 8776.3
(New 2/98)

An invoice or other type of claim document will be prepared and sent out as soon as possible after the recognition of a claim.  See SAM Section 10408 for an example of a standard journal entry to record the establishment of accounts receivables when invoices are prepared and sent.  When deemed appropriate, invoices will not be prepared and sent for contingent receivables.

8776.4     PREPAYMENTS 
(New 1/76)

Prepayments of claims are not receivables.  They should not be set up as a credit accounts receivable.  Instead, they should either be treated as revenue received in advance or as a liability until the transaction is completed.

8776.5     COLLECTION PROCEDURES 
(Revised 03/02)

Accounts receivable collection procedures differ depending on if the receivable is owed to the State by an employee or nonemployee.  If amounts are due from former State employees, follow the collection procedures for nonemployee accounts receivable.  In addition, notify the SCO, Division of Personnel/Payroll Services of the situation by sending a Personnel Action Request form, STD. 680A, and ask to be notified if the person reenters State service.  See SAM Section 8593.3.  

8776.6     NONEMPLOYEE ACCOUNTS RECEIVABLE 
(Revised 09/08)

Each department will develop collection procedures that will assure prompt follow-up on receivables.  Following are procedures and guidelines that departments will use for the collection of amounts owed to the State from nonemployees.  These procedures are in accordance with the Accounts Receivable Management Act as provided in GC Sections 16580-16586.

Locating Debtor

When the address of the debtor is unknown, departments shall attempt to obtain a current address.  Departments may utilize Internet search engines and/or a data research service.  Departments should perform a cost benefit analysis to determine if procuring services to locate debtors would be cost beneficial.  Another alternative is to request the debtor's address from the Department of Motor Vehicles by completing a Gov't Agency Request for Driver License/Identification Record Information form, INF 254.  In order to use this alternative, the date of birth or driver's license/identification number of the debtor is required.

Collection Letters

Once the address of the debtor is known, the accounting office will send a sequence of three collection letters at 30 day intervals.  If a reply or payment is not received within 30 days after sending the first letter, the accounting office will send a second letter.  This follow-up letter will reference the original request for payment letter and will be stated in a stronger tone.  If a response is still not received from the debtor, a third letter will be sent 30 days later.  This last letter will include references to prior letters and will state what further actions may be taken in the collection process.

Collection Actions Review

If the three collection letters are unsuccessful, departments will prepare an analysis to determine what additional collection efforts should be made.  The analysis should include a cost/benefit analysis of the collection actions listed below.  Departments should initiate one or more of the following actions:

Discharge From Accountability

If all reasonable collection procedures do not result in payment, departments may request discharge from accountability of uncollectable amounts due from private entities.  Departments will review their accounts receivable no less than quarterly to identify receivables for discharge.  If departments have identified receivables for discharge, departments will file an Application For Discharge From Accountability form, STD. 27, with the SCO, Division of Accounting and Reporting, no less than quarterly.  Applications for Discharge from Accountability of uncollectable amounts of more than $7,500 will be filed separately from applications for amounts of $7,500 or less.  The $7,500 amount applies to the total of all amounts owed by the debtor, not to each invoice.  The application for discharge shall include:

The individual authorizing the Application for Discharge from Accountability should be at a level at least equivalent to that of manager of the accounting office.

GC Section 13943.2 provides that upon written authorization by the California Victim Compensation and Government Claims Board (CVCGCB), State departments may refrain from collecting amounts of $250 or less.  The $250 limitation applies to the total of all amounts owed by the debtor, not to each invoice.  Questions regarding this authorization should be directed to the CVCGCB, Government Claims Program, at (916) 491-3700 or toll free (800) 955-0045.

Departments who do not obtain approval from the CVCGCB shall apply for discharge from accountability with the SCO, as indicated above.

The Californi