BILL ANALYSIS Ó
AB 2435
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Date of Hearing: May 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 2435 (Roger Hernandez) - As Amended: April 26, 2012
Policy Committee: Education
Vote:7-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill requires the State Department of Education (SDE), or
any other state agency that administers a grant or allocation of
federal funds to a school district, to allow an indirect cost
rate that is not less than the indirect cost rate established by
SDE for each district, unless federal or state law requires a
lower cost rate. Specifically, this bill:
1)Defines "direct cost" as a cost that provides measurable,
direct benefits to a particular program of an agency,
including, but not limited to, salaries and benefits of
teachers and aides, costs of purchasing textbooks and
instructional supplies, and costs for providing pupils with
counseling, health services, and transportation.
2)Defines "indirect cost" as the agency-wide, general management
cost of the activities for the direction and control of the
agency as a whole, including, but not limited to,
administrative activities necessary for the general operation
of the agency, as specified.
3)Defines "indirect cost rate" as the indirect cost rate
established by SDE for each school district.
FISCAL EFFECT
No additional GF/98 costs to implement this measure. The
majority of state and federal grants specify the amount school
districts can utilize for administration. If a federal or state
grant specifies the rate a district can utilize for
administration, this bill requires districts to use that rate.
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COMMENTS
1)Purpose . Federal and state law often delineate the amount of
indirect costs or administration either the state or LEAs can
utilize from a grant allocation. For example, under the state
After School Education and Safety program, school districts
are limited to expending no more than five percent of their
grant amount for administration.
According to the Los Angeles County Office of Education
(LACOE), sponsor of this bill, "School districts cannot cover
their operating costs when the indirect rate allowed for
certain grants and allocations is less than the SDE-determined
rate. If LEAs cannon cover their operating costs, they cannot
operate programs that provide vital services for students and
families without putting themselves at financial risk."
According to SDE, LACOE's indirect cost rate for the 2011-12
fiscal year is 9.31%.
This bill requires SDE or any other state agency that
administers a grant or allocation of federal funds to a school
district to allow an indirect cost rate that is not less than
the indirect cost rate established by SDE for each district,
unless federal or state law requires a lower cost rate.
2)Background . According to SDE, The United States Department of
Education (USDE) has approved a delegation agreement with the
department that authorizes the SDE, as the cognizant agency,
to establish indirect cost rates for the state's local
educational agencies (LEAs). Indirect costs are agency-wide
general management costs (i.e., activities for the direction
and control of the agency as a whole). General management
costs consist of administrative activities necessary for the
general operation of the agency, such as accounting,
budgeting, payroll preparation, personnel services,
purchasing, and centralized data processing.
According to SDE, "General management costs are necessary for
any program to exist. For instance, all programs will use the
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business office at one time or another for services such as
contracts, purchasing, payroll checks, and personnel
management. Without the benefit of an indirect cost rate,
there would be no standard way for each program to contribute
its share of the general management costs without spending a
lot of staff time having to 'time account' to each activity.
By using an indirect cost rate, LEAs have a standardized,
efficient way to recover a share of general management costs
from individual programs."
Analysis Prepared by : Kimberly Rodriguez / APPR. / (916)
319-2081