Fiscal Glossary

A Santa Monica Community College District (i.e. Santa Monica College / “District”) employee who is required to meet minimum academic standards as a condition of employment.

A short-term liability account reflecting amounts due to others for goods and services received prior to the end of an accounting period (includes amounts billed, but not paid). Most of these definitions are from Governmental Accounting, Auditing, and Financial Reporting (GAAFR).

An asset account reflecting amounts due from others for goods and services provided prior to the end of an accounting period (includes amounts advanced but not repaid).

The method of accounting which calls for recognizing revenue/gains and expenses/losses in the accounting period in which the transactions occur regardless of the timing of the related cash flows. 

A fund used to account for assets held by a governmental unit as an agent for individuals, private organizations, other governments, and/or other funds; for example, taxes collected and held by the county for a community college district.

Division or distribution of resources according to a predetermined plan.

In California, all governmental jurisdictions, including community college districts, must compute an annual appropriation limit based on the amount in prior years adjusted for changes in population, cost-of-living, and other factors, if applicable.

Allocation of State or Federal aid, district taxes, or other moneys to community college districts or other governmental units.

A legal authorization granted by a legislative or governing body to make expenditures and incur obligations for a specified time and purpose.

A probable future economic benefit obtained or controlled by an entity as a result of past transactions or events.

An official examination and verification of financial statements and related documents, records, and accounts for the purpose of determining the propriety of transactions, whether transactions are recorded properly, and whether statements drawn from accounts reflect an accurate picture of financial operations and financial status. Audit procedures may also include examination and verification of compliance with applicable laws and regulations, economy and efficiency of operations, and effectiveness in achieving program results. The general focus of the annual audit conducted on the district is usually a financial statement examination and compliance audit.

Documentation allowing verification of financial transactions.

An increase to a previously authorized appropriation or allotment.

Self-supporting activities which provide non-instructional support in the form of goods and services to students, faculty, and staff upon payment of a specific user charge or fee for the goods and services provided (e. g. Student Housing, Transportation and Parking Services). The general public may be served only incidentally.

Most often, a written promise to pay a specified sum of money, called the face value, at a specified date or dates in the future, called the maturity date(s), together with periodic interest at a specified rate.

A plan of financial operation for a given period consisting of an estimate of expenditures and the proposed means of financing them. The most common assumptions of budgeting include: 

• Centralized Budget: This budget localized resource allocation into central operations. A strategy used to provide additional control is usually instituted when resources are reduced. This tends to be a leaner allocation since there is only a single institutional contingency needed. 

• Decentralized Budget: This budget process allows resource allocation to take place outside of central operations, giving greater control to the programs that have direct 123 Budgeting and Accounting Manual 2024 Edition California Community Colleges interaction with students. Because the contingency must be spread over a large number of departments or programs, these budgets tend to be larger than those of the same size organization with a centralized budget. 

• Incremental or Rollover Budget: This is the most widely used form of budgeting in higher education. It assumes that each year is relatively the same and that any new activity is an add-on. It is the most efficient, cost-effective way to budget and usually has a large, centralized component. It focuses on inputs rather than outcomes. 

• Zero-based Budget: This type of budget assumes that each year stands on its own. All expenditures must be justified each year. This strategy creates a very lean budget with only known expenditures present. 

• Formula Budget: Objective formulas based on systematic data are used to distribute resources to ensure each program or entity is receiving a fair share. This is most often used at the state level. 

• Planning, Programming, and Budgeting Systems (PPBS): This system focuses on cost benefits and continuous analysis of alternatives for each program and systematically links them to the strategic plan. 

• Incentive-Driven Budget: This budget falls into two categories. The first is used at the state level to provide up-front funding to achieve a specific outcome. The second is used in research institutes to decentralize resource allocation to the various departments so that more timely and accurate decisions can be made. 

• Performance-Driven Budget: This process uses performance measures to allocate resources and is used primarily at the state level. In this model the funding comes after the measures have been achieved. It has been successfully implemented in the K-12 environment.

• Responsibility/or Cost Center Budget: This model recognizes that each instructional program can stand on its own and has a relative ability to generate income. This model allocates all of the revenue to each department and uses a charge back or tax to cover the expenses of the cost centers like central services.

An annual statute authorizing state departments to expend appropriated funds for the purposes stated in the Governor's Budget, amended by the Legislature, and signed by the Governor.

Official change to an approved budget.

The acquisition of or additions to fixed assets, including land or existing buildings, improvements of grounds, construction of buildings, additions to buildings, remodeling of buildings, or equipment.

Category of funds in the Governmental Funds Group used to account for the acquisition or construction of capital outlay items.

An asset account reflecting currency, checks, money orders, bank deposits, and banker’s drafts either on hand or on deposit with an official or agent designated as custodian of cash. Any restrictions or limitations as to the use of cash must be indicated.

Allocations that are required to be spent in a particular way or for a designated program. 

A district employee who is not required to meet minimum academic standards as a condition of employment.

Increases provided in state-funded programs intended to offset the effects of inflation.

The Unrestricted General Fund expenditures of a community college district in Objects of Expenditure 1000 through 5000 and 6400 (Equipment Replacement Sub-object) for activity codes 0100 through 6700 for the calculation of compliance with the Fifty Percent Law. Excluded from the current expense of education are expenditures for student transportation, food services, community services, lease agreements for plant and equipment, and other costs specified in law and regulations. Amounts expended from State Lottery proceeds are also excluded. (See Fifty Percent Law.) 

Expenditures for the retirement of principal and interest on long-term debt.

Fund for receipt and expenditure of property tax for bond payments.

Late payments to districts when the state cannot meet its funding obligations. Deferrals allow districts to budget for more money than the state will provide in a given year. A district is permitted to spend as if there is no deferral. Districts typically rely on local reserves or short-term loans (e.g., TRANS) to cover spending for the fiscal year.

The Education Protection Account (EPA) was created in November 2012 by Proposition 30, the Schools and Local Public Safety Protection Act of 2012, and amended by Proposition 55 in November 2016. Of the funds in the account, 89 percent is provided to K-12 education and 11 percent to community colleges. These funds are set to expire on December 31, 2030.

Amounts paid by an employer on behalf of employees. Examples are group health or life insurance payments, contributions to employee retirement, district share of O.A.S.D.I. (Social Security) taxes, and workers’ compensation payments. These amounts are not included in the gross salary but are over and above. While not paid directly to employees, they are a part of the total cost of employees.

Commitments related to unperformed (executory) contracts for goods or services. Used in budgeting, encumbrances are not GAAP expenditures or liabilities, but represent the estimated amount of expenditures ultimately to result if unperformed contracts in process are completed.

Amounts collected from students for instructional services (“Tuition”)

A subgroup of the Proprietary Funds Group used to account for operations when the governing board has decided either that the total cost of providing goods and services on a continuing basis (expenses including depreciation) be financed or recovered primarily through user charges; or that the periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. 

Payment of cash or cash equivalent for payroll, goods or services, or a charge against available funds in settlement of an obligation.

The “Fifty Percent Law”, as defined in Education Code section 84362 and California Code of Regulations, title 5, section 59200 et seq., requires California Community College districts to spend each fiscal year Fifty Percent Law of the current expense of education for payment of salaries of classroom instructors. The intent of the statute is to limit class size and contain the relative growth of administrative and noninstructional costs. The Annual Financial and Budget Report (CCFS-311) includes actual data on the district’s current expense of education and compliance with the Fifty Percent Law. 

A 12-month period to which the annual operating budget applies and at the end of which a government determines its financial position and the results of its operations. For governmental entities in the State of California, the period beginning July 1 and ending June 30.

Long-lived tangible assets having continuing value such as land, buildings, machinery, furniture, and equipment.

Ratio of the standard workload for a full-time faculty, (e.g. 15 units).

An enrolled student who attends 15 hours each week during the semester (or a number of students whose attendance, together, amounts to 15 hours each week)

An independent fiscal and accounting entity with a self-balancing set of accounts for recording cash and other financial resources, together with all related liabilities and residual equities or balances, and changes therein.

The difference between fund assets and fund liabilities of governmental and similar trust funds.

These are the uniform minimum standards for financial accounting and reporting. They govern the form and content of the financial statements of an entity. GAAP encompass the conventions, rules, and procedures 132 Budgeting and Accounting Manual (2024 Edition) California Community Colleges to define accepted accounting practice at a particular time. They include not only broad guidance of general application, but also detailed practices and procedures. The primary authoritative body on the application of GAAP to state and local governments is the Governmental Accounting Standards Board (GASB).

The fund used to account for the ordinary operations of the district. It is available for any legally authorized purpose not specified for payment by other funds.

The publication the Governor presents to the Legislature by January 10 each year, which includes recommended expenditures and estimates of revenues.

Contributions or gifts of cash or other assets from another government or private organization to be used or expended for a specified purpose, activity, or facility.

A provisional protection for community college districts (like SMC) that would have received more funding under the former funding formula. . . to provide time for those districts to ramp down their budgets to the new Student-Centered Funding Formula (SCFF)‑calculated funding level or find ways to increase the amount they generate through SCFF.

A plan of organization in which employees’ duties are arranged and records and procedures designated to provide a system of self-checking, thereby enhancing accounting control over assets, liabilities, income, and expenditures. Under such a system the employees’ work is subdivided so that no one employee performs a complete cycle of operation; such procedures call for proper delegation by designated officials.

Debt or other legal obligations (exclusive of encumbrances) arising out of transactions in the past which must be liquidated, renewed, or refunded at some future date.

An update to the Governor's Budget presented by Finance to the Legislature by May 14 of each year.

The accrual basis of accounting adapted to the governmental fund-type measurement focus. Under it, revenues and other financial resource increments (e.g., bond issue proceeds) are recognized when they become 135 Budgeting and Accounting Manual (2024 Edition) California Community Colleges susceptible to accrual, that is when they become both “measurable” and “available” to finance expenditures of the current period.” “Available” means collectible in the current period or soon enough thereafter to be used to pay liabilities of the current period. Expenditures are recognized when the fund liability is incurred except for the following: 

1. Inventories of materials and supplies that may be considered expenditures either when purchased or when used, and 

2. Prepaid insurance and similar items that may be considered expenditures either when paid for or when consumed. All governmental funds, expendable trust funds and agency funds are accounted for using the modified accrual basis of accounting.

Salaries, benefits, and related employee expenses.

Tax based on assessed value of real estate (Ad Valorem Tax).

A section of the California Constitution that, among other provisions, specifies a minimum funding guarantee for schools and community colleges. California Community Colleges typically receive 10.93% of the funds.

Cash or other assets which are limited as to use or disposition by their source. Their identity is therefore maintained, and their expenditure or use is also recorded separately.

An amount set aside in a fund to provide for an unanticipated decline in revenue or increase in expenditures.

Government income, generally derived from taxes, licenses and fees, and investment earnings, which are appropriated for the payment of public expenses.

A category of funds used to account for proceeds of specific legally restricted revenue for and generated from activities not directly related to the educational program of the college.

The state of California began using the Student Centered Funding Formula (SCFF) in the 2018-19 budget, replacing access-based funding. The intent of SCFF is to support student access, equity, and success through enrollment-based funding by prioritizing funds for districts serving students of low-income and providing districts with additional resources. 

SCFF bases general apportionments—discretionary funds available to community college districts—on three calculations of varying weight:

• A base allocation, which largely reflects enrollment. (70%)

• A supplemental allocation based on the numbers of students receiving a College Promise Grant, students receiving a Pell Grant, and students covered by AB 540. (20%)

• A student success allocation based on outcomes that include the number of students who are earning associate degrees and credit certificates, transferring to four-year colleges and universities, have completed transfer-level math and English within their first year of college, have completed nine or more career education units, and have attained the regional living wage. (10%)

SCFF when adopted included a hold harmless provision, which provided a community college district the option to receive its prior year’s apportionment plus a Cost-Of-Living Adjustment (COLA). Hold harmless was in place seven years, from 2018-19 through 2024-25. 

Beginning with the 2025-26 year, districts may use a modified form of hold harmless, able to receive the prior year’s apportionment but without COLA.

The SEA Program supports the California Community Colleges in advancing the systemwide goal to boost achievement for all students with an emphasis on eliminating achievement gaps for students from traditionally underrepresented groups.

A fund consisting of resources received and held by an entity as trustee to be expended or invested in accordance with the conditions of the trust.

Difference between budgeted and actual amounts.

A written order drawn by the governing board or its authorized officer(s) or employee(s) and allowed by the county auditor, directing the county treasurer to pay a specified amount to a designated payee. A warrant may or may not be payable on demand and may or may not be negotiable.