Jan-Feb Committee on School Finance Permanent School Fund Item 2
Review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing
February 2, 2017
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION
SUMMARY: Texas Government Code, §2001.039, establishes a four-year rule review cycle for all state agency rules, including State Board of Education (SBOE) rules. This item presents the review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter A, Budgeting, Accounting, Financial Reporting, and Auditing for School Districts; Subchapter B, Texas Education Agency Audit Functions; Subchapter C, Adoptions By Reference; and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract. The rules being reviewed provide requirements for school districts relating to budgeting, accounting, financial reporting, and auditing; Texas Education Agency (TEA) financial review functions; adoption by reference of the Financial Accountability System Resource Guide (FASRG); and the bank bid and proposal forms and the depository contract and surety bond forms.
STATUTORY AUTHORITY: The statutory authority for the rule review is Texas Government Code, §2001.039. The statutory authority for 19 TAC Chapter 109 is Texas Education Code (TEC), §§7.102(c)(32), 44.001, 44.002, 44.007, and 44.008, for Subchapter A; TEC, §§7.102(c)(32), 42.152, 44.001, 44.007, 44.008, and 44.010, for Subchapter B; TEC, §§7.055(b)(4), (36), and (37), 7.102(c)(32), 44.001, 44.007, and 44.008, for Subchapter C; and TEC, §§7.102(c)(34), 45.206, and 45.208, for Subchapter D.
Texas Government Code, §2001.039, requires a state agency to review and consider for readoption each of its rules.
TEC, §7.055(b)(4), requires the commissioner to prescribe a uniform system of forms, reports, and records necessary to fulfill reporting and recordkeeping requirements.
TEC, §7.055(b)(36), requires the commissioner to establish advisory guidelines relating to the fiscal management of a school district and report annually to the SBOE on the status of school district fiscal management as required under TEC, §44.001.
TEC, §7.055(b)(37), requires the commissioner to review school district audit reports as required under TEC, §44.008.
TEC, §7.102(c)(32), authorizes the SBOE to adopt rules concerning school district budgets and audits of school district fiscal accounts as required under TEC, Chapter 44, Subchapter A.
TEC, §7.102(c)(34), requires the SBOE to prescribe uniform bid blanks for school districts to use in selecting a depository bank.
TEC, §42.152, requires the SBOE, with the assistance of the comptroller, to develop and implement by rule reporting and auditing systems for district and campus expenditures of compensatory education funds.
TEC, §44.001, requires the commissioner to report annually to the SBOE the status of school district fiscal management.
TEC, §44.002, requires a superintendent to prepare a proposed district budget according to rules adopted by the SBOE.
TEC, §44.007, directs the SBOE to require each district to file a report of revenues and expenditures by a date set by the SBOE.
TEC, §44.008, requires each district's independent audit to meet minimum standards and be in the format prescribed by the SBOE.
TEC, §44.010, requires TEA staff to review and analyze the budgets, fiscal reports, and audit reports filed by school districts to determine if all legal requirements have been met and to collect fiscal data needed to report to the governor and the legislature.
TEC, §45.206, requires school districts to use the uniform bid blank and request for proposal forms prescribed by the SBOE when selecting a depository bank.
TEC, §45.208, requires that a school district and a bank selected as a depository enter into a depository contract using the form prescribed by the SBOE.
BOARD RESPONSE: This item is presented for review and comment.
PREVIOUS BOARD ACTION: The SBOE last adopted the review of 19 TAC Chapter 109, Subchapters A-D, in July 2014, finding that the reasons for initially adopting the rules continued to exist. Subsequent to the review, an amendment to 19 TAC §109.23, School District Independent Audits and Agreed-Upon Procedures, was adopted effective March 10, 2015. At the November 2016 SBOE meeting, the committee discussed an amendment to 19 TAC §109.51, Uniform Depository Bank Bid or Proposal Form.
FUTURE ACTION EXPECTED: The review of 19 TAC Chapter 109, Subchapters A-D, will be presented to the SBOE for adoption at the April 2017 board meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: Following is a summary of the SBOE rules in Chapter 109.
Subchapter A, Budgeting, Accounting, Financial Reporting, and Auditing for School Districts
The rule in this subchapter provides for a uniform system of accounting in public schools. Under current rules, school districts must use a uniform accounting system and maintain certain information for reporting to the TEA.
Subchapter B, Texas Education Agency Audit Functions
The rules in this subchapter provide for an annual audit plan, the completion and review of independent audits, and reporting and auditing for state compensatory education funds. School districts are held accountable for the use of compensatory education allotments through desk reviews and detailed investigations as needed to ensure compliance with the limitations in statute and rule.
Subchapter C, Adoptions by Reference
The rule in this subchapter adopts by reference the FASRG. The FASRG describes rules for financial accounting in modules for financial accounting and reporting, budgeting, purchasing, auditing, site-based decision making, accountability, data collection and reporting, management, and state compensatory education. The FASRG also includes special supplements for nonprofit charter schools. Public school districts use the FASRG to meet the accounting, auditing, budgeting, and reporting requirements set forth in the TEC and other state statutes relating to public school finance. The FASRG is available on the TEA website at http://tea.texas.gov/Finance_and_Grants/Financial_Accountability/Financ….
Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract
The rules in this subchapter provide uniform depository bank bid, proposal, contract, and surety bond forms. A school district is required to use a uniform bank bid or proposal form to obtain bids or proposals from depository banks located in the district at least 30 days before the termination of the current depository contract. However, a school district may add to the uniform bank bid or proposal form to specify additional depository requirements. Depository contracts have traditionally been executed for a two-year period, expiring on August 31 in odd-numbered years. Depository bank contracts are legal instruments that help ensure the security of all school district funds on deposit. Additionally, depository contracts contain terms and conditions describing depository bank services and fees.
As a separate item in this agenda, a proposed amendment to 19 TAC §109.51 that would update the uniform bid blank form and the uniform proposal blank form is presented for first reading and filing authorization.
ANTICIPATED REVISIONS TO RULES: At a future meeting, staff members plan to recommend changes to Subchapters A-C to clarify language and terminology and update an obsolete citation of the TEC. In addition, Subchapter C will be amended as necessary to adopt by reference updates to the FASRG.
RULE REVIEW: The TEA plans to file the notice of proposed review of 19 TAC Chapter 109, Subchapters A-D, with the Texas Register following the January/February 2017 SBOE meeting. The TEA will accept comments as to whether reasons for adopting 19 TAC Chapter 109, Subchapters A-D, continue to exist. The official comment period will begin with publication of the notice of proposed review of 19 TAC Chapter 109, Subchapters A-D, in the Texas Register.
The filing of the notice of proposed review soliciting comments as to whether the reasons for adoption continue to exist would not preclude any amendments that may be proposed at different dates through a separate rulemaking process.
FISCAL IMPACT: None.
PUBLIC AND STUDENT BENEFIT: Use of a uniform accounting system allows for consistent reporting of financial data and conditions across all school districts. In addition, the rules benefit the public and students by requiring financial accountability for education programs in the Texas school system, keeping financial management practices current with changes in state law and federal rules and regulations, and protecting public funds deposited in the event of any bank closures. Additionally, the bidding process and the standard forms help ensure fair and open competition for depository bank contracts. Standard forms also provide an advantage to districts in evaluating the best bid in regard to depository bank services and related fees.
PROCEDURAL AND REPORTING IMPLICATIONS: None.
LOCALLY MAINTAINED PAPERWORK REQUIREMENTS: None.
PUBLIC COMMENTS: None.
ALTERNATIVES: None.
OTHER COMMENTS AND RELATED ISSUES: An amendment to 19 TAC §109.51 is presented for first reading and filing authorization as a separate item in this agenda.
Staff Members Responsible:
Leo Lopez, Associate Commissioner
School Finance / Chief School Finance Officer
David Marx, Director
Financial Compliance
Attachments:
I. Statutory Citations (PDF, 52KB)
II. Text of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, Subchapter A, Budgeting, Accounting, Financial Reporting, and Auditing for School Districts; Subchapter B, Texas Education Agency Audit Functions; Subchapter C, Adoptions by Reference; and Subchapter D, Uniform Bank Bid or Request for Proposal and Depository Contract (PDF, 372KB)