Review of 19 TAC Chapter 109, Budgeting,
Accounting, and Auditing
April 27, 2006
COMMITTEE ON SCHOOL FINANCE/PERMANENT SCHOOL FUND: DISCUSSION
STATE BOARD OF EDUCATION: NO ACTION
SUMMARY: Texas Government Code, ?2001.039, establishes a four-year 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. The rules being reviewed
provide requirements for school districts relating to budgeting, accounting, financial reporting,
and auditing; Texas Education Agency (TEA) audit functions; adoption by reference of the
Financial Accountability System Resource Guide; and the uniform bank bid and depository
STATUTORY AUTHORITY: The statutory authority for the 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, ?7.055,
??7.102(c)(32), 44.001, 44.008, 44.010, and 42.152, for Subchapter B; TEC, ??7.055,
7.102(c)(32), 44.001, 44.002, 44.007, and 44.008, for Subchapter C; and TEC, ??7.102(c)(34),
45.206, and 45.208, for Subchapter D.
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 2002, finding that the reasons for initially adopting the rules continue to
exist. Subsequent amendments have been made in Subchapters A and B to clarify that costs
charged to the state compensatory education allotment must be for programs and services that
supplement the regular education program. Subsequent amendments have been made to
Subchapter C in order to update the Financial Accountability System Resource Guide.
Amendments have also been made to Subchapter D to update the depository contract form and
FUTURE ACTION EXPECTED: The review of 19 TAC Chapter 109, Budgeting, Accounting, and Auditing, will be presented to the SBOE for adoption at the July 2006 meeting.
BACKGROUND INFORMATION AND SIGNIFICANT ISSUES: The SBOE rules in 19
TAC Chapter 109 are organized as follows: 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 and Depository Contract. Following is a summary of each subchapter.
Subchapter A. Budgeting, Accounting, Financial Reporting, and Auditing for School Districts
The rules in this subchapter provide 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 agency. No changes are recommended in this subchapter at this time.
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 assure compliance with the limitations in statute and rule. No changes are recommended in this subchapter at this time.
Subchapter C. Adoptions By Reference
The rule in this subchapter adopts by reference the Financial Accountability System Resource Guide (Resource Guide). The Resource Guide describes rules for financial accounting such as financial reporting, budgeting, purchasing, auditing, site-based decision making, data collection and reporting, and management. The Resource Guide also includes a special supplement for charter schools. Public school districts use the Resource Guide to meet the accounting, auditing, budgeting, and reporting requirements as set forth in the TEC and other state statutes relating to public school finance. The Resource Guide is available at www.tea.state.tx.us/school.finance/ on the TEA website. No changes are recommended in this subchapter at this time.
Subchapter D. Uniform Bank Bid and Depository Contract
The rules in this subchapter provide uniform depository bank bid and contract forms as well as a surety bond form. School districts are required to use a uniform bank bid form to obtain bids from depository banks located in the district at least 30 days before the termination of the current depository contract. However, school districts may add to the uniform bank bid 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 contractual terms and conditions describing depository bank services and fees. Updates to the bid form and the contract form as well as a new surety bond form were adopted by the SBOE to be effective October 13, 2002. The surety bond form sets forth requirements relating to: guarantee; designation of depository owner(s) and account(s); limit of liability; payment of loss; termination or cancellation; responsibility of bank; consolidation or merger; and sole use and benefits. Proposed amendments to this subchapter are discussed in the Anticipated Revisions to Rules section of this item.
ANTICIPATED REVISIONS TO RULES: The TEA staff anticipate presenting proposed
amendments to 19 TAC Chapter 109, Subchapter D, Uniform Bank Bid and Depository Contract,
for first reading and filing authorization in July 2006. The proposed amendments would clarify wording in the depository contract form and the bid form.
RULE REVIEW: The TEA plans to file the notice of proposed review of 19 TAC Chapter 109,
Budgeting, Accounting, and Auditing, with the Texas Register following the April 2006 SBOE
meeting. The TEA will accept comments as to whether reasons for adopting 19 TAC Chapter
109 continue to exist. The official comment period will begin with the publication of the
proposed review of 19 TAC Chapter 109 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
public and student benefit anticipated is improving 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 proposed standard
forms help ensure fair and open competition for depository bank contracts. Standard forms
provide also an advantage to districts in evaluating the best bid in regard to depository bank
services and related fees.
PROCEDURAL AND REPORTING IMPLICATIONS: None.
PUBLIC COMMENTS: None.
OTHER COMMENTS AND RELATED ISSUES: None.
Shirley J. Neeley, Ed.D.
Commissioner of Education
Staff Members Responsible: Adam Jones, Associate Commissioner
Finance and Information Technology
Rita Chase, Acting Managing Director
Attachments: I. Statutory Citations
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 and Depository Contract