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Proposed Repeal and Readoption of 19 TAC Chapter 89, Adaptions for

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Proposed Repeal and Readoption of 19 TAC Chapter 89, Adaptions for

    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

    contract.

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

    bid form.

    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.

ALTERNATIVES: None.

    OTHER COMMENTS AND RELATED ISSUES: None.

Respectfully submitted,

Shirley J. Neeley, Ed.D.

    Commissioner of Education

Staff Members Responsible: Adam Jones, Associate Commissioner

     Finance and Information Technology

     Rita Chase, Acting Managing Director

     Financial Audits

    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

     Figure 1

     Figure 2

     Figure 3

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