The State Board of Education (SBOE) adopts an amendment to §109.51, concerning uniform depository bank bid or proposal form. The amendment is adopted without changes to the proposed text as published in the March 3, 2017 issue of the Texas Register (42 TexReg 859) and will not be republished. The adopted amendment facilitates the acquisition of a depository contract that is in compliance with current banking standards.

REASONED JUSTIFICATION. The rules in 19 TAC Chapter 109, Subchapter D, establish requirements related to a school district's selection of and contract with a bank to serve as the district's depository for all funds.

Specifically, §109.51 establishes the requirement that each school district, before the current depository contract expires, choose whether to select a depository bank through competitive bidding or through requests for proposals and then submit a blank uniform bid or proposal form to each bank in the district and, if desired, to other interested banks. Section 109.51 also establishes the requirement that a district file the selected form with the Texas Education Agency. The section includes the bid and proposal forms prescribed by the SBOE.

The adopted amendment to §109.51 updates the rule to comply with current banking standards by facilitating the acquisition of a depository contract that a school district must use with a depository bank.

Both the uniform bid blank form, adopted as Figure: 19 TAC §109.51(c), and the uniform proposal blank form, adopted as Figure: 19 TAC §109.51(d), were revised as follows.

The Definitions and Instructions section was revised to include the right to use a sub-depository bank other than the primary bank and specify that those deposits will be collateralized.

The Bank Compensation section was amended to specify that the district may pay for the bank's services by targeted balances or by fees and change the methodology when appropriate. The bank is required to detail any differences in related costs for either option.

The Compensation Based on a Targeted Balance section was amended to specify that a money market mutual fund used for excess collected balance daily investments must be one that strives to maintain a $1 NAV (Net Asset Value).

The District Investments section was modified to update the single maturity time deposits amount from more than $100,000 to more than $250,000.

The Collateral section was amended to remove language that requires the bank to specify whether it will use corporate surety bonds or pledged securities as collateral for the district's funds. Removing the language avoids duplication and contradiction with the section on Eligible Collateral.

The Collateral Conditions section was amended to remove language stating that the district may specify any limitations on its preferred custodial arrangement.

The Eligible Collateral section was revised to add language allowing the use of voluntary pooled collateral (if available) or a Federal Home Loan Bank Letter of Credit.

The Banking Services Fees section was modified to include language stating that all fees that may be charged to supply the services must be included or will not be eligible under the contract and that both the district and the bank reserve the right to mutually agree upon any change of contract terms or pricing during the contract extension periods.

The Depository Information section was amended to remove reference to the Uniform Bank Performance Report and add a requirement that audited financial statements will be required for each year of the contract.

The Consolidated Account Structure with Sweep Mechanism section was updated to add an option for the district to specify that it will not accept offshore investments as sweep investment vehicles; clarify that the district does not guarantee that it will maintain the account structure at the same level; and state that a money market fund used for the sweep proposal must strive to maintain a $1 NAV.

The Automated Cash Management Information section was amended to include language that the district is interested in online retention of cash management information. The amendment also makes optional the language relating to controlled disbursement presentment totals and the questions about controlled disbursements.

The Remote Deposit section was modified to clarify that the district is interested in using remote check deposit for certain locations.

The Standard Disbursing Services section was amended to update language to ask if the bank images all paid checks, deposit items, and deposit slips.

The Positive Pay section was modified to state that the district requires positive pay services if available at the bank for designated accounts on which checks are written. In addition, "payroll" was changed to "payee" in subsection g.

The Account Reconciliation section was amended to include a new subsection requesting that the bank provide references of customers who use the XX ledger system.

The Funds Transfer and Wire Services section was revised in subsection f to ask if templates and template storage are available for repetitive transfers.

The Optical Imaging section was amended to include new language in subsection a to ask how long certain items and reports are available online.

The Automated Clearinghouse (ACH) Services section was amended to state that the district requires ACH transactions for payable and receivable transactions. The section was also amended to include new subsections f and g that ask if ACH positive pay is available and if ACH debits the account on day of initiation or settlement.

The title of section 10 was changed to Safekeeping Services. Language in the section was amended to specify that the district may require the bank or another eligible offeror to provide book-entry safekeeping services for any securities the district owns and that the district will make all its investments and transmit instructions for clearing and safekeeping to the bank in writing or electronically. Language relating to the Federal Reserve or a Federal Home Loan Bank was updated.

The Collateral Requirements section was revised to state that the bank must meet all the requirements, including those beyond the Public Funds Collateral Act, as stated in the section. An update was also made to specify that authorized collateral includes only approved securities as specified by the Texas Government Code, Chapter 2257, Public Funds Collateral Act, and noted previously in the section.

The Account Analysis section was amended in subsection b to ask if account analysis is imaged monthly on electronic media.

The Monthly Statements section was modified to specify that the bank must state when monthly statements will be available online and on paper. In addition, language was amended to ask if statements are imaged and/or put on electronic media monthly.

Two new sections were added under Optional Services. Section 5 relates to check printing and asks if the bank offers check printing services, the deadline for same-day and next day printing, and where checks are printed and sent from. Section 6 relates to smart safes and asks if the bank offers smart safes and if smart safes are cost effective given the district's deposit history.

The amendment was approved by the SBOE for first reading and filing authorization at its February 3, 2017 meeting and for second reading and final adoption at its April 21, 2017 meeting.

In accordance with the TEC, §7.102(f), the SBOE approved the amendment for adoption by a vote of two-thirds of its members to specify an effective date earlier than the beginning of the 2017-2018 school year. The earlier effective date will allow school districts the opportunity to use the new forms in order to comply with banking standards.

SUMMARY OF COMMENTS AND RESPONSES. No public comments were received on the proposal.

STATUTORY AUTHORITY. The amendment is adopted under the Texas Education Code (TEC), §7.102(c)(34), which requires the State Board of Education (SBOE) to prescribe uniform bid blanks for school districts to use in selecting a depository bank; TEC, §45.206, which requires school districts to use the uniform bid blank and request for proposal forms prescribed by the SBOE when selecting a depository bank; and TEC, §45.208, which requires that a school district and a bank selected as a depository enter into a depository contract using the form prescribed by the SBOE.

CROSS REFERENCE TO STATUTE. The amendment implements the Texas Education Code, §§7.102(c)(34), 45.206, and 45.208.