The Texas Education Agency (TEA) adopts an amendment to §109.41, concerning the Financial Accountability System Resource Guide, with changes to the proposed text as published in the August 31, 2001, issue of the Texas Register (26 TexReg 6531). The section adopts by reference the Financial Accountability System Resource Guide (Resource Guide) as the TEA's official rule. 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. Public school districts use the Resource Guide to meet the accounting, auditing, budgeting, and reporting requirements as set forth in the Texas Education Code (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.

Under §109.41(b), the commissioner of education shall amend the Resource Guide, adopting it by reference, as needed. The adopted amendments to the Resource Guide include changes to auditing and financial accounting and reporting guidelines for management of public funds by school districts and charter schools and other minor edits. These adopted amendments constitute Version 8.1 of the Resource Guide.

The following change was made to §109.41 since published as proposed.

Subsection (a) was modified to reflect December 2001 instead of November 2001 as the effective date of the amendments to the Resource Guide. The later effective date was needed to allow additional time to incorporate changes made to the Resource Guide and the Special Supplement to the Financial Accountability System Resource Guide, Charter Schools (Charter School Special Supplement) in response to public comments.

Two technical corrections were made to Modules Nine and Ten of the Resource Guide since the amendment to §109.41 was published as proposed. The corrections reconcile conflicting language for consistency throughout the modules.

In response to public comments, the following changes were made to the Charter School Special Supplement since the amendment to §109.41 was published as proposed.

Introduction, page 1, was revised to indicate that the requirements discussed in the Charter School Special Supplement might not apply to the non-charter school programs, functions, services, and/or activities of the charter holder.

Section 1.2.4.10, Fixed Asset Exhibit, page 5, was revised to indicate that a fixed asset exhibit would not be required for fiscal years starting prior to September 1, 2001.

Section 3.3, Competitive Bidding on Certain Public Works Contracts, page 15, was revised to indicate that competitive bidding requirements on certain public works contracts apply to charter schools unless the charter school's charter otherwise describes additional procedures for purchasing and contracting, and the procedures are approved by the State Board of Education (SBOE).

Section 3.4, Competitive Procurement, page 16, was revised to specifically identify the requirements applicable to charter schools pursuant to federal statutes and regulations.

Appendix 5, page 34, was revised to add note 10 in order to clarify the reporting requirement regarding the footnote disclosure regarding group health insurance.

The following comments were received regarding the Charter School Special Supplement. The comments were made by participants of a stakeholder's meeting conducted on October 15, 2001, to discuss the contents contained in the special supplement.

Comment. An individual commented that the TEA should: "Clarify that the annual financial statement due 12/1/01 does not have to include accounting of all property acquired since inception; not until 12/1/02."

Agency Response. The agency agrees and the Charter School Special Supplement was appropriately revised to indicate that a fixed asset exhibit would not be required for fiscal years starting prior to September 1, 2001. (See Section 1.2.4.10, Fixed Asset Exhibit, page 5.)

Comment. An individual commented that the TEA should: "Clarify that charter/SBOE approved policies may substitute for competitive bidding requirements in LGC."

Agency Response. The agency agrees and the Charter School Special Supplement was appropriately revised to indicate that competitive bidding requirements on certain public works contracts apply to charter schools unless the charter school's charter otherwise describes additional procedures for purchasing and contracting, and the procedures are approved by the SBOE. (See Section 3.3, Competitive Bidding on Certain Public Works Contracts, page 15.)

Comment. An individual commented that the TEA should: "Clarify requirements applicable to non-charter activities."

Agency Response. The agency agrees and the Charter School Special Supplement was appropriately revised to indicate that the requirements discussed in the special supplement might not apply to the non-charter school programs, functions, services, and/or activities of the charter holder. (See Introduction, page 1.)

Comment. An individual commented that the TEA should: "Clarify requirements that flow from federal law."

Agency Response. The agency agrees and the Charter School Special Supplement was appropriately revised to specifically identify the requirements applicable to charter schools pursuant to federal statutes and regulations. (See Section 3.4, Competitive Procurement, page 16.)

Comment. An individual commented that the TEA should: "Clarify that if any portion of funds are public, then purchasing and contracting requirements are triggered."

Agency Response. The agency disagrees and the Charter School Special Supplement was not revised to address this comment because House Bill (HB) 6, 77th Texas Legislature, 2001, did not state that the requirements discussed in the Local Government Code, Chapter 271, Subchapter B, applied only to public funds.

Comment. An individual commented that the TEA should: "Please add a statement that says rules adopted under HB 6 control."

Agency Response. The agency disagrees and the Charter School Special Supplement was not revised to address this comment. As regulatory provisions are added to the Texas Administrative Code (TAC), the special supplement will be amended to ensure that it does not conflict with TAC requirements.

Comment. An individual commented that the TEA should: "Please provide a grace period for letting of contracts under HB 6; please adopt this period in a formal rule for all matters for which rules had not been adopted as of 9/1/01."

Agency Response. This comment did not clearly identify the issue that the individual wanted to have addressed. The Charter School Special Supplement was not revised to address this comment. HB 6 does not authorize the TEA to grant grace periods or extensions or in any manner waive the statutory requirements effective on September 1, 2001. As regulatory provisions are added to the TAC to address the mandates discussed in HB 6, the special supplement will be amended to ensure consistency with TAC rules.

Comment. An individual commented that the TEA should: "Please send follow-up letter to 10/9/2001 letter saying that as a result of this stakeholder meeting the financial statement due 12/1/01 does not have to include audit of all property acquired since inception of charter. Although prudent, not required until statement provided on 12/1/02."

Agency Response. This comment did not appear to address any specific provisions discussed in the special supplement. Consequently, the Charter School Special Supplement was not revised to address this comment.

Comment. Several individuals noted some confusion regarding the footnote disclosure regarding group health insurance, as required by HB 3343, 77th Texas Legislature, 2001.

Agency Response. The agency agrees and in order to clarify the reporting requirement, note 10 was added to Appendix 5 of the Charter School Special Supplement. (See Appendix 5, page 34.)

The amendment is adopted under the Texas Education Code, §§7.055, 44.001, 44.007, and 44.008, which authorizes the commissioner of education to establish advisory guidelines relating to fiscal management of a school district and the State Board of Education to establish a standard school fiscal accounting system in conformity with generally accepted accounting principles.