The State Board of Education (SBOE) proposes amendments to §§109.1, 109.23, 109.25, 109.51, and 109.52, concerning budgeting, accounting, and auditing. Section 109.1 provides for a uniform system of accounting in public schools. Under current rules, school districts must utilize a uniform accounting system and maintain certain information for reporting to the agency. Section 109.23 and §109.25 provide for 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. Section 109.51 establishes the requirement that each school district submit a blank uniform bid form to each bank located in the district and, if desired, to other banks interested in acting as depository for all funds. The section includes the bid form prescribed by the SBOE. Section 109.52 establishes the requirement that each school district select a bank as school depository and enter into a depository contract with the bank. A school district may select and contract with more than one bank. The section includes the depository contract form with the content prescribed by the SBOE.

The proposed amendment to §109.1 clarifies that charter schools are included in the public school requirements relating to budgeting, accounting, financial reporting, and auditing.

The proposed amendment to §109.23 adds the agreed-upon procedures report for the state compensatory education program.

The proposed amendment to §109.25 uses the phrase "public school" rather than "district" and clarifies applicability to charter schools. This amendment also changes wording to provide clarification that costs charged to state compensatory education shall be for programs and services that supplement the regular education program.

No changes are proposed to the rule text in §109.51; however, proposed revisions are reflected in the uniform bank bid form entitled "Bid Form for Acting as Depository for All Funds," which is referenced as Figure 19 TAC §109.51(b).

The proposed amendment to the rule text in §109.52 would add reference to depository contract filing requirements for charter schools, in accordance with 19 TAC §100.1043, Status and Use of State Funds; Depository Contract. The depository contract form entitled "Depository Contract for Funds of Independent School Districts Under Texas Education Code, Chapter 45, Subchapter G, School District Depositories," is referenced as Figure 19 TAC §109.52(b).

The proposed revisions to modify the bid form in §109.51 and the contract form in §109.52 include wording to eliminate the necessity of districts submitting copies of safekeeping receipts to the agency and to specify that the depository and district records are subject to audit at any time. The revisions also reorder the provision relating to the venue for litigation arising from a contractual dispute. Another revision removes the beginning and ending dates of September 1 and August 31 to allow for changes in fiscal year and would allow a district and its depository to mutually agree to extend a depository contract for one additional two-year term. This revision includes new language regarding extension of the contract and bid. In addition, a revision to the contract form includes clarification of the provision relating to the collateral pledge agreement.

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. The updates to the bid form and the contract form have been reviewed and approved by the Texas Attorney General's Office. Recommendations made by the Texas Attorney General's Office have been incorporated into the forms.

Tom Canby, Managing Director of the Division of School Financial Audits, has determined that for the first five-year period the sections are in effect there will be no fiscal implications for state or local government as a result of enforcing or administering the sections.

Mr. Canby has determined that for each year of the first five years the sections are in effect the public benefit anticipated as a result of enforcing the sections will be: the use of a uniform accounting system that allows for consistent reporting of financial data and conditions across all school districts; the improvement of financial accountability for education programs in the Texas school system and keeping financial management practices current with changes in state law and federal rules and regulations; and the protection of 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 also provide an advantage to districts in evaluating the best bid in regard to depository bank services and related fees. There will not be an effect on small businesses. There is no anticipated economic cost to persons required to comply with the sections as proposed.

Comments on the proposal may be submitted to Cristina De La Fuente-Valadez, Accountability Reporting and Research, 1701 North Congress Avenue, Austin, Texas 78701, (512) 463-9701. Comments may also be submitted electronically to rules@tea.state.tx.us or faxed to (512) 475-3499. All requests for a public hearing on the proposed amendment submitted under the Administrative Procedure Act must be received by the commissioner of education not more than 15 calendar days after notice of the proposal has been published in the Texas Register.

The amendments are proposed under the Texas Education Code (TEC), §7.102(c)(34), which requires the SBOE to prescribe uniform bid blanks for school districts to use in selecting a depository bank as required under TEC, §45.206; and §45.208, which requires the SBOE to prescribe the form and content of a depository contract or contracts, bond or bonds, or other necessary instruments setting forth the duties and agreements pertaining to a depository.

The amendments implement the Texas Education Code, §§7.102(c)(34), 45.206, and 45.208.