The State Board of Education (SBOE) adopts amendments to §§109.1, 109.23, 109.25, 109.51, and 109.52 concerning budgeting, accounting, and auditing. Section 109.25 and §109.51 are adopted with changes to the proposed text as published in the August 9, 2002, issue of the Texas Register (27 TexReg 6934). Sections 109.1, 109.23, and 109.52 are adopted without changes to the proposed text and will not be republished.

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

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

The adopted amendment to §109.25 clarifies applicability to charter schools. In response to public comment, this section was modified to substitute the phrase "school district and charter school" rather than "public school." The adopted 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.

For clarification purposes, language was modified in §109.51(a) to specify that the bid form must be mailed to each bank located in the school district. No changes were made to the revisions 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 adopted amendment to the rule text in §109.52 adds 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). No changes were made to the form in this section since published as proposed.

No changes were made to the revisions to modify the bid form in §109.51 and the contract form in §109.52 since published as proposed. The adopted revisions 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 were reviewed and approved by the Texas Attorney General's Office. Recommendations made by the Texas Attorney General's Office were incorporated into the forms when filed as proposed.

The effective date of the amendments is 20 days after filing as adopted with the Texas Register. In accordance with TEC, §7.102(f), the SBOE approved the rule action at second reading and final adoption by a vote of two-thirds of its members to specify an effective date earlier than September 1, 2003. This earlier effective date is necessary in order to implement necessary changes to depository contracts for the 2002-2003 school year.

The following comment was received regarding adoption of the amendments.

Comment. The Texas Association of School Boards (TASB) expressed concerns that changing the words "school district" to "public school" might be interpreted to mean that each individual public school campus is responsible for the bulk of documentation and reporting related to compensatory education funds. They felt that such a change would result in added paperwork and staff time for district campuses. TASB stated that the responsibility for these duties lies primarily with each school district's administrative office. TASB recommended that the phrase "school district and charter school" be used rather than "public school."

Agency Response. Campuses are already responsible for implementing campus improvement plans that explain use of the foundation school program compensatory education allotment. The proposed wording change from district to public school should not create a burden on individual campuses; however, the SBOE modified §109.25 to substitute the phrase "school district and charter school" rather than "public school."

The amendments are adopted 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.