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 22, 2003, issue of the Texas Register (28 TexReg 6665). The section adopts by reference the "Financial Accountability System 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, management, and state compensatory education. 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. Under §109.41(b), the commissioner of education shall amend the "Resource Guide," adopting it by reference, as needed. The "Resource Guide" is available at http://www.tea.state.tx.us/school.finance/ on the TEA website.

The adopted amendment to §109.41 changes the date from "January 2003" to "November 2003" to reflect the effective date of amendments to the "Resource Guide." The adopted amendments to the "Resource Guide" incorporate changes to the state compensatory education module and other changes due to the 78th Texas Legislature 2003; amendment of the charter school financial accounting and reporting standards; and other minor edits.

The rule text of §109.41 is adopted without changes; however, the document adopted by reference, the "Resource Guide," is adopted with the following changes made in response to public comments.

In Modules 1 and 10, the Fund Balance and Cash Flow Calculation Worksheet was modified to include estimates for delayed payments and underpayments from state and federal sources.

In Modules 1 and 10, the Schedule of Expenditure of Federal Awards in the Annual Financial and Compilation Report was modified to include reimbursements of costs from the Medicaid Administrative Claiming Program (MAC) funds received by school districts and charter schools.

Module 12 and the Nonprofit Charter School Chart of Accounts Special Supplement were updated to include reference to the changes made in Modules 1 and 10.

The following comments were received regarding adoption of the amendment.

Comment. A Stephenville Independent School District official commented that the Fund Balance and Cash Flow Calculation Worksheet (Worksheet) needs to be revised to reflect changes to future cash flows that will affect school districts.

Agency response. The agency, in general, agrees with this comment and modified the Worksheet to include estimates for delayed payments and underpayments from state and federal sources.

Comment. A State Auditor's Office official commented that reimbursements of costs from the Medicaid Administrative Claiming Program (MAC) funds received by school districts and charter schools (from Department of Human Services) should be included in the Schedule of Expenditure of Federal Awards in the Annual Financial and Compilation Report. The "Resource Guide" has not required the reimbursement to be listed in this schedule.

Agency response. The agency, in general, agrees with this comment and has made modifications to reflect this change in reporting.

Comment. An individual commented that reuse of one of the financial account codes may affect longitudinal user data. This individual suggested that the agency use a new program intent code and delete two previously required codes.

Agency response. The agency agrees that this is an important issue but it is not feasible to make immediate changes to financial account codes effective for the 2003-2004 school year. This change will be considered in a future amendment process.

Comment. An education service center official commented that combining the Program Intent Codes 26 and 27 was not ideal for tracking historical data. This individual suggested use of a different code, such as 31.

Agency response. The agency agrees that this is an important issue but it is not feasible to make immediate changes to financial account codes effective for the 2003-2004 school year. This change will be considered in a future amendment process.

The amendment is adopted under the Texas Education Code, §§7.055, 44.001, 44.007, and 44.008, which authorize the commissioner of education to prescribe the standards for the required agreed-upon procedures of school district leaver records and 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.

The adopted amendment implements the Texas Education Code, §§7.055, 44.001, 44.007, and 44.008.