PART 2. TEXAS EDUCATION AGENCY
CHAPTER 109. BUDGETING, ACCOUNTING, AND AUDITING
SUBCHAPTER AA. COMMISSIONER'S RULES CONCERNING FINANCIAL ACCOUNTABILITY
The Texas Education Agency (TEA) adopts an amendment to §109.1001, concerning financial accountability ratings. The amendment is adopted with changes to the proposed text as published in the February 10, 2023 issue of the Texas Register (48 TexReg 607) and will be republished. The adopted amendment updates financial accountability rating information and rating worksheets for school districts and open-enrollment charter schools, including adjustments required under Texas Education Code (TEC), §39.087, as added by House Bill (HB) 1525, 87th Texas Legislature, Regular Session, 2021. The adopted amendment also addresses adjustments for scores and ratings upon appeal for the indicator for the timely submission of a complete annual financial report.
REASONED JUSTIFICATION: Section 109.1001 includes the financial accountability rating system and rating worksheets that explain the indicators that TEA will analyze to assign financial accountability ratings for school districts and open-enrollment charter schools. The rule also specifies the minimum financial accountability rating information that a school district or an open-enrollment charter school is to report to parents and taxpayers in the district.
The adopted amendment clarifies the financial accountability rating indicators terminology used to determine each school district's and charter school's rating for the 2022-2023 rating year and subsequent years. The adopted amendment also includes some pandemic-related adjustments to the Financial Integrity Rating System of Texas (FIRST) based on TEC, §39.082(b) and (d), which require that the FIRST system include uniform indicators that measure the financial management performance and future financial solvency of a school district or open-enrollment charter school and that the commissioner evaluate indicators at least once every three years. Consequently, all school districts will pass Indicator 5 and be awarded the maximum points for Indicators 10 and 15 for School FIRST; all charter schools will be awarded the maximum points for Indicators 10 and 16 under Charter FIRST; and certain federal funds will be added to the administrative cost ratio calculation for Indicator 13 for School FIRST and Indicator 14 for Charter FIRST. At adoption, a change was made to specify that all school districts will be awarded the maximum points for Indicator 14 under School FIRST and that all charter schools will be awarded the maximum points for Indicator 15 under Charter FIRST.
Adopted new subsection (e)(7) has been added, including new Figure: 19 TAC §109.1001(e)(7) that clarifies terminology and calculations for School FIRST indicators for years subsequent to the 2021-2022 rating year.
Adopted new subsection (f)(7) has been added, including new Figure: 19 TAC §109.1001(f)(7) that clarifies terminology and calculations for Charter FIRST indicators for years subsequent to the 2021-2022 rating year.
The worksheets, dated June 2023, differ from the current worksheets, dated October 2021, as follows.
Figure: 19 TAC §109.1001(e)(7) (.pdf)
The calculation for Indicator 5 has been revised to use total net position instead of unrestricted net position in the calculation, and the scoring for Indicator 5 has changed from a critical pass or fail indicator with a ceiling for passing only the second part of the indicator to a ceiling indicator for both parts. In response to public comment, Indicator 5 was modified at adoption to allow school districts with a numeric growth indicator of 1,000 students in membership over five years to pass the indicator.
The statement that Indicator 10 will not be utilized for the 2021-2022 rating year has been deleted.
In response to public comment, Indicator 11 was modified at adoption to allow school districts with a numeric growth indicator of 1,000 students in membership over five years to pass the indicator.
In response to public comment, clarification has been added to Indicator 12 to specify that the interest and sinking value will be used as the assessed property value in the calculation for Indicator 12, and the wording for Indicator 12 has been revised to read, "What is the correlation between future debt requirements and the district's assessed property value?"
The calculation for Indicator 13 has been revised to include funds 266, 281, 282, and 283 in the calculation for the administrative cost ratio.
The statement that Indicator 15 will not be utilized for the 2021-2022 rating year has been deleted.
Indicator 17 has been revised to include the auditor's disclosure of substantial doubt about the school district's ability to continue as a going concern. The wording for Indicator 17 has been revised to read, "Did the external independent auditor report that the AFR was free of any instance(s) of material weakness in internal controls over financial reporting and compliance for local, state, or federal funds and free from substantial doubt about the school district's ability to continue as a going concern? (The AICPA defines material weakness.) (If the school district fails Indicator 17, the maximum points and highest rating that the school district may receive is 79 points, C = Meets Standard Achievement.)"
Indicator 20 has been revised to read, "Did the school district's administration and school board members discuss any changes and/or impact to local, state, and federal funding at a board meeting within 120 days before the district adopted its budget?"
Figure: 19 TAC §109.1001(f)(7) (.pdf)
The statement that Indicator 10 will not be utilized for the 2021-2022 rating year has been deleted.
The calculation for Indicator 14 has been revised to add funds 266, 281, 282, and 283 in the calculation for the administrative cost ratio.
The statement that Indicator 16 will not be utilized for the 2021-2022 rating year has been deleted.
Indicator 18 has been revised to include the auditor's disclosure of substantial doubt about the charter school's ability to continue as a going concern. The wording for Indicator 18 has been revised to read, "Did the external independent auditor report that the AFR was free of any instance(s) of material weakness in internal controls over financial reporting and compliance for local, state, or federal funds and free from substantial doubt about the charter school's ability to continue as a going concern? (The AICPA defines material weakness.) (If the charter school fails Indicator 18, the maximum points and highest rating that the charter school may receive is 79 points, C = Meets Standard Achievement.)"
Indicator 21 has been removed as an indicator for Charter FIRST.
Adopted new §109.1001(n)(9)(A) and (B) has been added to describe adjustments for scores and ratings upon appeal for the indicator for the timely submission of a complete annual financial report, which is currently Indicator 1 for School FIRST and Charter FIRST.
SUMMARY OF COMMENTS AND AGENCY RESPONSES: The public comment period on the proposal began February 10, 2023, and ended March 13, 2023. Following is a summary of public comments received and corresponding agency responses.
School FIRST Indicator 5
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), the Texas Association of School Business Officials (TASBO) recommended that the agency amend the definition for fast-growing districts by adding a numeric growth indicator in addition to the current percentage-based calculation. Specifically, TASBO recommended that the agency revise Indicator 5 to recognize the growth of districts that either increase by 7% (students in membership) or that grow by at least 1,500 students over a five-year period.
Response: The agency agrees that a numeric growth indicator should be added to Indicator 5 as an alternative to pass the indicator. Instead of a 1,500 student growth indicator, however, the agency added a numeric growth indicator of 1,000 students in membership over five years to Indicator 5 to allow school districts to pass the indicator.
School FIRST Indicator 7
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), a school district administrator and the Texas Association of School Administrators (TASA) proposed that the agency consider making the cash/investment reserve scoring uniform among school districts and charter schools.
Response: The agency disagrees that the number of days of cash on hand required to receive 10 points for Indicator 7 should be adjusted to align with the number of days of cash on hand required for charter schools to receive 10 points. This indicator measures the number of days of expenses that could be paid from existing cash and cash equivalents. Charter schools have a lower cash threshold because they generally receive cash monthly in near equal amounts whereas school districts may not receive cash for several months, depending on their payment schedule, so they need to have larger cash reserves to ensure cash is available to meet expenses. Although charter schools may receive 10 points in Charter FIRST for having 60 or more days of cash on hand, only a range of 66% to 82% of charter schools over the past five rating years have had 60 or more days of cash on hand as compared to a range of 90% to 97% of school districts over the same period of time. Additionally, 80% to 93% of school districts have had 90 or more days of cash on hand over the past five rating years and received 10 points. The agency has maintained language as proposed concerning Indicator 7.
School FIRST Indicator 8
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), a school district administrator and TASA proposed that the agency consider making the current ratio scoring uniform among school districts and charter schools. The administrator also stated that using a lower liquidity threshold for charter schools may provide stakeholders with a false sense of financial stability. TASA stated that independent school districts are held to a higher standard under FIRST when measuring assets to liabilities to cover short-term debt.
Response: The agency disagrees that the current assets to current liabilities ratio required to receive 10 points for Indicator 8 should be adjusted to align with the ratio required for charter schools to receive 10 points. Charter schools have a lower ratio requirement because they generally receive cash monthly in near equal amounts whereas school districts may not receive cash for several months, depending on their payment schedule, so they need to have a greater amount of current assets to ensure their short-term obligations can be met. About 80% of school districts have had a current assets to current liabilities ratio of 3.0 or greater over the past five rating years and received the maximum points of 10 for the indicator. Charter schools may receive the maximum points of 10 points in Charter FIRST for having a current assets to current liabilities ratio of 2.0 or greater and a comparable range of 77% to 89% of charter schools have met that ratio over the past five rating years. The agency has maintained language as proposed concerning Indicator 8.
School FIRST Indicator 9
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), a school district administrator proposed that the agency consider making the days of cash on hand threshold uniform among school districts and charter schools. The administrator stated that Indicator 9 holds school districts to a higher standard than charter schools. The administrator stated that school districts that do not meet the initial measurement (revenues exceed expenditures) for Indicator 9 pass the indicator if the days of cash on hand is 60 or more while charter schools that do not meet the initial measurement pass the indicator if the days of cash on hand is 40 days or more.
Response: The agency disagrees that if the initial measure for Indicator 9 is not met and that the number of days of cash on hand required to receive the maximum points of 10 should be adjusted to align with the number of days of cash on hand required for charter schools to receive the maximum points of 5 points for Indicator 9 in Charter FIRST. Charter schools have a lower cash threshold because they generally receive cash monthly in near equal amounts whereas school districts may not receive cash for several months, depending on their payment schedule, so they need to have larger cash reserves to ensure cash is available to meet expenses. Additionally, almost all school districts, about 98%, receive the maximum points for Indicator 9 year after year. The agency has maintained language as proposed concerning Indicator 9.
School FIRST Indicator 10
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), a school district administrator commented that Indicator 10 will not result in an accurate depiction of districts' financial integrity because of dramatic changes to both district budgets and enrollments due to the coronavirus disease (COVID-19) beginning with school year 2019-2020 and extending through school year 2021-2022. The administrator stated that hold harmless was awarded to districts in all three years used to calculate the grade for the 2022-2023 FIRST rating. The administrator further stated that TEA suspended Indicator 10 in the current grading period due to challenges that student attendance projections and hold harmless state funding presented as a result of COVID-19 and that it makes sense to suspend it again for the FIRST grading year that will include all three COVID-19 years (2019-2020, 2020-2021, and 2021-2022).
Response: The agency agrees that Indicator 10 should not be evaluated for School FIRST rating year 2022-2023. The agency has maintained language as proposed concerning Indicator 10; however, all school districts will receive the maximum of 10 points for Indicator 10 for rating year 2022-2023.
School FIRST Indicator 11
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), TASBO recommended that the agency amend the definition for fast-growing districts by adding a numeric growth indicator in addition to the current percentage-based calculation. A school district administrator commented that fast-growing school districts receive a scoring reprieve, but using a percentage increase of students in membership does not accurately reflect the different circumstances of growing school districts. The administrator further commented that a school district's ability to rely on Interest and Sinking (I&S) tax revenues, likely from a growing tax base, to service new debt is not considered when scoring this indicator.
Response: The agency disagrees that Indicator 11 should be replaced with the ratio of debt to assessed value but agrees that a numeric growth indicator should be added as an alternative to pass the indicator. Instead of a 700 student growth indicator, however, the agency added a numeric growth indicator of 1,000 students in membership over five years to Indicator 11 to allow school districts to pass the indicator.
School FIRST Indicator 12
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), TASBO recommended that the agency use the I&S property value in the calculation for Indicator 12 for districts with Chapter 313 agreements, which will be higher than the Maintenance & Operations value and which TASBO believes is a better reflection of the district's ability to pay. TASBO also recommended Indicator 12 be reworded because the current wording implies that districts that lose points on this indicator may be at risk of debt default. Additionally, TASBO recommended that enrollment growth be factored into the calculation for Indicator 12 with different ranges of points for districts that are growing rapidly as compared to other districts.
Response: The agency disagrees that enrollment growth should be factored into the calculation for Indicator 12 with different ranges of points but agrees that the I&S property value should be used in the calculation. The agency modified Figure: 19 TAC §109.1001(e)(7) at adoption to specify the I&S value as the assessed property value that is used in the calculation for Indicator 12 for all school districts. Additionally, the agency reworded Indicator 12 to read, "What is the correlation between future debt requirements and the district's assessed property value?"
School FIRST Indicator 13
Comment: Two administrators and TASA commented that the administrative cost ratio scoring criteria is unfair and should be uniform among school districts and charter schools.
Response: The agency disagrees that administrative cost ratio scoring should be uniform between school districts and charter schools primarily because of economies of scale that are generally experienced by school districts having a greater number of students. The agency has maintained language as proposed concerning Indicator 13.
School FIRST Indicator 15
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), a school district administrator commented that Indicator 15 will not result in an accurate depiction of districts' financial integrity because of dramatic changes to enrollments due to COVID-19 beginning with school year 2019-2020 and extending through school year 2021-2022. The administrator proposed that Indicator 15 be suspended for the 2022-2023 rating year.
Response: The agency agrees that Indicator 15 should not be evaluated for School FIRST rating year 2022-2023. The agency has maintained language as proposed concerning Indicator 15; however, all school districts will receive the maximum of 5 points for this indicator for rating year 2022-2023.
School FIRST Indicator 20
Comment: Concerning proposed Figure: 19 TAC §109.1001(e)(7), TASA commented that under the proposed changes, independent school district (ISD) administrators and trustees would be required to discuss any changes and/or impact to local, state, and federal funding at a publicly held school board meeting within 120 days prior to the district adopting its budget to receive points under FIRST and that there is no corresponding requirement for charter schools. TASA stated that charter school boards should be accountable to all taxpayers who fund their schools and hold public meetings in the same manner and circumstances as community-based ISDs, including when their FIRST rating changes.
Response: The agency agrees that charter schools should be accountable to the public but disagrees that changes should be made to School FIRST Indicator 20 or that an additional indicator should be added to Charter FIRST for the 2022-2023 rating year. Section 109.1001(q)(3)(A)(ii) requires charter schools to report their financial management performance under each FIRST indicator for the current and previous year's financial accountability ratings. Charter schools report their attendance every six weeks and generally receive cash monthly in near equal amounts; so, settle-ups may not have an impact as significant as that for school districts who may not receive cash for several months, depending on their payment schedule. Additionally, House Bill 3, 86th Texas Legislature, 2019, amended the TEC to fund school districts based on current property values as compared to previous year values. Therefore, a discussion regarding funding for school districts is vital prior to adopting the budget. The agency has maintained language as proposed concerning Indicator 20.
Charter FIRST Indicator 1
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), Texas Public Charter Schools Association (TPCSA) and a governmental charter school administrator commented that Indicator 1 should be a ceiling indicator and not a critical indicator. TPCSA also suggested that the appeal process allow an appeal for any reason on Indicator 1 so TEA can consider additional information about the failure for timely annual financial and compliance report (AFR) submission. TPCSA also recommended adding language that would assign points based on when the charter holder submits the AFR.
Response: The agency disagrees that Indicator 1 should be a ceiling indicator. The agency has maintained language as proposed concerning Indicator 1. The agency, however, has added language in §109.1001(n)(9) that allows the commissioner to adjust the overall score and rating to a passing score and rating upon appeal of Indicator 1 if the certificate of the board and the audit opinion letter from the external auditor for the charter school's AFR were signed on or before the due date of the AFR as required in TEC, §44.008.
Charter FIRST Indicator 2
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), a governmental charter school administrator and TPCSA commented that Indicator 2 should be a ceiling indicator and not a critical indicator. TPCSA also recommended adding language that would assign points based on the number of a charter holder's modified opinions and modifications.
Response: The agency disagrees that Indicator 2 should be a ceiling indicator based on a number of issues identified by an auditor. A modified opinion reported in an audit report indicates that the auditor concluded, based on the audit evidence obtained, that the financial statements as a whole are materially misstated or that the auditor was unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are free from material misstatement. The auditor, however, does not report the number of misstatements in the audit report. The agency has maintained language as proposed concerning Indicator 2.
Charter FIRST Indicator 3
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), a governmental charter school administrator and TPCSA commented that Indicator 3 should be a ceiling indicator and not a critical indicator. TPCSA also recommended adding language that would assign points based on compliance with the terms of a debt agreement and whether an appeal to TEA is granted.
Response: The agency disagrees that Indicator 3 should be a ceiling indicator for the 2022-2023 rating year and not a critical indicator. Compliance with payment terms of debt agreements is critical to a charter school's financial health and can help mitigate financial risk by ensuring that it has a manageable debt service burden. Additionally, non-compliance with debt agreements can trigger various penalties and fees and make it more expensive and harder for a charter school to borrow in the future. The agency has maintained language as proposed concerning Indicator 3.
Charter FIRST Indicator 4
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA requested that Indicator 4 no longer be a critical indicator and recommended that it be a ceiling indicator. TPCSA also stated that Indicator 4 should be amended to provide 30 days from when the public charter school receives official notice of a warrant hold and recommended adding language that would assign points based on when the charter holder rectifies a warrant hold.
Response: The agency disagrees that scoring for Indicator 4 should be amended to ceilings for four different conditions. The indicator already allows a charter school to pass the indicator with a ceiling of 95 points for the overall score if the charter school had a warrant hold that was cleared within 30 days. The agency has maintained language as proposed concerning Indicator 4.
Charter FIRST Indicator 5
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA and a governmental charter school administrator commented that Indicator 5 should be revised to exclude the effect of any deferred inflows or outflows of resources related to pension plans on the total net asset balance. TPCSA requested that Indicator 5 no longer be a critical indicator and recommended that it be a ceiling indicator.
Response: The agency disagrees that the calculation for Indicator 5 for governmental charter schools should exclude the effect of deferred inflows and outflows of resources related to pension plans. The calculation includes the addition of pension expense, other post-employment benefits (OPEB), and net pension liabilities (NPL) to total net position to exclude their effect in the calculation for Indicator 5; however, deferred outflows and deferred inflows of resources related to pensions are the portions of the effects not recognized in pension expense. The agency also disagrees that Indicator 5 should no longer be a critical indicator. Although Indicator 5 for School FIRST was changed from a critical indicator to a ceiling indicator, the agency disagrees that Indicator 5 for Charter FIRST should no longer be a critical indicator. The implementation of Governmental Accounting Standards Board (GASB) 68 and 75 had a significant impact on school districts' net position balance, but nonprofit charter schools are not subject to GASB. Additionally, 99% of charter schools met the requirements to pass Indicator 5 for the 2021-2022 Charter FIRST ratings by having a positive total net assets balance or at least a 7% growth in student membership over five years or year or year for new charter schools. The agency has maintained language as proposed concerning Indicator 5.
Charter FIRST Indicator 6
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA and a governmental charter school administrator commented that Indicator 6 should be revised to exclude the effect of OPEB, NPL, and deferred inflows or outflows of resources related to pension plans on total net assets.
Response: The agency disagrees that the calculation for Indicator 6 should exclude the effect of OPEB, NPL, and deferred inflows and outflows of resources related to pension plans on total net assets. Indicator 6 is a calculation of the average change in total net assets over three years, not a single year, so the impact of OPEB, NPL, and deferred inflows or outflows of resources related to pension plans are comparable per year. The agency has maintained language as proposed concerning Indicator 6.
Charter FIRST Indicator 10
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), a governmental charter school administrator commented that Indicator 10 should be revised to allow a 15% variance (instead of a 10% variance) when comparing budgeted revenues to actual revenues for the last three fiscal years. TPCSA commented that many public charter schools have less than 1,000 enrolled students and small changes in average daily attendance (ADA) can adversely impact the public charter school's budget. Additionally, TPCSA stated that any unexpected revenue source, including a grant from TEA or the federal government, can change a public charter school's budget and that Charter FIRST indicators should not discourage a public charter school from applying for TEA grants. TPCSA also added that new public charter schools in their first year of operation experience significant budget changes and should not be penalized for experiencing budget volatility or receiving grants from TEA. TPCSA proposed tiering the points for Indicator 10 and stating that TEA may only use this calculation if the charter holder has been in operation for two years and that the charter holder's first year of operations shall be excluded if it causes the charter holder to lose points.
Response: The agency agrees that there may be challenges with budgeting revenues for certain charter schools with student enrollment that is based on circumstances outside of the control of the charter school. Indicator 10 will not be evaluated for Charter FIRST rating year 2022-2023. The agency has maintained language as proposed concerning Indicator 10; however, all charter schools will receive the maximum of 10 points for Indicator 10 for rating year 2022-2023.
Charter FIRST Indicator 13
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), a governmental charter school administrator commented that Indicator 13 appears to measure the impact of long-term debt on a school's operations and that the indicator should be revised to divide long-term indebtedness (bonds and loans), excluding OPEB and NPL, by total assets to determine a ratio. Additionally, the administrator provided a point scale for the ratio and added that a charter school should automatically pass Indicator 13 if the charter school's change of students in membership over five years is 7% or more. The administrator also commented that Indicator 11 for independent school districts uses the ratio of long-term liabilities to total assets to determine long-term solvency and that by making the revision, Indicator 13 would be comparable to the one independent school districts use to measure the impact of long-term borrowings on long-term solvency. TPCSA commented that for government charter schools, OPEB and NPL should be excluded from the calculation for Indicator 13.
Response: The agency disagrees that Indicator 13 should be revised to divide long-term indebtedness, excluding OPEB and NPL, by total assets. The calculation for Indicator 11 for Charter FIRST already determines the long-term liabilities to total assets ratio with the point scale that was suggested by the administrator as well as allows a charter school to automatically pass the indicator if the charter school's change of students in membership over five years is 7% or more. The agency has maintained language as proposed concerning Indicator 13.
Charter FIRST Indicator 14
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA commented that since COVID-19, TEA has encouraged and even required Texas school systems to hire administrative staff, including staff to manage TEA COVID-19 and safety-related grants and HB 4545 tutoring requirements. TPCSA recommended that the calculation for Indicator 14 be a three-year average to account for uncontrollable volatility. TPCSA further stated that Indicator 15 and other indicators include a three-year average.
Response: The agency agrees that some schools hired additional staff to support positions funded by grants in response to the COVID-19 pandemic but disagrees that the administrative cost ratio calculation should be averaged over three years. A high administrative cost ratio may suggest that a charter school needs to adjust its administrative processes to reduce costs and improve efficiency. The agency, however, made a modification to Figure 19 TAC §109.1001(f)(7) for Indicator 14 to include Elementary and Secondary School Emergency Relief I, II, III, and supplemental funds in the calculation for the administrative cost ratio.
Charter FIRST Indicator 15
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA commented that many public charter schools have less than 1,000 enrolled students and have experienced, and are still experiencing, unanticipated declines in student enrollment due to COVID-19. TPCSA also stated that since COVID-19, TEA has encouraged and even required Texas school systems to hire staff, including staff to manage TEA COVID-19 and safety-related grants and HB 4545 tutoring requirements. TPCSA stated that regardless of declines in student enrollment, mid-year rapid personnel changes are not possible because of these TEA grant requirements. TPCSA recommended tiering the points for the Indicator 15.
Response: The agency agrees that some schools hired additional staff to support positions funded by grants in response to the COVID-19 pandemic. Therefore, Indicator 15 will not be evaluated for Charter FIRST rating year 2022-2023. The agency has maintained language as proposed concerning Indicator 15; however, all charter schools will receive the maximum of 10 points for Indicator 15 for rating year 2022-2023.
Charter FIRST Indicator 16
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), a governmental charter school administrator commented that Indicator 16 should be revised to allow for wider fluctuations in enrollment and attendance impacting schools with smaller numbers of students. The administrator provided a point scale and stated that the revised indicator would be more comparable to School FIRST Indicator 15 to measure actual average daily attendance (ADA) compared to estimated ADA. The administrator also stated that charter schools serving students in residential correctional facilities and residential treatment centers experience fluctuations in daily enrollment that can be greater than 10%. TPCSA commented that many public charter schools have less than 1,000 enrolled students and have experienced, and are still experiencing, unanticipated declines in student enrollment due to COVID-19. TPCSA also stated that minor changes in student populations can have an outsized impact on ADA. For Indicator 16, TPCSA recommended a three-year average to account for uncontrollable ADA volatility, much more variance for smaller charter holders, and a revision to allow for wider fluctuations in ADA for schools with smaller numbers of students. Additionally, TPCSA stated that provisions should be made for public charter schools serving students in residential correctional facilities and residential treatment centers that experience changes in daily enrollment that can be greater than 10% and who do not have control over the number of students enrolling in their school.
Response: The agency agrees that there may be challenges with estimating ADA for certain charter schools with student enrollment that is based on circumstances outside of the control of the charter school but disagrees that ADA should be averaged over three years. Indicator 16 will not be evaluated for Charter FIRST rating year 2022-2023. The agency has maintained language as proposed concerning Indicator 16; however, all charter schools will receive the maximum of five points for Indicator 16 for rating year 2022-2023.
Charter FIRST Indicator 17
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA and a governmental charter school administrator commented that Indicator 17 should be clarified to state that the data in the Public Education Information Management System should be within 3% of all expenses in the financial audit report reported in the Statement of Revenues, Expenditures, and Changes in Fund Balance for governmental charter schools. TPCSA added that government charter schools should be on a modified accrual basis and a three-year average for Indicator 17.
Response: The agency agrees that the source of data used in the calculation for Indicator 17 for governmental charter schools should be clarified but disagrees that the calculation should be averaged over three years. The agency has maintained language as proposed concerning Indicator 17. Although the expenses reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances are used in the calculation for Indicator 17 for governmental charter schools, clarification on the sources of data used for governmental charter schools will be provided in a different manner.
Charter FIRST Indicator 19
Comment: Concerning proposed Figure: 19 TAC §109.1001(f)(7), TPCSA stated that a 10-point loss for Indicator 19 is excessive and recommended partial credit for the indicator. TPCSA suggested that a charter school should receive five points if the charter holder has one instance of material noncompliance and receive zero points if the charter holder has two or more instances of noncompliance.
Response: The agency disagrees that the point scale for Indicator 19 should be modified to zero, five, or ten points based on the number of instances of material noncompliance. Depending on the severity of the noncompliance, one instance of material noncompliance can have a significant impact on the financial statements or the overall financial position of a charter school. The agency has maintained language as proposed concerning Indicator 19
STATUTORY AUTHORITY. The amendment is adopted under Texas Education Code (TEC), §12.104, as amended by Senate Bill (SB) 1365, 87th Texas Legislature, Regular Session, 2021, which subjects open-enrollment charter schools to the prohibitions, restrictions, or requirements relating to public school accountability and special investigations under TEC, Chapter 39, Subchapters A, B, C, D, F, G, and J, and TEC, Chapter 39A;TEC, §39.082, which requires the commissioner to develop and implement a financial accountability rating system for public schools and establishes certain minimum requirements for the system, including an appeals process; TEC, §39.083, which requires the commissioner to include in the financial accountability system procedures for public schools to report and receive public comment on an annual financial management report; TEC, §39.085, which requires the commissioner to adopt rules to implement TEC, Chapter 39, Subchapter D, which addresses financial accountability for public schools; TEC, §39.087, as added by House Bill 1525, 87th Texas Legislature, Regular Session, 2021, which requires the commissioner to adjust the financial accountability rating system under TEC, §39.082, to account for the impact of financial practices necessary as a response to the coronavirus disease (COVID-19) pandemic, including adjustments required to account for federal funding and funding adjustments under TEC, Chapter 48, Subchapter F; and TEC, §39.151, as amended by SB 1365, 87th Texas Legislature, Regular Session, 2021, which requires the commissioner to provide a process by which a school district or an open-enrollment charter school can challenge an agency decision related to academic or financial accountability under TEC, Chapter 39, including a determination of consecutive school years of unacceptable performance ratings. This process must include a committee to make recommendations to the commissioner. These provisions collectively authorize and require the commissioner to adopt the financial accountability system rules, which implement each requirement of statute applicable to school districts and open-enrollment charter schools.
CROSS REFERENCE TO STATUTE. The amendment implements Texas Education Code, §§12.104, as amended by Senate Bill (SB) 1365, 87th Texas Legislature, Regular Session, 2021; 39.082; 39.083; 39.085; 39.087, as added by House Bill 1525, 87th Texas Legislature, Regular Session, 2021; and 39.151, as amended by SB 1365, 87th Texas Legislature, Regular Session, 2021.
§109.1001.Financial Accountability Ratings.
(a) The following words and terms, when used in this section, have the following meanings, unless the context clearly indicates otherwise.
(1) Annual Financial Report (AFR)--The audited annual report required by the Texas Education Code (TEC), §44.008, that is due to the Texas Education Agency (TEA) by no later than 150 days after the close of a school district's or an open-enrollment charter school's fiscal year.
(2) Ceiling indicator--An upper limit (the maximum score) at which a score from a standard limit of a specific indicator will result regardless of overall points.
(3) Debt--An amount of money owed to a person, bank, company, or other organization.
(4) Electronic submission--The TEA electronic data feed format required for use by school districts, open-enrollment charter schools, and regional education service centers (ESCs).
(5) Financial Integrity Rating System of Texas (FIRST)--The financial accountability rating system administered by the TEA in accordance with the TEC, §39.082 and §39.085. The system provides additional transparency to public education finance and meaningful financial oversight and improvement for school districts (School FIRST) and open-enrollment charter schools and charter schools operated by a public institution of higher education under TEC, Chapter 12, Subchapters D and E (Charter FIRST).
(6) Fiscal year--The fiscal year of a school district or an open-enrollment charter school, which begins on July 1 or September 1 of each year, as determined by the board of trustees of the district or the governing body of the charter holder in accordance with the TEC, §44.0011.
(7) Foundation School Program (FSP)--The program established under the TEC, Chapters 41, 42, and 46, or any successor program of state-appropriated funding for school districts in this state.
(8) Open-enrollment charter school--A charter school authorized by the commissioner of education under TEC, Chapter 12, Subchapter D.
(9) Public institution of higher education (IHE)--A public college or university eligible to operate a school district; an open-enrollment charter school; or a TEC, Chapter 12, Subchapter E, charter school authorized by the commissioner.
(10) Summary of Finances (SOF) report--The document of record for FSP allocations. An SOF report is produced for each school district and open-enrollment charter school by the TEA division responsible for state funding that describes the school district's or open-enrollment charter school's funding elements and FSP state aid.
(11) Texas Student Data System Public Education Information Management System (TSDS PEIMS)--The system that school districts and open-enrollment charter schools use to load, validate, and submit their data to the TEA.
(12) Warrant hold--The process by which state payments issued to payees indebted to the state, or payees with a tax delinquency, are held by the Texas Comptroller of Public Accounts until the debt is satisfied in accordance with the Texas Government Code, §403.055.
(b) The TEA will assign a financial accountability rating to each school district, open-enrollment charter school, and charter school operated by a public IHE under TEC, Chapter 12, Subchapters D and E, as required by the TEC, §39.082.
(c) The commissioner will evaluate the rating system every three years as required by the TEC, §39.082, and may modify the system in order to improve the effectiveness of the rating system. If the rating system has been modified, the TEA will communicate changes to ratings criteria and their effective dates to school districts, open-enrollment charter schools, and charter schools operated by public IHEs.
(d) The TEA will use the following sources of data in calculating the financial accountability indicators for school districts, open-enrollment charter schools, and charter schools operated by public IHEs.
(1) AFR. For each school district, open-enrollment charter school, and charter school operated by a public IHE, the TEA will use audited financial data in the district's or charter's AFR. The AFR, submitted as an electronic submission through the TEA website, must include data required in the Financial Accountability System Resource Guide (FASRG) adopted under §109.41 of this title (relating to Financial Accountability System Resource Guide).
(2) TSDS PEIMS. The TEA will use TSDS PEIMS data submitted by the school district, open-enrollment charter school, or charter school operated by a public IHE in the calculation of the financial accountability indicators.
(3) Warrant holds. The TEA will use warrant holds as reported by the Texas Comptroller of Public Accounts in the calculation of the financial accountability indicators.
(4) FSP. The TEA will use the average daily attendance (ADA) information used for FSP funding purposes for the school district, open-enrollment charter school, or charter school operated by a public IHE in the calculation of the financial accountability indicators.
(e) The TEA will base the financial accountability rating of a school district on its overall performance on the financial measurements, ratios, and other indicators established by the commissioner, as shown in the figures provided in this subsection. Financial accountability ratings for a rating year are based on the data from the immediate prior fiscal year.
(1) The financial accountability rating indicators for rating year 2014-2015 are based on fiscal year 2014 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated August 2015 for rating year 2014-2015."
Figure: 19 TAC §109.1001(e)(1) (No change.)
(2) The financial accountability rating indicators for rating year 2015-2016 are based on fiscal year 2015 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated August 2015 for rating year 2015-2016."
Figure: 19 TAC §109.1001(e)(2) (No change.)
(3) The financial accountability rating indicators for rating year 2016-2017 are based on fiscal year 2016 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated December 2016 for rating year 2016-2017."
Figure: 19 TAC §109.1001(e)(3) (No change.)
(4) The financial accountability rating indicators for rating years 2017-2018, 2018-2019, and 2019-2020 are based on financial data from fiscal years 2017, 2018, and 2019, respectively, and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated April 2020 for rating years 2017-2018 through 2019-2020." The financial accountability rating indicators for rating years 2017-2018, 2018-2019, and 2019-2020 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(e)(4) (No change.)
(5) The financial accountability rating indicators for rating year 2020-2021 are based on fiscal year 2020 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated October 2021 for rating year 2020-2021." The financial accountability rating indicators for rating years after 2020-2021 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(e)(5) (No change.)
(6) The financial accountability rating indicators for rating year 2021-2022 are based on fiscal year 2021 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated October 2021 for rating year 2021-2022." The financial accountability rating indicators for rating years after 2021-2022 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(e)(6) (No change.)
(7) The financial accountability rating indicators for rating year 2022-2023 are based on fiscal year 2022 financial data and are provided in the figure in this paragraph entitled "School FIRST - Rating Worksheet Dated June 2023 for rating year 2022-2023." The financial accountability rating indicators for rating years after 2022-2023 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(e)(7) (.pdf)
(8) The specific calculations and scoring methods used in the financial accountability rating worksheets for school districts for rating years prior to 2014-2015 remain in effect for all purposes with respect to those rating years.
(f) The TEA will base the financial accountability rating of an open-enrollment charter school on its overall performance on the financial measurements, ratios, and other indicators established by the commissioner, as shown in the figures provided in this subsection. Financial accountability ratings for a rating year are based on the data from the immediate prior fiscal year.
(1) The financial accountability rating indicators for rating year 2014-2015 are based on fiscal year 2014 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated August 2015 for rating year 2014-2015."
Figure: 19 TAC §109.1001(f)(1) (No change.)
(2) The financial accountability rating indicators for rating year 2015-2016 are based on fiscal year 2015 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated August 2015 for rating year 2015-2016."
Figure: 19 TAC §109.1001(f)(2) (No change.)
(3) The financial accountability rating indicators for rating year 2016-2017 are based on fiscal year 2016 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated August 2015 for rating year 2016-2017."
Figure: 19 TAC §109.1001(f)(3) (No change.)
(4) The financial accountability rating indicators for rating years 2017-2018, 2018-2019, and 2019-2020 are based on financial data from fiscal years 2017, 2018, and 2019, respectively, and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated April 2020 for rating year 2017-2018." The financial accountability rating indicators for rating years 2017-2018, 2018-2019, and 2019-2020 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(f)(4) (No change.)
(5) The financial accountability rating indicators for rating year 2020-2021 are based on fiscal year 2020 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated October 2021 for rating year 2020-2021." The financial accountability rating indicators for rating years after 2020-2021 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(f)(5) (No change.)
(6) The financial accountability rating indicators for rating year 2021-2022 are based on fiscal year 2021 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated October 2021 for rating year 2021-2022." The financial accountability rating indicators for rating years after 2021-2022 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(f)(6) (No change.)
(7) The financial accountability rating indicators for rating year 2022-2023 are based on fiscal year 2022 financial data and are provided in the figure in this paragraph entitled "Charter FIRST - Rating Worksheet Dated June 2023 for rating year 2022-2023." The financial accountability rating indicators for rating years after 2022-2023 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(f)(7) (.pdf)
(8) The specific calculations and scoring methods used in the financial accountability rating worksheets for open-enrollment charter schools for rating years prior to 2014-2015 remain in effect for all purposes with respect to those rating years.
(g) The TEA will base the financial accountability rating of a charter school operated by a public IHE on its overall performance on the financial measurements, ratios, and other indicators established by the commissioner, as shown in the figures provided in this subsection. Financial accountability ratings for a rating year are based on the data from the immediate prior fiscal year.
(1) The financial accountability rating indicators for rating year 2016-2017 are based on fiscal year 2016 financial data and are provided in the figure in this paragraph entitled "IHE Charter FIRST - Rating Worksheet Dated June 2019 for rating years 2016-2017 through 2019-2020." The financial accountability rating indicators for rating years 2016-2017 through 2019-2020 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(g)(1) (No change.)
(2) The financial accountability rating indicators for rating year 2020-2021 are based on fiscal year 2020 financial data and are provided in the figure in this paragraph entitled "IHE Charter FIRST - Rating Worksheet Dated June 2019 for rating year 2020-2021." The financial accountability rating indicators for rating years after 2020-2021 will use the same calculations and scoring method provided in the figure in this paragraph.
Figure: 19 TAC §109.1001(g)(2) (No change.)
(h) The types of financial accountability ratings that school districts or open-enrollment charter schools may receive for the rating year 2014-2015 are as follows.
(1) P for pass. This rating applies only to the financial accountability rating for rating year 2014-2015 based on fiscal year 2014 financial data. In accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive a P rating if it scores within the applicable range established by the commissioner for a P rating.
(2) F for substandard achievement. This rating applies to the financial accountability rating for rating year 2014-2015 based on fiscal year 2014 financial data. In accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive an F rating if it scores within the applicable range established by the commissioner for an F rating.
(i) The types of financial accountability ratings that school districts or open-enrollment charter schools may receive for the rating year 2015-2016 and all subsequent rating years are as follows.
(1) A for superior achievement. Beginning with the financial accountability rating for rating year 2015-2016 and all subsequent rating years, in accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive an A rating if it scores within the applicable range established by the commissioner for an A rating.
(2) B for above standard achievement. Beginning with the financial accountability rating for rating year 2015-2016 and all subsequent rating years, in accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive a B rating if it scores within the applicable range established by the commissioner for a B rating.
(3) C for standard achievement. Beginning with the financial accountability rating for rating year 2015-2016 and all subsequent rating years, in accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive a C rating if it scores within the applicable range established by the commissioner for a C rating.
(4) F for substandard achievement. Beginning with the financial accountability rating for rating year 2015-2016 and all subsequent rating years, in accordance with the procedures established in this section, a school district or an open-enrollment charter school will receive an F rating if it scores within the applicable range established by the commissioner for an F rating.
(5) No Rating. Beginning with the financial accountability rating for rating year 2016-2017 and all subsequent rating years, in accordance with the procedures established in this section, a school district receiving territory due to an annexation order by the commissioner under the TEC, §13.054, or consolidation under the TEC, Chapter 49, Subchapter H, will not receive a rating for two consecutive rating years beginning with the rating year that is based on financial data from the fiscal year in which the order of annexation becomes effective. After the second rating year, the receiving district will be subject to the financial accountability rating system established by the commissioner in this section.
(j) The types of financial accountability ratings that charter schools operated by public IHEs may receive for the rating year 2016-2017 and all subsequent rating years are as follows.
(1) P for pass. Beginning with the financial accountability rating for rating year 2016-2017 and all subsequent rating years, in accordance with the procedures established in this section, a charter school operated by a public IHE will receive a P rating if it scores within the applicable range established by the commissioner for a P rating.
(2) F for substandard achievement. Beginning with the financial accountability rating for rating year 2016-2017 and all subsequent rating years, in accordance with the procedures established in this section, a charter school operated by a public IHE will receive an F rating if it scores within the applicable range established by the commissioner for an F rating.
(k) The commissioner may lower a financial accountability rating based on the findings of an action conducted under the TEC, Chapter 39 or 39A, or change a financial accountability rating in cases of disaster, flood, extreme weather conditions, fuel curtailment, or another calamity.
(l) A financial accountability rating remains in effect until replaced by a subsequent financial accountability rating.
(m) The TEA will issue a preliminary financial accountability rating to a school district, an open-enrollment charter school, or a charter school operated by a public IHE on or before August 8 of each year. The TEA will base the financial accountability rating for a rating year on the data from the fiscal year preceding the rating year.
(1) The TEA will not delay the issuance of the preliminary or final rating if a school district, an open-enrollment charter school, or a charter school operated by a public IHE fails to meet the statutory deadline under the TEC, §44.008, for submitting the AFR. Instead, the school district, open-enrollment charter school, or charter school operated by a public IHE will receive an F rating for substandard achievement.
(2) If the TEA receives an appeal of a preliminary rating, described by subsection (n) of this section, the TEA will issue a final rating to the school district, open-enrollment charter school, or charter school operated by a public IHE no later than 60 days after the deadline for submitting appeals.
(3) If the TEA does not receive an appeal of a preliminary rating, described by subsection (n) of this section, the preliminary rating automatically becomes a final rating 31 days after issuance of the preliminary rating.
(n) A school district, an open-enrollment charter school, or a charter school operated by a public IHE may appeal its preliminary financial accountability rating through the following appeals process.
(1) The TEA division responsible for financial accountability must receive a written appeal no later than 30 days after the TEA's release of the preliminary rating. The appeal must include adequate evidence and additional information that supports the position of the school district, open-enrollment charter school, or charter school operated by a public IHE. Appeals received 31 days or more after TEA issues a preliminary rating will not be considered.
(2) A data error attributable to the TEA is a basis for an appeal. If a preliminary rating contains a data error attributable to the TEA, a school district or an open-enrollment charter school may submit a written appeal requesting a review of the preliminary rating.
(3) A school district, an open-enrollment charter school, or a charter school operated by a public IHE may appeal any other adverse issue it identifies in the preliminary rating.
(4) The TEA will only consider appeals that would result in a change of the preliminary rating.
(5) The TEA division responsible for financial accountability will select an external review panel to independently oversee the appeals process.
(6) The TEA division responsible for financial accountability will submit the information provided by the school district, open-enrollment charter school, or charter school operated by a public IHE to the external review panel members for review.
(7) Each external review panel member will examine the appeal and supporting documentation and will submit his or her recommendation to the TEA division responsible for financial accountability.
(8) The TEA division responsible for financial accountability will compile the recommendations and forward them to the commissioner.
(9) The commissioner will make a final ratings decision.
(A) The commissioner may adjust a score for an indicator or the overall score upon appeal of the indicator(s) by the school district, open-enrollment charter school, or charter school operated by a public IHE.
(B) Upon appeal of the indicator for the timely submission of a complete AFR, the commissioner may adjust the overall score and rating as described in clauses (i)-(iii) of this subparagraph if the certificate of the board and the audit opinion letter from the external auditor for the school district's or charter school's AFR were signed on or before the due date of the AFR as required in TEC, §44.008.
(i) For a school district or charter school that has a failed preliminary FIRST rating with 85 to 100 points, deduct 15 points from the total points for an overall passing score if no other critical indicators were failed.
(ii) For a school district or charter school that has a failed preliminary FIRST rating with 70 to 84 points, adjust the overall score to 70 points for an overall passing score if no other critical indicators were failed.
(iii) For a school district or charter school that has a failed preliminary FIRST rating with total points less than the threshold for an overall passing score and/or the school district or charter school failed any other critical indicators, no adjustment to the points will be made for the overall score.
(o) A final rating issued by the TEA under this section may not be appealed under the TEC, §7.057, or any other law or rule.
(p) A financial accountability rating by a voluntary association is a local option of the school district, open-enrollment charter school, or charter school operated by a public IHE, but it does not substitute for a financial accountability rating by the TEA.
(q) Each school district, open-enrollment charter school, and charter school operated by a public IHE is required to report information and financial accountability ratings to parents, taxpayers, and other stakeholders by implementing the following reporting procedures.
(1) Each school district, open-enrollment charter school, and charter school operated by a public IHE must prepare and distribute an annual financial management report in accordance with this subsection.
(2) Each school district, open-enrollment charter school, and charter school operated by a public IHE must provide the public with an opportunity to comment on the report at a public hearing.
(3) The annual financial management report for a school district, an open-enrollment charter school, or a charter school operated by a public IHE must include:
(A) a description of its financial management performance based on a comparison, provided by the TEA, of its performance on the indicators established by the commissioner and reflected in this section. The report will contain information that discloses:
(i) state-established standards; and
(ii) the financial management performance of the school district, open-enrollment charter school, or charter school operated by a public IHE under each indicator for the current and previous year's financial accountability ratings;
(B) any descriptive information required by the commissioner, including:
(i) a copy of the superintendent's current employment contract or other written documentation of employment if no contract exists. This must disclose all compensation and benefits paid to the superintendent. The school district, open-enrollment charter school, or charter school operated by a public IHE may publish the superintendent's employment contract on its website instead of publishing it in the annual financial management report;
(ii) a summary schedule for the fiscal year (12-month period) of expenditures paid on behalf of the superintendent and each board member and total reimbursements received by the superintendent and each board member. This includes transactions on the credit card(s), debit card(s), stored-value card(s), and any other similar instrument(s) of the school district, open-enrollment charter school, or charter school operated by a public IHE to cover expenses incurred by the superintendent and each board member. The summary schedule must separately report reimbursements for meals, lodging, transportation, motor fuel, and other items. The summary schedule of total reimbursements should not include reimbursements for supplies and materials that were purchased for the operation of the school district, open-enrollment charter school, or charter school operated by a public IHE;
(iii) a summary schedule for the fiscal year of the dollar amount of compensation and fees received by the superintendent from an outside school district, open-enrollment charter school, charter school operated by a public IHE, or any other outside entity in exchange for professional consulting or other personal services. The schedule must separately report the amount received from each entity;
(iv) a summary schedule for the fiscal year of the total dollar amount of gifts that had a total economic value of $250 or more received by the executive officers and board members. This reporting requirement applies only to gifts received by the executive officers and board members (and their immediate family as described by Government Code, Chapter 573, Subchapter B, Relationships by Consanguinity or by Affinity) of the school district, open-enrollment charter school (or charter holder), or charter school operated by a public IHE (or charter holder) from an outside entity that received payments from the school district, open-enrollment charter school (or charter holder), or charter school operated by a public IHE (or charter holder) in the prior fiscal year and to gifts from competing vendors that were not awarded contracts in the prior fiscal year. This reporting requirement does not apply to reimbursement by an outside entity for travel-related expenses when the purpose of the travel was to investigate matters directly related to an executive officer's or board member's duties or to investigate matters related to attendance at education-related conferences and seminars with the primary purpose of providing continuing education (this exclusion does not apply to trips for entertainment purposes or pleasure trips). This reporting requirement excludes an individual gift or a series of gifts from a single outside entity that had a total economic value of less than $250 per executive officer or board member; and
(v) a summary schedule for the fiscal year of the dollar amount received by board members for the total amount of business transactions with the school district, open-enrollment charter school (or charter holder), or charter school operated by a public IHE (or charter holder). This reporting requirement is not to duplicate the items disclosed in the summary schedule of reimbursements received by board members; and
(C) any other information the board of trustees of the school district, open-enrollment charter school, or charter school operated by a public IHE determines to be useful.
(4) The board of trustees of each school district, open-enrollment charter school, or charter school operated by a public IHE must hold a public hearing on the annual financial management report within two months after receiving a final financial accountability rating. The public hearing must be held at a location in the facilities of the school district, open-enrollment charter school, or charter school operated by a public IHE. The board must give notice of the hearing to owners of real estate property in the geographic boundaries of the school district, open-enrollment charter school, or charter school operated by a public IHE and to parents of school district, open-enrollment charter school, or charter school operated by a public IHE students. In addition to other notice required by law, the board must provide notice of the hearing:
(A) to a newspaper of general circulation in the geographic boundaries of the school district, each campus of an open-enrollment charter school, or each campus of a charter school operated by a public IHE in one posting prior to holding the public meeting, providing the time and place of the hearing. The notice in the newspaper may not be earlier than 30 days or later than 10 days before the date of the hearing. If no newspaper is published in the county in which the district's central administration office is located or within the geographic boundaries of an open-enrollment charter school's campus or campus of a charter school operated by a public IHE, then the board must publish the notice in the county nearest to the county seat of the county in which the district's central administration office is located or in which the campus of the open-enrollment charter school or the campus of a charter school operated by a public IHE is located; and
(B) through electronic mail to the mass communication media serving the school district, open-enrollment charter school, or charter school operated by a public IHE, including, but not limited to, radio and television.
(5) At the hearing, the school district, open-enrollment charter school, or charter school operated by a public IHE must provide the annual financial management report to the attending parents and taxpayers.
(6) The school district, open-enrollment charter school, or charter school operated by a public IHE must retain the annual financial management report for at least three years after the public hearing and make it available to parents and taxpayers upon request.
(7) Each school district, open-enrollment charter school, or charter school operated by a public IHE that received an F rating must file a corrective action plan with the TEA, prepared in accordance with instructions from the commissioner, within one month after the public hearing of the school district, open-enrollment charter school, or charter school operated by a public IHE. The commissioner may require certain information in the corrective action plan to address the factor(s) that may have contributed to the F rating for a school district, open-enrollment charter school, or charter school operated by a public IHE.
The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on May 17, 2023.
TRD-202301814
Cristina De La Fuente-Valadez
Director, Rulemaking
Texas Education Agency
Effective date: June 6, 2023
Proposal publication date: February 10, 2023
For further information, please call: (512) 475-1497