Division of Financial Compliance Update and Relevant information

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1 Division of Financial Compliance Update and Relevant information Region 20 Education Service Center September 21, 2016 Topics Charter School Depository Contracts letter GASB 68 letter 313 Reporting Changes to FY2016 data feed FY2015 Annual Financial Report Common Issues AFR Deadline, Submission and Data feed Finalization Procedures State Program Compliance 2 1

2 To The Administrator Addressed Correspondence Charter School: Depository Contracts 3 Charter School Depository Contract Request for Submission, August 24, 2016 By December 1 of each year, the charter holder must either submit a: Complete depository contract (and Vendor Direct Deposit Authorization form) Or File a signed statement that there have been no changes to the depository contract For this year s depository contract submission, charter schools must submit a Depository Contract by December 1, A signed statement that there have been no changes to the depository contract will not be accepted. 4 2

3 Submission of the Depository Contract Information Submit the depository contract electronically through the Texas Education Agency Secure Environment (TEASE) Audit Application. Submit the depository contract documents in PDF under the 2017 year ( school year). The file should be named using the format of: DC = the charter school county district number DC = depository contract 7 = the effective year of the contract 5 TEASE Audit Depository Contract Roles Those who will be submitting the depository contract information should verify before the submission is due that they have one of the roles listed below: Charter AFR and Depository Contract User Submits annual financial report and depository contract Depository Contract User Submit only depository contract 6 3

4 To The Administrator Addressed Correspondence GASB 68 Clarifications 7 Clarification to Governmental Accounting Standards Board (GASB) Statement 68 disclosures and row addition to the AUDIT Application data feed September?, 2016 Clarifications to the GASB Statement 68 disclosures in the AFR Clarifications to Schedule L 1, Required Responses to Selected School FIRST Indicators Additions to the data feed submission for Schedule A 1, Statement of Net Position 8 4

5 Governmental Accounting Standards Board (GASB) Statement 68 Disclosures Reporting of contribution amounts for member (employee), non employer contributing entity (state), and employer (district) for the previous reporting period. Contribution amounts per GASB 68, paragraph 76, should be contributions for the reporting period 9 of the current audit report. Contribution Rates Member 6.4% 6.7% Non Employer Contributing Entity (State) 6.8% 6.8% Employers 6.8% 6.8% Employer # XXXX 2016 Employer Contributions Employer # XXXX 2016 Member Contributions Employer # XXXX 2016 NECE On behalf Contributions $xxx,xxx,xxx $ xxx,xxx,xxx $ xxx,xxx,xxx 10 5

6 Not reporting the Contributions Paid to Teacher Retirement System (TRS) Subsequent to the Measurement Date in the notes to the financial statements. Which resulted in the total of Deferred Outflows of Resources related to TRS disclosed in the notes to the financial statements not being consistent with the Statement of Net Position. 11 Deferred Outflows of Resources $x,xxx Deferred Inflows of Resources $x,xxx Differences between expected and actual economic experience Changes in actuarial assumptions $x,xxx $x,xxx Difference between projected and actual $x,xxx $x,xxx investment earnings Changes in proportion and difference between the $x,xxx $x,xxx employer s contributions and the proportionate share of contributions Contributions paid to TRS subsequent to the measurement date [to be calculated by employer] $x,xxx Total $xxx,xxx $xxx,xxx 12 6

8 The reporting of the GASB 68, paragraph 81, required supplementary information 10 year schedule information was not presented. The 10 year schedule information required by subparagraph (a) should be amounts presented as of the Plan's fiscal year end, August 31 of the prior year. The 10 year schedule information required by subparagraph (b) should be amounts presented as of the District's fiscal year end of the current audit report. Note, per GASB 68, paragraph 138, until a 10 year trend is compiled, information should be presented for those years for which information is available. 15 ANYWHERE INDEPENDENT SCHOOL DISTRICT EXHIBIT G-2 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF THE DISTRICT S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY OF A COST-SHARING MULTIPLE-EMPLOYER PENSION PLAN TEACHER RETIREMENT SYSTEM OF TEXAS (TRS) FOR THE YEAR ENDED AUGUST 31, 2015* 2015 District's Proportion of the Net Pension Liability 0.00XXXX% District's Proportionate Share of the Net Pension Liability $ x,xxx,xxx State's Proportionate Share of the Net Pension Liability Associated with the District x,xxx,xxx Total $ X,XXX,XXX District's Covered- Employee Payroll $ X,XXX,XXX District's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll 25.15% Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 85.25% * The amounts presented for the fiscal year were determined as of the Plan's fiscal year end, August 31 of the prior year. Ten years of date is not available. 16 8

ANYWHERE INDEPENDENT SCHOOL DISTRICT EXHIBIT G-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT CONTRIBUTIONS TO THE TEACHER RETIREMENT SYSTEM PENSION PLAN (TRS) FOR THE YEAR ENDED

District's Covered-Employee Payroll $ X,XXX,XXX Contributions as a Percentage of Covered- Employee Payroll 3.

9 ANYWHERE INDEPENDENT SCHOOL DISTRICT EXHIBIT G-3 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF DISTRICT CONTRIBUTIONS TO THE TEACHER RETIREMENT SYSTEM PENSION PLAN (TRS) FOR THE YEAR ENDED AUGUST 31, 2015* TRS 2015 Contractually Required Contributions $ xxx,xxx Contributions in Relation to the Contractually Required Contributions (xxx,xxx) Contribution Deficiency (Excess) $ - District's Covered-Employee Payroll $ X,XXX,XXX Contributions as a Percentage of Covered- Employee Payroll 3.25% *The amounts presented for the fiscal year were determined as of the District's fiscal year end August 31. Ten years of data is not available. 17 Clarifications to Schedule L 1, Required Responses to Selected School FIRST Indicators Past due amounts at fiscal year end. 18 9

10 Question: SF4 Was there an unmodified opinion in the Annual Financial Report on the financial statements as a whole? Answer: Yes/No 19 Question: SF5 Did the Annual Financial Report disclose any instances of material weaknesses in internal controls over financial reporting and compliance for local, state, or federal funds? Answer: Yes/No 20 10

Question: SF6 Was there any disclosure in the Annual Financial Report of material noncompliance for grants, contracts, and laws related to local, state, or federal funds?

11 Question: SF6 Was there any disclosure in the Annual Financial Report of material noncompliance for grants, contracts, and laws related to local, state, or federal funds? Answer: Yes/No 21 Question: SF7 Did the school district make timely payments to the Teachers Retirement System (TRS), Texas Workforce Commission (TWC), Internal Revenue Service (IRS), and other government agencies? Answer: Yes/No Were timely payments made to the governmental agencies? 22 11

12 Question: SF8 Did the school district not receive an adjusted repayment schedule for more than one fiscal year for an over allocation of Foundation School Program (FSP) funds as a result of a financial hardship? Answer: Yes/No Answer would be Yes, if you have no adjusted repayment schedule. If you have an agreement with the State Funding Division of the TEA for an adjusted repayment schedule for more than one fiscal year for an over allocation of Foundation School Program (FSP) funds as a result of a financial hardship you should then answer with No. 23 Question: SF10 Total accumulated accretion on CABs included in government wide financial statements at fiscal year end. Answer: $0000 Should be total amount of accumulated accretion on Capital Appreciation Bonds (CABs) reported in the notes to the financial statements. The most frequent issue found was that the total amount of accumulated accretion on Capital Appreciation Bonds (CABs) was not consistent with the total amount reported in the 24 notes to the financial statements or not reported at all. 12

13 Question: SF11 Net Pension Assets (1920) at fiscal year end. Answer: $0000 For most schools, the amount of Net Pension Assets would be expected to be zero unless the school had a supplemental pension plan in addition to the TRS. The most frequent issue found was that the amount of Net Pension Assets was not consistent with amount reported in the notes to the financial statements. Do not enter or include the amount of Deferred Outflow of Resources Related to TRS for question SF Question: SF12 Net Pension Liabilities (2540) at fiscal year end. Answer: $0000 Should be consistent with amount (row 2540) reported in the Statement of Net Position (Exhibit A 1) and the Notes to the Financial Statements

14 Question: SF13 Pension Expense (6147) at fiscal year end. Answer: $0000 The most frequent issue found was that the pension expense amounts reported in Exhibit L 1 appeared to have included the entire state pension expense or the combined state and district pension expense. Should include only the district pension expense (TRS schedules). In addition, pension expense reported should include any amortized items (differences between expected and actual experience) which are not provided in TRS schedules

15 313 Tax Credit Reporting The J 1 schedule will remain the same. The collection amounts should be reported net for school districts that have active agreements under Chapter 313 of the Texas Property Tax Code. Look for To The Administrator Addressed letter 29 Changes to FY2016 data feed 30 15

16 Additions to the data feed submission for Schedule A 1, Statement of Net Position The Net Pension Liabilities amount will be required to be reported under the new data feed on Schedule A 1, Statement of Net Position beginning with the fiscal year 2016 submission. New data feed row: 2540 Net Pension Liabilities 31 FY2015 Annual Financial Report Common Issues 32 16

17 Complete AFR not submitted by the due date of: November 27 th (June 30 th fiscal year end) or January 28 th (August 31 st fiscal year end) Two Electronic Files must be submitted PDF and Data Feed File (or Template): 1. ISDs, and Charter Schools: PDF document of the complete signed and board approved AFR submitted through TEASE 2. ISDs: Audit data feed text file submitted through TEASE Charter Schools: Charter School Data Template ed (Charter School Data Template can found on School FIRST for Charter School web page) 33 Data feed is not submitted, not finalized or finalized with blank schedules. After a data feed is uploaded a message is displayed that the finalization of the data feed is needed to complete the submission. This same message is also ed. We also found schools who finalized the data feed with blank schedules. Could be an indication that proper review of data feed schedules was not performed prior to finalization

18 Data Feed Upload Message 35 Certificate of Board is missing or incomplete 36 18

19 Expenditures exceeding the budget Expenditures exceeding the budget issues found on the Budgetary Comparison Schedule General Fund, Notes to the Financial Statement, Management Letter Comments and as Auditor Findings in the audit report. 37 Charter Schools: Information Not Provided for Budget Variances If the exhibit discloses a variance between the final budgeted amounts and the actual amounts that exceed 10 percent of the final budgeted amount, the charter holder must include a written statement discussing the cause of the variance and the corrective action(s) that were taken to ensure that the charter school adheres to its budget. If the original and final budgeted amounts vary by more than 10 percent of the original budgeted amounts, the charter holder must include a written statement discussing the cause of the variance(s). Section Budgetary Comparison Schedule for Individual Charter School, Module 10, 38 Special Supplement to the Financial Accountability System Resource Guide (FASRG) 19

20 39 Assets and/or liabilities in Schedules and Notes are not consistently reported. Verify that the Assets and Liabilities are consistently presented in the Schedules and in the Notes to the Financial Statements

22 Capital Assets 1510 Land 70,679, Buildings and improvements net 782,459,651 Buildings and improvements 1,472,115,084 Less accumulated depreciation 689,655, Furniture and equipment net 23,240,181 Furniture and equipment 95,066,629 Less accumulated depreciation 71,826, Construction in progress 76,228,

23 Statement of Net Position: Liabilities 45 Notes to the Financial Statements: Long Term Obligations 46 23

24 Non Current Liabilities Bond Payable 856,887,935 Loans Payable 3,624,351 Self Insurance Claims Payable 13,391,471 Total Long Term Liabilities 873,903,757 less Amount Due Within One Year 75,629,444 Amounts Due in More Than One Year 798,274, Bank Reconciliations Bank reconciliations are not being done on a regular basis or not done at all, are reported in Management Letter Comments and as Auditor Findings in the audit report

25 Purchase Orders Reported as Management Letter Comments: Purchases are being made prior to purchase orders being obtained. Local purchase policies and procedures are not being followed. 49 Reporting Schedule C1 Governmental Fund Balance Sheet and Schedule C2 Governmental Fund Statement of Revenues, Expenditures, and Changes in Fund Balance The paper report, PDF and data feed should be in agreement, except for the Other Non Major fund column which is not currently entered in the data feed for Schedules C1 and C2. If the Child Nutrition and Debt Service Funds are not major funds in the annual financial audit report (both paper and PDF) then they should not be broken out in the data feed

26 Annual Financial Report Data Feed Standards Manual Enter only the following columns from this schedule and only if they appear as major funds on your audit (Do not break them out if they are not already major fund columns in your audit). a. 10 General Fund b. 24 Child Nutrition Fund c. 50 Debt Service Fund d. 60 Capital Projects Fund e. 98 Total Do not be concerned that Other Governmental Funds and other columns are not populated. Enter the total column as shown in your audit. In some cases, the figures shown will not add across due to the missing columns. 51 AFR Submission and Data feed Finalization Procedures 52 26

27 State Program Compliance 53 Special Allotments Monitoring Program : SCOPE The new monitoring program is specifically designed to focus on ensuring the LEA s compliance and accountability related to supplemental state allotment program funding. The supplemental state allotment programs that will be monitored: Special Education Compensatory Education, Bilingual Education, Career and Technology Education, Gifted and Talented Education, and High School Education

28 Expenditure Requirements Supplemental state allotment expenditure requirements: Special Education = 52% Compensatory Education= 52% Bilingual Education= 52% Career and Technology Education= 58% Gifted and Talented Education = 55% High School Education = 100% 55 HOW does TITLE I affect funding for the Supplemental State Allotment Programs? Supplemental State Allotment Program funds must be still treated as supplemental funding for all Title 1 schoolwide programs in accordance with the Texas Education Code (TEC), (c)

29 Special Allotment Monitoring Program Flowchart Step1 Step 2 Step 3 Using a 3 year Average Calculation over a period of three fiscal years. The TEA identifies LEAs with underutilized supplemental state allotment program funds. The TEA notifies LEAs by letter that they have underutilized funds and must come into compliance with mandated supplemental state allotment expenditure requirements. Based on the level of underutilization, the TEA will require corrective action plans and/or conduct further monitoring review activities to seek LEA statutory compliance. 57 Assessment & Analysis The monitoring program s risk assessment process is based on three consecutive fiscal years of the LEA financial data reported in the Foundation School Program (FSP) System and the Public Education Information Management System (PEIMS). The risk assessment is designed to analyze the LEA s special allotment spending and reporting requirements for the purpose of identifying potential non compliance issues

30 FSP and PEIMS Data Reports The monitoring program will utilize data from the following reports: The TEA Special Allotment Variance Report. This report will analyze the LEA s special allotment program expenditure totals averaged over three fiscal years. (under development) The Summary of Finance Report: Near Final, September. This report identifies the state revenue for each of the allotted programs. The PEIMS EDIT PLUS +: PRF1D007, Midyear Collection Actual Compliance Report General Fund Allocated. This report breaks down direct costs versus indirect costs within each program intent code (PIC) and Function code. The PEIMS EDIT PLUS +: PRF1D003, Midyear Collection Actual Allocated Expenditures by Program and Object code within Function General Fund. This report identifies expenditures amounts within each PIC by Object code. 59 Monitoring review activities will include information obtained from the following: Follow up and Financial Management Compliance Reviews Student Attendance Compliance Reviews Annual Financial Reports (AFR) CPA Working Paper Reviews 60 30

31 Monitoring Activities continued Materiality thresholds will be established during the testing of special allotment transaction samples to identify LEAs with high transaction error rates caused by inaccurate coding or the coding of unallowable program costs in PEIMS. 61 TEA Monitoring Reports A TEA preliminary report will be provided to the LEA allowing for the LEA to respond in writing with any additional information related to the non compliance findings within 10 business days. A TEA final report and/or detailed Corrective Action Plan (CAP) report with prescribed timelines will be provided to the LEA to address non compliance issues

32 Past Program Review Findings No. 1 Transactions that are missing source financial supporting documentation No. 2 Unallowable costs charged to the program No. 3 Coding errors in PEIMS No. 4 Booking errors in the general ledger No. 5 Underutilization of supplemental state allotments No. 6 Providing program services to ineligible students No. 7 Under budgeting for supplemental state allotments. 63 Payroll Finding Examples Transactions that are missing source financial supporting documents The LEA split funded a school aid with both special compensatory education funds and local funds. However, the LEA did not budget for this FTE in its campus/district improvement plans before the beginning of the school year. The LEA could not provide documentation supporting the payroll costs for teachers or tutors charged to the supplemental state allotment program. The LEA s employment contracts for split funded FTEs do not specify and document the employee s duties and responsibilities. The LEA s employment contracts for split funded FTEs are not signed and dated by the employee and employee s supervisor(s)

33 Questioned Cost Finding Examples Unallowable costs charged to the program The campus principal s salary charged to the compensatory education allotment program. Non allowable FTE. Medical supplies for the school nurse s office charged to the high school education allotment program. Bilingual teacher s salaries charged to the bilingual education allotment program. Estimated costs versus actual costs charged to any of the supplemental state allotments. No evidence that costs incurred are supplemental versus supplanted. 65 Coding Error Finding Examples Common coding errors in PEIMS Coding allowable program expenses to the wrong PIC Coding FTE salaries for either an unqualified teacher or an unallowable FTE expense to a supplemental state allotment program. Coding ineligible students to a supplemental state allotment program. Not coding shared service agreement expenses in PEIMS to the correct PIC code under Function Code

34 General Ledger Finding Examples Booking errors in the general ledger Booking the incorrect amount in the General Ledger. Booking expenses in the General Ledger that fall outside of the current state fiscal year being reviewed. Booking expenses using estimated costs versus actual costs. Booking expenses for personal use that are not allowable, inappropriate or unsubstantiated by source financial documentation. 67 Underutilization & Purchasing Finding Examples Underutilization of supplemental state allotments Using supplemental state allotment programs funds to implement regular education programs versus supplement regular education programs for at risk students. Purchasing random large ticket item expenses at the end of the school year just to meet direct cost expenditure requirements that are not in the Campus Improvement Plan (CIP) or District Improvement Plan (DIP)

35 Eligibility Finding Examples Providing program services to ineligible students Inadequate or undocumented local policies and procedures that identify the LEA s local eligibility criteria used to identify students that are eligible for supplemental allotment program services. Campus or District Improvement Plans that do not adequately describe tutorials used to target at risk students. Inadequate or undocumented local policies and procedures for describing assessment tools that are used to determine student eligibility. 69 Budget Finding Examples Under budgeting for supplemental state allotments Not incorporating campus teachers, program directors, and principal s into the LEA budgeting process of supplemental state allotments funds. Not budgeting first for students that failed end of course (EOC) assessment instruments required for graduation

36 State Allotment Monitoring Program Contact Information Sunny Sadler Division of Financial Compliance Summary All Charter Schools submit complete Depository Contract by December 1, Look for GASB 68 letter. New data feed row, 2540 Net Pension Liabilities on the Statement of Net Position Verify the consistency of amounts reported throughout the financial statements Verify the complete electronic submission of the annual financial report. State Program Compliance expenditure requirements 72 36

37 Subscribe to Our Mailing List The link can be found at the bottom of the Financial Compliance web page: A direct link to the mailing lists can be found on the main page under The Latest TEA News heading ( 73 Contact information Paul Moreno Manager of Financial Desk Reviews Division of Financial Compliance Paul.Moreno@tea.texas.gov 74 37

Preview of the TEA Special Allotments Monitoring Program

1 Preview of the TEA Special Allotments Monitoring Program 2015 ACET Conference Houston, TX. PRESENTED BY MS. SUNNY SADLER, AUDITOR TEA DIVISION OF FINANCIAL COMPLIANCE FINANCIAL & FSP COMPLIANCE REVIEW