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4/10/10
The Texas Education Agency received input from interested stakeholders at the Financial Solvency Roundtable meeting on Friday afternoon, April 9, 2010. Belinda Dyer, Director of Forecasting & Fiscal Analysis, Texas Education Agency, who led the roundtable meeting, indicated that the TEA's formal rulemaking adoption process for the financial solvency analysis and reporting system will proceed within the next couple of months.
The proposed financial solvency analysis and reporting system, as presented on Friday, will primarily rely on data submitted to the Agency under currently existing reporting systems. Under the proposed system, all school districts and charter schools will also be required to submit additional data/information relating to: (1.) Current fiscal year expenditures for the first quarter in the General Fund by rolled up expenditure object code categories (61XX - 66XX); (2.) Recent reliance on short-term operating loans, if any; and (3.) Weighted Average Daily Attendance (WADA) or student-to-staff ratio that is significantly outside the norm, if applicable. Additionally, charter schools would be asked to disclose if they had declared bankruptcy within the past two fiscal years.
The TEA's proposed methodology will involve extensive analytics in forecasting potential future financial insolvency issues. The financial solvency assessment system includes four categories of critical indicators (there are up to four calculations per category). The determination of potential future insolvency will not rely on a single critical indicator category, except for situations where the Unreserved Fund Balance (working capital for charter schools) is less than 1% of expenditures for the General Fund. The proposed four critical indicator categories are as follows:
- WADA or student-to-staff ratio;
- Actual expenditures in excess of revenues in the General Fund;
- Actual expenditures in excess of budgeted expenditures in the General Fund; and
- Unreserved Fund Balance in the General Fund.
[Charter school assessment would involve critical indicators 1, 2 and 4 above. Critical indicator 4 above for charter schools involves an analysis of working capital (current assets minus current liabilities) relative to expenditures.]
If a school district or charter school is flagged under a preliminary determination of potential future insolvency, the school system will have an opportunity to explain how the TEA's preliminary determination was skewed by unusual data patterns, such as significant one-time expenditures. After being flagged under the final determination of potential future insolvency, a school system will be required to submit a financial plan and periodic progress reports. A school system may receive an accreditation sanction if it is not successful in remediating the potential future insolvency condition.
One attendee thanked the Agency for its efforts in designing a system that would be the least intrusive while accomplishing the objectives of the legislative directive to assess financial solvency of school districts and charter schools, under House Bill 3, 81st Legislature, Regular Session.
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