Begin with the End in Mind – Annual Financial and Compliance Report

It’s time to set up all the milestones on your calendar and begin with the end in mind (the Board Meeting and TEA Submission).

Begin with the end in mind. Failing to plan is planning to fail. – Benjamin Franklin

As record-breaking cruel summer temperatures are sweeping across Texas, most school districts and charter schools are experiencing the intensity of preparing for and undergoing their external financial statement audits throughout the fall season. Local education agencies are mandated by the Texas Education Agency (TEA) to submit a pdf version of their annual financial and compliance report (AFR), the completed Certificate of Board, the audit data feed, and the charter school annual financial report data template where applicable, in electronic format as outlined in the FASRG: Module 4 (texas.gov). Under the Texas Education Code (TEC), §44.008, an AFR is due by no later than 150 days after the close of the local education agency’s (LEA) fiscal year and does not provide for any extension when the date falls on a holiday or weekend.

The table below indicates the deadlines for the following fiscal years:

Fiscal Year-end

Due Date

June 30, 2023

November 27, 2023

August 31, 2023

January 28, 2024

It’s time to set up all the milestones on your calendar and begin with the end in mind (the Board Meeting and TEA Submission).

After LEAs submit their audited AFR and additional data to the TEA, the Financial Compliance Division will provide LEAs with a desk review letter that provide a detailed list of comments related to the AFR. The letter is addressed and emailed to the superintendent and with president of the board of trustees carbon copied on the email. With that, below we have listed a few reminders that will help reduce the number of comments received from the TEA.

  • Cash and investment note disclosure should be in line with the LEA’s investment policy.
  • Capital assets reported in the notes must agree to the capital assets (including Right-to-Use Assets for leases and Subscription Based Information Technology Agreements (SBITAs) and related accumulated amortization) reported in the Statement of Net Position.
  • The amounts reported as due within one year and due in more than one year in the Long-term Liabilities note disclosure should agree with the amounts shown in the Statement of Net Position accounts 2501–Due within one year and 2502–Due in more than one year.
  • The Statement of Changes in Fiduciary Net Position must properly identify two sections: additions and deductions in accordance with the Governmental Accounting Standard Board Statement No. 84. Specifically, the term “Contributions” should no longer be used.
  • The note disclosures should include all of the required verbiage for leases in accordance with Governmental Accounting Standards Board (GASB) Statement 87 paragraph 37 and the Module 1: Financial Accountability System Resource Guide’s financial accounting and reporting, section 1.2.4, for required notes.
  • The same will be true for GASB No. 96 SBITAs.
  • For refunding bonds, disclose a general description of the transaction in the year of the refunding that includes the deferred loss or gain on refunding and the economic gain/loss as provided by your financial advisor in the Final Verification.
  • Remember that if your auditor issues a management letter listing areas for improvement, this document should also be uploaded to TEAL during the AFR submission process.
  • The identification of major programs should agree to the Schedule of Expenditures of Federal Awards.
  • The consistency of the data feed with the annual financial report is essential. Each data feed schedule should be reviewed by school personnel and any incorrect or missing data should be entered before finalizing the data feed submission (Financial Accountability System Resource Guide 1.5.1.2).
  • The amounts reported as interfund payables and receivables and transfers in/out must net to zero.
  • Disclose correct amount of net assessed/appraised values for school tax purposes.
  • The schedule of delinquent taxes receivable (Schedule J-1) ending balance should agree with the amount shown as delinquent property taxes in the general fund and debt service fund on the Governmental Funds Balance Sheet.

School districts are encouraged to consult with their external auditors to address or resolve the AFR comments.

Effective for 2022-2023 School and Charter FIRST Ratings, the new adopted Texas Administrative Code (TAC) §109.1001(n)(9)(A) and (B) allows adjustments to scores and ratings upon appeal for FIRST Indicator 1—Timely Submissions of the Annual Financial Report – “Was the complete annual financial report (AFR) and data submitted to TEA within 30 days of the November 27 or January 28 deadline depending on the school district’s or charter school’s fiscal year end date of June 30 or August 31, respectively?” Charter FIRST: Impact on Your Charter School (texas.gov)

(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.

(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 institution of higher education (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.

Back to top