Financial Compliance and Accountability
Because Texans trust charter officials to spend money wisely and efficiently, the state’s financial accountability systems for public charters provides a report that annually examines school funding and compliance issues to confirm that spending has been appropriate. This report is referred to as Charter FIRST.
Districts and charters must also have an outside auditor examine their financial records each year to make sure they are in compliance with all rules and regulations.
Annual Financial and Compliance Report
Each year, a charter school must:
- Prepare its annual financial statements,
- Have its annual financial statements audited by a licensed independent CPA firm, and
- Submit the resulting audited annual financial and compliance report (AFR), and additional data to the Texas Education Agency (TEA) for review.
The objective of the Annual Financial Report is to determine that the Charter School is complying with the requirements of the applicable state and federal statutes, maintaining their records according to generally accepted accounting principles, and expending state and federal allotted funds in compliance. For your reference, here is a link to listing of qualified auditors and the number of schools they service by Region.
A charter holder must have a depository bank into which the Texas Education Agency (TEA) deposits funds for the charter holder. The charter holder creates a depository relationship with a bank by executing a depository contract with the bank.
Open-enrollment charter schools in Texas receive state funds based on the average daily attendance (ADA) of students. The Foundation School Program (FSP) is the source for these funds. See the Charter School Finance page for more information.
The Summary of Finances (SOF) is a state aid report produced by the Texas Education Agency for each charter school. It describes the charter’s funding elements, a variety of FSP allotments and Foundation School Program (FSP). For each charter, the TEA produces several SOF reports throughout the school year, updating the information in the report as new data is submitted every six-weeks reporting period.
To be in compliance with state coding, charter schools must follow The Financial Accountability System Resource Guide (FASRG), which describes the rules of financial accounting for charter schools, and education service centers. The FASRG is adopted by 19 Texas Administrative Code §109.41. The updates to the FASRG have been adopted and are now in Version 16.0.
Federal grant programs include fiscal requirements to ensure that grant recipients spend funds in the manner specified by the grant program. If your organization receives funds from federal grant programs, you must adhere to these fiscal requirements.
Maintenance of effort (MOE) requires local educational agencies (LEAs) to maintain their state and local expenditures at a specified level from one fiscal year to the next. If your organization receives a federal grant awarded under the Every Student Succeeds Act (ESSA), the MOE requirement specifies that you must spend at least 90% of state and local funds for free public education as you spent in the previous fiscal year. You must comply with MOE requirements in order to receive your full allocation for ESSA-covered programs.
The Code of Federal Regulations was incorporated into a general federal regulations document. These regulations govern all federal grants awarded by the US Department of Education (USDE) to the state or to a charter school. As a result of this change, the Education Department General Administrative Regulations (EDGAR) consists of multiple parts and regulations. For a complete description of the federal regulations that apply to federal education grant awards, visit USDE’s EDGAR website.