NEW DEAL, Texas (KCBD) - New Deal ISD has provided an explanation for the 2018-2019 “substandard achievement” rating received through the Texas Education Agency’s Financial Integrity Rating System.
The TEA says this system, “ensures that Texas public schools are held accountable for the quality of their financial management practices and that they improve those practices.”
New Deal ISD was one of 11 school districts in the state to receive a failed rating, based on 2017-2018 financial data. A total of 1020 districts received a rating.
New Deal ISD scored a 52 out of 100, with 60 considered a passing score.
NDISD received a score of 2 for the following indicator:
- Was the measure of current assets to current liabilities ratio for the school district sufficient to cover short-term debt?
NDISD received a score of 0 for the following indicators:
- Was the number of days of cash on hand and current investments in the general fund for the school district sufficient to cover operating expenditures? (excluding facilities acquisition and construction)?
- Did the school district’s general fund revenues equal or exceed expenditures (excluding facilities acquisition and construction)? If not, was the school district’s number of days of cash on hand greater than or equal to 60 days?
- Was the debt service coverage ratio sufficient to meet the required debt service?
- Did the external independent auditor indicate the AFR was free of any instance(s) of material noncompliance for grants, contracts, and laws related to local, state, or federal funds?
The school’s audit showed three instances of material weakness, a lack of segregation of duties among business office personnel, purchases that were not submitted for approval through a purchase order system and expenditures that were not properly coded in accordance with the TEA-mandated Financial Accountability System Resource Guide.
The audit also showed one instance of material noncompliance. According to the audit, NDISD purchased goods totaling more than $50,000 from a single vendor in a 12-month period and didn’t receive proper bidding. That was not in compliance with Texas Education Code Sec. 44.031.
The following is a statement from NDISD Chief Financial Officer Steve Jerden:
New Deal Independent School District received an, “F” rating, on the Financial Integrity Rating System of Texas (FIRST) for fiscal year 2017-18. During that fiscal year, the District utilized financial reserves, also known as fund balance, to both repair and improve our facilities and academic technology. This administrative decision was in lieu of a bond program, that would have increased our tax rate, which, has been, and is currently the lowest in Lubbock County. In addition, the District re-invested in academic technology as a basis to support our District-wide reading program and State required on-line testing. As a result of our increased funding, our District’s academic accountability ratings increased significantly.
Included in the, “F” rating were two notes that the fiscal year 2017-18 financial statements included the following:
1. District incurred three instances of material weaknesses in our Internal Controls;
a. Segregation of Duties;
b. Purchase Order System; and,
c. Expenditure Coding.
2. District incurred one instance of material non-compliance: Purchasing.
Regarding Segregation of Duties as an instance of material weakness within the District’s Internal Controls, and more specifically, a lack of segregation of duties among the District’s business office personnel, the New Deal Independent School District administration understands that in a larger district this is feasible; however, smaller districts are in a, “Catch 22” with indicator 11, administrative cost threshold analysis. In addition, there were no mishandled transactions during fiscal year 2017-18.
Regarding the purchase order system as an instance of material weakness within the District’s Internal Controls, and more specifically, certain purchases that were not being submitted for approval prior to incurrence, the District’s administration recognizes this issue and has addressed this is issue in full. All purchases were verbally approved; however, the District has implemented a computerized Purchase Order system, which will enhance and expand administration approvals and allow purchases to be documented in writing and on a timely basis. In addition, there were no unauthorized purchases during fiscal year 2017-18.
Regarding expenditure coding as an instance of material weakness within the District’s Internal Controls, and more specifically, certain expenditures were not properly coded, the District’s administration recognizes this issue and has addressed this is issue in full, as well. The Financial Accountability System Resource Guide allows some flexibility with expenditure coding within the financial statements; However, there were several end-of-year journal entries that were not properly allocated to all financial statement accounts. In no instance were the 2017-18 financial statements misleading.
Regarding the District’s one instance of material non-compliance, specifically, with purchasing, my office, in particular, the CFO, failed to properly monitor a vendor, as purchases throughout the year accumulated, and exceeded the $50,000 bid threshold for fiscal year 2017-18. All vendors will be monitored throughout the fiscal year, and if necessary, a formal bid will be processed.
The District is currently financially stable, and is expected to receive the highest rating available for the 2019-2020 rating based on fiscal year 2018-19 financial data.
NDISD received the full score of 10 for the following indicators:
- Was the ratio of long-term liabilities to total assets for the school district sufficient to support long-term solvency? (If the school district’s change of students in membership over 5 years was 7 percent or more, then the school district passes this indicator.)
- Was the school district’s administrative cost ratio equal to or less than the threshold ratio?
- Did the school district not have a 15 percent decline in the students to staff ratio over 3 years (total enrollment to total staff)? (If the student enrollment did not decrease, the school district will automatically pass this indicator.)
- Did the comparison of Public Education Information Management System (PEIMS) data to like information in the school district’s AFR result in a total variance of less than 3 percent of all expenditures by function?
- 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?
To find the score sheets for the TEA FIRST ratings, click here. Then, click the district number you wish to view.
To view New Deal ISD’s financial reports, click here. At the time of this publication, they are available on the district website.