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Chapter 3
FINANCIAL MANAGEMENT

This chapter reviews Grape Creek Independent School District's (GCISD) financial management in the following sections:

A. Accounting and Financial Management
B. Budget Process
C. Asset and Risk Management
D. Shared Service Opportunities

Financial management in school districts involves effective planning, budgeting and managing, and the district's ability to maximize resources. A district's ability to perform these tasks affects its relationships with its employees, vendors, funding agencies and the local community. Financial management is most effective when resources are spent based on the district's established priorities, when internal controls are in place and operate as intended, when financial information is provided in a timely way and in useful formats, and when staff resources and technology are allocated efficiently to maximize results.

BACKGROUND

GCISD receives revenue from local, state and federal sources. It has budgeted general fund expenditures of $6,381,114 for 2000-01 and had an ending fund balance of $540,224, or approximately four weeks of operating expenditures, as of August 31, 2000.

The amount of state revenue provided to each school district is proportional, based on the district's property values. Districts with a property wealth per student greater than the state average receive less from the state because of their ability to generate revenue from property taxes, while districts with a per pupil property value of less than the state average receive more from the state or directly from a school district with higher property values. GCISD receives additional funds from Austin ISD based on an agreement between the two school districts and approved by the state. Austin ISD paid GCISD more than $908,000 for 2000-01. With the exception of Celina ISD, GCISD and three selected peer districts receive a greater percentage of their revenue from the statethan from local sources (Exhibits 3-1 and 3-2).

Exhibit 3-1
GCISD and Peer District Revenue Sources
2000-01
District Local/Other
Revenue 		State
Revenue 		Federal
Revenue
Celina $5,095,531 $1,864,432 $5,000
Grape Creek $1,279,100 $5,290,000 $5,000
Hutto $2,335,030 $4,178,074 $0
Shallowater $1,499,390 $5,649,843 $1,550
Troy $1,799,000 $5,021,800 $10,000
Source: TEA, PEIMS, 2000-01.

Exhibit 3-2
GCISD, Peer Districts and State Revenue Sources
as Percentage of Total Revenues
2000-01
District Local/Other
Revenue 		State
Revenue 		Federal
Revenue
Celina 73.1% 26.8% 0.1%
Grape Creek 19.5% 80.5% 0.1%
Hutto 35.8% 64.2% 0.0%
Shallowater 20.9% 79.0% 0.0%
Troy 26.3% 73.5% 0.2%
State 53.1% 43.6% 3.4%
Source: TEA, PEIMS, 2000-01. Note: Total may not add to 100 percent due to rounding.

Since 1997-98, GCISD's general revenue from the state has increased 26.5 percent, while local revenue has increased by 12.3 percent. GCISD's general revenue from all sources increased by 23.2 percent between 1997-98 and 2000-01 (Exhibit 3-3).

Exhibit 3-3
GCISD General Revenue Fund Sources
1997-98 Through 2000-01
Revenue
Source 		1997-98 1998-99 1999-2000 2000-01 Percent
Change
1997-98
to
2000-01
Local and Intermediate $1,138,797 $1,128,930 $1,252,376 $1,279,100 12.3%
State $4,181,202 $4,833,142 $5,448,160 $5,290,000 26.5%
Other resources $17,134 $45,066 $26,495 $5,000 (70.8%)
Total $5,337,133 $6,007,138 $6,727,031 $6,574,100 23.2%
Source: GCISD Audit Reports, 1997-98 through 1999-2000 and TEA, PEIMS, 2000-01.

Texas has a court-approved school finance system for equalizing wealth among school districts that requires wealthy districts to pay money directly to poorer school districts or pay into a pool. That, together with additional state funds, subsidizes poorer districts. Wealthy districts are those with property values of at least $295,000 per pupil in weighted average daily attendance (WADA). GCISD's property value per pupil was $73,660 for 1999-2000.

In July 2000, Grape Creek ISD was able to recover $370,792 on an appeal of the 1999 property value study. The district hired a law firm to investigate the district's property values and to challenge the study. The law firm was hired on a contingent-fee basis and found that the original property value reported as $84,950,330 was actually $78,995,215. The reduction in property value increased the funding provided by the state by $370,792.

Exhibit 3-4 compares GCISD to its peer districts in terms of property value per pupil. GCISD has the second-lowest property value per pupil in its peer group. None of the peer districts exceed the state average or are considered a wealthy district. Hutto ISD has the highest property value per pupil.

Exhibit 3-4
GCISD, Peer Districts and State Average
Property Value per Pupil
1999-2000
District Property Value
per Pupil
Celina $175,031
Grape Creek $73,660
Hutto $194,124
Shallowater $68,192
Troy $103,278
State Average $215,121
Source: Comptroller's Office, Property Tax Division.

The state distributes payments to all districts based on WADA basic allotment. This allotment is adjusted according to the property wealth of the district. GCISD's basic allotment was $3,034 per student for 1999-2000.

The GCISD taxable property base consists primarily of residential property. Business property makes up 18.6 percent of the district's total property value compared to 40.6 percent for the state. More than 14 percent of the GCISD property value is land compared to 7.3 percent for the state (Exhibit 3-5).

Exhibit 3-5
GCISD and State Property Value by Category
As a Percentage of Total Property Value
1999-2000
Property Category Grape Creek State
Residential 62.9% 48.7%
Business 18.6% 40.6%
Land 14.6% 7.3%
Other 3.8% 0.6%
Oil and gas 0.1% 2.8%
Total 100.0% 100.0%
Source: TEA, AEIS, 1999-2000.

GCISD ranks first among its peer districts in property value from residential property (Exhibit 3-6) and last in land value.

Exhibit 3-6
GCISD and Peer Districts Property Value by Category
as a Percentage of Total Property Value
1999-2000
District Land Business Residential Oil and Gas Other Total
Celina 35.8% 12.5% 51.4% 0.0% 0.3% 100.0%
Grape Creek 14.6% 18.6% 62.9% 0.1% 3.8% 100.0%
Hutto 26.7% 24.2% 48.9% 0.0% 0.2% 100.0%
Shallowater 22.2% 13.3% 58.4% 5.1% 1.0% 100.0%
Troy 36.4% 24.3% 37.7% 0.0% 1.6% 100.0%
Source: TEA, AEIS, 1999-2000.

GCISD's tax rate has increased 16.39 percent in the past four years due to the addition of an interest and sinking tax rate of $0.271to accommodate payment of its bonds. The purpose of an interest and sinking tax rate is to generate tax revenue and interest that is reserved for the repayment of bonds. (Exhibit 3-7).

Exhibit 3-7
GCISD Tax Rates and Tax Levy
1997-98 Through 2000-01
Tax Category 1997-98 1998-99 1999-2000 2000-01 Percent Change
1997-98 to 2000-01
Maintenance and operations $1.495 $1.495 $1.475 $1.469 (1.74%)
Interest and sinking fund $0.00 $0.00 $0.00 $0.271 N/A
Total Tax Rate $1.495 $1.495 $1.475 $1.740 16.39%
Total Tax Levy $951,992 $1,001,764 $1,152,971 $1,441,585 51.40%
Source: GCISD Annual Financial Reports; GCISD 2000-01 Budget.

GCISD had the second-lowest property tax rate (Exhibit 3-8) of its peer group for 1999-2000, but now has the highest tax rate among its peers (Exhibit 3-9).

Exhibit 3-8
GCISD Adopted Tax Rate
Compared to Peer Districts
1999-2000
District Adopted
Tax Rate
Celina $1.633
Grape Creek $1.475
Hutto $1.559
Shallowater $1.384
Troy $1.560
State Average $1.510
Source: TEA, AEIS, 1999-2000.

Exhibit 3-9
GCISD and Peer Districts Adopted Tax Rate
2000-01
District Adopted Tax Rate
Celina $1.59
Grape Creek $1.74
Hutto $1.62
Shallowater $1.64
Troy $1.54
Source: TSPR Peer Surveys.

The superintendent and the director of Business and Finance are responsible for cash and investment management at GCISD. The district's investments consist of certificates of deposit worth $24,971 as of August 31, 2000. In addition to its investments, the district has funds deposited with its depository bank, Bank of America, in San Angelo, Texas. On August 31, 2000, the value of the district's deposits for all funds was $419,876. Cash and temporary investments of the general fund were worth $306,503 at August 31, 2000. The largest combined fund balance was $1,836,531 in March 2000. The district earned $18,590 on its general fund certificates of deposit and interest-bearing bank accounts and investments for 1999-2000. The district began investing with TexPool in February 2001.