School districts must practice sound financial management in order to maximize the effectiveness of limited resources and to plan for future needs. Effective financial management ensures that internal controls are in place and operating as intended, technology is maximized to increase productivity and that reports are generated that help management reach its goals.I. Organization, Management and StaffingFinancial management includes the broad areas of organization, management and staffing of the financial management function, planning and budgeting, accounting/ internal control and payroll, internal and external auditing, and tax collections.
The district is required to manage its financial operations in conformity with the regulations and requirements of the Texas Education Agency’s Financial Accountability System Resources Guide and to report their data to the Public Education Information Management System (PEIMS).
Financial management is most effective when a district properly aligns its business services functions, establishes strong systems of internal control, and properly allocates staff resources to achieve the best results.II. Planning and BudgetingData Needs
- Organization chart(s) for the business services functions
- Listing of the number and type of employees for each section of the business services function
- Summary of functions/activities/job descriptions for each business services function
- Budget for the district’s business services/financial management function
Possible People to Interview
Superintendent
Board members (as appropriate)
Assistant superintendent with assigned responsibility
Finance or budget director
Department head(s)Activities to Perform
I.A.1 Review the method of organizing the business services of the district; compare to a best practice school district’s organization; compare to peer districts. I.A.2 Review and compare to peer districts the number and type of staff dedicated to specific business services functions. I.A.3 Analyze the budget of the financial management functions and determine where and why budget changes have occurred within the organization. Questions to Ask
How are the business services functions organized? Is the management span of control appropriate? Is the reporting relationship with the superintendent and board clearly defined? Is the chain of command followed?
Are there one or more financial standing committees of the board that regularly reviews the work of the finance area or specific functions of the finance area? Who represents the administration on these committees? Is the administrative representation on the committee adequate and appropriate?
Has the organizational structure changed recently? Over the last five years? Is the organization the most effective way to carry out the functions? Are staff dedicated to specific business functions?
Are staff cross-trained to perform different business functions? Are staff shared in different functions during peak operating times? Is there any overlap among functions being performed by one or more units? Are there any business services functions that are better aligned with another district department? Are there any functions that are centralized in the business office that would be better handled in the schools and/or departments?
Are there any functions in the schools and/or departments that would be better centralized in the business office? Do the positions and titles of staff accurately describe their functions and responsibilities? How many levels of supervision exist and what is the reporting structure?
III. Accounting/Internal Control and Payroll
II.A. Districtwide Planning and Budgeting Budget preparation and administration are important aspects of overall district operations. Providing adequate resources for programs within the restraints of available funding sources presents administrators with a significant challenge. Sound budgeting practices benefit the district by:
- Establishing a documented method for budget development, adoption, and administration
- Providing administrative controls for expenditure of funds within approved allocations
- Assuring campus and community involvement through a "bottom up" budget approach
A review of this area must evaluate existing policies and procedures supporting the budget process. Operational practices which must be analyzed include staff involvement, community involvement, expenditure control, spending plans, program budgeting, and long term budget planning.
Data Needs
- Districtwide budget for current year and prior four years
- Audited financial statements for the last three years
- PEIMS reports on budgeted revenues and budgeted expenditures for district and peer districts for current year and prior four years
- Budget planning documents
- Budget policies and procedures
Possible People to Interview
Superintendent
Board members (as appropriate)
Assistant superintendent with assigned responsibility
Finance or budget director
Principal(s)
Department head(s)
Site-based decision making teamActivities to Perform
II.A.1 Chart, review and compare budgets of district and peer districts for the current year by fund, function and object code (possibly as per pupil expenditures to negate differences in district sizes). Chart and review the district’s budget for the last four to five years by fund, function and object code. Analyze the data to determine negative trends or specific areas where district spending is out of line with peers. II.A.2 Chart the differences between budget and actual data for the last few years to determine significant variances. Questions to Ask
What major initiatives have been undertaken to control costs or increase revenues? Were these initiatives successful, and how did they impact the delivery of education within the district? Were budget reductions done equitably throughout the district?
What are the major budget drivers in the district (i.e., growing or declining student enrollment, rising or declining property values, changes in program delivery procedures, and the like.) What advance planning has been undertaken to lessen the impact of these situations?
Is the board brought into the planning process early enough that they can have an impact on needed changes? Or, are most decisions administration driven? In what way has the community been involved in helping the district deal with budget needs? Are they made aware of needs well in advance so that they can offer suggestions and participate in the decision-making process?
II.B. Budget Planning Process
Activities to PerformII.C. Budget Staffing and Organization
II.B.1 Compile all budget planning documents including such things as budget calendars, budget training documents, staffing or other allocation formulas used to prepare campus and departmental budgets. Questions to Ask
Does the budget planning process provide for an adopted budget development timeline or calendar which is published and disseminated that alerts the board to ongoing activities that must be performed to create the budget?
Does the district have board-approved budgeting policies? Are there budget procedures that are published and disseminated to appropriate staff and committee members?
Do the budgeting procedures identify roles and responsibilities in the budget process including the Board of Trustees, superintendent, directors and supervisors, principals, teachers, staff, site-based decision making team, the community, budget committee (if one exists)?
Is there an established procedure for collecting community input to the budget including public hearings, program advisory committees and campus committees?
Is there a budget advisory committee? If so, is the representation appropriate and effective? Does the budget advisory committee provide recommendations to the superintendent? In what form are recommendations made?
Does the budget process provide for long-term (three to five years) budget planning including, but not limited to:
- Enrollment and ADA projections?
- Staffing requirements?
- Facility needs?
- Long-term debt requirements?
- Staff development?
- Debt retirement obligations?
- Salary and benefit projections?
- Transportation needs?
- Maintenance needs?
- Capital expenditures for equipment and vehicles?
- Income projections?
- Revenue collections?
Does the district engage in an annual planning process to improve budgeting procedures such as:
- Evaluation of procedures used to determine improvement goals?
- Evaluation of procedures used in establishing priority goals?
- Evaluation of procedures used to establish hardware, software and staffing needs?
- Evaluation of procedures used to establish training needs of budget staff and personnel involved in budget development and control?
- Evaluation of the budget preparation process including the budget manual, all forms, the submittal process, the adoption schedule, public input, etc.?
Does the district use multi-year budgeting? Could multi-year budgeting assist the board or administration to realize the long-term impact of decisions?
Does the district have a memorandum of understanding or interlocal agreement for providing any planning and/or budgeting services?
Does the district have a designated budget staff that is comparable to districts of similar size?II.D. Districtwide Revenue and Expenditure ProjectionsDoes the district’s budget staff have assigned areas of responsibility and monitoring, such as enrollment projections, and the various funds (general fund, special revenue fund, capital projects fund, debt service fund, trust and agency funds, enterprise funds (including internal service funds))?
Does the district’s budget staff have assigned budget responsibilities as they relate to the size of the budget, functions, categorical programs, and location?
Which department is responsible for developing and verifying enrollment projections, trends, comparative analysis and multi-year planning?II.E. Campus-level Expenditure ProjectionsAre projections of inflationary costs for energy (heat, electricity, etc.), insurance and other fixed expenditures included in the budget?
Are formalized forecasting methods used in the budget development process?
Are multi-year comparisons performed? How are these comparisons used to identify trends? To better understand the impact of certain decisions? Other?
Do the budgeting procedures provide a methodology for controlling full time equivalent (FTE) positions and part-time positions? Does the district have a position control system for budgeting and controlling staff allocations and hiring?
Are five-year trends and ratios in the growth of staff and students prepared and presented with budget information during budget adoption hearings?
Do all principals and other administrators have a specific spending plan for non-salaried expenditures?II.F. Budget Development ProcessDo the budgeting hardware and software systems meet the needs of the district? Is budget data automated and accessible to appropriate district staff and management? Does the budget system have automated features that facilitate the budget preparation process?II.G. Budget Review and MonitoringAre accurate budget reports produced from the system and provided to the board and staff members?
Are budget reports simple and clear in explaining the district’s budget status?
Can the budget hardware and software accommodate changing budget requirements?
Does the budget process provide for evaluating and prioritizing district needs (including but not limited to):
- Classroom instructional materials?
- Staffing requirements?
- Expenditure allocations?
- Facility needs?
- Staff development?
- Special services?
- Transportation requirements?
- Maintenance and operational needs?
Does the budgeting process include an analysis of prior year budgets and expenditures? Does the budgeting process provide training in budget development and monitoring procedures for all personnel involved in budget development?
Does the budgeting process provide training to budget staff on changing budget requirements and procedures? Does budget staff attend state and area budget seminars?
Does the budget provide a reserve for contingencies? Does the budgeting process allow for evaluating and prioritizing the special needs of the district?
Is there a budget manual? Does it contain all relevant forms, instructions, and other data?
Has the district implemented program budgeting in accordance with TEA’s Financial Accountability System Resources Guide? Are all direct costs charged directly to program/department budgets? Are special activities and other program costs charged to program/department budgets? Is overtime charged to program/department budgets? Are part-time employees charged to program/department budgets?
Are all funds included in the district's budgeting system with procedures clearly designating the budget manager’s responsibility for all funds (General fund, Special revenue funds, Debt service funds, Capital projects, Trust and agency funds, Enterprise funds (including Internal service funds) and Student activity funds.
Activities to PerformII.H. Finance & Budget Computer System
II.G.1 Diagram the process by which the district ensures that the board-approved budget is adhered to, including computerized systems, internal control mechanisms, and the like. Identify any weaknesses that might result in expenditures that exceed appropriated funds. Questions to Ask
Is the annual adopted budget published and disseminated to the Board of Trustees, superintendent, directors and supervisors, principals, teachers, staff, site-based decision making team, budget committee (if one exists), community, employee organizations, county clerk, mayor/city offices, local libraries?
What controls are in place to ensure that expenditures do not exceed appropriated funds? Does the budget process include monthly and quarterly reviews to determine the status of the annual spending plan (income, expenditures, encumbrances and balances) with a provision for necessary adjustments?
Are budgets distributed to campuses and departments monthly? Do users trust the budget distributed from the central office or do the campuses and departments keep their own manual ledgers because they do not trust the figures distributed from the central office?
Does the budget system provide a procedure for budget amendments (increases or decreases)?Are budget amendments signed and pre-approved by appropriate administrators? Are budget amendments distributed to board, staff and other interested parties?
Does the district have an expenditure control system which allows for controlling expenditures and allocations? Is the budget system integrated with financial, cash management, and payroll systems?Does the expenditure control system have an interrelationship between purchasing, accounting and the budget office?
Does the expenditure control system provide for a written request and approval process for exceeding expenditure allocations?
IV. Internal and External AuditingIII.B. Policies and Procedures
III.A. Districtwide Accounting and payroll are among the most important business functions performed by a school district. Although regulations such as the Financial Accountability System Resources Guide and other accounting standards exist, actual practices vary widely throughout the state.
A sound accounting and payroll system can provide numerous benefits including:
- Providing internal controls and safeguards
- Providing timely reporting on the status of funds
- Allowing systematic disbursements to maximize available funds.
Accounting and payroll policies, procedures, and operations must be evaluated. Key areas include segregation of duties, integration of funds into the central accounting system, use of hardware and software systems, and staff training programs to keep employees abreast of constantly changing requirements.
Data Needs
- Accounting manuals and any related manuals which identify policies and procedures
- Audited financial statements for the last three years
- External audit reports (with management letters), including TEA’s comments and the district’s responses to TEA’s comments, for the last three years
- TEA’s Summary of Finance for the last five years
- Payroll records for the last year identifying position and annual salary, organized by type of employee
- List of accounting/payroll training programs for accounting/payroll staff
- PEIMS reports on budgeted revenues and budgeted expenditures for district and peer districts for current year and prior four years
Possible People to Interview
Superintendent
Assistant superintendent with assigned responsibility
Finance director/Chief Financial Officer
Chief accountant
Personnel director
Director of information services
External auditor
TEA staff who commented on district’s audit reportActivities to Perform
III.A.1 Interview accounting staff to determine actual procedures performed; compare actual procedures to accounting policies/procedures manual. III.A.2 Prepare accounting process flowcharts to determine inefficiencies or control weaknesses, if any, in the process (specific flowcharts for each accounting function, including data entry, accounts payable, accounts receivable, payroll entry, payroll disbursements, other?) III.A.3 Examine samples of payroll files for links to payroll automated system. III.A.4 Examine TEA’s Summary of Finance reports for the last five years to determine and evaluate the level and type of funding received, and how the funding has fluctuated from year to year. Compare the results to the peer districts. III.A.5 Review the district’s external audit reports for the last three years, including management letter comments and TEA’s comments, to determine the continuing existence of problems in the district. Questions to Ask
Has the district organized the departments and adequately defined each position’s responsibility to ensure proper segregation of duties which promotes internal accounting control?
Has the district established staffing criteria for payroll and accounting with management staff assigned specific monitoring activities?
Has the district established procedures in the areas of cash receipts, cash disbursements, accounts payable and the payroll function which prevents someone from sole access to both assets (cash, equipment, vehicles, etc.) and accounting records?III.C. Internal ControlsDoes the district have board-approved payroll and accounting policies?
Are the district’s accounting and payroll policies published (or posted electronically) and distributed (or made available electronically) to the appropriate personnel?
Do the district’s accounting and payroll policies identify key roles and responsibilities of payroll and accounting personnel?
Are the accounting and payroll policies consistent with federal, state and local regulations?
Does the district have an approved accounting procedures manual and a payroll procedures manual?
Are the accounting procedures manual and the payroll procedures manual published (or posted electronically) and distributed (or made available electronically) to the appropriate personnel?
Does the accounting procedures manual and the payroll procedures manual identify required data for federal, state, and local reporting requirements?
Does the accounting procedures manual and the payroll procedures manual follow the TEA Chart of Accounts guidelines?
Does the accounting procedures manual provide for various levels of reporting for management review and evaluation for such purposes as cost analysis?
Does the payroll procedures manual provide for the control and confidentiality of payroll records?
Are accounting and payroll policies and procedures evaluated and revised annually according to changing federal, state (Financial Accountability System Resources Guide) and local requirements?
Has the external auditor pointed out any control weaknesses in the last three years? Have each of these items been corrected? Are payroll and disbursement checks signed by two authorized individuals? Are manual checks limited to once a week? Are automated checks limited to twice a month?III.D. PayrollAre personnel and payroll functions performed and supervised by staff in different departments? Are Payroll staff responsible for processes such as the payroll calculations, preparation of payroll disbursement records (payroll ledger, individual year-to-date earnings records) and preparation of payroll checks?III.E. Fiscal MonitoringAre Personnel staff responsible for processes such as documenting employee status, compensation and benefit records; approving employee status change documents; and preparing and updating payroll master files?
Is direct deposit of payroll checks available to staff at all levels? What percent of staff are enrolled in direct deposit?
Is revenue and expenditure information compiled for analysis, evaluation, and planning purposes? Is financial data used for program evaluation? Are revenues and expenditures tracked in a timely manner? Are disbursements made in a timely manner? Are available payment discounts taken advantage of? Are penalties incurred for late payments?III.F. Reporting & Computer SystemsDo the accounting systems create the following documents: General ledger (monthly and year-to-date); Subsidiary ledgers (cash disbursements, cash receipts, fixed assets, payroll, etc., as appropriate); Budget-to-actual expenditure reports (monthly and year-to-date); Various special reports (list of expenditures for period, outstanding encumbrances, etc.)?III.G. Activity FundsIs program and department accounting information readily available? Are budget detail reports, including expenditures, encumbrances and budget balances provided monthly to program managers, principals and directors? Do accounting hardware and software systems meet the needs of the district?
Are the district’s accounting systems automated, when appropriate for the district size, and integrated to supply consistent information? Does the district’s accounting system allow for the development of required analysis and reports on a regular and as-needed basis? Do payroll hardware and software systems meet the needs of the district?
Does the local regional education service center provide support for the district’s computer systems? If not, how remote is the location of the district’s support for and maintenance of their accounting systems?
Are payroll systems automated, when appropriate for the district size, to provide accurate and timely information on salaries and benefits? Is the payroll system automated and integrated with personnel, accounting and budget systems? Does the payroll system provide for efficient adjustment to changing requirements? Does the payroll system provide for efficient maintenance of historical payroll records?
Does the payroll system provide for efficient accounting for both 10 month and 12 month employee salaries? Are the payroll and personnel systems integrated to provide necessary financial data and reporting? Do the payroll and personnel systems share a common database with appropriate security measures employed?
Can the payroll and personnel systems generate management reports showing leaves, balances, overtime, special stipends, etc.? Does the accounting system provide for program cost accounting as specified in the Financial Accountability System Resource Guide? In the accounting system, are special activities and other program costs charged to the proper program/department budgets? In the accounting system, are overtime, part-time, substitute and other incidental salaries and benefits charged to program/department budgets?
Are funds and account groups integrated in the central accounting system (including the general fund, special revenue funds, debt service funds, capital projects, enterprise funds (including internal service funds), General fixed assets account group, General long-term debt account group and Trust and agency funds (including student activity funds)?
Are student activity funds monitored with full accounting through the central accounting system? Does the district have a published (or electronic) student activity funds accounting procedures manual which has been disseminated to students, advisors and officers? Are there district procedures for periodic monitoring and reporting if student activity funds are accounted for on a decentralized basis?III.H. TrainingIs training in accounting procedures provided to the accounting staff? Is training on payroll procedures provided to the payroll staff? Is training on payroll procedures provided to new employees and new management? Is training provided to management personnel in understanding and analyzing payroll and accounting reports?III.I. AccountingAre regularly scheduled reviews, analysis, and evaluation of accounting activities performed? Are periodic random internal audits of petty cash and activity funds performed?Are reviews of compliance with changing accounting requirements conducted? Is a review and evaluation of information provided to managers conducted? Is an evaluation of the accounting reporting system in relation to federal, state and local reporting requirements conducted?
Are monthly reconciliations of all bank accounts performed? Are detailed tax receipt records reconciled to the general ledger tax revenue? Is a review of changing payroll requirements conducted in a consistent manner? Is the payroll register reconciled to the payroll general ledger?
Does the district have a memorandum of understanding or interlocal agreement for providing any accounting or payroll services?
V. Tax Collection
IV.A. Districtwide Internal and external audits provide a review of the district's compliance with established standards and practices. External audits are required of all Texas districts and according to TEA, are performed by more than 300 public accounting firms. The external audit provides:
- An annual financial and compliance report
- An examination of the expenditure of federal funds (as applicable)
- A report to management on internal accounting controls (as applicable).
The internal audit function supplements the work of the external auditor. The State Auditor’s Office recommends districts with enrollment of 5,000 students or more have an internal audit function. The internal audit function examines specific areas to determine:
- The adequacy of internal controls
- Compliance with procedures, regulations, policies, and applicable law
- Efficiency and effectiveness of operations.
Data Needs
- External audit reports (with management letters), including TEA’s comments and the district’s responses to TEA’s comments, for the last three years
- Internal audit charter, plan, mission and goals (if applicable)
- List of published internal audit and other special reports and several samples of audit reports
Possible People to Interview
Superintendent
Selected board members (Audit committee if appropriate)
Assistant superintendent with assigned responsibility
Finance director
External auditor
Internal auditorActivities to Perform
IV.A.1 Attend Audit committee board meeting (if applicable) to determine the audit committee’s level of involvement in the audit process. Determine how the committee deals with audit findings and ensures that findings are remedied in a timely manner. IV.A.2 Evaluate the district’s internal audit function and internal audit reports to auditing standards established by the Institute of Internal Auditors to determine if the district is in compliance. IV.A.3 Obtain and review peer district information for the external audit function, including length of time district has had the same auditor and rotation policies, if any, of the external auditor. IV.A.4 Obtain and review peer district information for the internal audit function, including the existence of an internal audit function, type of reporting structure (to the superintendent or board), existence of an audit committee, number of internal audit staff, qualifications of internal audit director and staff, type of audits performed. Questions to Ask
IV.B. External Audit
Does the district have board-approved external auditing policies?IV.C. Internal AuditDoes the district regularly seek proposals for audit services? Are the district's procedures for selecting external audit firms published and distributed?
Are the external auditors trained in performing school district audits?
Does a public accountant or certified public accountant holding a valid permit from the Texas State Board of Public Accountancy perform the external audit?
Is the external auditor selected by the Board of Trustees and compensated from district funds?
How long has the current external auditor conducted the external audit for the district? Does the district have a rotation policy?
Do the external auditors meet with appropriate district management and Board of Trustees to discuss the annual audit plan for the external audit at the beginning of the audit; scheduling of audit work, and the findings and recommendations contained in the report to management at the end of the audit?
Do the external auditors meet with appropriate district management and Board of Trustees to discuss the role of the district’s participation in the external audit (i.e. internal audit and accounting personnel assistance)?
Does the external audit encompass the entire district, and involve all fund types and account groups of the district? Is a risk assessment done in compliance with auditing standards and is it followed?
If the district receives federal funding, is the external audit performed according to the required standards (OMB Circular A-128, Audits of State and Local Governments; Standards for Audit of Governmental Organizations, Programs, Activities, and Functions issued by the U.S. General Accounting Office; Financial Accountability System Resources Guide, "Special Program Guidelines"; OMB Circular A-133)?
Does the external auditor retain the original working papers for a period of seven years?
Does the external audit report include an annual financial and compliance report (minimum requirements stipulated by the Financial Accountability System Resources Guide) and a management report/management letter?
Was the annual financial and compliance report prepared, approved by the Board of Trustees and submitted to the Texas Education Agency within 120 days of the close of the fiscal year?
Were the audit reports reviewed in public meetings and copies distributed to appropriate users? What process or procedure is in place for monitoring the administration’s responses to the external and internal audits?
Does the district have a memorandum of understanding or interlocal agreement for providing any external audit services?
Does the Board of Trustees use outside management audits to identify areas for improving economy, efficiency and effectiveness of the district?
IV.C.1. Internal Audit Organization and Management
Is the Internal Audit department organizationally independent with the department being administratively responsible to a level in the district that has an understanding of the internal audit function and sufficient authority to provide oversight and budgetary support?
Does the Internal Audit department report to a level in the district that has an understanding of the internal audit function and authority to promote independence and allow the department to fulfill its purpose? (This may mean the internal auditor reporting to a department head, to the superintendent with some interface with the Board of Trustees, or directly to the Board of Trustees.)
Has the Internal Audit department established long-range goals that are defined, measurable, and approved by administration and the Board of Trustees?
Are the Internal Audit department’s long-range goals accompanied by measurement criteria?
Does the district have an internal audit charter?
Has Internal Audit been authorized to access records and personnel necessary for the performance of audits?
Does the district have documented internal audit policies and procedures which define the department’s purpose, authority, responsibility and scope of the audit work, preparation of audit working papers, development of audit findings and preparation of audit reports?
Can Internal Audit’s reported findings and recommendations be made without undue influence from the audited group?
Does the Internal Audit department have access, as needed, to the Board of Trustees?
Does the board receive and approve a summary of the annual audit work schedule?
Does the board receive and review student activity reports at least annually?
Is the Internal Audit department reviewed externally at least once every three years by persons who are independent of the organization and have no conflict of interest? Is a formal written report issued upon completion of the review?
Does the district have a memorandum of understanding or interlocal agreement for providing any internal audit services?
IV.C.2. Internal Audit Staffing
Are the Internal Audit staff’s audit assignments made using a rotation policy?
Do any of the Internal Audit staff have operational responsibilities for any areas of the district?
Is the work of the internal auditors reviewed before the related audit report is released to provide reasonable assurance that the work was performed objectively?
Are there clearly defined minimum educational requirements for internal audit staff holding various levels of responsibility?
Does the district require their audit staff to have work experience appropriate for the types of audits to be performed?
Is continuing education and on-the-job training provided to all staff to ensure each audit team possesses the training appropriate for the work required?
Do audit supervisors receive training in personnel management skills?
Do the Internal Audit staff participate in professional organizations?
Are internal audit staff evaluated at least annually?
IV.C.3. Internal Audit Operations
Is the scope of the department’s audit work clearly defined with all areas for potential audit within the district defined and approved?
Does the audit scope include an examination and evaluation of the adequacy and effectiveness of the system of internal control?
Are internal audits adequately planned and documented including the objectives and scope?
Do the internal auditors appropriately identify the areas of audit risk during audit planning? How are high risk programs and services determined? How is the risk assessment tracked and reported?
Do the internal audits examine all financial and operating records and reports?
Are special audits conducted such as investigative or other type audits? How are the decisions made about the type and number of special audits? How does conducting special audits affect the planned audits?
Do the internal audits review the systems established by management to ensure compliance with policies, plans, procedures, laws and regulations?
Do the internal audits review the operating or program objectives and goals established by management, as well as the administrative control procedures developed and implemented by management?
Do the internal auditors meet periodically with the external auditors to coordinate activities?
Do the internal auditors conduct their audits using audit programs?
Are concise, constructive and timely audit reports prepared, including the purpose of the audit, the scope of the audit, an expression of the auditors’ opinion and recommendations for improvements?
Are report follow-up procedures in place to determine that corrective actions were taken and are achieving the desired results?
Assessing and collecting school district property taxes is an important function involving different entities with distinct responsibilities. School districts develop and adopt their tax rate while county appraisal districts appraise the value of property within the district. The tax rate that school districts adopt consists of two components: (1) a maintenance and operations component for meeting operating costs; and (2) a debt service component to cover the costs of indebtedness. The combined rate is applied to the assessed property value to compute the district’s total tax levy.VI. Review and Evaluation of Contracting ProcessProperty values are important determinates of school funding, not only at the local level, but at the state level as well. There is an inverse relationship between local property wealth and state aid. The greater the property wealth of the district, the greater the amount of revenue raised locally, but the lower the amount of state aid.
Some districts collect their own property taxes, while others contract with other entities, such as the city or county. Often, districts contract with an attorney for collecting delinquent property taxes.
Data Needs
- Tax rates (debt service portion and maintenance and operations portion) for last five years for district and peer districts
- Current and delinquent tax collection rates
- Property value per student for district and peer districts
Possible People to Interview
Superintendent
Selected board members (Finance committee)
Assistant superintendent with assigned responsibility
Finance director
External auditor
Internal auditor
Delinquent Tax Attorney, if applicableActivities to Perform
V.A.1 Compare tax rates of the district with peer districts for the last five years and discuss any remarkable changes in either the debt service or maintenance and operations rates. V.A.2 Compare current and delinquent tax collection rates of district with peer districts, breaking out current and delinquent taxes. V.A.3 Compare district’s method of collecting current taxes with peer districts’ method of collecting current taxes (i.e., whether district collects taxes themselves or contracts with the county, city or other local taxing entity). V.A.4 Compare the district’s property value per student with the peer districts. Questions to Ask
Does the district collect its own taxes? How many staff are dedicated to the function of collecting taxes? Does the district contract with the city or county to collect taxes? If so, what is the payment arrangement?
Are there board policies regarding collection of delinquent taxes, including payment schedule to collector, goals/rates for collection of delinquent taxes? Do these policies allow for aggressive collection of taxes? What incentives exist to encourage taxpayers in the timely payment of taxes? Are discounts provided to taxpayers for early payment of taxes?
How are delinquent taxes collected? What is the delinquent tax rate? If the district uses an attorney for collecting delinquent taxes, what does the contract specify? What does the district pay for that service? Are there constraints imposed upon the delinquent tax attorney by the board or administration that inhibit the aggressive collection of taxes?
Does the district have a memorandum of understanding or interlocal agreement for providing any tax collection services?
A number of financial services such as the accounting function as well as internal or external audit functions could be purchased or contracted for through private companies or interlocal agreements with neighboring districts or other governmental entities. It is important to regularly evaluate whether there are goods or services that can be obtained from the private sector at a lower cost, higher quality or both. It is equally important to continually evaluate existing contracts to determine if the district is getting the best value possible through the contracting arrangement. For example, in a shared services arrangement, there is a fiscal agent. An important question to ask is whether there is evidence that the fiscal agent of the shared services arrangement is banking a significant amount of fund balance. Are payments to the fiscal agent comparable to other similar districts in shared services arrangements?The evaluation process is discussed in great detail in the Purchasing Module, Section IV. Contract Processes and Section V. Yellow Pages Test.