FINANCIAL MANAGEMENT
This chapter reviews the Wall Independent School District's (WISD) financial management operations in the following five sections.
- A. Accounting Department
- B. Budgeting
- C. Asset and Risk Management
- D. Purchasing
- E. Cash and Investments
E. CASH AND INVESTMENTS
Statutes authorize school districts to invest in obligations of the U.S. Treasury or the State of Texas, certain U.S. agencies, certificates of deposit, money market savings accounts, certain municipal securities, repurchase agreements and common trust funds and other investments specifically allowed by Chapter 2256, Public Funds Investment and Chapter 2257, Collateral for Public Funds, of the Government Code.
Cash and temporary investments for all district funds for the year ended August 31, 2000 totaled $1,244,689 and were attributed to in the following funds.
Exhibit 3-13 Source: WISD.
Cash and Temporary Investments by Funds
August 31, 2000
Funds Amount General $626,567 Special Revenue $336,968 Debt Service $48,524 Capital Projects $137,489 Internal Service $19,660 Trust and Agency $75,481 Total $1,244,689 WISD maintains 17 checking accounts, including the following:
- General operating fund;
- Interest and sinking fund;
- Construction fund;
- Special revenue fund;
- Special education fund;
- Lunchroom;
- Payroll;
- Computer clearing;
- Fairview Cooperative;
- Fairview Activity Fund;
- Wall High School Activity Fund;
- Wall Junior High School Activity Fund;
- Wall Elementary School Activity Fund;
- WISD textbook account;
- Workers' Compensation fund-Wall;
- Workers' Compensation-Special Education; and
- Small Schools Cooperative Flower Fund.
WISD investment policies and types of investments are governed by the Public Funds Investment Act. The district's investments consist of certificates of deposit and investments in TEXPOOL, a Texas Local Government Investment Pool. As of August 31, 2000, the district's investment in certificates of deposit had a carrying value of $133,344 and investments in TEXPOOL had a carrying value of $123,884.
Although Exhibit 3-2 shows the district general fund balance as $343,065, this figure does not represent the cash balance available for investment, because the fund balance does not mean cash in the bank.
WISD entered into a depository contract with Texas State Bank on June 17, 1997 and extended the contract through 2000-01. The district does not pay a fee for banking services and receives interest from its balance in the checking accounts. For the year ended August 31, 2000, the district received $13,958 in interest revenue from its checking account balance with Texas State Bank.
FINDING
The district does not have an investment policy that complies with Government Code 2256 and 2257. The district's investments consist of certificates of deposit and investments in TEXPOOL. As of August 31, 2000, the district's investment in certificates of deposit had a carrying value of $133,344 and investments in TEXPOOL had a carrying value of $123,884.
District board policy states that the superintendent or other person designated by board resolution shall serve as the investment officer of the district. The business manager has been designated as an investment officer, but this designation has not been reflected in board policy. The board has not adopted specific investment policies for the district, and the district has not compiled written procedures for investment activities.
WISD investment policies lack the following items:
- a listing of authorized investments;
- a rule, such as the "prudent person rule," establishing the standard of care that must be maintained by the persons investing the public funds;
- investment guidelines that are appropriate to the nature of the funds, the purpose of the funds and the amount of the public funds within the investment portfolio;
- a policy on the diversification of the investment portfolio that is appropriate to the nature of the funds, the purpose of the funds and the amount of the public funds within the investment portfolio;
- guidelines on the collateral requirements, if any, for the deposit of public funds in a financial institution made pursuant to the Public Funds Investment Act, and, if applicable, guidelines for contractual arrangements for the custody and safekeeping of that collateral;
- a policy on the establishment of a system of internal controls and written operational procedures designed to prevent losses of funds that might arise from fraud, employee error, misrepresentation by third parties, or imprudent actions by employees of the district;
- performance measures that are appropriate to the nature of the funds, the purpose of the funds and the amount of the public funds within the investment portfolio;
- a policy on the appropriate periodic review of the investment portfolio, its effectiveness in meeting the district's needs for safety, liquidity, rate of return and diversification and its general performance;
- a policy establishing at least quarterly written reports of investment activities by the district's chief financial officer for submission to the governing body and chief executive office of the district. The reports shall include information on the securities in the portfolio by class or type, book value, income earned and the market value as of the report date;
- a policy on the selection of investment advisors, money managers and the financial institutions; and
- a policy on ethics and conflicts of interest.
Moreover, the district's investments in certificates of deposit are earning 6.33 percent for the general operating fund account and 4.83 percent for the interest and sinking fund account, while Texpool investments are currently earning 4.29 percent interest. Districts that do not regularly monitor their investments and do not move dollars into the highest yielding instruments lose interest dollars that can supplement the overall general fund budget.
Recommendation 28:
Amend the district investment policy; invest dollars in higher yielding instruments and formally designate the business manager as an investment officer.
IMPLEMENTATION STRATEGIES AND TIMELINE
1. The superintendent and the business manager amend the district investment policies to include the above items. November 2001 2. The superintendent presents the investment policy to the board for approval. December 2001 3. The board approves or amends the investment policy in an open public meeting, and the approval is documented in the board minutes. December 2001 4. The superintendent provides approved investment policies to financial institutions that have on deposit investments of the district. January 2002 5. The superintendent prepares a quarterly report is prepared as required by the law. Quarterly 6. The board reviews and approves the investment policy annually. Annually FISCAL IMPACT
This recommendation can be implemented with existing resources.