Internal Control Tip: Shifting Our Controls for HB 3

When you think about the Foundation School Program do you automatically think “revenue?” Now that House Bill 3 is in our lives, maybe we should be thinking more about allotments, which means different compliance requirements. I came across an excellent tool published in the August 2019 TASBO report called the Foundation School Program Quick Reference Guide by Janet Spurgin, TASBO’s Research and Policy Associate. It highlights what allotments have been eliminated, have evolved and have been added.

As we all are painfully aware, the sweeping changes of HB 3 went into effect on September 1, 2019. Now is the time to determine if you have controls in place that ensure the proper expenditures are coded to these new allotments.

Here are a few tips:

  1. Review the Texas Education Agency’s HB 3 in 30 Video Series which are accompanied by other materials that help explain the content of the videos.
  2. After understanding the impact of HB 3, ensure that the proper Program Intent Codes (PIC) have been used as outlined by the TEA’s Update to Program Intent Codes dated August 15, 2019.
    1. PIC 36 captures costs related to Early Education Allotment
  3. PIC 37 captures costs for each student that a school district serves who has been identified as having dyslexia or a related disorder
  4. PIC 38 accounts for expenditures to improve college, career, and military readiness outcomes for students in grades 8 through 12.
  5. Read TEA’s House Bill 3 Current Legislature FAQ
  6. Because 75 percent to 85 percent of an entity’s costs are payroll related, hone in on these expenditures to make sure they meet the definition of allowable. For example, entities can only use the Bilingual Education allotment for supplemental expenses. This includes teacher aides’ pay, but most of the teachers’ salaries are NOT eligible. Importantly, HB 3 did expand eligible expenditures to include the cost of class size reduction, and so TEA may determine that a portion of the teacher’s salary (that portion clearly related to reducing class size) will be eligible. Further guidance on this topic is expected. Additionally, if your district is paying for salary supplements to attract bilingual teachers, this is an eligible expense.
  7. The good news is there are also new allowable expenditures. For example, HB 3 allows entities to use its Career and Technical Education (CTE) allotment for 7th and 8th graders. Prior to HB 3, only those expenditures related to 7th and 8th graders qualifying for special education services were allowable uses of the CTE allotment. Additionally, the State Compensatory Education allotment can be used for childcare and life skills programs.

Compliance with the spending requirements is critical and auditors will continue to evaluate these requirements. However, auditors now have the flexibility to apply the three-year rolling average that TEA has used in the past. This should reduce the number of noncompliance findings reported.

As we rethink our compliance with the advent of the new HB 3 requirements, let’s remember to revisit our controls over these types of expenditures. Before we know it, the Texas Education Agency will have a monitoring program in place testing for both controls and compliance and with careful attention, we can all get ahead of that process and deliver quality education to our students.

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