Statutory Authority for Monitoring
TEA is authorized by the Texas Education Code (TEC) to monitor compliance with requirements applicable to a process or program, and the related use of funds. Monitoring is conducted to ensure compliance with federal law and regulations and financial accountability, including compliance with grant requirements. The relevant statute is TEC §7.021(b)(1), in conjunction with §§7.028(a)(1) and 7.028(a)(2).
In addition, TEA is authorized by TEC §12.1163 to review the records of an open-enrollment charter school, a charter holder, and a management company.
Monitoring Requirements for TEA
TEA must monitor the activities of federal grant subrecipients to ensure that federal grant awards are used for authorized purposes in compliance with federal statutes, regulations, and the terms and conditions of federal awards. This requirement is given in Title 2 of the Code of Federal Regulations (CFR), 200.331(d) and 34 CFR §76.770.
Requirements for Federal Grant Subrecipients
Federal grant subrecipients must comply with the following requirements:
Compliance with Federal Financial Management Standards
All subrecipients of federal grants must have a financial management system that meets certain federal financial management standards. This requirement is specified in the general and fiscal guidelines and general provisions and assurances published by TEA. All grant applicants agree to this requirement when they certify and submit the grant application. The requirement is given in 2 CFR 200.302.
Compliance with Financial Accounting and Reporting
All school districts, open-enrollment charter schools, and education service centers (ESCs) must maintain records in accordance with the provisions of TEA's Financial Accountability System Resource Guide (FASRG). The Financial Accounting and Reporting (FAR) module of FASRG (or Module 11, Special Supplement to Financial Accounting and Reporting, Nonprofit Charter School Chart of Accounts, if applicable) establishes the requirements for proper budgeting, financial accounting, and reporting systems. FAR (and Module 11) are structured to comply with federal financial management standards requiring that grant funds be accounted for according to a fund-code structure.
School districts, open-enrollment charter schools, and ESCs must maintain an accounting system that uses the appropriate fund-code structure. The accounting system must allow the organization to report budgets, encumbrances, and expenditures in its general ledger in accordance with FAR (or Module 11). Fund codes must be a minimum of 15 digits: three of the digits identify the source of funds (the grant program), and four of the digits constitute an object code that identifies the expenditure category.
Compliance with Generally Accepted Accounting Principles
All subrecipients of federal grants must account for expenditures in accordance with generally accepted accounting principles (GAAP). GAAP addresses issues that help subrecipients account for their expenditures consistently and maintain financial statements that are reliable and verifiable by an independent party. The FAR and Module 11 code structures are established to accommodate compliance with GAAP, which reflects federal financial accounting standards.
All Texas nonprofit corporations must also account for the expenditure of funds in accordance with GAAP, as required by the provisions of the Texas Business Organizations Code, §22.352.
Notice of Agency Policy
TEA conducts federal fiscal grant subrecipient monitoring and compliance reviews, and implements related enforcement actions, in accordance with its established policies and procedures. These policies and procedures incorporate best practices and standards that may be similar to common auditing standards, but the agency does not apply a specific set of external standards, such as the US Government Accountability Office’s Generally Accepted Government Auditing Standards (Yellow Book), nor is it required to do so.