1. 1 Harlingen CISD Financial Integrity Rating System of Texas FIRST

2. 2 What is FIRST? A financial accountability system for Texas school districts developed by TEA in response to Senate Bill 875 of the 76 th Texas Legislature in 1999. Primary goal of FIRST is to achieve quality performance in the management of school districts’ financial resources. The Schools FIRST accountability rating system assigns one of four financial accountability ratings to Texas school districts.  Superior Achievement  Above-Standard Achievement  Standard Achievement  Substandard Achievement Districts with serious data quality problems may receive the additional rating of Suspended-Data Quality Districts that received a Substandard Achievement or Suspended-Data Quality, must file a corrective action plan with TEA

3. 3 How Ratings were assessed 21 indicators were developed and ratings were assessed based on the response for each indicator The following are the questions along with a brief explanation of each question and our response. Question #1-Was the total fund balance less reserved fund balance greater than zero in the general fund?  This indicator basically wants to determine if you have funds set aside for a “rainy day”  Our answer was yes-We have $34,824,852 in unreserved fund balance as of 8-31-2006. Question #2-Were there NO disclosures in the Annual Report and/or other sources of information concerning default on bonded indebtedness obligations?  This indicator wants to make certain that our district has paid our bills/obligations on bonds issued to pay for school construction.  Our answer was yes-We are NOT in default on any of our bonds.

4. 4 Ratings-continue Question #3-Was the Annual Financial Report filed within one month after the January 28 th deadline?  This indicator is asking if we filed our audit report filed on time.  Our answer-yes. We filed it prior to the deadline Question #4-Was there an Unqualified Opinion in the Annual Financial Report?  Did the auditors give a clean opinion?  Our answer-yes-We received an unqualified opinion. Question #5-Did the Annual Financial Report NOT disclose any instances of material weakness in internal controls?  Did the auditor NOT disclose any internal weakness that would create a risk in our District in not being able to properly account for our use of public funds?  Our answer-yes-There was NOT a disclosure of any material weakness in internal controls Question #6-Was the percent of Total Tax Collection(including delinquent)greater than 96%?  This indicator measures success in collecting our property taxes  Our answer-yes-We collected 99.53% of total levy

5. 5 Ratings-continue Did the comparison of PEIMS data to like information in the Annual Financial Report result in an aggregate variance of less the 4% of expenditures per fund type?  These indicator measures the quality of data reported to PEIMS and in our Annual Financial Report to make certain that the data agrees between both reports.  Our answer-yes-We strive to make sure that the data agrees exactly. Question # 8-Were Debt-Related Expenditures(net of IFA and/or EDA allotment)less than $770 per student?  This indicator shows the Legislature intent for school districts to spend money on education, rather than on fancy buildings.  Our answer-yes-Our debt related expenditures, net of IFA and EDA allotment, were $124.31 per student Question #9-Was there NO disclosure in the Annual Audit Report of Material Noncompliance?  Was there NO disclosure indicating the district failed to comply with laws, rules and regulations for a government entity?  Our answer-yes-There were NO disclosures.

6. 6 Ratings-continue Question #10-Did the district have full accreditation status in relation to financial management practices?  Did TEA take control of your district due to financial issues such as fraud or having a negative fund balance?-If not the answer should be yes.  Our answer-yes-The district did have full accreditation status in relation to financial management Question #11-Was the percentage of Operating Expenditures expended for instruction more than 54%?  This indicator shows our district’s ability to focus the majority of our funding so that it directly pays for student instruction.  Our answer-yes-We spent 57.2% of our dollars in the instructional classroom. Question #12-Was the aggregate of Budgeted Expenditures and Other Uses Less THAN the aggregate of Total Revenues,Other Resources and Fund Balance in General Fund?  Did we stay within our budget?  Our answer-yes. Our revenues plus our fund balance was greater than our appropriations.  Revenues-$108,771,195 plus fund balance at beginning of year $34,739,094 was greater than appropriations of $106,480,280.

7. 7 Rating-continue Question #13-If the district’s Aggregate Fund Balance in the General Fund and Capital Projects Fund was less than ZERO, were construction projects adequately financed?  This indicator measures our ability to construct facilities without depleting our fund balance.  Our answer-yes-We had a fund balance of $37,030,009 at the end of the year. Question #14-Was the ratio of Cash and Investments to Deferred Revenue(excluding amount equal to net Delinquent Taxes Receivable) in the General Fund greater than or equal to 1:1?  This indicator measures whether our district had sufficient investments to pay our debts  Our answer-yes-Our ratio is more than 91.91:1 in this area. Question #15-Was the Administrative Cost Ratio less than the standard in State Law?  TEA and state law sets a cap on the percentage of their budget that Texas school districts can spend on administration.  Our answer-yes-Our percentage was 7.62%- The standard for a district our size is 11.05%.

8. 8 Ratings-continue Question #16-Was the Ratio of Students to Teachers within the TEA recommended ranges for our district?  TEA recommends a ratio between 13.5-22 students per teacher for a district our size.  Our answer-yes-We had a ratio of 15.91 students to teacher. Question #17-Was the ratio of Students to Total Staff within the range as recommended by TEA?  TEA recommends a ratio between 6.6-14 students per total staff.  Our answer-yes-We were 7.36 student to staff ratio. Question #18-Was the Total Fund Balance in the General Fund more than 50 percent and less than 150 percent of the Optimum according to the Fund Balance and Cash Flow Calculation Worksheet in the Annual Financial Report?  Our district should be within that range.  $7,018,149-$21,054,448  Our answer-no-Our total fund balance was at 264 percent of the Optimum according to the Annual Financial Report. This was the only negative response in our ratings. It actually states that we are in very good financial condition.

9. 9 Ratings-continue Question #19-Was the decrease in Undesignated Fund Balance less than 20 percent over two fiscal years?  Has our fund balance decreased less than 20 percent over the past two years? This indicator notes rapid decreases to our undesignated fund balance.  Our answer-yes-Our undesignated fund balance has not decreased more than 20% over the last two years. Question #20-Was the aggregate Total of Cash and Investments in the General Fund more than $0?  Do we have money in the bank?  Answer-yes-We had $26,152,546 as of 8-31- 2006. Question #21-Were Investment Earnings in all funds more than $15 per student?  Are we investing our money wisely?  Answer-yes. Our total investment earnings was $2,036,843 for all funds. This represents $152.90 per student.

10. 10 Rating Determination of Rating: If the district answered no to default indicators 1,2 3, or if the district answered no to both 4 and 5 then rating is automatically Substandard Achievement Otherwise rating was determined by number of indicators answered NO as follows:  Superior Achievement 0-2  Above Standard Achievement 3-4  Standard Achievement 5-6  Substandard Achievement 7+ or NO to Default Indicators Based on our answers:  20 out of 21 were answered YES  1 was answered NO  Our rating for the fiscal year 2005-2006 was  SUPERIOR ACHIEVEMENT

11. 11 Comparative Analysis

12. 12 Required Disclosures

13. 13 Reimbursements to School Board and Superintendent

14. 14 Outside Compensation by Superintendent The Superintendent did not receive compensation from any vendor outside the school district.

15. 15 Gifts of $250 or more to School Board Trustees,Superintendent and First Degree Relatives The school board and superintendent did not receive any gifts of $250 or more from any vendor.

16. 16 School District Business Transactions with School Board Members for Fiscal Year 2006 The school district did not conduct any business with our school board members.