FIRST Accountability System - Top Three Indicators

FIRST is a financial accountability system for Texas school districts developed by the Texas Education Agency in response to Senate Bill 875 of the 76th Legislature in 1999.  The primary goal of FIRST is to achieve quality performance in the management of school districts’ financial resources, a goal made more significant due to the complexity of accounting associated with Texas’ school finance system.

The FIRST rating shows that schools are accountable not only for student learning, but also for achieving these results cost-effectively and efficiently.

The FIRST rating system assigns one of four financial accountability ratings to Texas school districts based on 22 indicators –

•  the highest being “Superior Achievement”, followed by
•  “Above-Standard Achievement”, 
• “Standard Achievement”, and 
• “Substandard Achievement”.

Districts with serious data quality problems may receive the additional rating of “Suspended - Data Quality.”

To address the importance of particular indicators, I cannot limit my choices to three indicators as directed for the following reason.  I consider indicators 1 - 6 as equally the most critical.  If a district answered “No” to indicators 1, 2, 3 or 4 or if the District answered “No” to both indicators 5 and 6, then the district automatically will receive a “Substandard Achievement” rating.

Having said that, let’s take a look at indicators 1-6:

1.      Was total Fund Balance less Reserved Fund Balance greater than zero in the General Fund?

School districts must legally have a fund balance to ensure adequate funding for operations.  This indicator is designed to ensure that your district has a positive amount of fund balance cash (savings) that is not designated or “reserved” for a specific purpose.  In other words, “Does your district have sufficient funds set aside to cover your cash flow needs and extraordinary events that may occur?”

2.      Was the total Unrestricted Net Asset Balance (net of accretion of interest on capital appreciation bonds) in the Governmental Activities column in the Statement of Net Assets greater than zero?

This indicator simply asks, “Did the District’s total assets exceed the total amount of liabilities?”  This is important to determine whether or not the district is operating in a structural deficit.

3.      Were there NO disclosures in the Annual Financial Report and/or other sources of information concerning default on bonded indebtedness obligations?

This indicator seeks to make certain that your district has paid your bills/obligations on bonds issued to pay for school construction, etc.

4.      Was the Annual Financial Report filed within one month after the November 27 or January 28 deadline depending upon the district’s Fiscal Year end date (June 30 or August 31)?

A simple indicator.  Was your Annual Financial Report filed by the deadline?

5.      Was there an Unqualified Opinion in the Annual Financial Report?

A “qualification” on your financial report means that you need to correct some of your reporting or financial controls.  A district’s goal, therefore, is to receive an unqualified opinion” on its Annual Financial Report.  This is a simple “Yes” or “No” indicator.

6.      Did the Annual Financial Report NOT disclose any instance(s) of material weakness in internal controls?

A clean audit of your Annual Financial Report would state that your district has no material weaknesses in internal controls.  Any  internal  weaknesses  create  a  risk  of  your District  not  being  able  to  properly  account  for  its  use  of public funds, and should be immediately addressed.