BOARD BUDGET BOOK FISCAL YEAR 2022-2023 VIEW THE COST SAVINGS REPORT AND OUR OTHER FINANCIAL REPORTS ONLINE 6300 IRVINGTON BLVD. | HOUSTON, TX 77022 | 713-694-6300 | WWW.HCDE-TEXAS.ORG This page was intentionally left blank. 2 Superintendent’s Proposed Annual Budget For Fiscal Year September 1, 2022 through August 31, 2023 Prepared by Business Services Division Jesus J. Amezcua, PhD, CPA, RTSBA, CPFIM, Assistant Superintendent Marcia Leiva, Chief Accounting Officer Julia Watts, Senior Accountant of Operations 6300 Irvington Blvd., Houston, Texas 77022 3 TABLE OF CONTENTS INTRODUCTORY SECTION Executive Summary ......................................................................................................................... 8 Department Officials, Staff & Consultants ........................................................................................ 27 Superintendent’s Biography ............................................................................................................. 28 Assistant Superintendent for Business Services Biography ............................................................ 29 Board of Trustees Biographies ......................................................................................................... 30 ORGANIZATIONAL SECTION Department’s Mission & Goals ......................................................................................................... 36 Organizational Chart ........................................................................................................................ 37 Profile of the Department ................................................................................................................. 38 Budget Administration & Financial Policies ...................................................................................... 43 Budgetary Control & Basis of Accounting ........................................................................................ 53 Budget Responsibilities .................................................................................................................... 60 Budget Planning Calendar ............................................................................................................... 63 Tax Calendar 2020 ........................................................................................................................... 64 Budget Development Process .......................................................................................................... 65 FINANCIAL SECTION HCDE’s Fund Structure & Fund Types ............................................................................................ 70 Governmental and Proprietary Funds - Summary ........................................................................... 72 General Fund ................................................................................................................................... 74 Proposed Budget Overview Revenues ............................................................................................ 76 Proposed Budget Overview Appropriations ..................................................................................... 77 Proposed Budget Compared to FY-22 Budget ................................................................................ 79 Revenue Analysis............................................................................................................................. 81 Tax Year 2022 Interim Current Tax Revenue Estimate Updates ..................................................... 80 Indirect Cost Estimates Proposed FY-23 Budget ............................................................................. 83 Special Revenue Funds ................................................................................................................... 84 Combined Statement of Revenues, Expenditures and Changes in Fund Balance ......................... 86 Comparative Analysis of Property Values ........................................................................................ 88 HCAD 2022 Certified Estimates ....................................................................................................... 89 Historical Tax Rates ......................................................................................................................... 91 New Personnel Recommendations .................................................................................................. 92 Budget Review Agendas .................................................................................................................. 95 Divisions Informational Data and analysis ....................................................................................... 96 DIVISIONS SECTION Introduction ......................................................................................................................................... 105 010 – Board of Trustees ................................................................................................................... 106 001 – Superintendent’s Office .......................................................................................................... 107 012 – Assistant Superintendent for Education & Enrichment ................................................... 108 201 – Adult Education-Local ............................................................................................................. 109 923 – Center for Grants Development .............................................................................................. 110 924 – Research & Evaluation ........................................................................................................... 111 005 – Center for Safe and Secure Schools (CSSS) ......................................................................... 112 301 – Center for Educator Success.................................................................................................. 113 4 094 – Chief of Staff ........................................................................................................................... 114 922 – CASE Local .............................................................................................................................. 115 083 – Facilities Support Services (799) .......................................................................................... 116 Facility Charges Distribution ..................................................................................................... 117 089 – Choice Partners Cooperative (711) .......................................................................................... 118 086 – Construction Services............................................................................................................... 119 087 – Local Construction .................................................................................................................... 120 954 – Records Management Services ............................................................................................... 121 088 – Building Replacement Schedule .............................................................................................. 122 050 – Business Support Services ................................................................................................... 123 950 – Purchasing-Internal Support Services ...................................................................................... 124 098 – Department Wide ...................................................................................................................... 125 099 – Retirement Leave Benefits Fund 190 ....................................................................................... 129 101 – State TRS on Behalf Payments ................................................................................................ 127 102 – State TEA Employee Portion Health Insurance ....................................................................... 128 753 – ISF Workers Compensation ..................................................................................................... 129 103 – State TEA Supplemental Compensation .................................................................................. 130 093 – Chief Communication Officer ............................................................................................... 131 092 – Client Engagement .................................................................................................................. 132 925 – Communication & Public Information ...................................................................................... 133 090 – Technology Support Services .................................................................................................. 134 030 – Human Resources .................................................................................................................. 135 011 – Assistant Superintendent for Academic Support ............................................................... 136 901 – Head Start................................................................................................................................. 137 111 – School Based Therapy ............................................................................................................. 138 501 – Special Schools Administration ................................................................................................ 139 131 – ABC East .................................................................................................................................. 140 132 – ABC West ................................................................................................................................. 141 800 – Fortis Academy ......................................................................................................................... 142 971 – Highpoint East .......................................................................................................................... 143 GLOSSARY SECTION Glossary .......................................................................................................................................... 148 APPENDIX Lease Revenue Bonds & Maintenance Tax Notes: Debt Service Analysis ...................................... 157 Lease Revenue Bonds & Maintenance Tax Notes: Timetable of Events .......................................... 159 Capital Improvement Plan ................................................................................................................. 161 5 INTRODUCTORY SECTION I–I N T RO D U C TORY S E C T ION This page was intentionally left blank. 7 June 28th, 2022 Members of the Board of Trustees Harris County Department of Education James Colbert, Jr. County Superintendent Board of Trustees Richard Cantu President Andrea Duhon First Vice President Amy Flores Hinojosa Second Vice President Danyahel (Danny) Norris David W. Brown Erica Davis Eric Dick 6300 Irvington Boulevard Houston, Texas 77022 Dear Trustees: We are pleased to present the Harris County Department of Education’s (the Department or “HCDE”) Annual Budget for fiscal year 2022-2023. This budget presents the Department’s financial and operations plan. Introduction In accordance with State requirements, we are presenting our projected budget to the Board of Trustees and to the Harris County community. We encourage you and our citizens to engage in positive dialogue in fine tuning our budget proposal. Given the limited resources, our staff has developed a financial plan for the 20222023 General Fund, Debt Service Fund, Enterprise Fund, Capital Projects Fund, and Internal Service Fund Budgets. The development, review, and consideration of the 2022-2023 budget were completed with a detailed review of every revenue and expenditure item within the context of the Department’s mission, goals, and financial policies. This document provides information on each of the fund budgets. In addition, we also provide information about our projected grants, which are accounted as Special Revenue Funds. The primary purpose of this document is to provide timely and useful information concerning the past, current, and projected financial status of the Department, to facilitate financial decisions that support the educational goals of the Department. This budget’s focus is the improvement of HCDE divisions with the fiscal resources available to the Department. This budget addresses the essential needs of the Department by directing resources to those areas that will assist our staff in carrying out the mission of HCDE. With this budget, we are continuing to use our performance-based budgeting model. Our conservative process focuses on evaluating programs and initiatives for efficiencies while considering current resources. Moreover, two variables are then reviewed during our SWOT Analysis Review (Strengths, Weaknesses, Opportunities & Threats Analysis), which includes (1) to determine the fee structure for our clients and (2) the level of taxation based on the property values projected to be received from the Harris County Appraisal District. 8 The HCDE Accountability System has been used as the basis for this performance-based budgeting model. This is the thirteenth year using goals, objectives, and performance measures to plan the budget. This budget document is the first step towards achieving these goals. It includes sound, prudent fiscal policies that will ensure the continuity of the Department. About Harris County Department of Education Harris County Department of Education (HCDE), one source for all learners, is a highly successful educational resource in the Houston Metroplex, is a nonprofit tax-assisted organization dedicated to the equalization of educational opportunity and to the advancement of public schools. HCDE has been serving the county's public schools for 133 years. HCDE is in Harris County in the upper Gulf Coast region of Texas, approximately 50 miles from the Gulf of Mexico. Harris County, Texas with 4.7 million people, is the third most populous county in the United States and houses the fourth largest city in the Country. Harris County’s population base includes a wide variety of racial, ethnic, and socio-economic groups that give the area a rich diversity and cosmopolitan feel. In Texas, the second largest county is Dallas with 2.62 million people. Harris County and the Houston metropolitan area comprise a leading region of business development in the nation. Houston continues to be a leader in oil and gas, aerospace, industrial engineering, and medical research, but diversification is fueling the local economy. The County’s major hospitals, many of these concentrated just south of downtown Houston in the Texas Medical Center, offer world-class facilities for general and specialized medical needs. Houston is the fourth largest city in the nation and is a leader in numerous industries including oil & gas, manufacturing, healthcare services and engineering. There are 25 public school districts located either entirely or partially within Harris County, as well as charter, private, and parochial schools. HCDE impacts the educational community through visionary leadership, shared resources, and innovative programs. HCDE Mission Statement Harris County Department of Education supports Harris County by enriching educational opportunities and providing value through services. Department Goals: 1. Impact education by responding to the evolving needs of Harris County. 2. Deliver value to Harris County by utilizing resources in an ethical, transparent, and fiscally responsible manner. 3. Advocate for all learners by using innovative methods to maximize students’ potential. 4. Provide cost-savings to school districts by leveraging tax dollars. 5. Recruit and maintain high-quality staff. In the reaching of these goals, HCDE is a public entity dedicated to helping meet the needs of uniquely challenged learners and school staff through innovative programing and support services. HCDE directly serves approximately 135,000 students with four alternative campuses, therapy services provided in local schools, 14 Head Start centers for early childhood education, after-school programming in dozens of community and school settings, the largest Adult education program in Texas, and other programs. HCDE also supports educators and staff through a diversity of programs and operational support, which will be presented in more detail in this document. Each HCDE Division has objectives directly associated with the Department’s goals, that are measured annually by the HCDE Accountability System. The Performance Measures are in four constructs: 1. Service Delivery 2. Client Satisfaction 3. Compliance 4. Financial Objectives 9 Budget Process and Significant Changes Legal Requirements in Preparing the Budget The Texas Education Code requires that a local education agency prepare a budget of anticipated expenditures and revenues on or before August 20th. The Board is required to adopt a budget before August 31st. The budget must be itemized in detail according to classification (object) and purpose of expenditure (function) and be prepared according to General Accepted Accounting Principles. The budget must be legally adopted before the adoption of the tax rate. The president of the Board of Trustees must call a public meeting of the Board of Trustees giving ten days public notice in a newspaper for the adoption of the budget. Any taxpayer within the Department’s taxing authority, may be present and participate in the meeting. The budget must be adopted by the Board of Trustees, inclusive of budget amendments no later than August 31st. Budget Development Process The budget development process comprises three stages: planning, preparation, and evaluation. The first phase, planning, involves defining the mission, goals, and objectives of campuses, divisions, and the Department. This initial phase took place from September 2021 and lasted until the middle of January 2022. Once these plans and programs have been established, the preparation phase of budgeting begins by allocating resources to support them. This phase took place the second quarter 2022 with several training sessions. Every division started assigning resources and gathering the data. Evaluation is the last step of the Department’s budget cycle, in which information is compiled and analyzed to assess the performance of each individual division and campus, as well as the Department as a whole. During April and May, the data was analyzed, organized, and summarized in the Board Budget Committee Workbook. After several internal review sessions, evaluations, and adjustments, the Administration prepared a Board Budget Book that will be presented to the Board Budget Committee on June 28, 2022. The Human Resources Department played an important role assisting the Business Support Services in the budget process as they developed salary budgets utilizing established staffing guidelines. On June 28th, the Board of Trustees will be presented with a final proposal for adoption and to be implemented on September 1st, 2022. Amending the Budget A budget is an estimate of planned expenditures and expected revenues. Many changes can take place between estimating for the proposed budget in March and April and the start of the new fiscal year in September. Program and operational changes will mean budget changes. These changes to the budget are made in the form of budget amendments. Any increase or decrease in the budget expenditures requires board approval. Changes to revenues also require budget adjustments before the end of the year. All other changes are submitted by divisions and campuses to the Business Support Services for review and processing. COVID19 Impact During fiscal year 2020-2021, HCDE was impacted by COVID19 and the majority of FY 20-21 was spent in virtual learning and operations. On August 2021, the Department began normal operations with added precautions for mask wearing, social distancing, and daily cleaning of all surfaces. For FY 21-22, the Department continued social distancing and daily cleaning, but allowed for optional mask wearing. The Department continues to be vigilant and promotes social distancing and health habits. Various aspects of 10 dealing with the pandemic continue such as ZOOM meetings, electronic processing of documents, and reduction in required face to face meetings. Initiatives for FY 22-23 In meeting the goals and objectives of the Board of Trustees, the Superintendent has implemented several new initiatives that will enhance the relations with school districts while maintaining a positive business model. Fiscal results and projections include this new planned objective, and the major initiatives include a focus of six major enhancements to program and services to include: 1. 2. 3. 4. 5. 6. Maintaining a positive business model while delivering high quality services. Enhancing HCDE’s Special Schools by investing in talent and recruitment. Invest in talent and recruitment and implement recruitment and retention plans. Continue to invest in marketing strategies and the campaign awareness. Continue the major capital projects started in FY 2020. Continuing our competitive edge to enhance services to school districts. To this objective, our financial plan encompasses the major elements: (1) the enhancement of local revenues through projected contract commitments that will be presented to the Board during the summer, (2) a review and implementation of program-based budgeting to seek internal efficiencies and budget reductions, (3) the recommendation of competitive salaries and (4) tax revenues due to the adoption of a rate of an estimated rate $.004990 per $100 valuation. Included in the budget are 24.95 new positions aimed at enhancing our capabilities to meet the client needs and enhance our fee revenue stream for Therapy Services, Fortis Academy, Highpoint School, AB East School, Client Engagement, and Adult Ed Program. In specific, our operations plan includes the following program enhancements: 1. Wage increase: 2% for all employees. HCDE plans to recruit, hire, and retain high quality staff to be able to provide the best services available in the marketplace. 2. Incorporate a retention plan for Principals and above to include a 13% equity adjustment that will allow HCDE to retain and attract new talent to the organization. 3. An additional $400,000 for sponsorships, grants and scholarships for the Education Foundation and $200,000 for the Teacher Supplies program from fund balance. 4. HCDE implemented a wellness program aimed at improving the health of HCDE staff. This program is nutrition-based program designed to promote healthy habits. The projected costs for FY22-23 are $25,000. 5. School Based Therapy Program will receive additional (6.2) FTE to increase the level of service to School Districts around the County. The cost is $300,000. 6. (1) Translator position for Client Engagement $60,000 and (0.5) additional FTE for an admin assistant $25,000. 7. Addition of grant funded positions for Adult Education to include (1.25) transitional specialists and (4) instructional aides. The cost associated is $332,265. 8. An (1) additional Counselor, (4) aides and (2) Teacher for Highpoint School totaling $333,000. 9. An (1) additional Treatment Counselor and (1) Recovery Coach for Fortis Academy, totaling $180,000 10. An (1) additional Counselor for AB East totaling $75,000. 11. (1) Process Improvement Coordinator for IT and Business Services. The associated cost is $95,000 12. An (1) additional Clerk position for Procurement and Choice Partners. The cost is $45,000. 13. Additional $35,000 for Music Therapy at AB East and $16,000 at AB West. 14. Additional $35,000 for Principal and Assistant Principal Professional Development. 15. Additional $25,000 for Speed of Trust funding for the Human Resources Division. 16. Additional $56,000 for Human Resources Software. 17. HCDE will continue the marketing strategy and awareness campaign started the previous year. The program includes $1 Million set aside for marketing and advertising in the Budget. 18. The Department has also included the continuation of the lobbying cost commitment previously approved 11 by the Board of Trustees. The projected cost is $276,000. 19. Balanced Budget: The proposed budget is balanced for on-going operations, and it is projected that the Department will invest part of its fund balance to implement a capital improvement program. All expenditures will be covered with the revenues generated during the year except the one-time costs. The use of fund balance will include $355,000 for the server and computer equipment, $189,586 for debt service payments, $600,000 for the Education Foundation, and $150,000 for retirement program for FY 2023. 20. A Capital Improvement Plan Phase Two is proposed to be implemented. The following projects are proposed: a. $6,000,000 for the Equine Center to be funded from the New Proposed Lease Revenue Bond 2022 plus $4 Million from fund balance. b. $7,500,000 for Maintenance Projects to be funded from the 2022 Maintenance Notes (includes $3,000,000 for HVAC and Roof at NPO, $300,000 for Head Start Barrett Station, $2,000,000 for equipment, buses and furniture, Renovation and remediation projects to existing facilities $1,700,000, Fortis Roof $500,000 and issuance costs. 21. Planned one-time expenditures from the General Fund balance totaling $1,294,586 as follows: Debt Service Transfer for future payments- CIP Plan IT Servers and Equipment Education Foundation teacher program and grant program Retirement benefit Total fund balance capital expenditure appropriations $ $ 189,586 355,000 600,000 150,000 1,294,586 22. The budget is predicated on adopting a tax rate that will bring in more revenue to address revenue loss and implementation of new initiatives such as the campaign awareness and costs associated with talent recruitment and compensation recruitment and retention plan. The estimated tax rate of $.004990 is proposed, and this is the same rate used last year and is expected to be below the voter-approval tax rate (“VAR”). Public hearings and notices will be required to adopt the tax rate. This rate is key to the funding of the operations plan for the current year. Summary of Proposed Budgets The Department utilizes Governmental, Proprietary, and Fiduciary fund types. The Department’s Governmental fund types are comprised of General Funds, Special Revenue Funds, Debt Service Funds, and Capital Projects Funds. The Proprietary Fund types include the Internal Service Fund and the Enterprise Fund. The Enterprise Fund includes the Choice Partners. The Fiduciary fund types include Agency Funds. It is important to note that the Department approves the annual budgets for the General Fund, Internal Service Fund, Debt Service Fund and Capital Project Funds. Agency (Custodial) Funds and Special Revenue Funds adopt project-length budgets which do not correspond to the Department’s fiscal year end. As the notice of grant awards are received, these are presented for Board approval. 12 HCDE fiscal year is September 1st to August 31st. The following table presents a comparison of the proposed expenditures for General Fund with a comparison to fiscal year 2022-2023. Adopted Amended Proposed Budget 2021-2022 Budget 2021-2022 Budget 2022-2023 Beg. Fund Balance $ 26,083,929 $ 26,083,929 $ 21,381,668 Estimated Revenues Appropriations 59,188,729 56,940,944 59,186,588 57,384,440 61,928,640 58,358,339 5% 2% Transfers Out 6,434,088 6,504,409 4,864,887 -25% $ 63,375,032 $ 63,888,849 $ 63,223,226 -1.04% (4,186,303) 21,897,626 (4,702,261) 21,381,668 (1,294,586) 20,087,082 Fund Balance categories per GASB 54 Non-Spendable Fund Balance 266,062 Restricted Fund Balance Committed Fund Balance 2,014,976 Assigned Fund Balance 2,584,487 Unassigned Fund Balance 17,032,101 $ 21,897,626 Ending Fund Balance 266,062 2,014,976 2,068,529 17,032,101 $ 21,381,668 125,000 2,000,000 1,939,384 16,022,698 $ 20,087,082 Total Appropriations Excess/(Deficiency) of Revenues Over/(Under) Appropriations Ending Fund Balance Percent Change Note: The projected fund balance is based on levels spent at 100%. Actual amounts are projected on the next page. (*) For FY23, planned one-time expenditures from the General Fund balance $1,294,586 as follows: Debt Service Transfer for future payments- CIP Plan IT Servers and Equipment Education Foundation teacher program and grant program Retirement benefit Total fund balance capital expenditure appropriations $ $ 189,586 355,000 600,000 150,000 1,294,586 The following table presents a comparison of the estimated revenues, appropriations, other financing sources and uses, and beginning and ending fund balance of all governmental funds for fiscal year 20222023: 13 Governmental $ Estimated Revenues Appropriations General Fund Special Revenue Fund 61,928,640 58,358,339 $ 4,864,887 Transfers Out Total Appropriations and Other Uses 63,223,226 Appropriations from Fund Balance: Projected Fund Balance Beg. (1,294,586) 21,381,668 Projected Fund Balance End. $ 20,087,082 46,259,560 46,259,560 Proprietary Debt Service Fund $ 2,959,100 4,097,770 - - $ $ Internal Service Enterprise Fund Fund 855,000 43,611,715 - 46,259,560 $ Capital Projects Fund $ - 6,367,076 6,367,076 $ - Total 7,359,809 3,755,397 $ 125,729,185 162,449,857 5,104,412 9,969,299 4,097,770 43,611,715 6,367,076 8,859,809 172,419,156 (1,138,670) 1,338,670 (42,756,715) 43,021,000 1,386,982 (1,500,000) 1,500,000 (46,689,971) 68,628,320 200,000 $ 264,285 $ 1,386,982 $ - $ 21,938,349 2022-2023 Proposed Estimated Revenues (All Funds) $125,729,185 Internal Service Fund, $6,367,076 Enterprise Fund, $7,359,809 Capital Projects Fund, $855,000 General Fund, $61,928,640 Debt Service Fund, $2,959,100 Special Revenue Fund, $46,259,560 Internal Service Fund, $6,367,076 2022-2023 Porposed Appropriations All Funds - Includes Transfers) $162,449,857 Enterprise Fund, $3,755,397 Capital Projects Fund, $43,611,715 General Fund, $58,358,339 Special Revenue Fund, $46,259,560 Debt Service Fund, $4,097,770 The Department’s Proprietary Funds are the Internal Service Fund and the Enterprise Fund. The Internal Service Fund consists of two funds: The Worker’s Compensation Fund and the Facilities Support Charges. For the Worker’s Compensation Fund, the Department participated in a partially self-funded pool, originally approved by the Board in the fiscal year 2005. Since 2016-2017, the Department moved to a fully funded program. Claims administration, loss control, and consultant services will be provided for by worker’s compensation insurance company and a third-party administrator will handle the run-off claims from the previous self-insurance plan. 14 Internal Service Fund - Workers Compensation The following table presents a comparison of the proposed fiscal year 2022-2023 revenues and expenditures for the Workers Compensation Fund with a comparison to fiscal year 2021-2022: Adopted Budget 2021-2022 Amended Budget 2021-2022 Proposed Budget 2022-2023 Operating Revenues $ $ $ Operating Expenses 400,000 415,000 415,000 400,000 415,000 415,000 1,386,982 1,386,982 1,386,982 $ 1,386,982 $ 1,386,982 $ 1,386,982 Total Operating Expenses and Other Uses Net Position Projected Balance Beginning Projected Balance Ending 400,000 415,000 415,000 Internal Service Fund - Facilities Support Charges The Internal Service Fund also includes the Facilities Support Charges Fund. It consists of facilities support charges that are divided among the divisions based on square footage. The following table presents a comparison of the proposed fiscal year 2022-2023 revenues and expenditures for the Facilities Support Charges with a comparison to fiscal year 2021-2022. The Facilities Division is projecting $151,586 more than adopted fiscal year 2021-2022 budget due to increase in security expenses, fuel expenses and supply chain constraints. Adopted Budget 2021-2022 Amended Budget 2021-2022 Proposed Budget 2022-2023 Operating Revenues $ 5,800,490 $ 5,918,339 $ 5,952,076 Operating Expenses 5,800,490 5,800,490 $ - 5,918,339 5,918,339 $ - 5,952,076 5,952,076 $ - Total Operating Expenses and Other Uses Projected Balance Beginning Projected Balance Ending 15 Enterprise Fund – Choice Partners The Enterprise Fund consist of the Choice Partners Fund which offers quality, legal, procurement and contract solutions to meet the purchasing needs of school districts and other governmental entities. The following table presents a comparison of the proposed fiscal year 2022-2023 revenues and expenditures for Choice Partners Fund with a comparison to fiscal year 2021-2022. Adopted Budget 2021-2022 Amended Budget 2021-2022 Proposed Budget 2022-2023 Operating Revenues $ 5,893,380 $ 5,893,380 $ 7,359,809 Operating Expenses Transfers Out 2,608,968 4,384,412 6,993,380 1,500,000 $ 400,000 $ Total Operating Expenses and Other Uses Projected Balance Beginning Projected Balance Ending 2,629,109 3,755,397 3,264,271 5,104,412 5,893,380 8,859,809 1,500,000 1,500,000 1,500,000 $ - Balanced Budget Per CE Local Policy, the operating budget requires a balanced budget. This means that for each fund, expenditures are not to exceed revenues plus projected one-time use fund balances. If the fund balance is used, this cost must be a one-time cost and not recurring (i.e., capital expenditures). The Department is projecting a balanced budget for fiscal year 2022-2023. Expenditures plus other financing uses total $63,223,226. Revenues equal $61,928,640. One-time costs total $1,294,586, from which technology equipment totals $355,000, Education Foundation program for $600,000, debt service payment from General Fund for $189,596, and retirement benefits from Fund Balance for $150,000. We believe that the budget represents a fiscally responsible and conservative approach to the needs of the Department within the available funds. The chart below shows a historical summary and forecast of the General Fund. General Operating Fund Summary (Trend) 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 2026-2027 2027-2028 2028-2029 Actual Forecast Actual Actual Actual Amended Proposed Forecast Forecast Forecast Forecast Forecast Beginning Fund Balance $ 28,122,494 $ 29,412,173 $ 32,614,360 $ 32,835,461 $ 26,083,929 $ 21,381,668 $ 20,087,082 $ 18,257,314 $ 17,747,535 $ 17,964,740 $ 17,964,740 $ 18,927,874 Estimated Revenue 51,262,202 56,240,706 54,663,765 56,961,707 59,186,588 61,928,640 62,241,499 64,108,744 66,032,007 68,012,967 68,012,967 70,053,356 Appropriations 44,202,144 47,209,422 48,169,777 49,765,045 57,384,440 58,358,339 59,525,506 60,091,776 61,293,611 62,519,483 62,519,483 63,769,873 Total Other Uses (5,770,379) (5,829,098) (6,272,887) (13,948,194) (6,504,409) (4,864,887) (4,545,762) (4,526,748) (4,521,191) (4,530,350) (4,528,350) (4,522,350) 1,289,679 3,202,186 221,101 (6,751,532) (4,702,261) (1,294,586) (1,829,768) (509,779) 217,205 963,134 965,134 1,761,133 Net Change in Fund Balance Ending Fund Balance $ 29,412,173 $ 32,614,360 $ 32,835,461 $ 26,083,929 $ 21,381,668 $ 20,087,082 $ 18,257,314 $ 17,747,535 $ 17,964,740 $ 18,927,874 $ 18,929,874 $ 20,689,007 For fiscal year 2024 to 2029 forecasted figures the trend includes 3% growth in revenues and 2% in expenditures. A more detailed projection can be found in the Financial Section. Projected Fund Balance We are projecting that the fiscal year 2022-2023 ending fund balance will be $20,087,082. This represents a decrease of $1,294,586 from the projected 2021-2022 ending fund balance. The use of fund balance is for planned appropriations that are one time in nature (i.e., construction projects and capital 16 outlay). It is the policy of the Department to maintain an unassigned fund balance equivalent to a minimum of two months of operations costs. Currently, the Department projects the desired fund balance. According to our five-year forecast, the Department will have sufficient funds to meet the CE local policy requirements but may need additional cash to fund the Special Revenue Fund since they work on a reimbursement basis. About the 2022-2023 Department Budget Below are highlights of the Department that will provide you with a general overview of the basis of our assumptions and projections for the coming 2022-2023 fiscal year. To prepare the annual budget, HCDE develops projections for taxable value, collection rate, and expenditure levels. Appropriation Levels General Operating Fund –The 2022-2023 appropriation levels for the General Operating Fund are projected at $58,358,339 and estimated other uses (transfers to other funds) and one-time cost at $4,864,887 for a total of $63,223,226; this represents a decrease of 1.4% or $665,623 from 2021-2022 amended budget. The 2022-2023 budget includes a 2% salary increase for all employees, and 13% equity adjustment for Principals and above. The budget process was representative of the economic environment. A series of budget meetings and reviews were conducted by the Superintendent and the Budget Committee to achieve this budget. Transfers-out to other funds amounted to $4,864,887 for fiscal year 2022-2023 mainly due to the CASE local match $550,787, the Head Start local match $500,000, and the Debt Service transfer of $2,959,100 and $855,000 for Construction and Computer Equipment Projects. Comparison of General Operating Fund Appropriations by Object General Fund Only Adopted Budget 2021-2022 Amended Budget 2021-2022 Proposed Budget 2022-2023 Percent Change Payroll $ 40,760,751 $ 40,617,320 $ 41,853,841 3% Contracted Services Supplies & Materials Misc Operating Cost Capital Outlay Transfers Out Total Appropriations 5,131,454 2,837,173 8,172,866 40,000 6,434,088 $ 63,376,332 6,383,669 3,074,583 7,265,428 43,440 6,504,409 $ 63,888,849 5,326,281 2,839,811 8,338,407 4,864,887 $ 63,223,227 -17% -8% 15% -100% -25% -1% Object Code 17 In the following charts, please find the comparison of the appropriation for the previous year budget and the current year budget. Transfers Out 10% 2021-2022 General Fund Adopted Appropriations - $63,376,332 Misc Operating Cost 13% Payroll 64% Supplies & Materials 5% Contracted Services 8% 2022-2023 General Fund Proposed Appropriations - $63,223,226 Transfers Out 8% Misc Operating Cost 13% Supplies & Materials 5% Payroll 66% Contracted Services 8% Debt Service Fund – The Department budgeted $2,959,100 in appropriations for fiscal year 2022-2023. Resources in the Debt Service Fund must be used to pay for general long-term debt principal and interest for debt issues and other long-term debts for which revenues are dedicated from the General Fund. A transfer was made in previous fiscal years to retire 2015 debt in the amount of $2,857,214. Currently the Department has approximately $52 million plus premium of $5.5 million in debt including: 18     PFC Lease Revenue bonds for $27 million issued for the construction of the 2020 Capital improvement Plan that included new buildings for HP East, AB East, Adult Education Center. For these projects, the General Fund contributed $5.7 million. Series 2020 HCDE Maintenance Notes for $13.8 million for the renovation of the Ronald Reagan building, equipment for the Adult Ed Center, equipment and other resources for AB East, Highpoint East buildings, and other equipment and renovation costs. Previous PFC Lease bonds and QZAB bonds for a remaining value of $11 million The amount of premium and other resources used from the bond sale was $5,500,000 Special Revenues Funds – Appropriations for these funds are restricted to or designated for specific purposes by a grantor. For fiscal year 2022-2023, the Department’s appropriation is $46,259,560 The Department provides information to the Board of Trustees on all Department grants, as the Notice of Grant Awards (NOGA) are received, the estimated revenues and appropriations are adjusted to reflect the awarded grant budget. These grants have restrictions placed by grantors. Revenue Levels Revenue estimates are based upon a variety of demographic and tax information. Proposed revenue from the two major sources, customer fees and local property taxes, are critical to the budget. The Department estimates total General Operating Fund revenues of $61,928,640 for the 2022-2023 fiscal year. Customer fees are projected to be $23,275,722 or 37% of the estimated revenues. Tax revenues are projected to be $27,380,681 or 44% of the estimated revenues. The remaining 19% of the revenues are indirect costs at $2,348,825; state funding $3,698,000, transfer in from Choice Partners Fund of $5,104,412 and other revenues at $121,000. The recommended budget includes an increase in revenues of 5% from the amended fiscal year 20212022 budget for the General Fund. The following charts present the adopted revenue levels for fiscal year 2021-2022 and the proposed revenues for fiscal year 2022-2023. Object Code Customer Fees Tax revenues Indirect costs State funding Other Transfer In-Choice Partners Total Revenues Adopted Budget 2021-2022 $ 22,145,627 26,528,250 2,790,440 3,620,000 50,000 4,384,412 $ 59,518,729 19 Amended Budget 2021-2022 $ 22,192,627 26,098,250 2,790,440 3,620,000 121,000 4,364,271 $ 59,186,588 Proposed Budget 2022-2023 $ 23,275,722 27,380,681 2,348,825 3,698,000 121,000 5,104,412 $ 61,928,640 Percent Change 4.9% 5% -16% 2% 0% 17% 5% 2021-2022 General Fund Adopted Revenue - $59,518,729 Other 0% Transfer In-Choice Partners 7% State funding 6% Customer Fees 37% Indirect costs 5% Tax revenues 45% 2022-2023 General Fund Proposed Budget - $61,928,640 Transfer In-Choice Partners 8% Other 0% State funding 6% Customer Fees 38% Indirect costs 4% Tax revenues 44% 20 Local Revenues Local revenues are projected to increase by 1%. Revenues from current year customer fees are expected to increase by 4.9% from an amended budget of $22,192,627 in fiscal year 2021-2022 to a projected $23,275,722 for fiscal year 2022-2023. HCDE has not increased the rates and additional contracted seats at the special schools, no increment in the service rates from Records Management, Therapy Division, and the Center for Safe and Secure Schools, and a reduction in rates from Educator Certification and Advancement Division for fiscal year 2022-2023. In addition, the Department anticipates a 5% increase change in tax revenues from $26,098,250 in fiscal year 2021-2022 to $27,380,681 in fiscal year 20222023 due to the increase in property values and the adopted tax rate. A 7.5% increase in values is projected based on the preliminary estimate from the Harris County Appraisal District. Also, a 99% collection was used in projecting revenues for fiscal year 2022-2023, and it is expected that this rate will be realized for the fiscal year. Tax Rate – Effective January 1st, 2020, the State Legislature approved SB3 that included change in terminology for tax rates and tax rate calculations. The new terminology is as follows: Effective Tax Rate – Now called “No-New-Revenue Tax Rate”. Roll Back Tax Rate – Now called “Voter Approval Tax Rate”. In addition, the calculation was changed as the new law requires to use the average of three-year collection rates. Based on the taxable value, the Department must project the level of taxation that will generate adequate funds to provide funds to meet Department obligations while keeping in mind the ability of local taxpayers to pay their taxes. The Harris County Tax Office will calculate the no-new-revenue tax rate (“NNRR”), formerly called the effective tax rate. The NNRR was projected at $.004955 for fiscal year 2022-2023. We expect the proposed tax rate will be below the voter approved rate (VAR) for fiscal year 2022-2023. Throughout the budget process, we used the current tax rate and the projected values to estimate the level of local effort. Upon receiving the certified values and the NNRR calculation from the Harris County Tax Assessor – Collector, the tax rate proposal will be developed and presented to the board in accordance with the truth in taxation law. Current revenue projections and tax rates are based on projected values and current rates. Projections will be recalculated in accordance with State tax regulations. Taxable Value – The Harris County Appraisal District certifies the taxable value from which the Department begins to develop the estimates for local tax revenues. The 2021 certified valuations of net taxable value for the 2021-2022 fiscal year are $516,540,607,587 (based on HCAD report updated 4/28/2022. The 2022 Preliminary Estimate is $568 Billion (based on HCAD letter dated 4/28/22), which is an increase of $52,105,114,013 or 10.9%. For fiscal year 2021-2022 the appraised values were estimated at $556 billion considering a larger increase of new property added, which represents a 7.5% increase. The adjacent chart illustrates the 10-year taxable value history of the Department. For fiscal year 2023-2024 to 2024-2025, the Department projects a 3% growth on appraised values due to the positive economic impact in the region and value growth. The Department is also proposing to increase the Over 65 & Disabled Exemption from $229,000 to $250,000 with an estimated impact of $101,646 at the current rate. 21 Tax Collections – The collections percentage used to estimate the tax revenues is 99%. This is a realistic approach given the trend of the Department’s collections effort and the projected tax increase. HCDE Property Values and Tax Rates $600,000,000 0.007000 0.006581 0.006617 Assessed Value $400,000,000 0.006581 0.006050 0.006500 0.006358 0.006000 0.005999 $300,000,000 0.005500 0.005422 0.005190 $200,000,000 0.005200 0.005195 0.004993 0.005000 0.005000 0.004990 0.004990 $100,000,000 0.004500 $0 0.004000 Fiscal Year In the chart above, the tax rate has been reducing as the property values for the Harris County have increased. As the population in the Harris County has grown, new areas have been developed with new construction and new businesses. Other Tax Revenues The Department does not have any other local taxes or collections. Harris County Department of Education does not receive sales tax, franchise taxes or any other taxes. It does charge fees for services for various activities. The following are general fee charges by the various divisions. Fees for services School based therapy services are provided to school districts which contract with HCDE to provide occupational therapists. The rates based are based whether the district is within the county boundaries or outside of the boundaries. The fees range from $440 to $540 per day. The sustainability of this model has been identified as locally supported activity which is assisted by property taxes. There is a 10% increase in fees compared to last year’s fees. 22 Tax Rate $500,000,000 Special school services are provided to school districts which contract with HCDE to provide services for students with behavioral and disability issues. The rates are based on whether the district is within the county boundaries or outside of the boundaries. The fees range from $6,250 (Fortis – In County) to $25,050 (AB Schools – Out of County) per year. The sustainability of this model has been identified as locally supported activity which is assisted by property taxes. There was an increase between 3% and 5% on the In-county fees and 10% on the out-of-county fees compared to last year. Records management services are provided to school districts which contract with HCDE to provide services for safe keeping documents and records. Rates are based whether the district is within the county boundaries or outside of the boundaries. The fees range from $.24 to $.26 cents per box, $.25 cents per month for tape or film. Rates are lower for educational entities, and other out of County or noneducational entities require a 15% to 25% margin to reduce the cost of providing services to ISDs. There was no increase in fees compared to last year’s fees. Center for Educator Success services are provided to school districts which contract with HCDE to provide digital training and course development. The rates are based whether the district is within the county boundaries or outside of the boundaries. The fees range from $850 to $2,000 depending on the scope of work. The sustainability of this model has been identified as locally supported activity which is assisted by property taxes. The cost per district participation in the teacher institute is $25,000 per year. Certification and Training Services are provided to individuals seeking certification in the areas of teaching and principalship. The rates for the previous fiscal year ranged from $2,500 to $3,500 per individual per program, for FY23 the proposed rates will range between $2,000 to $3,500 per individual per program. There was a slight decrease in fees compared to last year. Center for Safe and Secure Schools services are provided to school districts which contract with HCDE to provide facility audits. The rates are based on whether the district is within the county boundaries or outside of the boundaries. The fees range from $1,500 to $2,400 per school. There was a $300 increase in fees compared to last year’s fees. Enterprise Activity Cooperative procurement services are provided to school districts which contract with HCDE and participate in the national cooperative – Choice Partners. The rates are paid by the vendors based on the type of commodity. The fees range from 1% to 4%. The sustainability of this model has been identified a self-sustaining activity which provides revenue to the General Fund and supports Department activities for grants and other services. Other Local Revenue Sources The Department has other sources of revenue. For Fiscal Year 2022-2023 the only source of other revenue is interest. Interest revenues are estimated in $50,000. 23 The following chart presents the tax revenues collected in the last eleven years. Other 2022-2023 HCDE Budget Highlights Salary Increase – The proposed budget continues the $15 an hour minimum compensation plan and a 2% for all employees for General Fund, Facilities and Enterprise employees. The budget includes a 13% equity adjustment for Principals and above to keep up with competition and recruitment. HCDE plans to recruit, hire, and retain high quality staff to be able to provide the best services available in the marketplace. The new beginning teacher salary will be $62,800 which is expected to be at the highest level for the region. Grant employees are only included in the increase if the grant can absorb the cost. For the Head Start Program, a $500,000 additional transfer from General Fund will be required for FY 23 to continue the $15 minimum compensation plan. Other Payroll Highlights – Additionally, included in the budget are 24.95 new positions which included 6.15 therapists for the School Based Therapy Division, and 7 FTE for Adult Education, 2 for AB East School, 6 for High Point East, 1.5 for Client Engagement, 1 Human Resources, 2 for Fortis Academy. All positions are either grant funded and-or revenue producing. Workers Compensation Insurance – The amount of $415,000 was budgeted for fiscal year 2022-2023. There are sufficient funds in the reserve account for uncertainties and to cover any runoff claims. Transfers Out – The transfers out decreased from $6,504,409 in fiscal year 2021-2022 to $4,864,887 in fiscal year 20222023 due to the Head Start transfer for $500,000, the CASE transfer for $550,787, the capital projects and equipment for $855,000, the Debt Service transfer for $2,959,100. 24 Transfers In – Choice Partners Cooperative is an Enterprise Fund with excess funds transferred to the General Fund to support the mission of HCDE. The total transfer (revenue to General Fund) is projected at $5,104,412 Below is the five-year all Funds forecast for Harris County Department of Education. The assumption is that revenues will grow at a 3% rate and appropriation will grow at a 2% rate for the estimated years below. Harris County Department of Education All Funds Revenues and Expenditures Five Year Forecast Actual Actual Actual Amended Adopted Estimated Estimated Estimated Estimated 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 Beginning Fund Balance $42,583,959 45,676,310 $38,633,589 $83,222,067 $68,628,320 $21,938,348 $18,988,234 $18,201,743 $18,201,743 $18,093,570 Estimated Revenues Appropriations (Exp.) 105,155,340 102,062,989 100,243,233 107,285,954 160,830,826 116,242,348 130,519,406 145,113,153 125,729,185 172,419,157 124,495,347 127,445,461 127,409,472 128,195,963 130,661,649 130,769,822 132,777,276 132,175,478 136,080,243 134,833,048 3,092,351 (7,042,721) 44,588,478 (14,593,747) (46,689,972) (2,950,114) (786,491) (108,173) 601,797 1,247,195 $45,676,310 $38,633,589 $83,222,067 $68,628,320 $21,938,348 $18,988,234 $18,201,743 $18,093,570 $18,803,541 $19,340,765 504,996 Difference Projected Ending Fund Balance Nonspendable Fund Balance Estimated 169,805 177,243 504,996 178,000 504,996 504,996 504,996 504,996 504,996 Restricted Fund Balance 10,600,127 2,939,650 51,751,156 2,500,000 14,239,592 2,939,650 2,939,650 2,939,650 - Committed Fund Balance 2,014,976 2,014,976 2,014,976 2,014,976 1,914,976 1,914,976 1,914,976 1,914,976 Assigned Fund Balance 9,499,397 13,540,000 9,270,790 4,500,000 5,449,088 5,249,088 5,249,088 5,249,088 5,249,088 5,249,088 Unassigned Fund Balance 23,392,005 19,961,720 19,680,148 59,435,344 (170,304) 8,379,524 7,593,033 7,484,860 11,134,481 11,671,705 Cash Flow Required two months 17,010,498 17,880,992 19,373,725 24,185,526 28,736,526 21,240,910 21,365,994 21,794,970 22,029,246 22,472,175 1,914,976 1,914,976 Cash Flow Needed for one month: - For Special Revs Funds 2,040,766 2,930,382 2,569,467 3,290,074 3,355,876 3,422,993 3,491,453 3,561,282 3,561,282 3,632,508 - From General Fund 6,464,483 6,010,114 7,117,396 8,802,689 11,012,387 7,197,462 7,191,544 7,336,203 7,453,341 7,603,580 Special Revenue Funds - Grants 24,489,190 35,164,587 30,833,599 39,480,890 40,270,508 41,075,918 41,897,436 42,735,385 42,735,385 43,590,093 1/12 of Total Grant is (one month) 2,040,766 2,930,382 2,569,467 3,290,074 3,355,876 3,422,993 3,491,453 3,561,282 3,561,282 3,632,508 All Funds - Appropriations 77,573,799 72,121,367 85,408,749 105,632,263 132,148,650 86,369,543 86,298,526 88,034,437 89,440,093 91,242,956 1/12 of General Fund for Cash Flow 6,464,483 6,010,114 7,117,396 8,802,689 11,012,387 7,197,462 7,191,544 7,336,203 7,453,341 7,603,580 Cash Flow Calculations: Note: To reflect the actual events of the construction projects during fiscal year 2021-2022, the amended numbers were also adjusted to reflect expenditures over multiple years. Going forward beyond fiscal year 2022-2023 Estimated revenues and appropriations for the next five years will depend on the ability of HCDE to remain implementing a positive business model that will maximize fee structure, grant resources, and leverage local tax dollars. The ability to remain competitive in the market relies on maintaining a knowledgeable and expert work force, safe and secured facilities, 21st century technology, and relevant program and services that client districts and governmental entities need and seek from HCDE. The future financial situation of HCDE would be the result of the collective Department effort to become a major player in three areas: (1) Therapy Services: HCDE’s objective is to become the best source of therapy services for the schools in Harris County by offering competitive rates and top of the line services; (2) Special Schools: HCDE provides excellent services in schools designed to provide education to students with special needs. HCDE looks forward to expanding its clientele to new schools in other areas of the Harris County, such is the case of the Fortis Academy; (3) Choice Partners: HCDE provides 25 26 DEPARTMENT OFFICIALS, STAFF & CONSULTANTS COUNTY BOARD OF TRUSTEES NAME TITLE SERVICE DATE Richard Cantu President 2019 Andrea Duhon First Vice President 2020 Amy Flores Hinojosa Second Vice President 2020 Danyahel (Danny) Norris Member 2019 David W. Brown Member 2021 Erica Davis Member 2021 Eric Dick Member 2017 ADMINISTRATIVE OFFICIALS Name Position James Colbert, Jr. Superintendent Jesus Amezcua, PhD, CPA, RTSBA, CPFIM Assistant Superintendent for Business Services Jonathan Parker Assistant Superintendent for Academic Support Assistant C.J. Rodgers, Ed.D. Superintendent for Education & Enrichment Danielle Clark Chief Communications Officer Natasha Truitt, MBA Executive Director, Human Resources Rich Vela Executive Director for Facilities CONSULTANTS & ADVISORS Financial Advisor .................................................................................................................. US Capital, LLC. Houston, Texas Bond Counsel ............................................................................................. Orrick, Herrington & Sutcliffe LLP Houston, Texas Certified Public Accountants ............................................................................................. Whitley Penn, LLP Houston, Texas General Counsel ................................................ Karczewski, Bradshaw, Spalding, Nichols, Lamp, Langlois Houston, Texas 27 SUPERINTENDENT’S BIOGRAPHY James Colbert, Jr Mr. James Colbert., Jr. is the County School Superintendent of Harris County Department of Education since 2014. Harris County is the most populous county in Texas and encompasses 25 school districts. Superintendent Colbert is probably best known for being a fearless advocate for students and for his ability to transform academic performance. Prior to joining Harris County Department of Education, Mr. Colbert served as Superintendent of West OrangeCove Consolidated Independent School District. Before that post, he was Assistant Superintendent at Hamilton County Department of Education in Tennessee where he had oversight of 72 campuses with more than 42,000 students. A native of Washington, D.C., Colbert was the recipient of a track and field scholarship to the University of Texas at Austin, where he earned a Bachelor’s degree in Special Education. He received his Master’s degree in Education Administration from Texas State University and holds certification in the areas of the Superintendency, Administration, and Special Education in both Texas and Tennessee. He and his wife Angie are the parents of a son, Isom, who graduated from Louisiana State University. Mr. Colbert and his family have made Kingwood, Texas their home upon relocating to the Houston area. 28 ASSISTANT SUPERINTENDENT FOR BUSINESS SERVICES’ BIOGRAPHY Jesus J. Amezcua, PhD, CPA, RTSBA, CPFIM Dr. Amezcua has been the Department’s Assistant Superintendent for Business Services since 2008 and he oversees the financial management, investment management, debt management, procurement, compliance, tax collections, and school’s finance council. Under his leadership, the Department secured over $8 million in Quality Zone (QZAB) credit contracts and over $5.8 million in E-RATE technology funding, the 2016 Bond series for the construction of the AB West new campus for $7 million, and recently the $44.9 2020 Bond Series for the Construction plan of several new schools and buildings. Dr. Amezcua also coordinated the creation of the School Finance Council to provide professional development opportunities, sharing of ideas and networking opportunities for business managers in Harris County. After graduating from Martin High School, Dr. Amezcua attended Tarkio College in Missouri and earned three master’s degrees, including an MBA from Texas A&M International University. Dr. Amezcua is a Certified Public Accountant and has taught since 1991 at Texas A&M International University. He earned his doctorate in educational administration from Texas A&M University in December 2014, and his Texas Superintendent Certificate in 2016. Before HCDE, Dr. Amezcua worked for Laredo Independent School District as the Chief Finance Officer for 12 years. Prior to Laredo ISD, Dr. Amezcua worked for the City of Laredo. During his tenure with the City, he served as the assistant director of finance, revenue manager, internal auditor, and staff accountant. Dr. Amezcua is member of the Houston Rotary Club and is actively involved in numerous community events and organizations. He is a member of the best practice committees for GFOA and ASBO, and a member of the Professional Standards Committee by the Texas Society of CPAs. He is also a member of the AICPA. Dr. Amezcua and his wife, Ramona, have three children who graduated from St. Edwards University and a grandchild. 29 BOARD OF TRUSTEES BIOGRAPHIES Richard Cantu Position 3, At Large Board President Richard Cantu serves as trustee for Harris County Department of Education Position 3, At-Large and was elected to office in November 2018. Richard is the deputy executive director of the East Aldine Management District and has held several nonprofit and municipal leadership positions. Andrea Duhon First Vice President Position 4, Precinct 3 Andrea Duhon serves as board member for Harris County Department of Education Position 4, Precinct 3. Duhon is a territory manager and marketing strategist for Plant Sight 3D. She graduated with a Bachelor of Science in marketing from McNeese State University. Her affiliations include community leader for Combined Arms, formerly Lone Star Veterans Association, a nonprofit helping veterans’ transition to civilian life. Husband Hand is active-duty Navy. Her daughter attends school in Katy. Duhon was appointed to her position in December 2019 with the term ending December 2025. 30 Amy Flores Hinojosa Second Vice-President Position 1, Precinct 2 Amy Flores Hinojosa serves as board member for Harris County Department of Education Position 1, Precinct 2. As a process engineer, she is employed by Chevron Corporation as project manager in technology development. She earned a Bachelor of Science in Chemical Engineering from the University of Houston. She resides in Pasadena with her husband and two children and shares her passion for education through several student and professional mentoring initiatives. As the founder of Community Leaders Encouraging Academia Through Sports, Inc. or CLEATS, the Pasadena native heads a community youth athletic program which allows students to explore their college futures by visiting local universities. During 2020, Hinojosa serves as director on the board of Prounitas, a nonprofit dedicated to raising awareness for health and wellness resources for youth to be successful in school and beyond. She continues to grow her leadership skills as a Houston Leadership ISD 2020 fellow and a Houston Latinos for Education 2019 fellow. Danyahel (Danny) Norris Board Member Position 6, Precinct 1 Danyahel (Danny) Norris serves as trustee for Harris County Department of Education Position 6, Precinct 1 and was elected to office in November 2018. Norris is an associate director and instructor of law at Thurgood Marshall School of Law on the campus of Texas Southern University. He is a practicing intellectual property attorney, principal partner of Norris & Norris Attorneys and Counselors at Law and is a past president of the Houston Lawyers Association. He shares his leadership skills through various professional organizations, including the New Leaders Council, Houston chapter. 31 David W. Brown Position 7, At Large Brown, a first-generation high school, and college graduate is a proud husband and father of three. After graduating from college, he became a full-time entrepreneur and community activist. He is currently a health educator with a nonprofit organization located in 3rd Ward. He holds a bachelor’s degree in Business Administration, a Master’s in Business Administration with a focus in Public Administration and is currently working on a Doctorate’s in Business Administration Specializing in Leadership. Brown began his term January 2021 with the term ending December 2026. Erica Davis Position 5, At Large Davis is the Chief of Staff for the Harris County Precinct One Constable’s Office of Alan Rosen where she focuses on building bridges between Law Enforcement and the Community. She earned a Bachelor of Arts in Interpersonal Communication & Spanish from the University of Houston, a Master’s in Public Affairs from the LBJ School at the University of Texas – Austin, and currently working on a M.S. in Science at Columbia UniversityNew York. As a true public servant, Erica develops educational safety seminars to all communities, provide resource fairs for low-income communities and developed multiple platforms for diversity and inclusion and youth to dialogue on progressive issues. Erica Davis is a proud Veteran’s wife to David, devoted bonus mom to Elijah, & native Houstonian. In her free time, you can find her serving in all communities. Davis began her term January 2021 with the term ending December 2026. Davis believes the community needs to know about all the resources available for our children. 32 Eric Dick Position 2, Precinct 4 Eric Dick serves as a trustee of the HCDE Board of Trustees and as trustee for Position 2, Precinct 4. He was elected as trustee in November 2016. Dick is a homeowner’s insurance lawyer and owner of Dick Law Firm, PLLC. After obtaining as associate degree from Community College, he gained his bachelor’s degree from University of Phoenix. He obtained his law degree after attending Western Michigan University Cooley Law School and the University of Alabama School of Law. 33 ORGANIZATIONAL SECTION II–ORG ANIZATIONAL SEC TION 34 This page was intentionally left blank. 35 DEPARTMENT’S MISSION & GOALS Harris County Department of Education (“HCDE”), a highly successful educational resource in the Houston Metroplex, is a nonprofit tax-assisted organization dedicated to the equalization of educational opportunity and to the advancement of public schools. HCDE has been serving the county's public schools since 1889. Harris County Department of Education was formed as the original area district to provide free public schools. Today, HCDE has about 950 employees and provides education services for school districts and the public in Harris County and beyond. The organization impacts the educational community through visionary leadership, shared resources, and innovative programs. HCDE Mission Statement Harris County Department of Education supports Harris County by enriching educational opportunities and providing value through services. The chart below shows the Budget by Goals. Every division provided the Business Office the percentage of their task devoted to each goal. Divisions budget get allocated accordingly and as we add all division, we get the total amount of the budget devoted to every Goal. The process is reviewed and approved by the Assistant Superintendent for Business Services. Goals GOAL 5 , $9,583,026 , 8% Harris County Department of Education will HCDE FY23 Budget by Goals GOAL 1 , $21,973,229 , 17% GOAL 4 , $18,646,927 , 14% GOAL 2 , $19,911,463 , 15% GOAL 3 , $59,528,639 , 46% 36 1. Impact education by responding to the evolving needs of Harris County 2. Deliver value to Harris County by utilizing resources in an ethical, transparent, and fiscally responsible manner 3. Advocate for all learners by using innovative methods to maximize students’ potential 4. Provide cost-savings to school districts by leveraging tax dollars 5. Recruit and maintain high-quality staff HCDE Organizational Chart Public Executive Leadership Team Members Board of Trustees Leadership Team Members Campus Principals Attorney Superintendent James Colbert Jr Assistant Superintendent Education and Enrichment C.J. Rodgers Chief of Staff Danielle Bartz Executive Director Facilities Assistant Superintendent Business Services Chief Assistant Superintendent Academic Support Executive Director Human Resources Rich Vela Jesus Amezcua Danielle Clark Jonathan Parker Natasha Truitt Senior Director Adult Education Director CASE for Kids Director Choice Partners Stephanie Ross Lisa Caruthers Jeff Drury Director Grants Development Director Adult Education Director Construction Director Procurement Linda Fehoko Joe Carreon Kendra Jackson Director Research and Evaluation Director Maintenance Darlene Breaux John Prestigiacomo Director Safe and Secure Schools Julia Andrews Marcia Leiva HCDE PLUS Director Marketing & Client Engagement Senior Director Head Start Stephanie De Los Santos Venetia Peacock Director Communications & Creative Services Senior Director School-Based Therapy Services Director InformationTechnology Senior Director Schools Lowell Ballard Charles Ned Dave Einsel Carie Crabb Director Records Management Principal Highpoint School East Principal Fortis Academy Curtis Davis Courtney Waters Travita Godfrey Principal Academic and Behavior School West Principal Academic and Behavior School East Senior Director Center for Educator Success Victor Keys Cynthia Brunswick Revised: 6-9-2022 37 Donna Treviño-Jones PROFILE OF THE DEPARTMENT Harris County Department of Education, incorporated in 1889, is a political subdivision of the State of Texas. HCDE is in Houston, Texas. Originally every county in Texas had its own department of education. Therefore, Harris County Department of Education was the first school district in Harris County, Texas. It is important for the reader of this budget to know and understand that the name ‘Harris County Department of Education’ stands as an entity separate and distinct from county agencies of the Harris County, in Texas. Also, HCDE is not a school district but a governmental entity. It has evolved in response to educational and community needs to provide educational services to students (of all ages) and school districts primarily within but also outside of Harris County, Texas. The HCDE County Board of School Trustees (Board), elected by voters of Harris County, Texas, has governance responsibilities over all activities and operations of the Department. The Board consists of seven members who serve overlapping six-year terms. Trustees are elected in even numbered election years for sixyear staggered terms to provide board continuity. Four trustees must be elected from districts conforming to the four Harris County Commissioners’ precincts. The other three trustees are elected at-large. COUNTY BOARD OF TRUSTEES NAME TITLE SERVICE DATE Richard Cantu President 2019 Andrea Duhon Vice President 2019 Amy Flores Hinojosa Second Vice President 2019 James Colbert,Jr. Secretary 2014 David W. Brown Member 2021 Erica Davis Member 2021 Erick Dick Member 2017 Danyahel Norris Member 2019 ADMINISTRATIVE OFFICIALS Name James Colbert, Jr. Jesus Amezcua, PhD, CPA, RTSBA, CPFIM Jonathan Parker CJ Rodgers, Ed.D. Danielle Clark Natasha Truitt, MBA Rich Vela Position Superintendent Assistant Superintendent for Business Services Assistant Superintendent for Academic Support Assistant Superintendent for Education & Enrichment Chief Communications Officer Executive Director, Human Resources Executive Director for Facilities 38 The Department is a primary governmental unit and is not included in any other governmental reporting entity. There is a blended component unit, the Harris County Department of Education Public Facilities Corporation (PFC), included within the reporting entity. The PFC Board of Directors: NAME TITLE Rich Vela President Richard Cantu First Vice President Andrea Duhon Second Vice President Dr. Jesus Amezcua Treasurer / Secretary James Colbert, Jr Director Danny Norris Director Joe Carreon Director Organization Authority HCDE was created by the Texas Legislature in 1889 and operates under Chapter 17 &18 of the education code. 39 Harris County School Districts Aldine ISD Alief ISD Channelview ISD Clear Creek ISD Crosby ISD Cypress-Fairbanks ISD Dayton ISD Deer Park ISD Galena Park ISD Goose Creek ISD Houston ISD Huffman ISD Humble ISD Katy ISD Klein ISD La Porte ISD New Caney ISD Pasadena ISD Pearland ISD Sheldon ISD Spring ISD Spring Branch ISD Stafford MSD Tomball ISD Waller ISD Organizational Philosophy The core ideology of Harris County Department of Education outlines the direction of the Department and the expectation held for all employees. The mission defines what we are. Our goals define how we intend to achieve our mission. Primary Services The Department’s primary service area geographically covers 1,788 square miles within Harris County, Texas in the upper Texas Gulf Coast region. Harris County’s population base includes a wide variety of racial, ethnic, and socio-economic groups that gives the area a rich diversity and cosmopolitan feel. The Department offers services to 25 rural, suburban, and urban school districts entirely or partially within its primary service area of Harris County. It also serves school districts and governmental agencies in surrounding counties, as well as schools, education services centers, and other governmental agencies statewide. Responding to and serving the needs of learners of all ages, socio-economic status, ethnic backgrounds, educational or development delays and at-risk behaviors requires the Department to be an institution of great flexibility as evidenced by the activities described below. Affordable and highly flexible programs and products are developed with clients in mind. Client population examples are: Academic and Behavior Schools serve children, youth, and young adults ages 5-22 with severe emotional disturbances, mental retardation, pervasive developmental disorders, and other health impairments. 40 Adult Education Program prepares age 16-plus youths and adults to read and speak English, and/or to complete a high school General Equivalency Diploma education. Business Services / HCDE Plus provides professional services in school finance to school districts and charter schools. It also, through the School Finance Council, serves school districts business managers and CFOs with training and pertinent information relative to school finance and business operations. CASE - The Center for After-School, Summer and Enrichment serves elementary, middle, and high school students delivering quality after-school learning opportunities. It includes a program implemented in FY18 as an out-of-school-time debate program for low income and minority high school students. An expansion of HUDL – Houston Urban Debate League in collaboration with Houston ISD. Center for Educator Success transforms educator talent pipelines by partnering directly with districts to reimagine a comprehensive approach to educator recruitment, growth, advancement and leadership with the primary goal to inspire a new generation of educators to teach and lead in ways that generate real results and new opportunities for all children. Center for Safe and Secure Schools was created in 1999 in response to a request from School Superintendents in Harris County. The Center was tasked with the mission of supporting school districts’ efforts to have safe and secure learning environments; it provides a wide variety of services pertaining to best practices in the fields of Emergency Preparedness and School Safety. Choice Partners National Cooperative offers quality, legal procurement, and contract solutions to meet the purchasing needs of school districts and other governmental entities. Through this cooperative purchasing program, members gain immediate access to legal, competitively bid contracts they need, saving time and money on the bidding and purchasing process. Fortis Academy serve youth coming out of treatment from substance dependency by providing a safe place with counseling and curriculum to continue academic requirement for finishing school. Head Start / Early Head Start Programs serve preschool children ages 6 weeks to 5-years old from economically disadvantaged families, and their families with school readiness abilities. Over 10 percent of those children have an identified disability requiring intervention. Highpoint School serve adjudicated youth by providing intensive counseling and a technology-driven curriculum in a strict disciplinary environment. Records Management Cooperative assists Houston-area school and governmental agencies to achieve and maintain compliance with State of Texas Local Governmental Records Act of 1989. Resource Development / Texas Center for Grant Development supports efforts to locate and obtain funds which forward new programs, program enhancement and expansion needs. Research and Evaluation provides quality, scientific-based evaluations services that meet the needs of HCDE, School districts, and other community groups. School-Based Therapy Services provides assessment, intervention, consultation training and direct service to children with disabilities and their families. Below is a map of Houston identifying the location of the administrative building and the five different campuses, including the new AB West campus. 41 42 BUDGET ADMINISTRATION & FINANCIAL POLICIES Legal Requirement for Budgets Legal requirements for school district budgets are formulated by the state, the Texas Education Agency (“TEA”), and the local district. In addition to these requirements, individual school districts also may have their own legal requirements for budget preparation. Additional legal requirements also may be imposed by state and federal grants; however, this section deals only with state legal mandates, TEA legal requirements and local district requirements for basic budget development and submission. HCDE follows the legal budget requirements for school districts in accordance with the education code and the tax adoption requirements for counties in accordance with the Government code. HCDE policies can be found at http://pol.tasb.org/Home/Index/578. Statement of Texas Law Sections 44.002 through 44.006 of the Texas Education Code establish the legal basis for budget development in school districts. The following six items summarize the legal requirements from the code: 1. The superintendent is the budget officer for the district and prepares or causes the budget to be prepared. 2. The district budget must be prepared by a date set by the state board of education, currently August 20th. 3. The president of the board of trustees must call a public meeting of the board of trustees, giving ten days public notice in a newspaper, for the adoption of the district budget. Any taxpayer in the district may be present and participate in the meeting. 4. No funds may be expended in any manner other than as provided for in the adopted budget. The board does have the authority to amend the budget or adopt a supplementary emergency budget to cover unforeseen expenditures. 5. The budget must be prepared in accordance with GAAP (generally accepted accounting principles) and state guidelines. 6. The budget must be legally adopted before the adoption of the tax rate. Texas Education Agency (TEA) Legal Requirements TEA has developed additional requirements for school district budget preparation as follows: 1. The budget must be adopted by the board of trustees, inclusive of amendments, no later than August 31st. 2. Minutes from district board meetings will be used by TEA to record adoption of and amendments to the budget. 3. Budgets for the General Fund, the Food Service Fund (whether accounted for in the General Fund, a Special Revenue Fund or Enterprise Fund) and the Debt Service Fund must be included in the official district budget (legal or fiscal year basis). These budgets must be prepared and approved at least at the fund and function levels to comply with the state’s legal level of control mandates. Tax Authority HCDE received its tax authority in 1935 with a statute creating an equalization tax not to exceed of $0.01. HCDE follows Property Tax Code Chapter 26 for the tax setting process. HCDE follows the Texas Comptroller’s Truth in Taxation - A Guide for Setting Tax Rates for Taxing Units Other than Schools. Code of Ethics All Business Services and Purchasing Division employees are required to read and sign the HCDE Code of Ethics for Business Support Services and Purchasing Division Employees on an annual basis. The management of the Business Support Services and Purchasing Division is dedicated to making ethical and lawful choices by providing a structured code of ethics for its personnel to follow. Business Support Services and Purchasing Division employees shall model and promote ethical behavior to all HCDE employees through their behavior. Risk Awareness Risk awareness is an organization wide process to address internal control and risk-based standards in an audit 43 requirement, per Statement of Auditing Standards (SAS) No. 115 Communicating Internal Control Related Matters, issued by the American Institute of Certified Public Accountants (AICPA). The finished product, the packet of completed forms, is provided to the independent auditors for their review during the audit process. Each Division is given a Risk Awareness packet early in the budget process. This packet is completed and returned to the Business Office. The Business Office reviews each packet and looks for high risk items and discuss the reasons why the division manager considers the item a high risk. The information is documented and placed in folders for additional review. There is a Mid-Year review and assessment during the budget process in February in addition to a Year End Review by the Executive Team member for that division. Fraud Prevention The HCDE Fraud Prevention Model and Awareness Program supports SAS #99 by communicating to management and others an awareness and understanding of FRAUD and educating management about FRAUD and the types of controls that will deter and detect FRAUD. The Business Office alone cannot prevent and/or detect all the types of FRAUD that may be perpetrated within the Department. It takes all HCDE employees being aware and being knowledgeable that FRAUD could occur to possibly prevent FRAUD from occurring or even detecting a FRAUD that has occurred. HCDE Financial Policies In addition to state legal requirements, HCDE has established its own requirements for annual budget preparation. HCDE recognizes the importance of maintaining its financial integrity; therefore, it has developed this policy to support its mission and its goals and objectives. Five-year financial forecasts are used to estimate financial decisions on subsequent fiscal years. The forecasts are updated, reviewed, and evaluated annually by the Assistant Superintendent of Business Services to identify areas where resources have been over/under allocated. Long term financial plans will include, but not be limited to, an analysis that may include such factors as: 1. Economic growth rates 2. Property tax valuations 3. The full ongoing impacts of grants 4. The costs of new programs that are not fully funded 5. The difference between ongoing and one-time expenses and revenue 6. Analyze financial trends HCDE’s fiscal policies dictate budgetary requirements that go beyond those required by the Texas Education Code and TEA. These policies are delineated below. Local Board Policies are reviewed and approved by the Board of Trustees periodically when there is a change in Federal or State Law. Administrative procedures are implemented consistent with Board Policy. Fiscal Policy & Objectives Financial Stability In seeking to fulfill its mission, HCDE shall maintain a high level of financial stability and shall not compromise the long-term financial integrity to achieve short term benefits. To provide adequate cash flow for its operations, HCDE shall maintain a fund balance (the difference between assets and liabilities in a governmental fund) with five categories to meet the GASB 54 requirements: 1. Non-Spendable fund balance 2. Restricted fund balance 3. Committed fund balance 4. Assigned fund balance 5. Unassigned fund balance As of August 31, 2022, HCDE will have a fund balance of approximately 2 months of operating costs. To achieve this goal, the Superintendent and the Assistant Superintendent for Business Services are instructed to implement the following financial plan: 44 1. Develop and submit for Board approval a balanced budget with input from Division Managers to the Budget Committee. (A balanced budget means that for each fund, expenditures are not to exceed revenues plus available fund balances; if the fund balance is to be used, then this must be for a one-time cost and not reoccurring costs.) 2. Restrict any surplus funds towards unassigned fund balance. Funds from Operations Funds from operations should provide adequate funds to support its: 1. Special schools and alternative schools 2. Instructional programs 3. Capital programs 4. Debt service programs Revenue Revenue levels shall be evaluated with staff recommendations yearly, in consideration of: 1. Student growth assumptions 2. The projected level of expenditures 3. Facility and construction requirements 4. Current business conditions (local economy) 5. Economic projections (state economy, legislative issues, etc.) 6. Bond ratings General Operating Fund Expenditures General Fund expenditures shall maintain the following priorities of obligation: 1. Payments of all legal and reasonable expenditures relating to maintenance and operations of the HCDE operating fund. 2. Payments to meet all debt service requirements of outstanding bond indebtedness including the interest and sinking fund. 3. Payments to special revenue funds that require a matching for federal or state grants, including the CASE fund, the Head Start fund and others. 4. All net surpluses after payment of items 1 to 3 above may be used to fund necessary capital equipment purchases, facility expansion, and renovation. All remaining funds will go toward maintaining a budgeted ending cash balance (unassigned fund balance) which equates to at least two months of operating costs. This amount would be determined by first adding budgeted operations and maintenance costs plus debt service requirements. This total would be divided by 12 and then multiplied by two to calculate the two months operating costs requirements. Long Term Financing In the absence of surplus funds in item 4 above, the HCDE will utilize long term financing for capital projects and equipment funded through the maintenance and operations tax rate. Available mechanisms include the following: 1. Public Property Finance Contractual Obligations (PPFCO) 2. Time Warrants 3. Delinquent Tax Notes 4. Any other legal mechanism 5. Public Facilities Corporation (PFC) Short Term Financing HCDE will strive to minimize its short-term financing by maintaining a two-month unassigned fund balance. Based on cash flow projections, the Assistant Superintendent for Business may recommend to the Board to utilize short term financing to satisfy the cash flow requirements of the HCDE. Available mechanisms include the following: 1. Tax anticipation notes 2. Tax warrants 3. Delinquent tax notes 45 Reporting –Department and Public Facilities Corporation (PFC) HCDE will prepare reports of financial operations as follows: 1. A monthly operating and financial report, requiring review by the Audit Committee and/or the Board as the Board deems necessary. 2. An annual financial plan (budget) detailing revenues, expenditures, and capital additions presented for approval prior to September 1 of each year. Midyear analysis and review shall be presented to the Board for approval. 3. An annual audit by an outside professional auditing firm that would include all necessary details in reconciling all the year's financial operation. The audit report will be submitted for review and approval to the Board after the end of the fiscal year. A copy of the audit report will be submitted to Harris County and other respective oversight agencies. Investments Investment Authority Department depository and investment authority is established within the office of the Superintendent. By the authority of the Board, the Assistant Superintendent - Business Services, Chief Accounting Officer, and Senior Accountant are designated as the HCDE's investment officers. The investment officers are responsible for depositing funds, investing such funds, assuring that each investment has the proper authorized collateral, monitoring investments, assuring the security of HCDE's principal and interest, receiving and reporting principal and interest at the maturity of each investment, and providing the proper documentation and reports on such investments to the Superintendent and the Board in accordance with the HCDE's written investment policy and generally accepted accounting procedures. The investment officers shall be bonded or shall be covered under a fidelity insurance policy. All investment transactions except investment pool funds and mutual funds shall be executed on a delivery-versus-payment basis. Approved Investment Instruments From those investments authorized by law and described further in CDA (LEGAL), the Board shall permit investment of Department funds in only the following investment types, consistent with the strategies and maturities defined in this policy: 1. Obligations of or guarantees by, governmental entities as permitted by Government Code 2256.009. 2. Certificates of deposit and share certificates as permitted by Government Code 2256.010. 3. Fully collateralized repurchase agreements permitted by Government Code 2256.011. 4. A securities lending program as permitted by Government Code 2256.0115. 5. Banker's acceptances as permitted by Government Code 2256.012. 6. Commercial paper as permitted by Government Code 2256.013. 7. No-load money market mutual funds, as permitted by Government Code 2256.014. 8. No-load mutual funds as permitted by Government Code 2256.014. 9. A guaranteed investment contract as an investment vehicle for bond proceeds provided it meets the criteria and eligibility requirements established by Government Code 2256.015. 10. Public funds investment pools as permitted by Government Code 2256.016, .019. 11. Corporate bonds as permitted by Government Code 2256.0204 (a)-(c). Safety and Investment Management The main goal of the investment program is to ensure its safety and maximize financial returns within current market conditions in accordance with this policy avoiding any financial risk. Investments shall be made in a manner that ensures the preservation of capital in the overall portfolio, and offsets during a 12-month period any market price losses resulting from interest-rate fluctuations by income received from the balance of the portfolio. No individual investment transaction shall be undertaken that jeopardizes the total capital position of the overall portfolio. 46 Liquidity and Maturity Any internally created pool fund group of HCDE shall have a maximum dollar weighted maturity of 180 days. The maximum allowable stated maturity of any other individual investment owned by HCDE shall not exceed one year from the time of purchase. The Board may specifically authorize a longer maturity for a given investment, within legal limits. HCDE's investment portfolio shall have sufficient liquidity to meet anticipated cash flow requirements. Diversity The investment portfolio shall be diversified in terms of investment instruments, maturity scheduling, and financial institutions to reduce risk of loss resulting from over concentration of assets in a specific class of investments, specific maturity, or specific issuer. It does not apply to U.S. Treasury securities and money market mutual funds. Monitoring Market Prices The investment officer shall monitor the investment portfolio and shall keep the Board informed of significant declines in the market value of HCDE's investment portfolio. Information sources may include financial / investment publications and electronic media, available software for tracking investments, depository banks, commercial or investment banks, financial advisors, and representatives / advisors of investment pools or money market funds. Monitoring shall be done monthly, or more often as economic conditions warrant by using appropriate reports, indices, or benchmarks for the type of investment. Funds / Strategies Investments of the following fund categories shall be consistent with this policy and in accordance with the strategy defined below.  Operating Funds – Investment strategies for operating funds (including any co-mingled pools containing operating funds) shall have as their primary objective’s safety, investment liquidity, and maturity sufficient to meet anticipated cash flow requirements.  Agency Funds – Investment strategies for agency funds shall have as their objective’s safety, investment liquidity, and maturity sufficient to meet anticipated cash flow requirements.  Debt Service Funds – Investment strategies for debt service funds shall have as their objective sufficient investment liquidity to timely meet debt service payment obligations in accordance with provisions in the bond documents. Maturities longer than one year are authorized provided legal limits are not exceeded.  Capital Projects – Investment strategies for capital project funds shall have as their objective sufficient investment liquidity to timely meet capital project obligations. Maturities longer than one year are authorized provided legal limits are not exceeded. Safekeeping and Custody HCDE shall retain clearly marked receipts providing proof of HCDE's ownership. HCDE may delegate, however, to an investment pool the authority to hold legal title as custodian of investments purchased with HCDE funds by the investment pool. Brokers / Dealers Prior to handling investments on behalf of HCDE, brokers / dealers must submit required written documents in accordance with Law. Representatives of brokers / dealers shall be registered with the Texas State Securities Board and must have membership in the Securities Investor Protection Corporation (SIPC) and be in good standing with the Financial Industry Regulatory Authority (FINRA). Soliciting Bids for CD's To get the best return on its investments, HCDE may solicit bids for certificates of deposit in writing, by telephone, or electronically, or by a combination of these methods. Internal Controls A system of internal controls shall be established and documented in writing and must include specific procedures designating who has authority to withdraw funds. Also, they shall be designed to protect against losses of public funds arising from fraud, employee error, and misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees and officers of HCDE. Controls deemed most important shall include: 47 1. 2. 3. 4. 5. 6. 7. Separation of transaction authority from accounting and recordkeeping and electronic transfer of funds. Avoidance of collusion. Custodial safekeeping. Clear delegation of authority. Written confirmation of telephone transactions. Documentation of dealer questionnaires, quotations and bids, evaluations, transactions, and rationale. Avoidance of bearer-form securities. These controls shall be reviewed by HCDE's independent auditing firm. Portfolio Report In addition to the quarterly report required by law and signed by HCDE's investment officer, a comprehensive report on the investment program and investment activity shall be presented annually to the Board. This report shall include a performance evaluation that may include, but not be limited to, comparisons to 91-day U.S. Treasury Bills, six-month U.S. Treasury Bills, the Fed Fund rate, the Lehman bond index, and rates from investment pools. The annual report shall include a review of the activities and total yield for the preceding 12 months, suggest policies, strategies, and improvements that might enhance the investment program, and propose an investment plan for the ensuing year. The Government Treasurers’ Organization of Texas (GTOT) has certified our policy. Ad-Valorem Taxes Discounts Discount options shall not be provided for the early payment of property taxes in HCDE. Split Payments Split payment of taxes shall be allowed in accordance with statutory provisions. Purchasing & Acquisition Purchasing Authority The Board delegates to the Superintendent or designee the authority to determine the method of purchasing, in accordance with HCDE Board policy CH (LEGAL), and to make budgeted purchases. However, any single budgeted purchase of good or services that costs or aggregates to a cost of $50,000 or more shall require procurement. In accordance with CH LEGAL, there are 7 methods of procuring goods and services: (1) (2) (3) (4) (5) (6) (7) competitive bidding for services other than construction services; competitive sealed proposals for services other than construction services; a request for proposals, for services other than construction services; an interlocal contract; a method provided by Chapter 2269, Government Code, for construction services; the reverse auction procedure as defined by Section 2155.062(d), Government Code; or the formation of a political subdivision corporation under Section 304.001, Local Government Code. In addition, contracts amounting to more than $75,000 must be approved by the Board according to HCDE Board policy CH (LOCAL). Additionally, all purchases of political services, including, without limitation, lobbying services, shall require Board approval. The Board is informed of purchases that aggregate to $50,000 or greater from a single vendor in the absence of prior Board approval. A competitive bid and a competitive proposal are both purchasing methods that may be used when making formal purchases valued at $50,000 or greater. The key difference between the two methods is that the competitive bid does not allow for negotiation and the competitive proposal does allow for negotiations. 48 Competitive Bidding Competitive Bids, or Invitation to Bid (“ITB”), are used when you can clearly define what goods or services you need. If competitive bidding is chosen as the purchasing method, the Superintendent or designee shall prepare bid specifications. All bids shall be submitted in sealed envelopes, plainly marked with the name of the bidder and the time of opening. All bidders shall be invited to attend the bid opening. Any bid may be withdrawn prior to the scheduled time for opening. Bids received after the specified time shall not be considered. The Department m...
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