DALLAS - An internal investigation revealed that Fort Worth Independent School District must repay the state nearly $40 million of state aid because the district miscalculated its average daily attendance, officials said.
However, analysts at Moody's Investors Service said the district should be able to absorb the additional cost because of its otherwise conservative fiscal practices.
"Officials were projecting a $20 million surplus in the general fund, but, with a $40 million repayment to the TEA, now anticipate a net $20 million reduction in fund balance," Moody's analyst James Hobbs said in an Aug. 6 report. "This will bring the balance to roughly $140 million, still a healthy cushion equal to 22% of revenues."
The district's interim superintendent, Patricia Linares, said an investigation of the accounting discrepancy is continuing.
"The District is committed to returning this money in a timely manner and is working closely with the Texas Education Agency (TEA) to ensure that happens," Linares said in a prepared statement.
In the 2010-2011 school year software contractor Tyler Technologies made a mistake in the development of software that measured data for the district, according to the investigation thus far.
The result perpetuated an error spanning several years in data sent to the Texas Education Agency, the district said.
"The calculation error was discovered very recently during the transition of information to a new computer processing system," according to the district's statement on the matter. "The district had sought a new information system as a result of continuing problems with the previous system and vendor."
Over successive school years 2010 through 2014 the error grew, resulting in overpayments to the district of about $37 million to $39 million, officials said.
After first hearing of the error on July 23, Linares notified the TEA deputy commissioner for finance, the district said.
The Fort Worth ISD Board of Education was informed about the matter on July 30, the district said.
"Not only is this situation disappointing but it is completely unacceptable," board president Norman Robbins said in a prepared statement. "But we are very appreciative of the staff for finding this error this month and ensuring corrections are made to next year's budget. We have charged the interim superintendent with showing us how such issues will be prevented in the future."
The district has underlying ratings of Aa1 from Moody's and AA from Standard & Poor's. The Permanent School Fund, administered by the TEA, provides a triple-A guarantee to the district's bonds. So far, the accounting error has not resulted in a change in outlook.
"In the short term, repayment of funds to the TEA reduces the district's reserves, but the strong reserve position accumulated from prior years of positive budget variances, attributed to conservative budgeting, is expected to allow the district to absorb the costs," Hobbs said. "Future reviews will focus on management's ability to adjust the fiscal 2015 budget and manage financial operations in such a way that adequate reserve are maintained and structural balance is maintained."
