Ezel / AG Opinions / TX
TX JM-42 June 28, 1983

Could a Texas school district deposit student-organization activity funds in a credit union instead of its school depository bank?

Short answer: Yes, for the activity funds described in JM-42. Because no identified statute or administrative rule required those custodial funds to be placed in the school depository, the district could deposit them in a credit union, even though a credit union could not itself serve as the district's statutory depository.

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This page answers the general question as of 1983. Ezel answers yours: what it means for your facts, under current Texas law, with citations.

Currency note: this opinion is from 1983
Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.
Disclaimer: This is an official Texas Attorney General opinion. AG opinions are persuasive authority in Texas courts but are not binding precedent. This summary is for informational purposes only and is not legal advice. The opinion dates from 1983 and relies on former Education Code provisions and agency materials; verify current law before relying on it.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official AG opinion. The original opinion (linked on this page as a PDF) is the authoritative source for any reliance.
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Texas AG Opinion JM-42: School Activity Funds in Credit Unions

Plain-English summary

JM-42 concluded that a Texas independent school district could deposit the particular "activity funds" described in the request in a credit union. Those funds belonged to organizations such as parent-teacher associations, school bands, drill-team clubs, and athletic booster clubs, while the district held them for safekeeping and accounting.

"The monies are not derived from taxes but are generally obtained by an organization through solicitation of contributions, promotions and similar functions for the sole benefit of the organization, with such monies being the property of the organization and not the school districts. The school district merely acts as custodian of the monies."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

A credit union could not serve as the district's statutory school depository because it was not a bank within the School Depository Act. That restriction controlled funds that the law required the district to place in its depository.

"It follows, in our opinion, that credit unions are not 'banks' within the meaning of the School Depository Act, and therefore may not serve as school district depositories."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

The AG found no statute or administrative regulation requiring the described activity funds to be deposited there. The district therefore could place those funds in a credit union.

"Because no statute or administrative regulation to which our attention has been directed requires independent school districts to deposit in their depositories the 'activity funds' that you have described, we conclude that districts may place these funds in credit unions."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What activity funds did JM-42 address?

The request described money belonging to organizations such as PTAs, school bands, drill-team clubs, and athletic booster clubs that a district held for safekeeping and accounting.

"[T]hose monies belonging to various organizations such as the PTA (Parent-Teachers Association), school bands, drill team clubs, and athletic booster clubs which are held by a school district for safekeeping and accounting."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Could a credit union serve as the school district's official depository?

No. JM-42 said the School Depository Act required the depository to be a bank in Texas, and a credit union was not a bank under that act.

"[C]redit unions are not 'banks' within the meaning of the School Depository Act, and therefore may not serve as school district depositories."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Did every school-related fund have to go into the statutory depository?

The opinion said some statutes expressly required particular tax and school funds to be placed there, but it found no statute covering the activity funds described in the request.

"There are statutes requiring that certain funds be placed in the school depository, see, e.g., Educ. Code §§23.94(d); 23.95(f) (tax revenues); 16.254(c) (foundation school funds); 15.10(d) (state available school funds), but we have found no statute that touches upon the funds about which you are concerned, and our attention has been directed to no such statute."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

What position did the Texas Education Agency take?

The agency argued that co-curricular funds under its Bulletin 679 were controlled by school boards and therefore had to be deposited under the School Depository Act.

"Because co-curricular funds have been, since September 1, 1982, unarguably under the control of the Board of Trustees of each Texas public school district, it is our opinion that these funds must be deposited by each public school district only as prescribed by the School Depository Act."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Did accounting rules alone dictate where the money had to be deposited?

No. JM-42 distinguished the duty to account for a class of funds from a legal requirement to deposit the funds in a particular place.

"To require districts to account for a certain class of funds is not, in our opinion, to require them to deposit those funds in a particular place."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Did the AG decide whether the agency could adopt such a deposit rule?

No. It left that question open and said that no such rule had been adopted.

"It may be (although we do not decide this issue) that the Texas Education Agency possesses the requisite statutory authority to promulgate an administrative regulation requiring independent school districts to deposit 'co-curricular activity' funds in their depository. It has not done so, however."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Background and statutory framework

The School Depository Act imposed detailed procedures for choosing a depository but did not itself identify every type of school fund that had to be deposited there.

"Although the School Depository Act contains elaborate procedures to be followed by school districts in selecting their depository, it offers no clue as to what school funds must be deposited therein."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

JM-42 understood co-curricular activity funds as funds from school-sponsored events or activities financed or subsidized by public-school funds. Bulletin 679 classified them as general funds controlled by boards of trustees and required their accounting.

"We understand that 'co-curricular activity' funds are funds deriving from 'school sponsored events or activities that are financed or subsidized from public school funds.'"
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

"It is true that Bulletin 679 places these funds in the category of 'general funds' which are under the control of the boards of trustees in the school districts. It is also true that school districts are required to account for general funds."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Holding

"Independent school districts may deposit 'activity funds,' as herein defined, in credit unions."
Source: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1983/jm0042.pdf

Citations and references

Statutes discussed by JM-42:

Source

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain. The linked PDF is authoritative.

The Attorney General of Texas

JIM MATTOX
Attorney General

June 28, 1983

Mr. John P. Parsons
Commissioner
Credit Union Department
914 East Anderson Lane
Austin, Texas 78752

Opinion No. JM-42

Re: Whether certain school funds may be deposited in credit unions

Dear Mr. Parsons:

You have asked whether an independent school district may deposit "activity funds" in a credit union in Texas. In a letter to this office, you characterized "activity funds" as:

[T]hose monies belonging to various organizations such as the PTA (Parent-Teachers Association), school bands, drill team clubs, and athletic booster clubs which are held by a school district for safekeeping and accounting. The monies are not derived from taxes but are generally obtained by an organization through solicitation of contributions, promotions and similar functions for the sole benefit of the organization, with such monies being the property of the organization and not the school districts. The school district merely acts as custodian of the monies.

In Attorney General Opinion MW-272 (1980), this office concluded that the School Depository Act, Education Code sections 23.71 et seq., to which independent school districts are subject, requires that a "school depository" shall be a bank located in Texas. Sec. 23.74. The opinion held that a savings and loan association does not qualify as a "bank" within the meaning of this provision. See §23.73 (definition of "bank"). In Attorney General Opinion MW-534 (1982), this office held that a credit union is not a "banking corporation, association or individual banker." It follows, in our opinion, that credit unions are not "banks" within the meaning of the School Depository Act, and therefore may not serve as school district depositories.

If an independent school district may not use a credit union as its depository, it necessarily follows that any funds that must be placed in the depository by the school district may not be deposited in a credit union. Thus, the next step in our analysis is to determine whether any statute requires an independent school district to deposit in the school depository the "activity funds" that you have described. Although the School Depository Act contains elaborate procedures to be followed by school districts in selecting their depository, it offers no clue as to what school funds must be deposited therein. There are statutes requiring that certain funds be placed in the school depository, see, e.g., Educ. Code §§23.94(d); 23.95(f) (tax revenues); 16.254(c) (foundation school funds); 15.10(d) (state available school funds), but we have found no statute that touches upon the funds about which you are concerned, and our attention has been directed to no such statute.

In a letter which was submitted to this office, the Texas Education Agency urges that "co-curricular activity" funds, as that term is defined in Texas Education Agency Bulletin 679, must be placed in the school depository. The agency asserts:

Briefly stated, it is the position of the Texas Education Agency that funds deriving from co-curricular, school-related activities and held in trust by Texas public school districts for a dedicated purpose are under the control of each district's Board of Trustees for the purpose of the trust. Accordingly, such co-curricular funds must be both fully accounted for and accorded the same measures of care, collateral protection and safekeeping as are public funds derived from state appropriations, local taxes and federal grants.

To assure this the State Board of Education and the Commissioner of Education promulgated, effective April 9, 1982, significant changes in Texas Education Agency Bulletin 679, adopted by reference at 7 Tex. Reg. 1300, March 26, 1982. These changes, effective September 1, 1982, require all school districts to treat and account for co-curricular funds as a part of the General Fund under the direct control of each school district's Board of Trustees. . . .

Because co-curricular funds have been, since September 1, 1982, unarguably under the control of the Board of Trustees of each Texas public school district, it is our opinion that these funds must be deposited by each public school district only as prescribed by the School Depository Act . . . and may not be separately deposited with any financial entity other than the district's school depository bank or banks.

We understand that "co-curricular activity" funds are funds deriving from "school sponsored events or activities that are financed or subsidized from public school funds." TEA Bulletin 679, Procedure CDE-402. It is true that Bulletin 679 places these funds in the category of "general funds" which are under the control of the boards of trustees in the school districts. It is also true that school districts are required to account for general funds. See, e.g., TEA Bulletin 679, Procedures CDE-402; CDE-406; APP-B-2; see also Educ. Code §21.256 (annual audit of school district fiscal accounts). It does not follow, however, that these funds "may not be separately deposited with any financial entity other than the district's school depository bank or banks." As we have noted, we have found no statute that requires that these funds be deposited in the school depository. We have not, moreover, found any provision in Bulletin 679 that imposes such a requirement. To require districts to account for a certain class of funds is not, in our opinion, to require them to deposit those funds in a particular place. It may be (although we do not decide this issue) that the Texas Education Agency possesses the requisite statutory authority to promulgate an administrative regulation requiring independent school districts to deposit "co-curricular activity" funds in their depository. It has not done so, however.

Because no statute or administrative regulation to which our attention has been directed requires independent school districts to deposit in their depositories the "activity funds" that you have described, we conclude that districts may place these funds in credit unions.

SUMMARY

Independent school districts may deposit "activity funds," as herein defined, in credit unions.

Very truly yours,

JIM MATTOX
Attorney General of Texas

TOM GREEN
First Assistant Attorney General

DAVID R. RICHARDS
Executive Assistant Attorney General

Prepared by Jon Bible
Assistant Attorney General

APPROVED:
OPINION COMMITTEE

Susan L. Garrison, Chairman
Jon Bible
Rick Gilpin
Yolanda McKeeman
Jim Moellinger
Nancy Sutton

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